9911796707
TMI Blog2011 (1) TMI 1562X X X X Extracts X X X X X X X X Extracts X X X X ..... l, Bangalore. In the said proceedings, proprietary concern of 3rd Respondent herein was 1st Defendant, 2nd Defendant was G.K. Shantha Raju himself and 3rd Defendant was Petitioner herein. In the said proceedings 1st Defendant M/s. Vinayaka Electrical Enterprises and its proprietor Shantharaju 2nd Defendant were represented by common advocate. So far as 3rd Defendant/Petitioner herein was represented by a different advocate. 3. In the said proceedings, besides the aforesaid three Defendants there were three other Defendants who also stood as guarantors to the credit facility availed by Defendants 1 and 2. During 2004 there was negotiation between creditor bank and principal borrower, who were respectively applicant and 2nd Defendant in OA. No. 67/2000. They entered into settlement, wherein 2nd Defendant agreed to settle the entire arrears due from him to applicant by paying a sum of ₹ 20,00,000/- in one lump-sum against its claim in the said application. In that behalf, a joint memo was also filed by bank and principal borrower. The memo which was filed by them before DRT was referred to Lok Adalath. When the matter came up before Lok Adalath, Bank entered appearance throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equently, the arrangement that is arrived at between bank and principal borrower in the said application amounted to novation of contract, which was entered into between bank, principal borrower and guarantors in terms of loan transaction. The said novation has taken place without reference to Petitioner, he is not a party to said proceedings. He has not agreed for any settlement arrived at between principal borrower and bank in OA. No. 67/2000. Therefore, any such arrangement arrived at between them will not bind Petitioner and he is not bound by the decree passed in OA. No. 67/2000 pursuant to the settlement arrived at between bank and principal borrower in the said proceedings. 7. Heard the counsel for Petitioner and Respondents. Counsel for Petitioner try to substantiate the grounds urged in this petition contending that the same is governed by Sections 133 to 135 of the Indian Contract Act. In any loan transaction if there is variance to the terms of contract between the borrower and creditor without reference to surety, the surety gets automatically discharged and he will not be bound by any of the modified terms and conditions agreed upon between the principal borrower an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be said that any prejudice was caused to the surety by the grant of instalments to the principal judgment debtor and that therefore the liability of the surety did not stand discharged on account of the grant of instalments to the principal judgment-debtor. Section 135 of the India Contract Act repels the said contention. Under Section 135, even if the creditor gives sometime to the principal judgment-debtor without the assent of the surety, the surety stands discharged. Sri Mallya, Learned Counsel for the L.R., of the surety quoted before me the decision in Amrit Lal Goverdhan Lalan (dead) by his legal representative v. State Bank of Travancore and Ors.. It is clearly laid down on page 1436 as: The act of the Bank in giving time to the principal debtor to make up the quantity of the goods pledged is not tantamount to the giving of time to the principal debtor for making the payment of the money within the meaning of Section 135 of the India Contract Act. What really constitutes giving of time is the extension of the period at which by the contract between them, the principal debtor was originally obliged to pay the creditor by substituting a new and valid contract betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd it availed it and let it attain finality, having thus taken the remedy to its conclusion its result cannot be discarded or ignored and proceedings afresh started under SARFAESI Act. 3. In my view, the principles of estoppel by conduct shall apply. Bank is estopped from now ignoring the order they suffered and which attained finality with regard to dispute inter se that order binds both parties. It being an order competently passed by a competent Court in a competent jurisdiction. 11. Therefore, in the light of the aforesaid decisions counsel for the Petitioner contends that notice issued by creditor bank under Section 13 of the SERFAESI Act is not binding on him for two reasons. Firstly, in view of the settlement arrived at between bank and principal borrower way back in the year 2004 which has reached finality and not being challenged or altered at the instance of bank subsequent thereto, it is not open for bank to seek recovery of said amount from Petitioner as he was not a party to novation of contract between bank and principal borrower. Secondly, in view of bank having secured a compromise decree in OA.67/2000 under DRT Act, it is not open for bank to initiate proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid decisions relied upon by both counsel for parties it is seen that contentions raised by bank is without basis. The facts and circumstances as set out in the decisions relied upon by the bank does not enure to its benefit. On the contrary, the finding of Apex Court on Sections 133 to 135 of the Indian Contract Act regarding novation of contract where the parties to application entered into compromise in exclusion of guarantor will not bind guarantor so far as decree passed in the said proceedings, is found to be valid and bonafide. In the facts and circumstances of the case this Court holds that the liability of guarantor in view of compromise between principal borrower and creditor bank in OA. No. 67/2000 has come to an end and that Petitioner as guarantor is absolved of liability in respect of the claim in proceedings in OA. No. 67/2000 much less the amount quantified in pursuance to compromise decree in the said proceedings. In view of that it is not open to bank to initiate proceedings against Petitioner either by filing execution petition or by initiating proceedings under Section 13 of SERFAESI Act for recovery of aforesaid amount by attaching property belonging to Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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