Appeal No. 308 of 2013, L.A. Nos. 187, 637 of 2014 and Inward No. 117 of 2014. Case: Navnit Talwar Vs Bank of Baroda and Ors.. High Court of Bombay (India)

Case NumberAppeal No. 308 of 2013, L.A. Nos. 187, 637 of 2014 and Inward No. 117 of 2014
CounselFor Appellant: Anil Panwar, Advocate and For Respondents: R.P. Aggarwal and Manisha Aggarwal, Advocates
JudgesRanjit Singh, J. (Chairperson)
IssueConstitution of India - Article 22; Indian Contract Act, 1872 - Sections 126, 128, 133, 134, 135, 139, 140, 141, 2(g), 2(j); Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 - Section 30
Citation2015 (IV) BC 59 (DRAT)
Judgement DateMay 28, 2015
CourtHigh Court of Bombay (India)


Ranjit Singh, J. (Chairperson)

  1. The appellant-guarantor, for a loan facility availed by principal borrower, namely, Reinz-Tablros Ltd., claims his discharge from his liability on the ground that the amount as settled by the O.L. stands realized from the principal debtor. This pure question of law which arises for consideration in these two Appeals therefore is whether the guarantor is liable to be proceeded against for recovery of dues independently when amount is realized from the principal borrower in liquidation proceedings.

  2. In Appeal (No. 308/2013), the appellant has impugned the order passed by the Tribunal below in an Appeal filed by the appellant-guarantor under Section 30 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, RDDBFI Act). During the pendency of this Appeal, the Bank came up with the objection that the appellant-guarantor had not challenged the order passed in the Original Application and hence he would lose his locus to impugn the order passed by the Recovery Officer (R.O.) in recovery proceedings. The Counsel for the appellant initially maintained that he would not be required to challenge the order passed in the Original Application, but subsequently, has filed another Appeal (Inward No. 117/2013) to impugn the order passed in the Original Application as well. The Appeal therefore is filed with the delay of 1005 days is accompanied by application seeking condonation of delay. Since the basic issue is on the ground of liability of the guarantor and is under consideration in Appeal No. 308 of 2013, the delay in filing the Appeal to challenge order in Original Application should not matter much. It is taken to have been condoned.

  3. The challenge in both the Appeals, of course, is on the ground that the appellant being a guarantor would be discharged from his liability once the principal debtor is relieved of its liability in view of the order passed in the liquidation proceedings. This was the precise challenge raised in the Appeal before the Tribunal below which, after due consideration, has been rejected.

  4. The facts noticed, in brief, to get a hang of the ground of the challenge are that Bank of Baroda instituted a Suit against principal borrower Reinz Talbros and guarantors for recovery of the credit facilities allowed to the principal borrower, by filing Original Application 54/2002. The Original Application was allowed and Recovery Certificate was issued on 15th April, 2011 for a sum of Rs. 7,57,77,191.16 along with pendente lite and future interest @ 14% p.a. with quarterly rests from 5th April, 2002 till recovery.

  5. The principal borrower company was ordered to be wound up vide order passed by the Hon'ble High Court of Delhi and the O.L. attached to the High Court was appointed as O.L. of the Company. The O.L. took charge of the assets and sold the same. The Company Judge directed Bank of Baroda, the sole secured creditor, to file its claim before the O.L. The claim filed before the O.L. was, settled for an amount of Rs. 7,56,02,575/- on 29th February, 2008. As per the appellant-guarantor, Bank of Baroda never challenged the claim so settled by the O.L. and thus this claim became final.

  6. The appellant would also refer to some statements made on behalf of Bank of Baroda before the Hon'ble Delhi High Court that its claim be settled in view of Sections 529,529-A and 530 of the Companies Act. The Bank accordingly received an amount of Rs. 7,18,85,000/- which, as per the appellant, would be the entire amount claimed and thus the Bank would be entitled to proceed against the guarantor as its claim against principal borrower has been fully satisfied.

  7. Despite the above position, the Bank proceeded further to recover the amount from the appellant, being guarantor, and the Recovery Officer issued notice to the appellant. The appellant-guarantor appeared before the Recovery Officer and pleaded before him that the Bank had received the entire claim raised by it before the O.L. The Recovery Officer, however, did not listen to these pleas and proceeded to effect recovery from the appellant. Aggrieved against this action of the Recovery Officer, the appellant approached the Delhi High Court by invoking its Company jurisdiction by moving C.A. 451/2013 against the order passed by the Recovery Officer. The High Court, however, disposed of the said application with the observation that the appellant may invoke the appellate jurisdiction to seek redressal of his grievance. The appellant, accordingly, had challenged the order dated 14th March, 2013 passed by the Recovery Officer to continue with the recovery proceedings on the ground that this was contrary to law and in violation of various orders passed by the High Court of Delhi in Company Petition. The appellant had also pleaded that action of the Bank was in violation of the principle laid down in Article 22 of the Constitution of India besides being bound by principles of estoppel. The plea by appellant was that the Bank had received its amount after adjudication by the O.L. and thereafter it was not entitled to continue the recovery proceedings against the appellant-guarantor.

  8. Bank of Baroda came up with the stand that it was entitled to recover the full amount decreed by the Tribunal while allowing the Original Application. As per the Bank, the guarantor would not be discharged from his liability due to any part payment or any payment having been made by the O.L. It was stated that the amount received from the O.L. was appropriated by the Bank against the decretal amount and the Bank was proceeding to recover the balance amount which the Bank could so recover from the appellant who was a guarantor. The Bank in its response would alao point out that it had agreed for sale of the mortgaged property by the O.L. without prejudice to its rights and this fact was duly reflected in the proceedings recorded on 21st September, 2006. As per the Bank, the liability of the guarantor was independent, co-extensive, joint and several for which he had executed the deed of guarantee and so the Bank was entitled to recover the balance decretal amount from the appellant.

  9. The undisputed facts in this case are that the borrower Company went into liquidator as ordered by the Hon'ble Delhi High Court and was wound up on 25th February, 2002. After appointment of O.L., the Company Judge directed the O.L. to invite claims against the Company. In the order dated 21st May, 2009 in C.A. 1030/2008, it is recorded that a sum of Rs. 7,56,02,576/- and Rs. 8,34,04,285/- were found admissible by the O.L. and the Bank prayed for prorata disbursement. The Bank had requested for sale of the industrial area property at Loni Road belonging to the Company under liquidation. This property was sold and the sale was accepted by the Company Judge. The Company Judge has recorded in its order dated 27th November, 2012 that the admitted claim of Bank of Baroda (secured creditor) stood paid. The order reads as under:

    Submission of the Bank is that he has not been paid full amount in his capacity as a secured creditor learned Counsel for the Official Liquidator points out that the claim of the Bank has already been admitted for Rs. 7,56,02,575/- which entire amount has since been paid to the Bank, and if the Bank has any grievance, he is permitted to file an Appeal against the order of the Official Liquidator, if so advised.

  10. It is thus clear that the Bank had pleaded before the Court that it had not been paid the full amount as secured creditor. The Counsel for the appellant, however, would point out the Bank never filed any Appeal against this order and it ought to have done so if it had any grievance against the payment so made. The appellant accordingly would plead that the Company Judge had clearly recorded that the entire amount had been paid and thus the claim of the Bank was found to have been satisfied. The plea accordingly was that the Bank was not entitled to proceed with the recovery against the appellant.

  11. The Counsel for the appellant had placed reliance on various judgments like Union Bank of India v. Chairperson, DRAT, II (2012) BC 67: 2011 (8) A.D.J. 506; Kundanmal Dabriwala v. Haryana Financial Corporation, II (2013) BC 614 (DB): Civil Writ Petition No. 2713/2009 (O. & M.), decided on 20th December, 2011 and Anil Kumar v. Haryana Financial Corporation, AIR 2011 P. & H. 140.

  12. On the other hand...

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