SCA/17125/2007 1/7 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 17125 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE RAVI R.TRIPATHI ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================= BABALDAS AMTHARAM PATEL AND ANOTHER Versus BHAGYALAXMI CO.OP.BANK LTD. AND ANOTHER ========================================= Appearance : MR HR PRAJAPATI for the Petitioners MR DHARMESH V SHAH for Respondent No.1 None for Respondent No.2 ========================================= CORAM : HONOURABLE MR.JUSTICE RAVI R.TRIPATHI Date : 25/06/2008 ORAL JUDGMENT 1. Present petition is filed by the petitioners who are the guarantors of the original borrower – proprietor of M/s.Darshak Trading Co. being Patel Laljibhai Ambalal – respondent No.2 in this petition. SCA/17125/2007 2/7 JUDGMENT 2. The facts which are not in dispute are that respondent No.2 herein had obtained hypothecation cash credit facility to the tune of Rs.4 lacs on 30.10.1993; that the bank executed the necessary documents and goods of respondent No.2 were pledged to the bank and the petitioners stood as guarantors. Later on, the original borrower did not pay the amount after utilizing the hypothecation cash credit facility and therefore, the bank had to file Lavad Suit being 181 of 1995 before the Board of Nominees for recovery of Rs.26,95,196.75 ps. from the petitioners as well as from the original borrower holding them jointly and severally liable. The Board of Nominees allowed the suit by judgment and order dated 09.07.2001. The Board of Nominees was pleased to accept the claim of the plaintiff bank qua defendant No.1 only, i.e. original borrower and ordered that an amount of Rs.26,95,196.75 ps. be recovered from defendant No.1 with 21% interest since 01.10.1994. An amount of Rs.5,000/- was awarded towards cost. The suit qua the present petitioners was dismissed and the stay granted against their properties was vacated. 3. The bank, being aggrieved by the aforesaid judgment and order, preferred an appeal before the Gujarat State Cooperative Tribunal being Appeal No.552 of 2001. The Tribunal, acting as a 'Court of equity', as is mentioned in judgment and order dated 31.01.2007, allowed the appeal of the bank and ordered that an amount of Rs.4 lacs be recovered with 21% interest since 30.10.1993 from the movable and immovable properties of the SCA/17125/2007 3/7 JUDGMENT defendants – the present petitioners. The Tribunal was also pleased to issue an injunction order against the petitioners from dealing with their immovable properties. 4. Mr.Prajapati, learned advocate for the petitioners, submitted that this is a case wherein the Tribunal has failed to consider a pure question of law raised before the Tribunal in the appeal memo in light of Sections 139 and 141 of the Indian Contracts Act, 1872. Learned advocate for the petitioners invited attention of the Court to the relevant pleadings in the appeal memo produced at Annexure-D, page 66. Learned advocate for the petitioners invited focused attention of the Court to paragraph No.6 and submitted that in absence of the material on record, the Cooperative Tribunal had no reason to vary the judgment and order passed by the Board of Nominees. 5. The learned advocate for the petitioners invited attention of the Court to paragraph Nos.4 and 5 of the judgment and order of the Tribunal, wherein the Tribunal described itself as a 'Court of equity' and observed that though it is not possible for it to order recovery of the entire amount of Rs.26,95,196.75 ps. with interest @ 18% since 30.10.1993, an order is required to be passed atleast for the principal amount of Rs.4 lacs against the present petitioners. Looking to the contents of Section 139, a surety stands discharged when there is lapse on the part of the creditor and if SCA/17125/2007 4/7 JUDGMENT that is so, that is for the entire amount and it could not be bifurcated in two parts as is sought to be done by the Hon'ble Tribunal. 6. Mr.D.V.Shah, learned advocate for the respondent bank, submitted that the judgment and order of the Tribunal is not required to be interfered with by this Court while exercising power under Article 227 of the Constitution of India. He submitted that the Tribunal has acted as a 'Court of equity' and has tried to strike a balance between the interest of the depositors of the bank and the guarantors – the petitioners of this petition. Learned advocate for the respondent bank is not able to dislodge the submissions made by the learned advocate for the petitioners about the involvement of the bank officers, which is borne out from the averments made in the appeal memo. The submission of learned advocate does not find favour with the Court. 7. The learned advocate for the respondent bank submitted that as no discharge application was submitted by the petitioners before the board of Nominees, the petitioners should not be allowed to take that contention and the same should not be entertained by this Court. 8. The learned advocate for the respondent bank relied upon a decision of the Hon'ble the Apex Court in the matter of Mohd. Yunus Vs. Mohd. Mustaqim and others, reported in AIR 1984 SCA/17125/2007 5/7 JUDGMENT Supreme Court 38, wherein the Hon'ble the Apex Court was pleased to observe about the power of High Court under Article 227 of the Constitution of India. Relevant part of the observations reads as under:- “A mere wrong decision without anything more is not enough to attract the jurisdiction of the High Court under Article 227. The supervisory jurisdiction conferred on the High Courts under Article 227 of the Constitution is limited “to seeing that an inferior Court or Tribunal functions within the limits of its authority” and not to correct an error apparent on the face of the record, much less an error of law. In exercising the supervisory power under Article 227, the High Court does not act as an appellate Court or Tribunal. It will not review or re- weigh the evidence upon which the determination of the inferior court or tribunal purports to be based or to correct errors of law in the decision.” In the present case, the Cooperative Tribunal has stated in paragraph 5 that it is acting as a 'Court of equity', but without being alive to the relevant provisions of law. It has passed an order which cannot be allowed to stand. The guarantors may be either liable to pay the entire amount which is due and payable by the principle borrower or not at all. There cannot be a bifurcation as the Tribunal has done by branding itself a 'Court of equity'. 9. In the result, the petition is allowed. Judgment and order dated 31.01.2007 passed by the Gujarat State Cooperative Tribunal in Appeal No.552 of 2001 is quashed and set aside. The order SCA/17125/2007 6/7 JUDGMENT passed by the Board of Nominees is restored. Rule is made absolute. No costs. 10. At this juncture, Mr.Shah, learned advocate for the respondent bank requests that the injunction granted by the Cooperative Tribunal while allowing Appeal No.552 of 2001 be continued so that the petitioners do not sale off their property with a view to frustrate the claim of the respondent bank. The request is a good gesture on the part of a sincere advocate, but there is no anxiety on the part of the officers of the respondent bank in this regard. The injunction which is now prayed to be continued against the petitioners was granted by the Cooperative Tribunal on 31.01.2007. There was no injunction against the bank from taking appropriate steps for recovery of the amount in question. Still, the bank officers have not taken any steps in this regard, which speaks volumes for the bonafides of the bank officers. It is shocking that on 02.05.2008 this Court, when admitted this petition, had observed as under:- “The pendency of this application shall not operate as bar to the bank to recover the amount against principal borrower. Recovery if any, shall be subject to final order of this Court.” Despite this clear indication that the bank can take steps for recovery of the amount, the bank has not taken any steps. In fact, SCA/17125/2007 7/7 JUDGMENT this is high time when the bank should undertake exercise of introspection and start taking action against erring officers. The request of learned advocate Mr.Shah is found reasonable. The injunction granted by the Cooperative Tribunal is ordered to continue till 30.08.2008. (RAVI R.TRIPATHI, J.) *Shitole