Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Telangana) 104

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
G.RADHA RANI, J.
Sri T.M. Raju - Appellant
Versus
M/s. Greater Hyderabad benifit Fund Ltd. - Respondent
City Civil Court Appeal No.126 of 2003
Decided On : 09-06-2025

Advocates:
Advocate Appeared:
For the Appellant : N CHANDRADHAR RAO
For the Respondent: S SURYA PRAKASA RAO

A guarantor is not liable for a loan if it is proven that the principal borrower did not receive the funds, especially when the plaintiff's claims are contradictory.

Headnote:(A) The Indian Contract Act, 1872 - Guarantor's liability - Suit for recovery of promissory note amount with interest - Plaintiff advanced loan based on representation by defendant who acted as guarantor - No sufficient proof that loan was paid to borrower as claimed - Defendant's defense of fraud sustained due to contradictory claims made by plaintiff regarding cheque's recipient - Appeal allowed and original suit decree set aside. (Paras 21 and 22)

Facts of the case:
The plaintiff claimed recovery of Rs.5,88,000/- from the defendant for a loan given to Mr. B. Kutumba Rao, guaranteed by the defendant, who argued that the loan was not for the stated borrower. (Paras 4, 5 and 17)

Findings of Court:
The court found that the plaintiff had taken contradictory positions in different proceedings and failed to prove that the loan was indeed issued to the principal borrower, thus exonerating the defendant from liability. (Paras 20 and 21)

Issues: The court addressed whether the plaintiff could recover the loan amount given these dual claims and whether the suit was barred by limitation. (Paras 6 and 13)

Ratio Decidendi: The court determined that the plaintiff's simultaneous claims contradicted each other to the detriment of the defendant, constituting a fraudulent filing of the suit. (Paras 20 and 21)

Result: Appeal allowed and original suit decree set aside.

Table of Content
1. introduction of the case and parties (Para 1 , 2 , 3)
2. details of the loan transaction and plaintiff's claim (Para 4)
3. defendant's denial and counterclaims (Para 5)
4. issues framed by the trial court (Para 6)
5. trial court's decision (Para 8)
6. appeal allowed; original judgment set aside. (Para 9 , 23)
7. court's findings on contradictory claims and fraud. (Para 10 , 13)
8. arguments and defenses raised by the appellant (Para 12 , 14 , 18)
9. defendant's denial of liability and claim of settlement agreement. (Para 15 , 16)
10. court's analysis of contradictory pleadings (Para 17 , 19 , 20 , 21)
11. conclusion of the appeal and order (Para 22)

JUDGMENT :

G.RADHA RANI, J.

This appeal is filed by the appellant-defendant aggrieved by the judgment and decree dated 23.10.2002 passed in O.S No.163 of 2000 by the XI Additional Chief Judge, City Civil Court (FTC), Hyderabad.

2. The respondent is the plaintiff.

3. For the sake of convenience, the parties are hereinafter referred as arrayed before the trial court.

4. The plaintiff filed the suit for recovery of money of Rs.5,88,000/- with interest at 24% per annum. The plaintiff was a finance company registered under the Companies Act, 1956, represented by its Managing Director Mr. G. Mahesh. The contention of the plaintiff was that the plaintiff and defendant were longtime friends and had longstanding association. The defendant had also deposited amounts with the plaintiff company. One day, the defendant brought his friend by name Mr. B.Kutumba Rao and introduced him and stated that the said Kutumba Rao was in need of money for his business requirement and requested the plaintiff to advance a loan of Rs.3,00,000/- and offered to stand as a guarantor. Mr. Kutumba Rao submitted loan application on 05.11.1995 and executed a promissory note on the same date for which the defendant signed as a guarantor. After executing the said documents, the plaintiff issued a cheque bearing No.130624 dated 05.11.1995 in favour of Mr. B. Kutumba Rao drawn on Allahabad Bank, Himayathnagar Branch, Hyderabad. The plaintiff came to know that the cheque issued by the plaintiff was encashed at Vijayawada. As per the terms of the loan, the loan was repayable together with interest at 24% per annum within two years from the date of execution of promissory note. Mr. Kutumba Rao did not repay the amount with interest even after lapse of two years by 05.11.1997. The plaintiff informed the defendant that Kutumba Rao defaulted in payment of loan and that the shares of Vysya Bank offered by Kutumba Rao as security for repayment of loan were sent to Vysya Bank to realize the amount and that he came to know that the shares were not genuine but spurious. The plaintiff stated that he gave loan in favour of Kutumba Rao on 05.11.1995 only on the basis of representation made by the defendant that Mr. Kutumba Rao was his friend. The plaintiff got enquiries made at Vijayawada and came to know that Mr. Kutumba Rao was not residing in the address given in the application. The plaintiff made number of attempts to trace Mr. Kutumba Rao, but in vain. Mr. Kutumba Rao either was absconding or was a fictitious person. The plaintiff requested the defendant several times to repay Rs.3,00,000/- along with interest since he was co-guarantor. Instead of repaying the amounts to the plaintiff, the defendant started blackmailing the plaintiff company. The defendant sent false complaints against the plaintiff company to the authorities like Reserve Bank of India, Company Law Board etc., that the plaintiff was withholding the fixed deposits of defendant and his relatives illegally. The plaintiff was having deposits of the defendant worth Rs.3,00,000/- incidentally equivalent to the loan taken by Mr. Kutumba Rao. The defendant kept the said deposit by way of security and the defendant was now using pressure tactics to repay the deposit amount, because of the demand made by the plaintiff to defendant to repay the amount of Rs.3,00,000/- l