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1986 (4) TMI 353

.K. Sen Gupta, 1. This appeal by two of the defendants is directed against the order dated 2nd May, 1983 allowing the application made by the plaintiff-first respondent, Grindlays Bank Ltd. (hereinafter referred to as 'the Bank') for a final judgment under Chap. XIIIA of the Original Side Rules. The facts are in a narrow compass which are stated briefly hereafter. 2. On or about 6th Nov. 1973, Cresswell Breweries Ltd. the second respondent (first defendant in the suit) made an application to the Bank for financial assistance by way of, inter alia, a Term Loan of ₹ 75,00,000/- for the purpose of financing the setting up of a brewery project at Chowk Bansberia in the District of Hooghly. The Bank by its letter dt. 21st Aug. 1974 informed the second respondent that the said application for a Term Loan of ₹ 75,00,000/- for the said project had been sanctioned by the Bank subject, inter alia, to the approval of the Reserve Bank of India to whom the application was being submitted by the Bank. In or about 1974 pending the consideration by the Reserve Bank of India of the said application for Term Loan, the Bank at the request of the second respondent and 7or the defen .....

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9 became due and payable. The second respondent also created an equitable mortgage of Immovable property owned by the second respondent situate at Bansberia in the District of Hooghly. It may be mentioned that the said equitable mortgage was for securing loan not only of the plaintiff bank but also those other banks i.e. Allahabad Bank, United Industrial Bank Ltd. and Punjab & Sind Bank Ltd. Which had, along with the first respondent proposed to grant a consortium loan of ₹ 70,00,000/-including the said proposed term loan of ₹ 25,00,000/- by the first respondent. At the time of institution of the suit leave was obtained by the Bank under Order 2 Rule 2 of the Civil P.C. to institute the suit for enforcement of the said mortgage by a separate suit in the appropriate forum. 4. After the institution of the suit the plaintiff bank took out an application under Chap. XIIIA of the Original Side Rules for obtaining a summary judgment for the sum of ₹ 13,08,535,10 both against M/s. Cresswell Breweries Ltd., the principal debtor as well as its Directors Sri Pradeep Chand Lal and Sri Santanu Chaudhury, the appellants and Syed Jabber one of the defendants in the suit. Th .....

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defendants for the amount claimed together with the interest at the rate of 6% per annum till realisation and has ordered that such decree should be a personal decree against the defendants 1 and 2 and so far as it is against the other defendants their shares in the joint properties would be liable. The defendant 5 has appealed. The question which the court was concerned with in the said appeal is whether it is competent for the plaintiff to obtain a decree of the character which has been made in his favour. Udayakanta and Hridayakanta, the defendants 1 and 2 purported to execute the bond in their individual and personal capacity and not as Kartas, nor members of a joint family. As regards consideration, (a) ₹ 5,000/- was said to be on two heads ₹ 1,250/- being the consideration for the sale of the mortgagee's right in a certain decree in the property described in Schedule 1 and ₹ 3,750/- as nazar for a mirash settlement of their rights in the property described in Schedule 2; and (b) ₹ 8,000/- being due as the price of certain decrees and bonds. It was said that out of the aforesaid amount of ₹ 5,000/- and ₹ 8,000/- i.e. ₹ 13,000/-, & .....

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Nandy (1911) 9 IndCas 660 (Cal) a stipulation such as we have in this mortgage, that if the debt be not paid off by the sale of the hypothecated properties the mortgagee would be able to sell other properties of the mortgagor, does not imply that the personal remedy is to be postponed to that against the mortgaged properties. But a mortgagee in respect of a simple mortgage, in view of the provisions of Section 68, T. P. Act, has in our opinion, no cause of action for a relief in the shape of a decree for money independently of the mortgage and apart from his rights as mortgagee. Where none of the Clauses (b)(c) or (d) of that section are satisfied, he can only sue on his rights ex contractu upon the covenant under Clause (a) and it is not open to him to ignore the mortgage and fall back on the debt." 6. The above decision no doubt supports the contention of Mr. Sarker. It is therefore, necessary to consider whether the instant suit instituted by the Bank is a mortgage suit or not and whether Section 68 of the Transfer of Property Act has any application. This will necessarily depend on the construction of the pleadings. In this suit the plaintiff Bank has claimed a decree, in .....

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bill of exchange is therefore, not a suit on the main contract but it is a suit for recovery of what is an equivalent of cash had and received or a suit on a subsidiary contract." 9. A Promissory Note is a distinct cause of action independent of and apart from the mortgage. Similarly the cause of action based on the agreements for guarantee is independent of and apart from the mortgage. Thus the personal liability to repay the loan in the instant case arises independently of any existing mortgage and the suit is not by the mortgagee for mortgage money. Accordingly section 68 cannot have any application. In this connection reference may also be made to the judgment of this Court in the case of Nityananda Ghose v. Rajpur Chhaya Beni Cinema Ltd. reported in MANU/WB/0071/1953MANU/WB/0071/1953 : AIR1953Cal208 . In that case the suit was instituted by the plaintiff on or about 9th Jan. 1952. In para 1 of the plaint the claim against the defendant company was made only on the basis of its alleged liability as drawer of a Promissory Note dated 11th January 1949 for the sum of ₹ 40,000/- carrying interest at the rate of 6% per annum payable on demand to the plaintiff or order. Th .....

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y view, make a difference in the construction of Section 68(1)(a), T. P. Act or in the result of this application. Every mortgage represents both a loan and a security. The nature and terms of the security must be considered in each case in order to find out whether they support or negative the personal liability for repayment of the loan. In my view as I have already expressed, the personal liability referred to in Section 68(1)(a); T. P. Act is a personal liability inherent in the mortgage and not dehors the mortgage or independent of the mortgage. The principle behind this statutory provision, as I understand it, is the law's reluctance to make the mortgagor personally liable so long as his security is there to answer for the debt. But if the mortgagor chooses to create a personal liability by independent transaction like a promissory note, a cheque or other independent engagement completely dissociated from the mortgage, then he is not within the meaning of Section 68(1)(a), T. P. Act as I construe it nor within the principle that security should be called up first before personal liability is enforced. The reason is that by engaging into an independent contract for a debt .....

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pplication. On an appeal the Division Bench upheld the order of the learned Trial Judge. In that case two decisions in Sukhadakanta Bhattacharjee (AIR 1934 Cal 73) (supra) and Nitya Nanda Ghose AIR1953Cal208 (supra) were relied on. The Division Bench quoted in extenso the various passages from those two decisions although some of such passages are not known within quotations, obviously due to the printing errors. In that case the Court was more concerned with the exercise of the discretion by the learned Judge in refusing to stay the suit under Section 68(2) of the said Act but the court impliedly accepted the contention that Section 68(1)(a) had no application on the facts of that case. The Court observed in paragraph 16 (at p. 591) as follows. "The suit in the instant case is for recovery of the sum alleged to be due and payable by the appellant No. 1 the principal debtor to the bank for realisation of the securities furnished by the deeds of hypothecation and also enforcement of the guarantee. The present suit is also for adjudication of the right of the bank to the various securities created by the deeds of hypothecation vis-a-vis the claim made by the Firm, the 5th defend .....

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ase of Sukhadakanta v. Jogineekanta (supra) the Court also noted the fact that there was difficulty in the plaintiffs way in that case because no cash money was advanced and the consideration money of ₹ 12,000/- was made up of the items mentioned earlier in this judgment. The Court observed : "If the debt was to be sued upon, it was the different items in respect of which the liability was to be pleaded and proved and the mortgage could only be pleaded as evidence of admission or acknowledgment of the said liability. The plaint has not been framed in that way. On the plaint, as framed, the suit could not possibly be treated as a suit for recovery of the said items." 12. It is therefore evident that the Court has to examine the frame of the suit and come to the conclusion whether, or not the suit is on the mortgage for realisation of the mortgage money. As indicated earlier the present suit, on a proper construction of the pleadings, is not and cannot be a suit by the creditor qua mortgagee. It is a suit essentially to enforce the promissory note and the agreements of guarantee. 13. The contention of Mr. Sarkar, learned Advocate for the appellants can be tested in th .....

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led. Neither the principal debtor nor the surety discharged the admitted liability of the principal debtor in spite of demands. Under Section 128 of the Contract Act, save as provided in the contract, the liability of the surety is coextensive with that of the principal debtor. The surety became thus liable to pay the entire amount. His liability was immediate. It was not deferred until the creditor exhausted his remedies against the principal debtor." "Before payment the surety has no right to dictate terms to the creditor and ask him to pursue his remedies against the principal in the first instance. As Lord Eldon observed in Writ v. Simpson. (1802) 6 Ves Jun 714 : 31 ER 1272 1282; "But the surety is a guarantee; and it is his business to see whether the principal pays, and not that of creditor. In the absence of some special equity the surety has no right to restrain an action against him by the creditor on the ground that the principal is solvent or that the creditor may have relief against the principal in some other proceedings." 14. Thus if a suit can be filed, decree obtained and executed against the guarantors before any suit is instituted against the p .....

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keeping and handling of pledged goods and the security of pledged goods was lost on account of the negligence of the bank. On the aforesaid facts the Supreme Court held that in the circumstance aforesaid Section 141 of the Contract Act 1872 would be attracted. Supreme Court held that even if the surety of personal guarantee is not aware of any other security offered by the principal debtor yet once the right of the surety against the principal debtor is impaired by any action or inaction which implies negligence appearing from lack of supervision undertaken in the contract, the surety would be discharged under the combined operation of Sections 139 and 141 of the Act. 16. This case is distinguishable on facts. In that case the bank was prevented from taking recourse against the surety because the bank had in its possession various valuable properties and assets, belonging to the principal debtor and which were lost through the negligence of the Bank itself. Because of the negligence of the Bank which resulted in the loss of property it was held that Section 141 of the Contract Act came into operation. These are not the facts in the instant case before us. There is no such allegati .....

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