Hon'ble Rajnish Kumar,J.
( Per Hon'ble Rajnish Kumar,J.) The petitioner has approached this Court for writ of mandamus commanding to opposite parties no.1 to 3 to return back the relevant papers including the original sale deed in respect of plot of land measuring 1000 Sq. Feet Khasra No.87 situated at Iradat Nagar, Pargana, Tahsil and District Lucknow submitted to the opposite parties 2/3 by the petitioner in his capacity as guarantor of opposite party no.4 in lieu of cash credit facility for Rs.3,00,000/- provided to the opposite party no.4 way back in the year 1997-98 after scrapping the name of the petitioner as guarantor of the opposite party no.4.
The facts in brief for adjudication of the present controversy as born out from the pleadings are that in the year 1997-98 the opposite party no.4 had taken a loan under the cash credit facility for Rs.3,00,000/- from opposite parties no.1 to 3. The petitioner stood guarantor for the above loan. The petitioner while undertaking the guarantee in respect of Accounts No.C/C-16 'Saurabh Traders', proprietor Shri Ram Shanker Chaurasiya / opposite party no.4, had deposited the original sale deed in respect of his plot of land measuring 1000 Sq. Feet Khasra No.87 situated at Iradat Nagar, Pargana, Tahsil and District Lucknow. Apart from executing guarantee deed, promissory note and other relevant documents in favour of the opposite party no.2, the guarantee undertaken by the petitioner was for one year only and in accordance with rules of the bank, the guarantee is renewed every year.
The petitioner vide his letter dated 12.09.2005 requested the opposite party no.2/3 to return original sale deed deposited by him at the time of extending the cash credit facility to the opposite party no.4. Thereafter, the petitioner reiterated his request by means of letters dated 06.01.2006, 17.05.2006, 24.10.2006 and 18.09.2006. Since the request was not accepted, the petitioner sent a legal notice dated 29.10.2008 to the opposite party no.2/3. The legal notice was replied by the opposite party no.2/3 through their counsel on 30.11.2008 indicating therein that the house of the petitioner was pledged in lieu of the loan under the cash credit facility extended to the opposite party no.4. After alleged withdrawal of guarantee by the petitioner a sum of Rs.3,84,184/- has been deposited in the Account No.C/C-16 'Saurabh Traders. On account of delay on the part of opposite party no.2/3 in returning the documents to the petitioners, the petitioner has approached to this Court by means of the present writ petition.
Heard learned counsel for the parties.
Submission of learned counsel for the petitioner is that the petitioner had undertaken the guarantee for the cash credit Limit for Rs.3,00,000/- extended to the opposite party no.4 in the year 1997-98 and he had deposited the original sale deed in respect of his plot of land. Apart from executing guarantee deed, promissory note and other relevant documents in favour of the opposite party no.2 on the assurance of the then Branch Manager- Shri Umesh Gupta that the original sale deed of the petitioner will be given back after a year.
The guarantee taken by the petitioner was for a period of one year but the opposite parties no.1 to 3 in collusion with the opposite party no.4 pledged sale deed of the petitioner against the loan given to the opposite party no.4 in place of the property of the opposite party no.4. In any case the guarantee undertaken by the petitioner was for a period of one year therefore after a period of one year the respondent nos.1 to 3 can not hold the original sale deed and documents of the petitioner. But instead of returning the documents, respondents extended and renewed guarantee of the petitioner every year without signatures of the petitioner. When the documents were not being returned, the petitioner had withdrawn his guarantee by means of letter dated 12.09.2005 and requested for returning of his documents and thereafter reiterated his request by means of several letters but no action was being taken therefore the petitioner had sent a legal notice to the respondents 2/3 in response to the same an evasive reply was furnished therefore the petitioner was left with no option except to approach this Court for return of his original sale deed.
Lastly it has been submitted that now the respondents have also initiated recovery proceedings against the petitioner which can not be done because firstly the bank had to recover the amount of loan from the borrower and if the complete recovery can not be made only thereafter the recovery can be made from the guarantor.
On the basis of above, learned counsel for the petitioner submitted that the opposite party no.2/3 be directed not to make any recovery of the loan given to the respondent no.4 from the petitioner and return the original sale deed deposited by the petitioner.
On the other hand, learned counsel for the respondents no.1 to 3 submitted that the respondent no.4, on his application, was extended cash credit limit of Rs.1,00,000/- for extending his business which was sanctioned on 21.02.1997 and the property of the petitioner was pledged with the bank being guarantor. The respondent no.4 had further requested to extend the cash credit limit for Rs.1,00,000/- to 1,50,000/- and after completing the formalities the bank had sanctioned another cash credit limit for Rs.1,50,000 on 18.10.1997 and again the petitioner was guarantor and willingly he signed the agreement for the aforesaid cash credit limit and also signed the documents 'General Form of Guarantee'. Since the petitioner had already pledged his property against the cash credit limit of Rs.1,00,000/- therefore it was treated as cash credit limit of Rs.1,50,000/-.
It has further been submitted that the petitioner has completed formalities and signed the requisite papers and agreement several times as and when required. Subsequently, the respondent no.4 had submitted application form for extending cash credit limit from Rs.1,50,000/- to Rs.3,50,000 on 08.07.1997 and in the form the name of the petitioner was again mentioned as guarantor including another guarantor. It was further mentioned in the application form that document which was to be mortgaged was a sale deed in the name of the petitioner. The said application form was signed by the respondent no.4 as well as the petitioner. After completing the formalities the bank had sanctioned cash credit limit of Rs.3,00,000/- instead of Rs.3,50,000/- on 23.05.1997. Thereafter, an agreement was signed by the respondent no.4 and the petitioner on 30.07.1998 and on the same date the general form of guarantee was signed by the petitioner.
The petitioner had also written a letter to the respondent no.3 mentioning description of property as 100 Sq. Feet Khasra No.87 situated at Iradat Nagar, Pargana, Tahsil and District- Lucknow in schedule-A which was mortgaged with the bank by the said letter. It was also undertaken by the petitioner that he has already deposited the documents title of the property with the bank detailed in schedule 'A' to be held till the said advance is full paid or in case of sanction limit, fully paid and cancel limit.
It has further been submitted that no pressure was exerted by the bank on the petitioner for the aforesaid cash credit limit and in case of guarantee, it is not necessary to mortgage the property of borrower; property of guarantor can also be mortgaged. In the present case the same thing has happened and the property of the petitioner being guarantor was mortgaged with the bank.
It has further been submitted that as and when the respondent no.4 defaulted in making payments, the bank issued notice to the respondent no.4 as well as the petitioner who stood guarantor. A joint letter dated 14.11.2007 was written by the respondent no.4; borrower and the petitioner; guarantor to the respondent no.3 in which respondent no.4 had stated that he will deposit the entire balance amount to the bank within 30 days and will take back mortgage property of the petitioner and in case of failure it will be open to the bank not to release the balance amount. But the respondent no.4 has failed to comply the assurance therefore the bank was constrained to issue a notice to the respondent no.4 with a copy to the petitioner on 11.04.2008 that in case dues could not be cleared within 15 days, the bank will recover the amount from the mortgaged property in view of provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (Second) Act, 2002 (herein after referred as Act, 2002).
On account of failure of the respondent no.4 in making the repayment a notice under Section 13(2) of the Act, 2002 was sent on 13.07.2009 to the respondent no.4 and a copy of the same was sent to the petitioner also disclosing therein that the outstanding as on 30.06.2009 is Rs.1,39,987/- with details of property mortgaged with the bank from which the outstanding amount will be adjusted and the date of execution. The said account of cash credit limit number 16-A has been declared as non performing asset (NPA) account.
Learned counsel for the respondent nos.1 to 3 has relied in support of his case the judgment of the Apex court in case of Sita Ram Gupta Vs. P.N.B and Others; (2008) 5 SCC 711.
We have considered the submission of learned counsel for the parties and perused the record.
Admittedly the respondent no.4 had taken a loan under the cash credit facility from the respondent nos.1 to 3 in the year 1997-98 vide Account No.C/C-16 'Saurabh Traders'. The petitioner undertook guarantee on 23.07.1998 and placed his property for the said loan and deposited his original sale deed and executed guarantee deed as promissory note and other documents in favour of the respondent no.2. It appears from the record placed before this Court by the parties that the cash credit limit was extended by the respondent no.4 twice during the period 1997-98 and every time the petitioner had taken guarantee for the loan by way of cash credit limit and placed his property till the said advance is full paid or in case of sanction limit, fully paid and limit cancelled.
It appears that the loan amount was not repaid by the respondent no.4 and the notices were issued for recovery of the loan amount. Therefore, the petitioner approached to the respondent no.2 for return of his original sale deed of the property pledged in lieu of the loan extended to the respondent.4. When after repeated request the same was not returned, the petitioner sent a legal notice to the respondent no.2 which was duly replied by him stating therein that the loan amount of the respondent no.4 is not closed / adjusted and loan account is still showing dues of Rs.1,26,753/- as on 30.09.2008, so there is no question of withdrawal of guarantee or return of documents regarding the said loan account to the petitioner as the petitioner is still standing as guarantor.
The perusal of the documents filed by the parties discloses that the petitioner had pledged his property and undertaken guarantee for the loan under cash credit limit facility taken by the respondent no.4 and signed several documents. The perusal of Annexure No.CA-3 filed by respondents nos.1 to 3 duly signed by the petitioner clearly indicates that the petitioner is surety and guarantor for repayment of advance of Rs.3,00,000/- received by M/s Saurabh Traders, the proprietors of which is respondent no.4, as collateral security for the principal amount with interest and other charges due thereon. The petitioner has already deposited the documents of title of the property as detailed in schedule 'A' given in schedule A and the property mentioned is of the petitioner. It has further been stated that the property was to be held till the advance is fully paid or in case of sanction limit; fully paid and limit cancelled. The said document has not been denied by the petitioner in the rejoinder affidavit therefore the contention of learned counsel for the petitioner that the respondents have deliberately and illegally pledged the property of the petitioner against the loan under cash credit limit sanctioned to the respondent no.4 against the dues of the banks is misconceived and an after thought which is not acceptable.
On default in payment of the loan amount the respondent no.4 had written a letter to the respondent no.2 on 14.11.2007, the said letter has been duly signed by the petitioner also. It has been stated in the said letter that the respondent no.4 would deposit the entire remaining dues within 30 days alongwith interest and get the property of the petitioner released and handed over to him. In case of default the bank would be entitled to take legal action for recovery of the loan amount. In response to the same the petitioner has stated that the letters shown the liability of the respondent no.4 and the petitioner had already revoked his continuing guarantee on 12.09.2005 which is totally misconceived and contrary to the said letter which was duly signed by the petitioner on 14.11.2007.
Learned counsel for the petitioner failed to indicate that the guarantee undertaken by the petitioner for the loan amount sanctioned to the respondent no.4 was only for a period of one year and it stands cancelled thereafter. It is also not acceptable in view of the admission of the petitioner in paragraphs-7 and 11 of the writ petition in which it has been stated that the petitioner had revoked his continuing guarantee on 12.09.2005. The letter dated 12.09.2005 contained in Annexure-1 to the writ petition also discloses that the guarantee of the petitioner was continuing for the last seven years and the same was also not revoked by the said letter also as only request was made to receive from the the loanee within three months and return the original sale deed to the petitioner which is strengthened by the letter dated 14.11.2007 contained in Annexure No. CA-4 filed by the respondent nos.1 to 3.
In view of the above, we are of the considered opinion that the petitioner had taken guarantee of the loan by way of cash credit facility extended to the respondent no.4 by the respondent nos.1 to 3 and pledged his property and deposited his original sale deed with his sweet will and the same can not be revoked unless the loan amount alongwith interest till date of payment is repaid to the bank i.e respondent nos.1 to3 and it is not open to the petitioner to revoke the guarantee before repayment of the entire loan amount with interest. Our view is also fortified by the judgment of the Hon'ble Apex court in the case of Sita Ram Vs. P.N.B and Others;(2008) 5 SCC 711. The relevant paragraph 10 of the judgment is reproduced as under:-
"10. Keeping this principle in mind, we now look at the clause in the agreement of guarantee, as noted herein earlier. There cannot be any dispute that the appellant had clearly agreed that the guarantee that he had entered into with the Bank was a continuing guarantee and the same was to continue and remain in operation for all subsequent transactions. Having entered into the agreement in the manner indicated above, in our view, it was, therefore, not open to the appellant to turn around and say that in view of Section 130 of the Act, since the guarantee was revoked before the loan was advanced to defendant Nos. 1 to 4 and 6, he was not liable to pay the decretal amount as a guarantor to the Bank as his guarantee had already stood revoked. In this view of the matter, we are not in a position to accept the submissions of the learned counsel for the appellant and we hold that in view of the nature of guarantee entered into by the appellant with the Bank, the statutory provision under Section 130 of the Act shall not come to his help. The findings arrived at by the High Court while deciding the first appeal were that the amount shown due in the accounts of the Bank against the appellant and the defendants was neither cleared by the defendants nor by the appellant. Therefore, even if a letter was written to the Bank by the appellant on 31st of July, 1980 withdrawing the guarantee given by him, it was contrary to the clause in the agreement of guarantee, as noted herein earlier. Therefore, it was not open to the appellant to revoke the guarantee as the appellant had agreed to treat the guarantee as a continuing one and was bound by the terms and conditions of the said guarantee. For this reason, it is difficult to accept the submissions of the learned counsel for the appellant that in view of the statutory provision under Section 130 of the Act, after the revocation of the guarantee by the appellant, he was not liable to pay the decretal amount to the Bank. No other point was raised by the learned counsel for the appellant. Accordingly, there is no merit in this appeal. The appeal is thus dismissed. There will be no order as to costs."
On repeated query being made by the Court from the learned counsel for the petitioner that under what provision the bank authority can be directed to recover the amount of loan; firstly from the borrower and only thereafter from the guarantor, learned counsel for the petitioner failed to show any provision or any authority in his favour. Therefore, the submission of learned counsel for the petitioner that the loan amount should be recovered firstly from the borrower and only thereafter from the guarantor is misconceived and without any basis and liable to be repelled. Our view is also fortified by the judgment of the Hon'ble Apex Court in the case of Central Bank of India and Others Vs. C.L. Vimla and Others; (2015) 7 SCC 337. The relevant paragraph 13 and 14 of the judgment are reproduced as under:-
"1 3 . After a thorough reading of the Form of Guarantee for Advances & Credit Generally, our attention has been drawn to Clause 2 where Respondent No. 1, C.L. Vimala and one of her sons N. Ramesh Babu, have stated under the relevant part of the clause as under:
2)......in relation to the subject matter of this guarantee or any judgment or award obtained by you against the principal debtor shall be binding on us....
14. This Court has held in United Bank of India v. Bengal Behar Construction Co. Ltd. and Ors. MANU/SC/1326/1998 : (1998) 8 SCC 653, that the Clauses in the letter of guarantee are binding on the guarantors as follows:
In view of the above, the question regarding confirmation of the decree against the guarantors now needs to be settled. .................. we see no reason why the guarantors should not be made liable under the letters of guarantee, the terms whereof clearly stipulate that on the failure of the principal debtor to abide by the contract, they will be liable to pay the amount due from the principal debtor by the Appellants. Clause 15 of the letter of guarantee, in terms states that any action settled or stated between the bank and the principal debtor or admitted by the principal debtor shall be accepted by the guarantors as conclusive evidence. In view of this stipulation in the letter of guarantee, once the decree on admission is passed against the principal debtor, the guarantors would become liable to satisfy the decree jointly and severally."
In view of above, the prayer of the petitioner for return of the original sale deed, pledged for the loan amount advanced to the respondent no.4 under cash credit limit by the respondent nos.1 to 3, before repayment of the loan amount with interest is totally misconceived and baseless therefore the writ petition is devoid of any merit and is liable to be dismissed.
The writ petition is dismissed.
No order as to cost.
Order Date :- 18.9.2018 Haseen U.
(Rajnish Kumar,J.) (Dr. Devendra Kumar Arora,J.)