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WEST BENGAL STATE CONSUMER DISPUTES
REDRESSAL COMMISSION, CALCUTTA
Hon’ble Mr. Justice S.C. Datta, President &
Mrs. Shilpi Majumder, Member
UCO BANK—Appellant
versus
DR. SISIR KUMAR KAR—Respondent
S.C. Case No. 457/A of 1998
The liability of a guarantor is co-extensive with that of the principal debtor, and the creditor is entitled to proceed against the guarantor without first exhausting his remedies against the principal debtor.
Headnote:
CONSUMER PROTECTION ACT, 1986 - SECTION 2(1)(D)(II) - GUARANTOR - LIABILITY - CO-EXTENSIVE WITH THAT OF BORROWER - BANK ENTITLED TO PROCEED AGAINST GUARANTOR WITHOUT FIRST PROCEEDING AGAINST BORROWER - ADJUSTMENT OF MATURITY VALUE OF NATIONAL SAVINGS CERTIFICATES PLEDGED AS SECURITY - JUSTIFIED.
Fact of the Case:
Respondent-2 approached the Bank for a loan to purchase an Auto Rickshaw. The Bank sanctioned and disbursed a loan of Rs. 29,800/- to him on 5.8.1989. Respondent-1 stood as a guarantor and deposited three National Savings Certificates (NSCs) for Rs. 5,000/-, Rs. 5,000/- and Rs. 10,000/- respectively as security for the loan amount. Respondent-2 made some initial installment payments but later failed to pay the balance. The Bank adjusted the maturity value of one NSC for Rs. 5,000/- in the borrower's loan account on 14.10.1993. Respondent-1 filed a complaint before the Consumer Forum claiming refund of the sum of Rs. 10,034/- representing the maturity value of one NSC with interest thereon @ 15% p.a. and a direction upon the Bank for the return of two other NSCs lying in its custody.
Finding of the Court:
The Forum allowed the complaint, holding that the complainant was a consumer as contemplated in Section 2(1)(d)(ii) of the Consumer Protection Act, 1986, and that there had been deficiency in service on the part of the Bank in refusing to furnish a bank statement as called for by the complainant. The Forum also held that the surety stood discharged as the Bank had varied the terms and conditions of the agreement and had shown indulgence to the borrower in the matter of realizing the outstanding dues.
Issues: 1. Whether the complainant is a consumer as defined under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986? 2. Whether the Bank was justified in adjusting the maturity value of the NSC pledged as security without first proceeding against the borrower?
Ratio Decidendi: 1. The complainant is a consumer as defined under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986, as he had availed of the services of the Bank by standing as a guarantor for the loan and had pledged NSCs as security. 2. The Bank was justified in adjusting the maturity value of the NSC pledged as security without first proceeding against the borrower, as the complainant's liability was co-extensive with that of the borrower and he had agreed that the Bank could proceed against the guarantor without first proceeding against the borrower.
Final Decision: The appeal is allowed, the judgment and order of the Forum are set aside, and the complaint is dismissed without cost.
Mr. Justice S.C. Datta, President—This appeal is at the instance of United Commercial Bank, Amta Branch (for short Bank) and is directed against the order dated 31.7.1998 passed by DF, Howrah in Case No. 135/94. By the impugned judgment and order the claim of the complainant was allowed directing the present appellant to make refund of the amount realised by it by way of encashment of National Savings Certificates pledged with the Bank.
2. What happened in this case is that respondent-2 Hassan Ali Mallick having approached the Bank for loan for the purpose of purchasing 3-Wheelers Auto Rickshaw the latter sanctioned and disbursed a loan of Rs. 29,800/- to him on 5.8.1989 and respondent-1 stood as guarantor and deposited three National Savings Certificates for Rs. 5,000/-, Rs. 5,000/- and Rs. 10,000/- respectively as security for the loan amount. Respondent-2 made a cavenant to repay the loan amount with interest @ 9.5% p.a. by equal monthly instalments of Rs. 700/-. According to the complainant, the liability of the guarantor was co-extensive with that of the borrower and the guarantor agreed to pay on demand of the moneys due to the Bank in the event of borrower’s failure to pay back the money. Both the respondents executed a Memorandum of Agreement dated 2.8.1998 in favour of the Bank agreeing fully with the aforesaid terms and conditions and they voluntarily gave the appellant a lien of all the securities pledged.
3. The borrower, viz. respondent-2 made some instalment payments initially but later he failed and neglected to pay the balance of instalments. Thereupon the Bank asked the respondent-1 to pay the balance amount but the latter having not paid any heed to the demand notice of the Bank, the latter adjusted the maturity value of one N.S.C. for Rs. 5,000/- in the borrower’s loan A/c on 14.10.1993. The respondent-1 called upon the Bank to furnish him with certain opportunities but the Bank did not oblige him on the ground that the matter was confidential in nature. According to the complainant, his liability was to the tune of Rs. 20,000/- only but the Bank tried to saddle him with liability for a sum more than Rs. 40,000/-. Moreover, the Bank having not returned two other NSCs held by the Bank, the complainant approached Forum claiming refund of the sum of Rs. 10,034/- representing the maturity value of one NSC with interest thereon @ 15% p.a. The complainant also prayed for a direction upon the Bank for return of two other NSCs lying in its custody.
4. The appellant who was the opposite party-1 before the Forum raised a dispute that the present appellant was not a consumer and as such he had no right to lodge the complaint. According to the Bank, the status of the complainant was that of a guarantor and he has not hired or availed of the services of the Bank for any consideration and hence he cannot be treated as a consumer. It has been contended that the dispute between the parties is essentially a civil dispute which can only be resolved by a competent Civil Court.
5. After having heard the learned Lawyers for the parties, the Forum concluded that the complainant was a consumer as contemplated in Section 2(1)(d)(ii) of the Consumer Protection Act, 1986 and as such the complaint was quite maintainable. The Forum further held that there had been deficiency in service on the part of the Bank in refusing to furnish Bank statement as called for by the complainant. In merit also the Forum noticed that the surety stood discharged the Bank having varied the terms and conditions of the agreement and having shown indulgence to the borrower in the matter of realising the outstanding dues. In that view of the matter, the Forum allowed the case with the directions as aforesaid.
6. Feeling aggrieved thereby the Bank was preferred this appeal. In the first place it has been urged that the complainant cannot be regarded as a consumer, he having not hired or availed of the services of the Bank for consideration and the dispute rais
