Union Bank of India vs Pandharinath S/o Gangadhar Gadakh on 2 August 2022

BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present : Mr. Justice Ashok Menon, Chairperson Appeal No. 213/2015

Between Union Bank of India … Appellant/s

V/s.

Pandharinath S/o Gangadhar Gadakh & Anr. …Respondent/s Mr. Meghnath Navlani, Advocate for Appellant. -: Order dated: 02/08/2022:- Heard the Ld. Counsel for the Appellant. The Respondent remained ex-parte. The Appeal is directed against the impugned order in M.A. No. 45/2014 on the files of D.R.T., Aurangabad. The facts to the relevant the purpose of disposing of this Appeal, in brief, is thus- The Appellant had filed O.A. No. 6/2007 before D.R.T., Aurangabad for the realization of a sum of ₹63,71,000/- from the Respondent therein namely, M/s. Maulee Cattle Feeds Pvt. Ltd., a company through its director, and Ms Gadakh Brothers, and Karle Brothers as guarantors in their personal capacity to the aforesaid transaction. The O.A. was decreed on 01.02.2008 and the Recovery Certificate was issued. The Appellant filed Recovery Proceeding No. 10/2008 before the Recovery Officer, Aurangabad for the realization of the amount. While the Recovery Proceeding was pending, guarantors namely Karle Brothers approached the Appellant Bank with an OTS proposal on the payment of ₹28 Lacs, and exonerate them from the liability. The OTS proposal was accepted by the Appellant Bank and they were discharged from the liability. Karle Brothers filed M.A. No. 19/2012 on 21.03.2012 for getting themselves discharged from the liability, and accordingly, on the basis of the settlement that was arrived at between Appellant and Karle Brothers, they were discharged by the D.R.T. vide order dated 28.03.2012. It is specifically mentioned that the liability of M/s. Maulee Cattle Feeds Pvt. Ltd., the principal borrower and Gadakh Brothers, the guarantors would continue. Thereafter Gadakh Brothers filed M.A. No. 45/2014 on 18.07.2014 relying on the discharge of Karle Brothers, the other set of guarantors and insisted on discharging them as well in view of the provisions of Sections 133 to 139 of the Indian Contract Act. It was contended that since the original contract pertaining to the liability of the guarantors has been modified, the entire debt against the other guarantors also falls to the ground. The Ld. P.O. in the impugned order dated 28.11.2014 accepted the contentions raised by the Gadakh Brothers and forgave them as well in view of the provisions under Sections 133 to 139 holding that since there is a discharge of some of the guarantors, the original terms of the contract have been varied. There is novation of contract which leads to the discharge of other guarantors as well. The Appellant has come up on Appeal impugning the said order. The Ld. Counsel appearing for the Appellant submits that the provisions under Sections 133 to 139 apply only when the contract is subsisting. Once a decree has passed on the basis of the contract, the liabilities of all the judgment debtors become joint and several and there is no distinction between sureties, guarantors or principal borrowers. The Ld. Counsel relies on the decision of the Hon’ble Delhi High Court in Charan Singh V/s M.S. Security Finance Pvt. Ltd. & Ors 1988 Bank.J.369 wherein it is held that the discharge of one of the sureties from the debts on payment of some amount will not automatically discharge the other judgment debtors who are all based on similar footing consequent to the decree of the suit. The Hon’ble Delhi High Court relied upon the decision of the Hon’ble Madras High Court reported in Nellore Co-operative Urban Bank Ltd. V/s Akili Mallikarjunayya, A.I.R. 1948 Mad. 252 and in a decision Hon’ble Kerala High in Velappe Kumar V/s Kosamattom Chit Funds, 1978 Ker. L. T. 10 wherein it was held that after passing of the decree, the question of variation of contract does not arise and therefore, it was held that Sections 133 to 139 of the Contract Act can have application only as long as no decree is passed against the principal debtor and surety on the basis of the contract. It was observed that the above provisions of the Contract Act which govern the right and liability of the creditor, the principal debtor, and the surety ceases to operate after the rights and liabilities are determined and declared by a decree. In the instant case also, the provisions of Sections 133 to 139 of the Contract Act relied upon by the Ld. P.O. will not apply since the O.A. was already decreed casting joint and several liabilities on all the Defendants. They become judgment debtors and therefore, discharge of one of them on payment of some amount will not automatically discharge the principal debtor or the other judgment debtors. The Ld. P.O. had committed an error in the impugned order in allowing M.A. No. 45 of 2014. Hence, the Appeal has to be allowed and I do so. The impugned order dated 28.11.2014 stands reversed and the M.A. No. 45/2014 stands dismissed. Hence, the Appeal is allowed. The Recovery Officer, D.R.T., Aurangabad, is directed to continue with Recovery Proceeding in R. P. No. 10 of 2008 against the principal debtor and also Gadakh Brothers, jointly and severally. Sd/- Chairperson mks-12