# Jalil Ahmad Ansari v. State Bank of India & Ors

- **Citation:** (2014) 3 ILRA 1461
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2014-11-20
- **Case number:** Special Appeal No. 1061 of 2014
- **Bench:** Vineet Saran, Vivek Kumar Birla
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/jalil-ahmad-ansari-v-state-bank-of-india-ors-43043
- **Pages:** 3

## Headnote

High Court Rules, 1952-Chapter 8 Rule
5-Special appeal recovery proceedingliability of principal debtor as well as
guarantor
are
co-extensive-even
on
compromise between parties no full
payment made-debt Tribunal already
fixed liability in the year 2001-appeal
dismissed.
Held: Para-7
The liability of the guarantor is coextensive with that of the principal debtor
as has been clearly held by the Supreme
Court in the case of Industrial Investment
Bank of India Limited (supra). In the
present case either on the ground of
entering into a compromise or on the
ground that the recovery should first be
made from the principal debtor and not
from
the
guarantor,
the
recovery
proceedings
have
been
delayed
and
postponed for over a decade. The law on
this point is absolutely clear that the
liability of the guarantor is co-extensive.
As such in equity also if the principal
debtor as well as the guarantor have been
postponing the recovery for the last more
than a decade firstly by offering to enter
into a compromise and thereafter resiling
and then challenging the recovery on
technical grounds, we are of the firm view
that by doing so, the very purpose of The
Recovery of Debts Due to Banks and
Financial Institutions Acts, 1993 is being
defeated. As such, on merits as well as on
equity, we do not find any good ground to
interfere with the order passed by the writ
court.
Case Law discussed:
AIR 1998 SC 157; (2010) 7 SCC 678; (2004) 6
SCC 758; (2009) 9 SCC 478; AIR 1969 SC 297

## Text

3 All]. Jalil Ahmad Ansari Vs. State Bank of India & Ors.
1461
within three months from the date of
production of a certified copy of this
order in the light of the observation made
aforesaid.
7. The Registry is directed to remit
the record to the lower court within two
weeks from today.
--------
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 20.11.2014
BEFORE
THE HON'BLE VINEET SARAN, J.
THE HON'BLE VIVEK KUMAR BIRLA, J.
Special Appeal No. 1061 of 2014
Jalil Ahmad Ansari
 ...Appellant
Versus
State Bank of India & Ors. .Respondents
Counsel for the Appellant:
Sri Vivek Kumar Singh
Counsel for the Respondents:
Sri Satish Chaturvedi
High Court Rules, 1952-Chapter 8 Rule
5-Special appeal recovery proceedingliability of principal debtor as well as
guarantor
are
co-extensive-even
on
compromise between parties no full
payment made-debt Tribunal already
fixed liability in the year 2001-appeal
dismissed.
Held: Para-7
The liability of the guarantor is coextensive with that of the principal debtor
as has been clearly held by the Supreme
Court in the case of Industrial Investment
Bank of India Limited (supra). In the
present case either on the ground of
entering into a compromise or on the
ground that the recovery should first be
made from the principal debtor and not
from
the
guarantor,
the
recovery
proceedings
have
been
delayed
and
postponed for over a decade. The law on
this point is absolutely clear that the
liability of the guarantor is co-extensive.
As such in equity also if the principal
debtor as well as the guarantor have been
postponing the recovery for the last more
than a decade firstly by offering to enter
into a compromise and thereafter resiling
and then challenging the recovery on
technical grounds, we are of the firm view
that by doing so, the very purpose of The
Recovery of Debts Due to Banks and
Financial Institutions Acts, 1993 is being
defeated. As such, on merits as well as on
equity, we do not find any good ground to
interfere with the order passed by the writ
court.
Case Law discussed:
AIR 1998 SC 157; (2010) 7 SCC 678; (2004) 6
SCC 758; (2009) 9 SCC 478; AIR 1969 SC 297
(Delivered by Hon'ble Vineet Saran, J.)
1. Respondents no. 2,3,4,5 and 6 had
taken loan from the respondent-State
Bank of India for which the appellant was
the
guarantor.
The
Debt
Recovery
Tribunal (hereinafter referred to as the
Tribunal) passed an order in the year 2001
for recovery of the defaulted amount from
the principal debtors as well as the
appellant
(as
guarantor).
Execution
proceedings were initiated before the
Recovery Officer of the Tribunal in the
year 2002. The matter has been pending
since then. In the year 2009, on the basis
of a compromise made by the principal
debtors and the appellant as the guarantor,
the auction scheduled to be held was
postponed on the ground that the
appellant as well as the principal debtors
would deposit a sum of Rs. 4.5 lacs with
the bank. In response thereto, the
appellant is said to have deposited Rs. 2
lacs with the bank but the full amount was
not deposited by the principal debtors or
the
appellant.
Recovery
proceedings
1462
 INDIAN LAW REPORTS ALLAHABAD SERIES
continued and the appellant claimed that
the amount should first be recovered from
the principal debtors and if from such
recovery proceedings the total amount
could not be recovered, then balance
should be recovered from the appellant,
who is the guarantor. The Tribunal as well
as the Debt Recovery Appellate Tribunal
rejected such prayer of the appellant. The
appellant then filed Civil Misc. Writ
Petition No. 45784 of 2009, which has
also been dismissed by order dated
15.7.2014. Challenging the same, this
appeal has been filed.
2. We have heard Sri Vivek Kumar
Singh, learned counsel for the appellant as
well as Sri Satish Chaturvedi, learned
counsel for the respondent-Bank and have
perused the record.
3. The submission of the learned
counsel for the appellant is that no
recovery could have been made from the
appellant (who was merely a guarantor)
unless recovery was made first from the
principal debtors. He has also submitted
that there should be fairness in the action
of the State authorities and in first not
proceeding against the principal debtors,
they have discriminated against the
appellant, whose liability would have
arisen after the recovery from the
principal debtors could not satisfy the
payment of the loan amount. He has
submitted that the property of the
principal debtors had been attached by
order of the Recovery Officer of the
Tribunal passed in the year 2002 but
instead of auctioning such property of the
principal debtors they are now proceeding
to recover the said amount from the
appellant and as such the said action of
the recovery officer is arbitrary and liable
to be set aside.
4. We may first consider the
decisions relied upon by the learned
counsel for the appellant with regard to
the fairness in the action of the State
authorities. Learned counsel has relied
upon the judgment of the Apex Court in the
cases of Haji T.M.Hassan Rawther vs.
Kerala Financial Corporation (AIR 1988 SC
157) and East Coast Railway vs. Mahadev
Appa Rao (2010) 7 SCC 678. In the case of
Haji T.M.Hassan Rawther (supra), in
paragraph 14, the Apex Court has held that
public property should generally be sold by
public auction or by inviting tenders which
is for not only to get the highest price but
also ensures fairness in the activities of the
State and public authorities. In the case of
East Coast Railway (supra) the Supreme
Court has held that non application of mind
by the authority making the order or non
disclosure of proper reasons would be
clearly suggestive of the order being
arbitrary.
5. There is no dispute about the
aforesaid principles of law as laid down
by the Apex Court but the same would not
be applicable in the present case as here
the matter relates to recovery and what is
to be determined is as to whether the
authorities can proceed against the
guarantor only after the recovery cannot
be made from the principal debtors. Such
being the main question we have to now
examine as to whether the liability of the
appellant herein was co-extensive with
that of the principal borrowers or not.
Learned counsel for the appellant has
relied on decisions of the Apex Court in
the cases of Ashok Mahajan vs. State of
U.P. (2006) 10 SCC 332 and Pawan
Kumar Jain vx. Pradeshiya Industrial and
Investment
Corporation
of
U.P.Ltd.
(2004) 6 SCC 758 and has submitted that
action against the guarantor cannot be
3 All]. The National Insurance Co.Ltd. Vs. Ratibhan Kewat & Ors.
1463
taken until the property of the principal
debtors is first sold of. In the said cases, the
Apex Court was dealing with recovery
under the provisions of the U.P. Public
Moneys (Recovery of Dues) Act, 1972. The
said Act provides for recovery to be first
made from the pledged goods and hence it
was held that action against the guarantor
cannot be taken until the property of the
principal debtor is first sold of. The present
is not a case under the aforesaid U.P. Act.
The learned Single Judge, relying on the
judgment of the Apex Court in the case of
Industrial Investment Bank of India Limited
vs. Biswanath Jhunjhunwala (2009) 9 SCC
478 has dismissed the writ petition on the
ground that liability of the borrower as well
as the guarantor is always co-extensive and
it is for the Bank to proceed either against
the borrower or the guarantor. In the said
judgment the Supreme Court has relied on
various judgments, including that of the
Supreme Court in the case of Bank of Bihar
Ltd. vs. Dr. Damodar Prasad AIR 1969 SC
297 wherein it has been held that "the very
object of the guarantee is defeated if the
creditor is asked to postpone his remedies
against the surety. In the present case the
creditor is a banking company. A guarantee
is a collateral security usually taken by a
banker. The security will become useless if
his rights against the surety can be so easily
cut down."
6. It is not disputed that in the
present case the order of the Tribunal was
passed in the year 2001, which had
become final and in pursuance thereof,
recovery proceedings had been initiated
against the principal debtors as well as the
appellant, who was a guarantor.
7. The liability of the guarantor is
co-extensive with that of the principal
debtor as has been clearly held by the
Supreme Court in the case of Industrial
Investment Bank of India Limited (supra).
In the present case either on the ground of
entering into a compromise or on the
ground that the recovery should first be
made from the principal debtor and not
from
the
guarantor,
the
recovery
proceedings have been delayed and
postponed for over a decade. The law on
this point is absolutely clear that the liability
of the guarantor is co-extensive. As such in
equity also if the principal debtor as well as
the guarantor have been postponing the
recovery for the last more than a decade
firstly by offering to enter into a
compromise and thereafter resiling and then
challenging the recovery on technical
grounds, we are of the firm view that by
doing so, the very purpose of The Recovery
of Debts Due to Banks and Financial
Institutions Acts, 1993 is being defeated. As
such, on merits as well as on equity, we do
not find any good ground to interfere with
the order passed by the writ court.
8. This appeal is accordingly
dismissed.
--------
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 20.11.2014
BEFORE
THE HON'BLE PANKAJ MITHAL, J.
First Appeal From Order No. 3162 of 2014
The National Insurance Co. Ltd.
 ...Appellant
Versus
Ratibhan Kewat & Ors.
...Respondents
Counsel for the Appellant:
Sri P.K. Sinha
Counsel for the Respondents:
Sri S.D. Ojha