VARUN GAUBA Vs. PUNJAB & SIND BANK

JUDGEMENT

(1.) THIS appeal is directed against the judgment and decree dated 3 rd March, 2012 whereby the application of the appellant for grant of leave to contest was dismissed and a decree for recovery of Rs.5,93,099/- along with simple interest on that amount at the rate of 9% per annum was passed against the appellant and three others. The facts giving rise to the filing of this appeal can be summarized as under:- Ramesh Kumar Gupta, proprietor of New Orient Transport Company, which was defendant No.1 in the suit and is respondent No.2 in this appeal, had a current account with the plaintiff/respondent No.1 � Punjab & Sind Bank and in that account, he availed overdraft facility on payment of interest at the rate of 6.5% per annum above the Reserve Bank of India rate subject to minimum rate of 16.5% per annum with quarterly rests. He also requested respondent No.1 bank to purchase three cheques of Rs.1,25,000/-, Rs.1,05,000/- and Rs.1,25,000/- respectively drawn by M/s. Quality Handloom in his favour. The cheques were purchased by the bank and the amount was credited to the account of respondent No.2/defendant No.1 on his assurance that the cheques were genuine and would be cleared by the drawee on being presented. The cheques when presented by the Bank were returned with endorsement "Refer to Drawer". There was thus a debit balance of Rs.3,64,038.39 in the current account which defendant No.1/respondent No.2 had with respondent No.1 bank. In August, 1989, he requested the Bank for the adhoc loan facility to the extent of debit of Rs.3,64,038.39 in his current account and the request was granted by the bank. He executed a promissory note for that amount. However, he failed to regularize the current account and, therefore, was asked by the bank to pay the amount which was debited in his account. He, however, failed to honour the demand of the bank and then another demand notice dated 24.10.1989 was issued to him demanding a sum of Rs.3,65,473.89. He again availed facility to the extent of Rs.3,50,376.03 in the current account and executed promissory note dated 05.04.1992 and also executed various other documents in favour of the bank. He agreed to pay the sum due to the bank, on demand from it, along with interest at the rate 10.75% above the RBI rate, with a minimum of 22.75% p.a., with quarterly rests. It is alleged by the plaintiff/respondent No.1 bank that defendant No.1/respondent No.2 also had executed and delivered a letter of guarantee, guaranteeing the repayment of entire amount advanced to defendant No.1/respondent No.2 with all interests and charges with continuity, till the liability of the defendant No.1/respondent No.2 subsists. Two other defendants created an equitable mortgage of the immovable property in favour of plaintiff bank by depositing title deeds. Defendant No.1/respondent No.2 issued 30 cheques of Rs.10,000/- each of their concern M/s. Sahil Golden Transport Company which also were dishonoured when presented to the bank. A sum of Rs.5,39,099/- was due to the plaintiff Bank at the time of filing of suit which came to be decreed by impugned order.

(2.) THE contention of the learned counsel for the appellant is that the document referred as a guarantee bond by the plaintiff bank is in fact an indemnity bond. He has contended that a suit based on indemnity bond cannot be filed under Order 37 of the Code of Civil Procedure. In support of his contention, he has relied upon the decision of the Supreme Court in State Bank of Saurashtra vs. Ashit Shipping Services (P) Ltd. And Another (2002) 4 SCC 736.

(3.) ON a careful analysis of the covenants contained in this document, there can be no doubt that it is in fact a guarantee bond whereby the appellant/defendant No.2 undertook to pay to the plaintiff/respondent No.1 bank whatever amount it advanced to defendant No.1/respondent No.2, along with interest on that amount. Of course, the liability of the appellant was not to exceed Rs.3,50,376.03 and the interest on that amount at the rate agreed by the borrower. The document specifically refers to all accounts such as current, overdraft cash, credit, discounting bills, promissory notes etc. The liability of the appellant was to remain in force until three months of his sending a notice to the bank expressing intention to discontinue his obligation and determine the agreement which he had executed with the bank. He had also undertaken to pay whatever amount was due to the bank at the time of expiration of any such notice. The plaintiff bank was also given liberty to make such variations as it might deem appropriate in the terms of its contract with defendant No.1. The amount of the credit to defendant No.1 could be enlarged or varied but that was not to discharge the appellant from his liability. Even if the principal debtor was to be released from his liability, that was not to release the appellant of his obligation under the agreement he executed with the bank. In para 3 of the document, the appellant specifically stated that though as between the principal debtor and himself, he was surety only, agreed that as between him and the bank, he was principal debtor jointly with defendant No.1 and accordingly shall not be entitled to any of the rights conferred on sureties of Sections 133, 134, 135, 139 and 141 of the Contract Act. This specific term in the document leaves no doubt that in fact the appellant had executed a guarantee bond and not an indemnity bond with the bank and that is why he has referred to himself as a surety qua defendant No.1. In fact, in terms of this contract with the bank, he became the principal debtor, along with defendant No.1 in the suit. I also notice that in the last para of the document, the document has specifically been referred as a ,,guarantee. I therefore agree with the learned Trial Judge that this document is a ,,guarantee letter/bond.