The liability of a guarantor and the principal debtor is co-extensive, allowing the creditor to proceed against the guarantor's mortgaged property without first exhausting remedies against the principal borrower.

Order

1. By way of the present civil writ petition under Article 226 of the Constitution of India, the petitioner has sought following reliefs :-

“It is therefore, prayed that the writ petition may kindly be allowed and the record of the case may kindly called for and:

a) By an appropriate writ order or direction, the respondent bank may kindly be directed not to take physical possession of the residential house no. 733 at Ram Singh Ji Ki Badi, Sector 11. Hiran Magri, Udaipur.

b) By an appropriate writ, direction or order, the respondent bank may kindly be directed to first proceed against borrower for recovery of total outstanding towards cash credit facility extended to the borrower by auctioning the immovable properties available at Udaipur.

c) Any other appropriate direction or order which this Hon'ble Court deems fit in the facts and circumstances of the case may kindly be granted.

d) Cost of this writ petition may kindly be awarded in favour of the petitioner.”

2. Learned counsel for the petitioner submits that respondent No.4 is a partnership firm, wherein respondent No.5 holds 97% of the total share (hereinafter referred to as “the borrower”). The respondent No.4 (firm) had availed a cash credit facility to the extent of Rs.80,000,000/- from the State Bank of India under a loan agreement executed with respondent – Bank. It is further submitted that the petitioner and respondent No.5 are related as nephew and uncle, and at the time of availing the said loan facility, respondent No.5 requested the petitioner to stand as guarantor for the loan. The petitioner, however, is neither a partner nor a shareholder in the borrowing firm. It is submitted that, acting upon such request, the petitioner mortgaged his sole residential property as collateral security. It is further submitted that the borrower defaulted in repayment of the monthly installments payable to respondent – Bank, consequently, the loan account was classified and declared as a Non-Performing Asset (NPA) on 13.11.2023.

3. Upon the loan account being classified and declared as a Non-Performing Asset (NPA), respondent – Bank, issued a demand notice dated 15.11.2023 under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “the Act of 2002”) jointly to the borrower and guarantors. It is further submitted that, in the interregnum, respondent – Bank also initiated proceedings under Section 19(4) of the Act of 2002 before the Debt Recovery Tribunal-I, Ahmedabad by filing an application, wherein notice has been served upon the petitioner. The said application is presently pending adjudication before the learned Tribunal.

4. It is further submitted that respondent – Bank thereafter preferred an application under Section 14 of the Act of 2002 before the Collector and District Magistrate, Udaipur, which came to be allowed, and pursuant thereto, the learned Collector issued orders for taking possession of the petitioner’s mortgaged sole residential house. It is, however, submitted that no corresponding action or order has been initiated for taking possession of the properties belonging to the borrower. It is, therefore, prayed that the petitioner, being a senior citizen and owner of a sole residential house, may be afforded protection of his rights, and respondent – Bank be directed to proceed with recovery of the outstanding dues primarily from the borrower.

5. Learned counsel for respondent – Bank has opposed the submissions advanced on behalf of the petitioner and has prayed for