1986 (4) TMI 353 - HC - Indian Laws

Summary

Issues Involved:
1. Applicability of Section 68 of the Transfer of Property Act.
2. Personal liability of guarantors.
3. Rights of the creditor to proceed against guarantors before exhausting remedies against the principal debtor.
4. Nature of the suit - whether it is a mortgage suit or a suit on promissory notes and guarantees.

Issue-wise Detailed Analysis:

1. Applicability of Section 68 of the Transfer of Property Act:
The appellants argued that the plaintiff Bank should not be allowed to proceed against the guarantors for the realization of its dues until the Bank has exhausted all its securities against the principal debtor. They relied on the case of Sukhadakanta Bhattacharjya v. Jogineekanta Bhattacharjya, which held that a mortgagee is not entitled to sue upon the debt ignoring the mortgage. The court examined whether the instant suit was a mortgage suit and if Section 68 of the Transfer of Property Act applied. The court concluded that the present suit was based on a promissory note and agreements of guarantee, which are independent of the mortgage, thus Section 68 did not apply.

2. Personal Liability of Guarantors:
The court analyzed the personal liability of the guarantors, noting that the liability arises from the independent agreements of guarantee and promissory notes, not from the mortgage. The court referenced the case of Nityananda Ghose v. Rajpur Chhaya Beni Cinema Ltd., which supported the view that a suit on a promissory note is distinct from a suit on a mortgage. The court concluded that the personal liability of the guarantors in this case was created by independent transactions and not connected with the mortgage.

3. Rights of the Creditor to Proceed Against Guarantors Before Exhausting Remedies Against the Principal Debtor:
The court stated that a creditor is not bound to exhaust remedies against the principal debtor before suing the surety. The court cited the Supreme Court judgment in Bank of Bihar Ltd. v. Dr. Damodar Prasad, which held that the liability of the surety is immediate and not deferred until the creditor exhausts his remedies against the principal debtor. The court emphasized that the very object of the guarantee would be defeated if the creditor were required to postpone remedies against the surety.

4. Nature of the Suit - Whether It Is a Mortgage Suit or a Suit on Promissory Notes and Guarantees:
The court examined the frame of the suit and concluded that it was not a suit by the creditor qua mortgagee but a suit to enforce the promissory note and agreements of guarantee. The court referenced the case of Sm. Manoda Sundari Saha v. Mercantile Bank Ltd., which supported the view that a suit on promissory notes and guarantees is distinct from a mortgage suit. The court held that the instant suit was for a money decree based on the overdraft account and enforcement of guarantees, not for the recovery of mortgage money.

Conclusion:
The court dismissed the appeal, holding that the suit was not a mortgage suit and that the Bank was entitled to proceed against the guarantors based on the promissory notes and agreements of guarantee. The court reiterated that a creditor is not required to exhaust remedies against the principal debtor before pursuing the guarantors. The appeal was dismissed with costs, and all interim orders were vacated.