The main legal point established in the judgment is the bank's duty to mitigate loss and take reasonable steps to sell the seized vehicle to minimize the loss to the borrower.

B.S. Walia, J.

Instant Letters Patent Appeal impugns judgment and decree dated 02.06.2006 dismissing CIA No. 28/1996 titled as "Jammu and Kashmir Bank Ltd. v. Girdhari Lal Gupta and others" whereby the judgment and decree dated 15.03.1996 passed by the learned District Judge, Udhampur dismissing the suit of the appellant was upheld.

2. Brief facts as noticed by the trial Court are that loan of Rs. 1,09,800/-under Self Employment Scheme was sanctioned by the appellant-bank in favour of respondent No. 1 on the recommendation and sponsorship of respondent No. 4 on behalf of respondent No. 3, with respondent No. 4 guaranteeing on behalf of respondent No. 3 repayment up to 25% of the loan with interest. Respondent No.1 executed two demands Promissory Notes for Rs. 82,800/- and Rs. 27,000/- respectively dated 06.05.1971 besides Deed of Hypothecation whereby Mini Bus, for which demand loan had been sanctioned, was hypothecated as a security in favour of the plaintiff bank. Respondent No. 2 by executing the Deed of Guarantee undertook to repay the loan amount to the Bank in case of default by respondent No. 1; whereas respondent Nos. 3 & 4 also executed Deed of Guarantee to the extent of 25% of the loan amount. Respondent No. 1 availed the loan facility and purchased the Mini Bus, but did not stick to the schedule of repayment. As on 29.06.1977 balance amount due and payable by respondent No. 1 to the appellant bank as per statement of account placed on record, was Rs. 1,32,860.17 paisa. In view of default by respondent No. 1 in making payment of instalments despite repeated requests by the appellant-bank for a period of over one year, the appellant took the vehicle in question into its possession under Section 176 of the Contract Act in July, 1977 in terms of the Deed of Hypothecation dated 06.05.1975.

3. As per the appellant bank, taking over of possession of the vehicle was done only to force respondent No. 1 to make payment of due amount but respondent No. 1 neither made payment to redeem the vehicle nor insisted/cooperated in the selling of the vehicle. On the contrary, respondent No. 1 is stated to have served Notice dated 27.07.1977 that the bank should get the value of the vehicle assessed by an independent Valuer before auction, that despite Notice by respondent No. 1 to the appellant, the appellant scheduled the auction of the vehicle but had to cancel the same as the price offered was less.

4. Despite demand notice as well as notice u/s 80 CPC, respondents defaulted in clearing the liability leading to institution of the suit seeking decree for recovery of the suit amount along with interest @ 15% per annum thereon.

5. Suit for recovery was filed by the appellant in the High Court of J&K at Jammu, which was transferred to the Court of the District Judge, Udhampur. CMP No. 288 of 1980 was filed by the appellant in the High Court for the sale of the vehicle in question by mentioning that the market value of the vehicle was Rs. 60,000/- at the time of seizure but in the auction proceedings lesser price was being offered, therefore, the same was not accepted.

6. In the written statement by respondent Nos. 1 & 2, it was contended that the Bank had the right to seize the vehicle pursuant to the deed of hypothecation and to auction the same to recover the outstanding amount and as the hypothecated vehicle was seized by the Bank in the year 1977 and the value thereof was more than the amount due under transaction but despite Notice from the borrower on the appellant bank in July, 1977, neither was value of the hypothecated vehicle got ascertained nor was auction conducted to the knowledge of the borrower despite the fact that the possession of the vehicle remained with the bank all along. On the basis of the same, it was pleaded that the borrower and the guarantor stood absolved of their liability on seizure of the vehicle and retention thereof by the bank. Respondent Nos. 3 & 4, on the other hand, pleaded that liability of the