TMI Blog2015 (5) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract before us, there is no clause which shows that the liability of the guarantor is not co-extensive with the principal debtor. Therefore Section 128 of the Indian Contract Act will apply here without any exception. Sale was confirmed on 15th November, 2006. The sale certificate was also issued in favour of the auction purchaser after paying the requisite stamp duty and registration fees which, as pointed out to us on behalf of the auction purchaser, to the tune of ₹ 30,73,800/-. It is also not in dispute that auction purchaser was put in possession of the property and is still in possession of the property since the sale certificate was issued and registration was made in his favour. It is submitted on behalf of the auction purchaser that he has purchased the property by availing private borrowing for the said property and he is paying nearly ₹ 5 lakhs per month as interest. Therefore, in our opinion, the equity and good conscience also has to play a role in the matter in question on the given facts and after considering the conduct of the respondents (C.L. Vimla and others) in the matter. - since the auction purchaser has already paid the full amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debt Recovery Tribunal, Bangalore. The Debt Recovery Tribunal referred the case for settlement before Lok Adalat. The High Court Legal Services Committee considered the reference and passed an award whereunder the borrower have agreed to pay ₹ 33,50,000/- as final settlement of the claim of the Bank. This settlement was not within the knowledge of the guarantor C.L. Vimla as she had not signed the joint memo. One of her sons N. Surya Bhagavan has signed it. Her advocate has also signed the Joint Memo. It was only on 5.4.2006 when she learnt that the property has been ordered to be sold by auction. She also learnt about the signing of Joint Memo by N.Surya Bhagavan and the Bank. So she filed Writ Petition No.6625 of 2006 before the High Court of Karnataka for setting aside the award dated 20.03.2004 of the Lok Adalat, as far as she was concerned. The High Court by an order dated 1.06.2006, dismissed the writ petition on the ground of laches. Thereafter, she filed Writ Appeal No.899 of 2006, which was permitted to be withdrawn with liberty to approach the Lok Adalat for appropriate relief. Thereafter, the guarantor approached the Lok Adalat by filing an application under Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and payment of solatium to the Central Bank of India. On the issue of the inherent power of the Lok Adalat, the High Court after relying on a number of decisions held that as the guarantor was not a party to the Joint Memo, the decree would not be binding on her. Regarding the validity of the sale, the High Court held that the sale was not done as per the mandate of the sale proclamation which said that the sale was to be conducted part by part and stopped as soon as the decree amount was realized. Thus, the High Court held that the auction was violative of Order 21 Rule 64. It also rejected the plea for solatium of 20% of the Central Bank of India. 7. The learned counsel for the appellant contends that the respondent cannot seek recalling of the settlement which was entered into between the Lender and the Borrower. The appellant contends that there is no provision under the Legal Services Authority Act, 1987 ( the Act , for short) which entitles the Lok Adalat to set-aside or adjudicate on its own orders. Under Section 21 of the Act of 1987 the awards of the Lok Adalat are given the status of a decree of a Civil Court and finality is given to them. Under Section 21(2), no appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding before the DRT, N. Surya Bhagavan, Respondent No.2 signed a Joint Memo for referring the matter to the Lok Adalat. The counsel for the Respondents stated that Joint Memo was not signed by the Respondents. No notice was issued on the Joint Memo to the Respondents. Before the Lok Adalat, Respondents alleges that the Joint Memo was filed whereunder the partners of Satyashree Silks would repay the sum of ₹ 33,50,000/-. The learned counsel contends that N. Surya Bhagavan had no authority to enter into a contract on behalf of the Respondents. After lapse of two years, the property was attached and notice of proclamation for sale was published on the ground of non-payment of amount. It was only at this juncture that the Respondents came to know of the settlement. As soon as the answering respondent came to know of the proclamation and auction sale notice of the property, she preferred a writ petition before the Karnataka High Court, being W.P. No.6625/2006. The High Court dismissed the writ petition by its order dated 01.06.2006. The Respondents thereafter preferred a writ appeal being W.A. No.899/2006 and the High Court permitted the Respondents to approach the Lok Adalat for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld make the recovery and pursue his remedies against the principal debtor at his instance . Thus, we are of the view that in the present case the guarantor cannot escape from her liability as a guarantor for the debt taken by the principal debtor. In the loan agreement, which is the contract before us, there is no clause which shows that the liability of the guarantor is not co-extensive with the principal debtor. Therefore Section 128 of the Indian Contract Act will apply here without any exception. 13. After a thorough reading of the Form of Guarantee for Advances Credit Generally, our attention has been drawn to Clause 2 where Respondent No.1, C.L. Vimala and one of her sons N. Ramesh Babu, have stated under the relevant part of the clause as under: 2)......in relation to the subject matter of this guarantee or any judgement or award obtained by you against the principal debtor shall be binding on us.... 14. This Court has held in United Bank of India v. Bengal Behar Construction Company Ltd. and others, (1998) 8 SCC 653, that the Clauses in the letter of guarantee are binding on the guarantors as follows: In view of the above, the question regarding confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the bank by the respondents. But it appears that, time and again, they have failed to comply with the orders. 17. The respondent Nos.3 to 8 who were actual owners of the property in dispute have remained ex-parte throughout, i.e. from the date of filing of Miscellaneous Petition dated 29th April, 2006, challenging the award dated 20th March, 2004. Respondent No.1 had the only right of residence in respect of the property in question. She did not dispute the fact that she was the guarantor in the transaction by which her sons took loan from the Central Bank. It is also not in dispute that the property was mortgaged with the Bank. 18. We cannot brush aside the fact that respondent Nos.4, 6 7 filed a claim petition before the Recovery Officer on 4th January, 2007 claiming their share of balance of sale proceedings after adjustment of the dues of the Central Bank which shows that the parties to the dispute have accepted the award passed by the Lok Adalat. It appears to us that the High Court did not consider the said facts and further it has escaped from the mind of the High Court that the auction purchaser has purchased the auctioned property for sale consideration of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X
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