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TMI Blog2007 (5) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... rty, learned senior Counsel assisted by Mr. S. Bhattacharjee, learned Counsel for the respondents. 3. To appreciate the moot question, it would be necessary to state the facts involved in the writ petition, which are in brief are as follows: The proforma respondent No. 2, son of the writ petitioner (hereinafter referred to as respondent 2), who had passed diploma in X-ray) (Radio therapy) and ECG in the year 1989, prepared a project for self employment, borrowed a term loan amounting to Rs. 3,64,000 from the Tripura Industrial Development Corporation (hereinafter referred to as the Corporation) respondent No. 1 in the year 1994 for establishing his sole proprietorship X-ray Clinic namely, M/s. Chowdhury Diagnostic Clinic in the land and building of the petitioner situated at Dhaleswar (near Prachya Bharati School), Agartala and purchased a Siemens 100 ma X-ray Sm 377 machine comprising of and 302 MANIPHOS 100 x Ray Generator in combination with PLLYSCOPE II hand tilt Diagnostic Examination table POLYSCOPE-II/MANOPHOS 100 and complete Dark Room accessories by utilising the term loan sanctioned by the corporation respondent and. also by utilizing further amounts of two lak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of the unit as per the provision of Section 29 of the SFC's Act. 1951 According to the petitioner, as the copy of the said letter was served to him as guarantor, he remained present on 1-1-1998, but no one from the office of the Corporation came to visit the clinic of the borrower-respondent No. 2 either at the homestead of the petitioner, i.e. place of mortgaged land at Dhaleswar or at the premises of Nandi Pathological Laboratory at 45 Office Lane, Agartala where the X-ray machine with accessories were lying after shifting. 6. Thereafter, failing to take over the possession of the mortgaged/hypothecated property of the respondent No. 2 as of first charge, the Managing Director of the Corporation respondent issued the impugned public notice dated 8-5-1998, Annexure-2 to the writ petition, in exercising of his power under Section 29 of the published in the local Bengali Daily 'Dainik Sambad' on 12-5-1998 wherein the Corporation respondent invited tender for sale of the residential land with building etc. of the writ petitioner which was mortgaged to the Corporation-respondent by separate agreement and with individual promise. 7. By this writ petition under A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner did not keep his commitment. As per terms of the loan agreement, if the borrower fails to pay the dues, the Corporation-respondent is legally entitled to realize the dues by selling out the land which was given as co-lateral security against the loan and for this purpose, a guarantee bond was executed. 9. Mr. A.K. Bhowmik, learned senior Counsel for the petitioner submits that admittedly the writ petitioner is not a borrower/loanee nor a surety, but a guarantor The contract of guarantor is his own separate undertaking, in which the principal does not join. The original contract of the principal is not the guarantor's contract and the guarantor is not bound to take notice of its non-performance. The guarantor makes a separate and individual promise and is only liable secondarily if the borrower fails to discharge his primary liability and if the Corporation cannot realise the loan after selling the mortgaged and hypothecated property like X-Ray Machine and other accessories. He also contended that the guarantor's liability is contingent on default of his principal i.e. borrower and he only becomes absolute liable when such default takes place subject to issuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Corporation by the borrower/loanee and who was also advised to remain present on 1-1-1998 at his factory premises but not to the guarantor for his mortgaged property: i.e. residential land with domestic building and the said letter cannot be treated as a notice as required under law to the petitioner and for non-issuance of any proper notice to the petitioner/guarantor before issuance of public notice in question (Annexure-2) is violative of principle of natural justice. Hence on that ground alone, the impugned letter and the public notice. (Annexure-1 and Annexure-2 to the writ petition) respectively/are liable to be quashed. 10. To knock down the submission of Mr. Bhpwmik, Mr. S.M. Chakraborty, learned senior Counsel for the Corporation-respondent submits that the provisions of Section 29 of the SFC Act empowers the Corporation-respondent to possess and sell the hypothecated and mortgaged property of the borrower as well as the guarantor, as because in the aforesaid provisions, it is specifically stated that the Corporation shall the right to take over the management or possession or both of the industrial concern as well as right to transfer by way of lease or sale an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the respondent is accepted, then also as per provisions of Section 29 of the SFC Act, the guarantor is liable to repay the loan amount of the loanee including interest accrued thereon as and when the borrower fails to refund the same and when the guarantor also fails to pay its liability, the Corporation has the right to adjust the loan amount with interest by way of selling his mortgaged property as because the guarantor mortgaged/assigned his land property to the Corporation in response to Mr. Bhowmik submission regarding the status of the guarantor, Mr. Chakraborty submits that the meaning of surety and guarantor are same the liability of them are also similar. In the instant case the petitioner is the surety cum-guarantor, and he cannot deny his liability, when his son borrower/loanee fails to discharge his primary liability and as per Section 128 of the Indian Contract Act, for repayment of loan amount, liability of guarantor is co-extensive. He again contended that no separate notice need be required to the guarantor petitioner as he has already been informed vide notice dated 23-12-1997 (Annexure-1 to the writ petition) by the Corporation and according to him no case is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial Corporation has taken any action against an industrial concern under the provisions of Sub-section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of the concern. 128. Surety's Liability.-- The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract. 12. The Full Bench decision of Allahabad High Court in Munna Lal Gupta AIR1975All416 (supra), their Lordships, considering the facts of that case, held that the preamble of the Agreement describes the industrial concern as a borrower and the petitioner, Munna Lal as mortgager who has mortgaged his property as security of the loan and the distinction between the borrower and surety has been kept throughout the agreement, which has been signed separately by the borrower and also by Munna Lal as the mortgager. A borrower obviously is a person who borrows and took loan includes the surety who guarantees or secures the loan, and for such a Corporation could not be proceeded against the mortgager under Section 31 of the Act. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of preliminary objections deserve to be overruled indeed, this is now the settled position in view of the pronouncement of the Apex Court in the case of Kharavela industries (Pvt.) Ltd. v. Orissa State Financial Corporation, reported in AIR1985Ori153 . Therefore, the opposite parties were duty bound to issue a notice regarding their intended auction under Section 29 of the Act. 7. In support of their contention that a notice under registered post was issued on 8-2-1990, a xerox copy of the notice has filed as Annexure-A. A mere perusal of this document shows that it was sent by registered post with A.D. to 'Sri Banshidhar Samantray . The endorsement in the notice shows that a copy was, amongst others, also marked to Smt. Hiranyaparava Samantray, the petitioner herein. As there was a dispute between the parties regarding issuance of this notice by registered post, we called upon the opposite parties to produce the Despatch Register. The entry 5488 in the Despatch Register shows that a notice under Registered A.D. post was sent to Bansidhar Samantray and a postal receipt has been affixed in the Despatch Register against the said entry. The subsequent entry does show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovery of the short-fall, though (sic) we must add that since the provisions of the Act were complied with so far as the loanee is concerned, the remedy against the loanee remains unaffected. Under the circumstances, the proposed action contemplated against the petitioner by Annexure-1 cannot be sustained and Annexure-1 is thus liable to be quashed. 14. This Court also notice the judgment of the Apex Court in the case of Delhi Financial Corporation v. Rajiv Anand, reported in (2004)11SCC625 wherein their lordships observed that, The borrower and the surety or the guarantor know what the amounts due are, they know what amounts have been repaid, they know when the amounts were to be repaid, what has not been repaid or how belatedly amounts have been repaid. They know what the rate of interest is. Thus a mere calculation has to be made to ascertain the amount due. If on such calculations it is found that an amount due is due to the financial corporation then a certificate or recovery can be issued. Undoubtedly, the provision is in the nature of an execution proceeding but it is not a recovery proceeding pursuant to a decree of a Court. It is a recovery proceeding on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be due to a financial corporation either from the industrial concern and/or from a surety/guarantor. If the intention were to limit the procedure under Section 32G only to the principal debtor then the legislature would necessarily have had to use the words amount due from the principal debtor or a amount due from the industrial concern . The legislature has purposely omitted to use those words. Further Section 32G was incorporated by the same amending Act which incorporated provisions for enforcement against a surety. The fact that it is incorporated at the time when provisions permitting proceedings against a surety were being incorporated indicates that the legislature was aware that proceedings under Section 32G could apply even against a surety. If at this time the legislature intended that Section 32G was not to apply to a surety then the legislature would have specifically so provided. It is, therefore, clear that the remedy under Section 32G is available even against a surety. 15. The case law cited by the learned Counsel for the Corporation respondent are the case wherein the Corporation went for recovery the loan amount from the borrower/loanee either by transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the beginning, and is held ordinarily to every known default of his principal. On the other hand, the contract of guarantor is his own separate undertaking, in which the principal does not join. It is usually entered into before or after that of the principal, and is often founded on a separate consideration from that supporting the contract of the principal. The original contract of the principal is not the guarantor's contract, and the guarantor is not bound to take notice of its non-performance. The surety joins in the same promise as his principal and is primarily liable; the guarantor makes a separate and individual promise and is only secondarily liable. His liability is contingent on the default of his principal, and he only becomes absolutely liable when such default takes place and he is notified thereof. Surety and guarantor are both answerable for debt, default, or miscarriage of another but liability of guarantor is, strictly speaking, secondary and collateral, while that of surety is original, primary and direct. In case of suretyship there is but one contract, and surety is bound by the same agreement which binds his principal, while in case of guaranty ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement, and when the Corporation also so fails to recover the same from the borrower even after selling the hypothecated and mortgaged property of the borrower, then only the guarantor is liable. Before proceeding for transfer of mortgaged property of guarantor by way of sale to other persons through public notice (Annexure-2) the financial corporation is bound to give proper notice to the guarantor expressing its intention for such sale of the said mortgaged property and not only that, before sale of the said property the Corporation has also to allow the guarantor an opportunity to make repayment of the loan if possible from his other sources and if the guarantor fails to make such repayment of loan then only the Corporation can issue public notice like Annexure-2 to the writ petition for sale of the mortgaged property after providing proper notice to the guarantor, which is absent in the present case. Non issuance of any notice prior to issuance of public notice for sale in the newspaper is not only unfair but also unjust and as the same is unjust is also unreasonable and when such action is unreasonable, the same is also arbitrary and an arbitrary action is always ultra vires. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment (supra) the Apex Court observed that the exercise of the right of the financial corporation under. Section 29 of the Act should be fair and reasonable, ultimately where the action of the financial corporation is bona fide or not as is appearing in the instant case. It is also settled that writ Court cannot act as an appellate authority over the decision of State Financial Corporation so far as taking over possession of the mortgaged property as well as transfer of the same by way of sale for recovering its dues are concerned. Writ Court can only interfere with the decision of Financial Corporation, if such decision is contrary to statutory provision and unfair, unjust, unreasonable and arbitrary. Every delinquent borrower and guarantor expect that the financial corporation being a trust of borrower, surely and guarantor, would initially try to help them to repay loan from their own sources and if falls, then only the Corporation should try for selling the mortgaged and hypothecated property after providing proper notices. In the instant case if appears from the affidavit in opposition of the corporation/respondent that the writ petitioner requested the appropriate authority ..... X X X X Extracts X X X X X X X X Extracts X X X X
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