Hon'ble Vivek Kumar Birla,J.
Respondents no. 2,3,4,5 and 6 had taken loan from the respondent-State Bank of India for which the appellant was the guarantor. The Debt Recovery Tribunal (hereinafter referred to as the Tribunal) passed an order in the year 2001 for recovery of the defaulted amount from the principal debtors as well as the appellant (as guarantor). Execution proceedings were initiated before the Recovery Officer of the Tribunal in the year 2002. The matter has been pending since then. In the year 2009, on the basis of a compromise made by the principal debtors and the appellant as the guarantor, the auction scheduled to be held was postponed on the ground that the appellant as well as the principal debtors would deposit a sum of Rs. 4.5 lacs with the bank. In response thereto, the appellant is said to have deposited Rs. 2 lacs with the bank but the full amount was not deposited by the principal debtors or the appellant. Recovery proceedings continued and the appellant claimed that the amount should first be recovered from the principal debtors and if from such recovery proceedings the total amount could not be recovered, then balance should be recovered from the appellant, who is the guarantor. The Tribunal as well as the Debt Recovery Appellate Tribunal rejected such prayer of the appellant. The appellant then filed Civil Misc. Writ Petition No. 45784 of 2009, which has also been dismissed by order dated 15.7.2014. Challenging the same, this appeal has been filed.
We have heard Sri Vivek Kumar Singh, learned counsel for the appellant as well as Sri Satish Chaturvedi, learned counsel for the respondent-Bank and have perused the record.
The submission of the learned counsel for the appellant is that no recovery could have been made from the appellant (who was merely a guarantor) unless recovery was made first from the principal debtors. He has also submitted that there should be fairness in the action of the State authorities and in first not proceeding against the principal debtors, they have discriminated against the appellant, whose liability would have arisen after the recovery from the principal debtors could not satisfy the payment of the loan amount. He has submitted that the property of the principal debtors had been attached by order of the Recovery Officer of the Tribunal passed in the year 2002 but instead of auctioning such property of the principal debtors they are now proceeding to recover the said amount from the appellant and as such the said action of the recovery officer is arbitrary and liable to be set aside.
We may first consider the decisions relied upon by the learned counsel for the appellant with regard to the fairness in the action of the State authorities. Learned counsel has relied upon the judgment of the Apex Court in the cases of Haji T.M.Hassan Rawther vs. Kerala Financial Corporation (AIR 1988 SC 157) and East Coast Railway vs. Mahadev Appa Rao (2010) 7 SCC 678. In the case of Haji T.M.Hassan Rawther (supra), in paragraph 14, the Apex Court has held that public property should generally be sold by public auction or by inviting tenders which is for not only to get the highest price but also ensures fairness in the activities of the State and public authorities. In the case of East Coast Railway (supra) the Supreme Court has held that non application of mind by the authority making the order or non disclosure of proper reasons would be clearly suggestive of the order being arbitrary.
There is no dispute about the aforesaid principles of law as laid down by the Apex Court but the same would not be applicable in the present case as here the matter relates to recovery and what is to be determined is as to whether the authorities can proceed against the guarantor only after the recovery cannot be made from the principal debtors. Such being the main question we have to now examine as to whether the liability of the appellant herein was co-extensive with that of the principal borrowers or not. Learned counsel for the appellant has relied on decisions of the Apex Court in the cases of Ashok Mahajan vs. State of U.P. (2006) 10 SCC 332 and Pawan Kumar Jain vx. Pradeshiya Industrial and Investment Corporation of U.P.Ltd. (2004) 6 SCC 758 and has submitted that action against the guarantor cannot be taken until the property of the principal debtors is first sold of. In the said cases, the Apex Court was dealing with recovery under the provisions of the U.P. Public Moneys (Recovery of Dues) Act, 1972. The said Act provides for recovery to be first made from the pledged goods and hence it was held that action against the guarantor cannot be taken until the property of the principal debtor is first sold of. The present is not a case under the aforesaid U.P. Act. The learned Single Judge, relying on the judgment of the Apex Court in the case of Industrial Investment Bank of India Limited vs. Biswanath Jhunjhunwala (2009) 9 SCC 478 has dismissed the writ petition on the ground that liability of the borrower as well as the guarantor is always co-extensive and it is for the Bank to proceed either against the borrower or the guarantor. In the said judgment the Supreme Court has relied on various judgments, including that of the Supreme Court in the case of Bank of Bihar Ltd. vs. Dr. Damodar Prasad AIR 1969 SC 297 wherein it has been held that "the very object of the guarantee is defeated if the creditor is asked to postpone his remedies against the surety. In the present case the creditor is a banking company. A guarantee is a collateral security usually taken by a banker. The security will become useless if his rights against the surety can be so easily cut down."
It is not disputed that in the present case the order of the Tribunal was passed in the year 2001, which had become final and in pursuance thereof, recovery proceedings had been initiated against the principal debtors as well as the appellant, who was a guarantor.
The liability of the guarantor is co-extensive with that of the principal debtor as has been clearly held by the Supreme Court in the case of Industrial Investment Bank of India Limited (supra). In the present case either on the ground of entering into a compromise or on the ground that the recovery should first be made from the principal debtor and not from the guarantor, the recovery proceedings have been delayed and postponed for over a decade. The law on this point is absolutely clear that the liability of the guarantor is co-extensive. As such in equity also if the principal debtor as well as the guarantor have been postponing the recovery for the last more than a decade firstly by offering to enter into a compromise and thereafter resiling and then challenging the recovery on technical grounds, we are of the firm view that by doing so, the very purpose of The Recovery of Debts Due to Banks and Financial Institutions Acts, 1993 is being defeated. As such, on merits as well as on equity, we do not find any good ground to interfere with the order passed by the writ court.
This appeal is accordingly dismissed.