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PUNJAB & HARYANA HIGH COURT
Satish Kumar Mittal and Rakesh Kumar Garg JJ.
Punjab And Sind Bank
Versus
Debts Recovery Appellate Tribunal
Decided On : APRIL 7, 2008
Guarantor - Recovery of Loan - DRT Act, 1993, Section 19(24) - Companies Act, 1956, Section 187C - SARFAESI Act, 2002, Section 13(2) - Evidence Act, 1872, Section 114 - Transfer of Property Act, 1882, Section 58 - Indian Contract Act, 1872, Section 62 - Limitation Act, 1963, Section 5 - Banking Regulation Act, 1949, Section 21 - Recovery of Loan from Guarantor, Interpretation of Guarantee Deed, Liability of Director-Guarantor, Mortgage Deeds, Personal Guarantee, Fresh Guarantee, Additional Guarantee, Adverse Inference, Jurisdiction of Quasi Judicial Authority
Fact of the Case:
The petitioner, a nationalized bank, sought to quash an order allowing the deletion of a guarantor's name in a recovery application before the Debt Recovery Tribunal, Chandigarh. The guarantor claimed discharge due to resignation from the company's board and substitution of his guarantee by another. The bank argued that the guarantee was continuing and not renewed, and the guarantor remained liable.
Finding of the Court:
The court found that the guarantor had resigned and did not renew the guarantee, and other guarantors had executed a fresh guarantee. It also noted the bank's failure to disclose additional guarantee and drew adverse inference against the bank. The court upheld the order of the quasi-judicial authority, finding no error of jurisdiction.
Issues: Interpretation of guarantee deed, liability of director-guarantor, substitution of guarantee, adverse inference, jurisdiction of quasi-judicial authority
Ratio Decidendi: The court interpreted the guarantee deed, considered the resignation of the guarantor and the execution of a fresh guarantee by others, and drew adverse inference due to the bank's failure to disclose additional guarantee. It upheld the order of the quasi-judicial authority based on the totality of circumstances and found no error of jurisdiction.
Final Decision: The writ petition was dismissed.
Rakesh Kumar Garg, J.
1. Petitioner, which is a nationalized bank, has approached this Court for the issuance of a writ of certiorari quashing order dated 9.1.2007 (Annexure P-17) passed by respondent No. 1 i.e. Debts Recovery Appellate Tribunal, Delhi (hereinafter referred to as DRAT, Delhi) in Misc. Appeal No. 134/2006 (in OA 343/2004), vide which application of respondent No. 2 was allowed and his name has been ordered to be deleted as a defendant/guarantor in the original application No. 343/2004, pending in the Debt Recovery Tribunal, Chandigarh (hereinafter referred to as DRT, Chandigarh).
2. Respondent No. 3 i.e. M/s Bawa Shoes Leather Guild (P) Limited, 435, Guru Teg Bahadur Nagar, Jalandhar, through its M.D., which is a registered company with the Registrar of Companies, had approached the petitioner bank for loan facilities which were secured by way of mortgage of the properties as well as personal guarantee executed by respondent Nos. 2, 4, 5 and 6. However, respondent No. 3 failed to maintain financial discipline pertaining to the loan facilities, availed by it from the petitioner bank and as such its accounts was classified as Non-Performing Asset (NPA). Thereafter petitioner bank filed an application for recovery of Rs. 7,22,65,971/- before DRT, Chandigarh. Respondent No. 2 filed written statement before DRT, Chandigarh and claimed his discharge on the plea that he has resigned from the Board of Director and his guarantee was substituted by the Bank by taking the guarantee of Mr. Sharanpal Singh Janeja. Replication was filed by the petitioner bank, wherein it was pleaded that no guarantee was substituted after the retirement of respondent No. 2 as a Director of the Company. Respondent No. 2 also filed an application for striking out his name as defendant from the array of the parties in the original application before DRT, Chandigarh and the said application was disposed of on 20.03.2006 with the observations that the issues of novation of contract i.e. strucking off the name of respondent No. 2 will be dealt with finally after producing the evidence by both the parties.
3. The case was taken up for hearing on 30.05.2006 by DRT, Chandigarh and an order was passed wherein it was found that the bank has not reverted back to the factual issues in compliance with order dated 20.03.2006 and a specific affidavit on oath be made in this regard whether Shri Sharanpal Singh Janeja executed any guarantee deed on 13.05.2003 after the resignation of respondent No. 2. The case was ordered to be listed before the Registrar of the Tribunal on 15.09.2006 for exhibition of documents of both the parties. Respondent No. 2 raised objections regarding additional documents being filed by the bank and the same was upheld by the Tribunal. Respondent No. 2 also filed a Miscellaneous Appeal No. 134/2006 against order dated 30.05.2006 before DRAT, New Delhi on the ground that the case has been fixed for evidence and exhibition of documents on 15.09.2006 and respondent No. 2 is being made to face the trial of the case and sought deletion of his name from the proceedings in the original application, pending before DRT, Chandigarh, which was allowed, vide impugned order dated 9.1.2007 (AnnexureP-17).
4. Feeling aggrieved against the impugned order (Annexure P-17), the petitioner bank has filed the present writ petition.
5. Shri I.P. Singh, Advocate for the petitioner has argued that respondent No. 2 was a guarantor of respondent No. 3 and the original application filed by the petitioner bank for a recovery of Rs. 7,22,65,971/- is still pending before DRT, Chandigarh and since respondent No. 2 was one of the guarantors, who had given his personal guarantee pertaining to the loan facilities of respondent No. 3 and the guarantee deed was renewed from time to time by the guarantors, which he did not renew after 30.8.2000 whereas the other guarantors got renewed the guarantee deed on 13.05.2003 for an amount of Rs. 6,70,51,800.85 Ps., whic
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