Delhi High Court
Usha Rani & Anr. vs Delhi Financial Corporation & ... on 6 August, 2013
Author: V. K. Jain
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 06.08.2013
+ W.P.(C) No.621/2010 & CM No.1315/2010 and 12125/2012
USHA RANI & ANR. ..... Petitioners
Through:Mr.G.C.Nagar, Advocate
versus
DELHI FINANCIAL CORPORATION & ORS. ..... Respondents
Through:Mr.Rajesh Mahajan, Advocate for R.1
Ms.Isha Khanna and Ms.Nidhi Raman, Advocates
for respondents No.2 and 3.
CORAM:
HON'BLE MR. JUSTICE V.K.JAIN
JUDGMENT
V.K.JAIN, J. (ORAL)
The respondent No.1 Delhi Financial Corporation sanctioned a loan of
Rs.14,58,000/- to respondent No.2 Shyam Lal for purchase of a CNG bus. A
Term Loan Agreement-cum-Hypothecation Deed was executed in favour of
respondent No.1. The petitioners had stood as guarantors for the loan taken by
respondent No.2 from respondent No.1. Since respondent No.2 defaulted in
payment of the loan taken from respondent No.1, the bus which was purchased
from the funds provided by respondent No.1, was seized by respondent No.1 and
was sold for recovery of its dues. The respondent No.1 filed an application under
Section 32(G) of State Financial Corporations Act for issuance of recovery
certificate against the petitioners as well the principal borrower for recovery of
Rs.1720507/- along with pendent lite and future interest in terms of Loan
Agreement-cum-Hypothecation Deed executed by them in favour of respondent
No.1 on 9.9.2002. The authority under Section 32(G) of the aforesaid Act, after
issuing notice to the petitioners and considering their reply dated 2.1.2008, inter
alia, passed the following order:-
"I find merit in the contention of Applicant "Corporation and I
am of the view that it would be just and proper to issue the
recovery certificate in the light of the facts and circumstances of
this case. After going through the records of this case and
hearing the arguments of the Applicant Corporation, I am
satisfied that a sum of Rs.17,20,507/-(Rupees seventeen lakh
twenty thousand five hundred seven only) exclusive of interest
w.e.f. 01.03.07 in terms of Term Loan
Agreement/Hypothecation deed executed by the Respondent in
favour of Corporation on 09.09.02 is recoverable from the
Respondents. Issue Recovery Certificate. The recovery
certificate issued shall form a part of this order."
The petitioners approached this Court by way of WP(C)
No.10913/2009 for quashing the aforesaid order dated 10.6.2009. Vide
order dated 17.8.2009, the aforesaid petition was dismissed as withdrawn,
with liberty to the petitioners to approach the appropriate authority against
the order dated 10.6.2009. Vide subsequent order dated 13.11.2009, the
competent authority reiterated the order dated 10.6.2009 passed by him. The
respondent No.1 has initiated proceedings for recovery of the balance
amount payable to it, from the petitioners they being guarantors of the loan
taken by respondent No.2. Being aggrieved the petitioners are before this
Court seeking the following reliefs:-
"(a) Quash and set aside the order dated 13.11.2010
passed by the Competent Authority,
(b) Direct the respondent to pay litigation cost to the
petitioner."
2. The petitioners do not dispute that they had stood as guarantors for the
loan taken by respondent No.2 from respondent No.1. The grievance of the
petitioners, as articulated by their counsel is that respondent No.1 is not
taking steps for recovering the balance amount from respondent No.2. He
further submits that a cheque of Rs.50,000/- was issued by respondent No.2
to respondent No.1 towards payment of the loan taken by him and the said
cheque, when presented to the bank, got dishonoured but despite that,
proceedings under Section 138 of the Negotiable Instruments Act were not
initiated against him. The learned counsel for the petitioner states that
another bus belonging to respondent No.2 was also seized by respondent
No.1 and was sold towards recovery of its dues. The learned counsel for the
petitioner submits that this was done only when the matter was brought to
the notice of this Court. This, to my mind, would make no difference since
it only shows that respondent No.1 does not hesitate in recovering the
amount due to it from respondent No.2, he being the principal borrower.
The question involved in this writ petition is as to whether the respondent
No.1 can simultaneously recover the amount due to it from the petitioners or
not. Since the petitioners had admittedly stood as guarantors for the loan
taken by respondent No.2, the liability of the guarantors being co-extensive
and the liability of the principal borrower and the guarantors being joint as
well as several, it is open to respondent No.1 to recover its dues either from
the petitioners or from respondent No.2 or from all of them.
3. The legal position with respect to obligation of a guarantor to pay the
amount guaranteed by him to the lender was upheld by the Apex Court in
Industrial Investment Bank of India Ltd. v. Biswanath Jhunjhunwala JT
2009 (10) SC 533 where the Apex Court, after considering its earlier
decision on the subject, inter alia, held as under:-
"30. The legal position as crystallized by a series of cases of
this court is clear that the liability of the guarantor and principle
debtors are co-extensive and not in alternative. When we
examine the impugned judgment in the light of the consistent
position of law, then the obvious conclusion has to be that the
High Court under its power of superintendence under Article
227 of the Constitution of India was not justified to stay further
proceedings in O.A. 156 of 1997."
4. Since the liability of the petitioners is co-extensive and not in the
alternative, no infirmity was committed by respondent No.1 in seeking to
recover the balance amount due to it, from the petitioners.
The writ petition is devoid of any merits and is, hereby, dismissed.
V.K. JAIN, J
AUGUST 05, 2013/ks
