Sh. Chhattar Pal Singh & Anr. vs Delhi Financial Corporation & Ors
2011 Latest Caselaw 1087 Del

            *IN THE HIGH COURT OF DELHI AT NEW DELHI

                                       Date of decision: 23rd February, 2011

+                  W.P.(C) No.3283/2010 & CM No.6591/2010 (for stay)

%        SH. CHHATTAR PAL SINGH & ANR.          ..... Petitioners
                     Through: Mr. Manish Kumar, Advocate.

                                     Versus

    DELHI FINANCIAL CORPORATION & ORS ....Respondents
                 Through:  Mr. Rajesh Mahajan, Advocate for
                           R-1.
                           Mr. Anand Nandan, Advocate for
                           R-2.
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1.       Whether reporters of Local papers may
         be allowed to see the judgment?                   No

2.       To be referred to the reporter or not?            No

3.       Whether the judgment should be reported           No
         in the Digest?

RAJIV SAHAI ENDLAW, J.

1. The two petitioners working as Conductor & Driver respectively

with the respondent no.2 Delhi Transport Corporation (DTC) have filed

this petition for quashing of the orders dated 20th March, 2006 and 25th

June, 2009 of the respondent no.1 Delhi Financial Corporation (DFC) and

for restraining the respondent no.2 DTC from in pursuance to the said

orders attaching the salary of the petitioners.

2. Notice of the petition was issued. No interim relief was granted.

3. The counsel for the respondent no.1 DFC has today in Court handed

over a copy of the counter affidavit with annexures. The counsel for the

petitioners has stated that no rejoinder is required. The counsels have been

heard.

4. The petition was filed pleading that the petitioners had in good faith

and on the request of their friend Shri Bijender Singh whose wife is

impleaded as respondent no.3, agreed to become guarantors for the loan of

` 4,50,000/- taken by the respondent no.3 from the respondent no.1 DFC. It

is further pleaded that the respondent no.3 had mortgaged her property

with the respondent no.1 DFC by way of security for the said loan and

even otherwise has sufficient means to repay the said loan; that the

respondent no.1 DFC has however directed the respondent no.2 DTC to

attach the salary of the petitioners. The petitioners contend that recovery of

the loan amount from them as guarantors is not permissible without the

respondent no.1 DFC first attempting to recover the same from the

principal borrower i.e. respondent no.3 and/or without sale of the

mortgaged property. It is further pleaded that the respondents had attached

the salary of the petitioners under Section 29 of the State Financial

Corporations Act, 1951 and which provision cannot be invoked against the

guarantors. Reliance in this regard is placed on Karnataka State Financial

Corporation v. N. Narasimahaiah (2008) 5 SCC 176. It is yet further

pleaded that Shri Bijender Singh is also employed with the respondent no.2

DTC but action of recovery of the loan amount from the petitioners only

has been taken. The petitioners have along with the petition annexed the

letters dated 20th March, 2006 and 25th June, 2009 of the respondent no.1

DFC to the respondent no.3 under Section 29 of the Act with copies inter

alia to the petitioners.

5. The respondent no.1 DFC in its counter affidavit has inter alia

pleaded that the respondent no.3 had availed the loan for purchase of a

Rural Transport Vehicle (RTV) and the petitioners herein had stood

surety/guarantors and executed Bond of Guarantee in favour of the

respondent no.1 DFC; that the said loan was also secured by hypothecation

of the financed vehicle and an FDR amounting to ` 25,000/-; that the

principal borrower failed to repay the installments and defaulted; that the

financed vehicle was accordingly seized but the principal borrower did not

take any steps for release of the same; that the vehicle over a period of time

deteriorated and was sold as scrap. In the circumstances the respondent

no.1 DFC had taken action under Section 32G of the Act and applied to the

Competent Authority for issuance of a Recovery Certificate in the sum of

` 7,24,659/- exclusive of interest; that Competent Authority issued notices

to the petitioners also but the petitioners failed to appear and accordingly

Recovery Certificate was issued against the petitioners also and in

pursuance whereto the salary of the petitioners was attached. It is denied

that the salary of the petitioners has been attached under Section 29 of the

Act. The respondents along with the counter affidavit have filed documents

showing such attachment of salary of the petitioners in exercise of powers

under Section 32G of the Act.

6. Faced with the aforesaid, the counsel for the petitioners has argued

that even Section 32G of the Act cannot be invoked against the

surety/guarantor on the same parity of reasoning as in Karnataka State

Financial Corporation (supra).

7. I am unable to agree. While Section 29 of the Act empowers the

State Financial Corporation to take over the management and possession of

industrial concern and realize the property pledged mortgaged,

hypothecated or assigned and for which reason it was held in Karnataka

State Financial Corporation (supra) that the property of a guarantor

which did not find mention in Section 29 of the Act could not be taken

over in exercise of powers thereunder, the phraseology of Section 32G of

the Act is entirely different. The said provision is attracted when any

amount is due to the State Financial Corporation. It is not disputed that

amount is due to the respondent no.1 DFC for the accommodation granted

by it to the respondent no.3. The Supreme Court, in para 35 of the

judgment in Karnataka State Financial Corporation itself has held that

Section 32G can be resorted to both against the industrial concern as also

the security. Reliance was placed on Delhi Financial Corporation v. Rajiv

Anand (2004) 11 SCC 625 holding that if the intention was to limit the

procedure under Section 32G only to the principal debtor, then legislature

would necessarily have had used the words "amount due from the principal

debtor" or "amount due from the industrial concern". It is also not disputed

that the petitioners had stood guarantors for the amounts so due. The

petitioners in the Guarantee Bond executed by them had agreed that they

will be liable to pay the said amount upon default by the principal borrower

and further agreed that the Guarantee shall be enforceable against them

notwithstanding that the securities specified in the loan agreement are

outstanding and had yet further agreed to realization from them as if they

were the principal borrowers.

8. The counsel for the respondent no.1 DFC has also referred to

Industrial Investment Bank of India Ltd. v. Biswanath Jhunjhunwala

(2009) 9 SCC 478 and to Pawan Kumar Jain v. The Pradeshiya

Industrial & Investment Corporation of UP Ltd. 2004(6) SCALE 560

laying down that the liability of guarantor and principal debtor are co-

extensive and not in the alternative.

9. In any case, in view of the specific terms of the Bond executed by

the petitioners, they cannot contend that the respondent no.1 DFC should

first exhaust all remedies against the principal borrower before proceedings

against them. The respondent no.1 DFC has in any case stated that

Recovery Certificate has been obtained against the principal borrower also

but remains unexecuted.

10. The petitioners have therefore not been able to make out any case.

The petition is dismissed. I refrain from imposing any costs.

RAJIV SAHAI ENDLAW (JUDGE) FEBRUARY 23rd , 2011 pp..