1 PGK IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE Writ Petition No.8415 of 2009 Isha Avishkar Dwellers Pvt.Ltd. & ors. ... Petitioners v/s. Rajaram Sahakari Bank Ltd. & Ors. ... Respondents Mr.R.S. Ghadge i/by Mr.A.S. Desai for Petitioners. Mr.Dinesh Bhosale for Res.Nos.2 to 5. Mr.R.M. Patne, AGP for Res.Nos.17 & 18. Mr.Ajit M. Suvagae i/by Mr.S.S.Patwardhan for Res.Nos.9 to 11. Mr.G.V. Bhagwat i/by M/s.Divekar & Co. for Res.No.1. ----- CORAM : SMT.ROSHAN DALVI, J. DATED : 22nd January, 2010 P.C. : 1.Heard the learned Advocates for the parties. 2.Rule. Rule is made returnable forthwith. 3.Respondent No.1-Bank advanced a loan of Rs.2.3 Crores to Respondent No.2. Respondent Nos.3 to 11 guaranteed that loan. Respondent Nos.3 to 5 are the partners of Respondent No.2. The other Respondents are the first guarantors to the initial loan. This loan was also granted to another person stated to be the co-borrower (since deceased). Respondent Nos.9 to 11 are the heirs 2 and legal representatives of the co-borrower. The usual documents for the purpose of taking the loan and offering securities have been accepted by Respondent No.2 in favour of Respondent No.1-Bank. 4.A Sports Complex was to be developed by Respondent No. 2. Respondent No.2 could not develop the Sports Complex and entered into a Development Agreement assigning their rights to the Petitioners as Project Manager. The Petitioners were to take over the liability of Respondent No.2 with regard to the loan. They, inter alia, executed a promissory note and a guarantee Agreement on 23rd September 2002 with regard to the said liability. Under Clause-5 of the Guarantee Agreement, the Petitioners confirmed that the initial Guarantee Agreement shall remain subsisting until the repayment of the entire loan amount and the Petitioners would not be released from their liability. It was further specified that if the agreement between Respondent No.2 and the Petitioners was terminated within 9 months due to any unforeseen circumstances, the Petitioners would be liable, only to the extent of Rs.1 Crore being disbursed pursuant to the Guarantee Agreement along with interest thereon, jointly and severally with the principal debtor and in that event, the liability for the remaining amount of Rs.1.3 Crores and interest thereon would be only upon the initial 3 borrower / principal debtor; Respondent No.2 and the co-borrower-Chandanmal Yuvraj Sanghvi (since deceased) who is now represented by Respondent Nos.9 to 11. If the agreement is terminated later, their liability would be to the full extent. This agreement executed by the Petitioners shows the confirmation of the liability. This stands to reason. If the project for which the loan was initially sanctioned is not developed and is transferred to another person who takes advantage of the loan initially disbursed by the Bank, he must be entitled to develop the project only subject to taking over the liability of the loan. 5.The Bank, however, has got an undertaking executed by the principal debtor and its partners, confirming that they have taken the loan for the construction of the stadium-cum-commercial complex of the Kolhapur Sports Association and for the purpose of the repayment of the loan and completion of the project they have appointed the Petitioners as Project Managers and executed an Agreement of Development with them to complete the project. Respondent No.2, therefore, undertook that until the project was completed and the Bank loan was repaid, they would not terminate the agreement executed in favour of the Petitioners. They further agreed not to violate any terms of the agreement and in case that happened, they would repay the entire loan of Rs.2.3 4 Crores along with interest thereon to the Bank immediately along with the co-borrower. 6.The Petitioners relied upon the said undertaking. The agreement with the Petitioners has been cancelled / terminated and Respondent No.11 who, as one of the heirs of the co-borrower, is assigned rights in the development of the project. Hence disputes have arisen between the Petitioners and the principal debtor as well as Respondent No.11. The Petitioners allege collusion. The Bank has nothing to do with the dispute. The Petitioners contend that because the said undertaking is breached and their agreement as Project Managers has been terminated, they are not liable for repayment of the loan to the Bank. Respondent No.11 would certainly be liable as he is one of the heirs and legal representatives of the co-borrower himself and now developing the Sports Complex. 7.Nevertheless, the liability of the Petitioners as guarantors under the specific agreement entered into by them with the Bank showing the specifications of their liability dated 23rd September 2002 cannot be ipso facto terminated because of any dispute they have with either of the principal borrowers or the heirs of the co-borrower or even because of any collusion between them. Their liability to the Bank is as specified in 5 Clause-5 of their Agreement dated 23rd September 2002. 8.As guarantors their liability would be co-extensive with the principal debtor. Had that Contract been terminated within 9 months, under the specific terms of the agreement, their liability would have been only to the extent of Rs.1 Crore. Their Contract has been terminated after 2 years. In that event, their liability would be to the full extent. 9.However, it may be clarified that the Petitioners, as the guarantors, would be liable to pay only if the movable and immovable properties of the judgment debtor, which have been mortgaged / charged to the Bank, are made available to the Petitioners to enable the Petitioners to follow their separate remedy against the principal debtors or the heirs of the co-borrower after they discharge their liability under their specific guarantee Contract with the Bank. It is, therefore, clarified that the Bank shall not lose or impair such extent of security, as would be required if the guarantors are made liable upon their Contract of Guarantee. 10.Respondent No.1-Bank started recovery proceedings before the Assistant Registrar, Co-operative Societies. However, in view of the fact that there have been 2 6 sets of transactions with 2 sets of documents issued in favour of the Bank - by Respondent No.2 as the principal debtors along with the predecessor-in-title of Respondent Nos.9 to 11 as the co-borrower earlier and the other by the Petitioners later, upon they being appointed the Project Managers for development of the Sports Complex, the Assistant Registrar directed the Bank to file a dispute as he found certain complicated questions of fact to have been involved. In Revision filed by the Bank before the Divisional Joint Registrar, Co-operative Societies, Kolhapur Division, Kolhapur, under Section 154 of the Maharashtra Co- operative Societies Act, 1960, the order of the Assistant Registrar has been set aside and the matter is remanded back for fresh hearing as per law. 11.It is seen that Clause-5 of the Agreement dated 23rd September 2002 clarifies this issue and indeed there is no dispute with regard to the liability of Respondent No.2 as the principal debtor along with the co-borrower, the other Respondents as guarantors and the Petitioners also as guarantors. There is also no dispute that towards the loan of Rs.2.3 Crores, the securities which were offered of several immovable properties was to the extent of more than Rs. 5 Crores. The 1st Respondent-Bank is entitled to be repaid their loan with the accrued interest from any of the above 7 sources. 12.Hence the impugned order directing the remand for a fresh hearing does not deserve any interference. The Assistant Registrar shall comply with the impugned order in respect of the issue of the Recovery Certificate. 13.Consequently, the Writ Petition is dismissed. Rule is discharged accordingly. (SMT.ROSHAN DALVI, J.)