9911796707
TMI Blog1986 (4) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... the said project had been sanctioned by the Bank subject, inter alia, to the approval of the Reserve Bank of India to whom the application was being submitted by the Bank. In or about 1974 pending the consideration by the Reserve Bank of India of the said application for Term Loan, the Bank at the request of the second respondent and 7or the defendants in the suit agreed to grant and granted to the second respondent an overdraft facility up to the limit of ₹ 5,00,000/- in the current account of the second respondent repayable on demand. The Reserve Bank of India by its letter dt. 28th Nov. 1974 sanctioned the Term Loan of ₹ 25,00,000/- only as against ₹ 75,00,000/-, applied for by the second respondent. On or about 3rd Nov. 1976 the Bank at the request of the second respondent agreed to increase the said limit of overdraft facility by a further sum of ₹ 3,66,000/-. The Reserve Bank of India by its letter dated 19th August, 1976 informed the Bank regarding sanction by the Reserve Bank of India of a further Term Loan amounting to a total sum of ₹ 45/00,000/- to be disbursed by Allahabad Bank, Punjab Sind Bank Ltd. and United Industrial Bank Ltd. The B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk took out an application under Chap. XIIIA of the Original Side Rules for obtaining a summary judgment for the sum of ₹ 13,08,535,10 both against M/s. Cresswell Breweries Ltd., the principal debtor as well as its Directors Sri Pradeep Chand Lal and Sri Santanu Chaudhury, the appellants and Syed Jabber one of the defendants in the suit. The said application was heard by Khastgir J. The learned Judge passed a decree on 2nd May 1983 against all the defendants. It appears that the Company as well as all the guarantors appeared and contested separately. This appeal has been preferred by two of the defendants guarantors against the said judgment and decree dt. 2nd May 1983. 5. Sri Sudipto Sarker, learned Advocate appearing for the guarantors, the appellants herein, has contended that the learned trial Judge failed to appreciate the arguments advanced on behalf of the guarantors. The contention is that the plaintiff Bank should not be allowed to proceed against the guarantors for realisation of its dues until the plaintiff Bank has exhausted all its securities against the principal debtor. It is his contention that the guarantors were entitled to each and every item of securiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain decree in the property described in Schedule 1 and ₹ 3,750/- as nazar for a mirash settlement of their rights in the property described in Schedule 2; and (b) ₹ 8,000/- being due as the price of certain decrees and bonds. It was said that out of the aforesaid amount of ₹ 5,000/- and ₹ 8,000/- i.e. ₹ 13,000/-, ₹ 1,000/- was to go in discharge of a liability of the mortgagees under a decree. The balance ₹ 12,000/- was the consideration for the mortgage bond. The Court observed : The question therefore plainly is whether a mortgagee is entitled to sue upon the debt ignoring the mortgage. Thereafter the Court observed as follows : We have not been referred to any authority one way or the other directly bearing upon the question. But giving it all the consideration it deserves, we have come to the conclusion that the question must be answered in the negative. It is true that a creditor, who takes a security in the shape of a mortgage, cannot be regarded as having foregone such rights as a creditor has under the general law. But it seems sufficiently clear, from the provisions of the Transfer of Property Act, that these general rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Mr. Sarker. It is therefore, necessary to consider whether the instant suit instituted by the Bank is a mortgage suit or not and whether Section 68 of the Transfer of Property Act has any application. This will necessarily depend on the construction of the pleadings. In this suit the plaintiff Bank has claimed a decree, inter alia, for ₹ 13,08,535,10 p. The said claim is in respect of the outstanding arising out of overdraft facilities granted by the Bank to the second respondent in the current account of the second respondent. In consideration of the Bank granting and/or continuing to grant the said overdraft facility and security for due repayment of the outstandings thereunder the defendants in the suit including the appellants executed the following documents : -- (a) A Promissory Note dt. 5th Nov. 1976 executed by the second respondent (first defendant) in favour of the bank for ₹ 10,00,000/- with interest at the rate of 16.5% per annum. (b) (i) An agreement of guarantee dated 18th February 1977 entered into by the Second defendant (S. Jabber) with the bank. (b) (ii) An agreement of guarantee dt. 18th Feb. 1977 entered into by the third defendant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stituted by the plaintiff on or about 9th Jan. 1952. In para 1 of the plaint the claim against the defendant company was made only on the basis of its alleged liability as drawer of a Promissory Note dated 11th January 1949 for the sum of ₹ 40,000/- carrying interest at the rate of 6% per annum payable on demand to the plaintiff or order. That was the only claim made in the plaint. In para 3 of the plaint the plaintiff pleaded that the defendant also created an equitable mortgage by deposit of title deeds in respect of a cinema house situate at Rajpur outside the jurisdiction of this Court but that is only pleaded to ask for leave under Order 2 Rule 2 Civil P.C. to file a separate suit to enforce the mortgage if and when necessary. In the suit the plaintiff asked for a decree for a sum of ₹ 47,200/-inclusive of interest due on the Promissory Note. That is the only decree claimed by the plaintiff on that plaint. An application was made by the defendants to stay the suit and all proceedings therein until the plaintiff had exhausted all his available remedies against the mortgaged property or until he abandons his mortgage security. The said application was made under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a cheque or other independent engagement completely dissociated from the mortgage, then he is not within the meaning of Section 68(1)(a), T. P. Act as I construe it nor within the principle that security should be called up first before personal liability is enforced. The reason is that by engaging into an independent contract for a debt as evidenced by a promissory note the debtor indicates to the creditors by such a contract that he brings an independent personal liability to answer the loan apart from what inheres in a mortgage with personal liability. To repeat what I have already said the promissory note in this case on which alone the suit is based is an independent and distinct cause of action apart from the mortgage. The juristic difference in this respect is as similar as the difference between a suit on the promissory note and a suit on the original consideration. Although the consideration is the same for the promissory note and the original loan they are regarded in law as distinct and separate causes of action so that although a suit on the promissory note has failed a suit on the original loan may be competent as pointed out by the Privy Council in 'Pavana Reena v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 the principal debtor to the bank for realisation of the securities furnished by the deeds of hypothecation and also enforcement of the guarantee. The present suit is also for adjudication of the right of the bank to the various securities created by the deeds of hypothecation vis-a-vis the claim made by the Firm, the 5th defendant in the suit and the 2nd respondent in the appeal, who is threatening to interfere with the right of the bank to the said securities. The firm has been impleaded as a party for adjudication of the question of the bank's right to the security and the determination of the question of priority if necessary. The facts and circumstances of the case go to indicate that the various securities of the bank created by the appellant No. 1 by the deeds of hypothecation executed by the said appellant are in jeopardy and the Bank for proper preservation, protection and realisation of the securities has to take necessary steps. For the said purpose the bank has instituted this suit impleading the Firm as a defendant and the Bank has also made an application for appointment of a Receiver and for other reliefs in the suit filed by the bank. The refusal to stay the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money. As indicated earlier the present suit, on a proper construction of the pleadings, is not and cannot be a suit by the creditor qua mortgagee. It is a suit essentially to enforce the promissory note and the agreements of guarantee. 13. The contention of Mr. Sarkar, learned Advocate for the appellants can be tested in the light of another well-settled principle. A creditor is not bound to exhaust his remedies against the principal debtor before suing the surety and that when a decree is obtained against the surety it may be enforced in the same manner as a decree for any other debt. In this case the appellants are the sureties. The principal debtor has not preferred any appeal. The plaintiff has proceeded against the guarantors on the basis of the agreements of guarantee. A creditor can sue the surety even before exhausting the remedies against the principal debtor. The equitable mortgage in this case was created by the principal debtor and not by the appellants, the guarantors. On behalf of the respondents reliance has been placed on a judgment of the Supreme Court in the case of Bank of Bihar Ltd. v. Dr. Damodar Prasad reported in [1969]1SCR620 . In that case the plaintiff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to restrain an action against him by the creditor on the ground that the principal is solvent or that the creditor may have relief against the principal in some other proceedings. 14. Thus if a suit can be filed, decree obtained and executed against the guarantors before any suit is instituted against the principal debtor for enforcement of the security given by him in other words before the remedies are exhausted against the principal debtor, on a parity of reasoning the creditor can sue on promissory note and the agreements of guarantee for realisation of his dues. The guarantors in any event cannot restrain an action against them by the creditor on the ground that the creditor has not exhausted his remedies against the principal debtor. The very object of the guarantee will be defeated if the creditor is asked to postpone the remedies against the surety. The banking company obtains guarantee as a collateral security in consideration of granting cash credit facilities or loan to the principal debtor. This security may become useless if his right against the surety is postponed till the creditor exhausts his remedies against the principal debtor. A creditor is not obliged to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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