LAWS(DLH)-2019-11-121

RAJAN MALHOTRA Vs. UNION BANK OF INDIA

Decided On November 18, 2019
Rajan Malhotra Appellant
V/S
UNION BANK OF INDIA Respondents

JUDGEMENT

(1.) By this common order above-mentioned three writ petitions are disposed of. First of these writ petition bearing No. 4802/2015 has been filed by Sh. Rajan Arora, Sh. Neeru Malhotra. Petitioner No.1 claims to be ex-director of Respondent No.3 company and Petitioner No.2 is the earlier guarantor of loan/credit facilities enjoyed by Respondent No.3 company from Respondent No.1 and 2 bank. Union Bank of India is Respondent Nos. 1 and

(2.) Respondent No. 3 is a company named M/s Faishan Flairs India Private Limited. Respondent No. 4 is Sh. Ram Raghubir Pandey, who is ex-director of Respondent No.3 company, Respondent No. 5 is Sh. Raman Mehta and Respondent No. 6 Smt. Geetha Mehta are the new directors of Respondent No.3 company and Respondent No. 7 Sh. Kuldeep Singh had mortgaged his property to Respondent Bank for the loan facilities extended to Respondent No.3 company. The Petitioners have challenged the order dated 25th March, 2015 passed by Debt Recovery Appellate Tribunal ( "?DRAT "?) in appeal No. 79/2014 by which the appeal filed by Respondent Nos. 1 and 2 Bank against the present Petitioners and Respondent No. 4 was allowed. The writ petitioner bearing No. 4803/2015 was filed by Sh. Ram Raghubir Pandey who was Respondent No. 4 in petition No. 4802/2015. He has also impleaded the Union Bank of India as Respondent Nos. 1 and 2, M/s Faishan Flairs India Private Limited as Respondent No. 3, Smt. Neeru Malhotra and Rajan Malhotra as Respondents No. 4 and 5 and Respondents No. 6, 7 and 8 are same i.e. Sh. Raman Mehta, Smt. Geetha Mehta and Sh. Kuldeep Singh. The impugned order is the same i.e. order dated 25 th March, 2015 passed by DRAT in appeal No. 79/2015 against the Petitioner Ram Raghubir Pandey and Respondent No. 4 and 5 Neeru Malhotra and Rajan Malhotra. Sh. Ram Raghubir Pandey has died and has been substituted by his legal heirs. 2. The writ petition No. 11928/2015 was filed by Union Bank of India wherein Sh. Rajan Malhotra, Smt. Neeru Malhotra and Ram Raghubir Pandey (since deceased) have been impleaded as Respondent Nos. 1, 2 and 3 respectively and the company M/s Faishan Flairs India Pvt. Ltd. is Respondent No.4. Sh. Raman Mehta, Smt. Geetha Mehta and Sh. Kuldeep Singh have been impleaded as Respondent Nos. 5, 6 and 7. The Bank has also challenged the same order passed by DRAT as the bank is aggrieved from that portion of the order where DRAT had held that bank had failed to prove that Respondent Nos. 1, 2 and 3 had executed the deeds of guarantee dated 22nd July, 1995. For the sake of convenience we will be referring to the parties and pleadings in Writ Petition (Civil) No. 4802/2015 as all the three petitions have emanated from the same order dated 25 th March, 2015 and the parties as well as the facts are common although the relief claimed by Union Bank of India is different from the relief claimed by the Petitioners in Writ Petition No. 4802/2005 and 4803/2015.

(3.) The relevant portion of the impugned order of DRAT is as under: "27. Without further multiplying the judgments which may be relevant in this regard, the discussion can be cut short as the issue apparently has now been decided by the Hon "?ble Supreme Court in the case of HB Basavaraj. (Dead) by LRs. & Anr. Vs. Canara Bank &Ors., 2010(1) KarLJ 588. This issue on the basis of this judgment was considered by this Tribunal while deciding Appeal No.320/14 titled Sudhir Kumar Khuara.na vs. Punjab &Sind Bank &Ors., decided on 27.10.2014. This Tribunal considered the question on, the basis of various judgments to hold as under: .... The Court in this case has considered the contract between the parties. After examining the agreement executed between the appellant and the bank, the Court has observed that one of the conditions clearly shows that the guarantee to be a continuing one under Section 129 of the Indian Contract Act. As per Section 130 of the Contract Act, a continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor The deed of guarantee in the case before the Court had mentioned that while between the guarantor and borrower, the guarantor is only a surety; yet between the bank and the guarantor, the surety is the principal debtor and his liability would be co-extensive to that of the borrower. The Court has accordingly observed that the guarantor himself waived off his rights under Chapter VIII of the Act which conferred on surety. The Court, therefore, approved the decision of Karnataka High Court in T. Raju Shetty vs. Bank of Baroda, AIR 1992 KARNATAKA 108, whereby it had been held that surety can waive off his rights under various provisions of Chapter VIII of the Contract Act. It is further observed that it is in line with long established precedents that anyone has a right to waive the advantages offered by law provided they have been made for the sole benefit of an individual in his private capacity and does not infringe upon the public right or public policy. This principle was reiterated in Lachoo Ma! Vs. Radhey Shyam, (1971) 1 SCC 619. Further on the principles of continuing guarantee, the position was cleared by the decision of the Supreme Court in Sita Ram Gupta vs. Punjab National Bank &Ors., (2008) 5 SCC 711. The Court in this case has held that it is not open to a party to revoke a guarantee when he had agreed to it being a continuing one and thus would be bound by the terms and conditions of the agreement executed at the time of entering into the guarantee. 28. While coming to the above conclusion, this Tribunal had not only considered and taken note of the case in the case of S. Perumal Reddiar vs. Bank of Baroda and Ors., AIR 1981 MADRAS 180, but the other judgments in the case of Central Bank of India vs. All Mohammad and Anr., 1993 Civil Court Cases 668 (Bombay), C. N. Sundaram vs. Chennal Finance Company Limited and Ors., 2006 3 Civil Court Cases 422 (A.P.) and N. Sanjeeva vs. State Bank of Travancore, 2006 (1) ISJ (Banking) 650, State Bank of India vs. Machine Well Industries and Ors., (1983) 53 Comp Cas 830 (Delhi), In view of the law laid down by the Hon "?ble Supreme Court, the other judgments relied upon by the counsel for the respondents may not require any further consideration in detail. It can, therefore, be said that the respondent Nos.1, 2 and 3 are not entitled to claim exemption from the liability arising out of contract of guarantee in view terms of the of the guarantees dated 28.3.1994 and 17.10.1994. I am thus of the view that respondents are not entitled to claim any protection under Sections 133, 134, 135, 139 and 141 of the Indian Contract Act. This could not be a case of novation of contract. 29. Respondent No.3 has also questioned the guarantee dated 22.7.1995 on the ground that by then he had already resigned from the Board and had written a letter to the bank in this regard. Contention is that the said respondent ceased to be a Director of the company and all the liabilities of the company was the responsibility of the other Directors. Respondent No.3 had also approached the bank to return the India Development Bonds which the bank failed to return. As per the said respondent, the bank had obtained his signatures on this guarantee on blank and misused them to fabricate documents. It is accordingly pleaded that the said respondent never gave guarantee dated 22.7.1995. This issue has been discussed by me in detail and the finding has been recorded above. 30. Since the liability has now been determined on the basis of those guarantees, which concededly had been signed by respondent No.3 as well and which had been held to be continuing guarantees, his liability in this regard has to be examined in view of the finding recorded above. 31. The counsel for respondent No.3 on this aspect would submit that recovery against the respondents on the basis of these guarantees would be barred by limitation. The submission by the counsel is that the recovery on the basis of the guarantee given in the year1994 is barred by time. No such plea was taken in the written statement filed by this respondent. However, the said respondent has sought stay of the present suit in terms of Section 10 CPC as the matter in issue is also directly and substantially in issue in a previous suit instituted, which was pending before Civil Judge, Delhi. The plea of the appellant was also that he stood discharged of surety under Sections 134 and 139 of the Contract Act. The counsel has also relied upon the provisions of Section 23 of the Contract Act to urge that the consideration or object of an agreement was not lawful as it involved or implied injury to the person or property of another. The counsel would submit that there is difference between waiver and estoppel and this is a case of waiver whereby the bank had waived its rights to recover the amount form the respondent by entering into a new agreement. The counsel would also plead that on account variance made without the consent of the respondent, the said respondent shall stand discharged of liability as to the transaction made subsequent to that. 32. The aspect of waiver has to be considered in the light of the provisions contained in Sections 133, 134,135,139 and 141 of the Contract Act. I have already made reference to clauses 7and 8 of the guarantee deeds. The respondent having waived his right available to him under Sections 133, 134, 135, 139 and 141 of the Contract Act, cannot now be heard making complaint this regard. The issue of limitation apparently does not arise and cannot be urged at this stage. The clauses in the deed of guarantee otherwise would also stand against the respondent The respondent had agreed the in the event of principal being a limited company etc. then the guarantee shall remain effective notwithstanding any death, retirement, change, accession or addition, as fully as if the committee, firm, partnership, trustees or debtors or Joint account, at the date of principals "? default or at any time previously was or were the same as at the date thereof. The respondent had also given guarantee that bank shall not be bound to enquire into the powers of the principal or any agents acting or purporting to act on the principal "?s behalf and the bank may recover against the respondent to the extent mentioned notwithstanding that any security given or to be given to the bank may be void, defective or formal or informal etc. In this view of the matter, the plea of the counsel for respondent No.3 is found without any merit. 33. The liability of the respondents, therefore, would continue to remain. The finding returned by the Tribunal in holding defendants 4, 5 and 6 (respondents 1, 2 and 3) not liable, therefore, is set aside and the appeal is allowed. Respondent Nos.1, 2 and 3 (defendants 4, 5, and 6 in the OA) shall be jointly and severally liable to pay the amount determined by the Tribunal below along with the other defendants in the O.A, already held liable. Recovery certificate may be amended accordingly by the Tribunal below."