IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P.

THURSDAY, THE 15^TH DAY OF SEPTEMBER 2022 / 24TH BHADRA, 1944 WP(C) NO. 18761 OF 2022 PETITIONER/S:

MUHAMMED MUSTHAFA PADINHAKKARA AGED 55 YEARS HAVING ADDRESS AT: PADINHAKKARA HOUSE, VILAYUR, POST, KARINGANAD, PALAKKAD DISTRICT -679309.

BY ADVS.

PHILIP MATHEW VINAY MATHEW JOSEPH M.A.SHAJI K.J.KARTHIKA MUHAMMED RIYAS A.T.

RESPONDENT/S:

1 BANKING OMBUDSMAN SHRI G RAMESH, C/O RESERVE BANK OF INDIA, BAKERY JUNCTION, THIRUVANANTHAPURAM-695 033.

2 THE FEDERAL BANK, VICE PRESIDENT, LOAN COLLECTION AND RECOVERY DEPARTMENT, FEDERAL TOWERS, PO BOX NO.101, ALUVA, KERALA- 683101.

3 AUTHORIZED OFFICER UNDER SARFESI ACT, FEDERAL BANK, PALAKKAD, HAVING ADDRESS AT SAI KRISHNA RESIDENCY, KUNNATHURMEDU, PALAKKAD - 678013.

BY ADVS.

MOHAN JACOB GEORGE P.V.PARVATHY (P-41)

REENA THOMAS NIGI GEORGE THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 15.09.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

JUDGMENT

The petitioner is a guarantor in respect of the credit facilities availed by a company known as M/s. Scot Free Steels Limited from the Palakkad branch of the respondent Bank. As on 29.8.2022, the total amounts due from M/s. Scot Free Steels Limited is stated to be Rs.4,77,32,129/-. The petitioner is also a co- obligant in respect of credit facilities availed by an associate business enterprise (a registered partnership firm) known as M/s. Premier Alloys, which also owes money to the respondent bank. The total amount claimed by the respondent bank from M/s. Premier Alloys is Rs.8,47,32,369/- as on 29.8.2022. It is not in dispute that eight items of properties, out of which six are common (to both loans) are mortgaged with the respondent bank as collateral security by way of equitable mortgage. The total liability in respect of the facilities extended by the respondent Bank to M/s. Scot Free Steels Limited and to M/s. Premier Alloys is Rs.13,24,64,498/-.

2. The petitioner has approached this Court stating that the petitioner, as a guarantor in respect of the facilities extended to M/s. Scot Free Steels Limited and as a co-obligant in respect of facilities extended to M/s. Premier Alloys, is willing to settle the liabilities subject to the condition that the petitioner is permitted to proceed against the securities now held by the bank. Pursuant to interim orders issued by this Court, the petitioner has deposited, in total, a sum of Rs.2.50 crores, which is now maintained in a no-lien account by the respondent bank.

3. In respect of the facilities where the petitioner is a guarantor, the provisions of Sections 140 and 141 of the Indian Contract Act, 1872 make it clear that where the guarantor is called upon to discharge the liability of the principal borrower, the guarantor has the right to recover the amounts from the principal borrower and also that the guarantor is entitled to every security that is available against the principal borrower. Sections 140 and 141 of the Indian Contract Act, 1872 read as under:

“140. Rights of surety on payment or performance.—Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.

141. Surety’s right to benefit of creditor’s securities.—A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and if the creditor loses, or, without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security.”

4. I am of the view that in respect of facilities extended by the respondent Bank to M/s.Scot Free Steels Limited, where the petitioner is a guarantor, the provisions of Sections 140 and 141