STATE BANK OF MYSORE Vs. SRI A M DEENATHAYALAN
LAWS(DR)-2003-12-13
DEBTS RECOVERY APPELLATE TRIBUNAL
Decided on December 29,2003

Appellant
VERSUS
Respondents

JUDGEMENT

A.Subbulakshmy, - (1.)AGGRIEVED against the order passed by the PO, DRT-1, Chennai, on the direction that the property of D3 should be sold only after exhausting the securities furnished by D1 and D2 and in case the amount realised is insufficient, then the balance may be recovered by selling the security furnished by D3 and also awarding interest pendente life and future at 11% simple, the appellant Bank has come forward with this appeal,
(2.)With regard to the first point that the properly of D3 should be sold only after exhausting the securities furnished by D1 and D2, Counsel for the appellant Bank submits that D3 is the guarantor and D3 executed the guarantee document and the Bank is entitled to proceed against the principal debtors and the guarantor and the liability of the principal debtors and guarantor is co-extensive and the Bank cannot be deprived of its opportunity to proceed against the property of the guarantor and it should not be directed that the Bank should proceed only against D1 and D2 in the first instance and then only the Bank should proceed against D3. Counsel for the appellant Bank submits that all the properties available should be proceeded for realisation of the amount due to the Bank and the Bank cannot be fettered with the condition that D3's property should be proceeded only after exhausting the remedy as against D1 and D2.
Counsel for the respondents submits that the RDDB & FI Act, 1993 gives special power and Section-22 of the Act emphasises that the Tribunal and the Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 but shall be guided by the principles of natural justice, and he further submits that some fraud has been committed by the Bank Officers in granting loan to D1 and D2 and only under such circumstances it has been ordered by the PO, DRT-1 that the property of D1 and D2 may be proceeded first and then against the property of D3. He also relies upon the decision of the Hon'ble Supreme Court in The Bank of Bihar Ltd. v. Dr. Damodar Prasad and Anr., AIR 1969 SC 297. In para-4 of that Judgment the Apex Court has observed that--

"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 Wright v. Simpson, (1802) 6 Ves Jun 714 at p. 734=31 ER 1272 at p. 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."

(3.)MUCH reliance is placed on the above decision by the Counsel for the respondents and he submits that in the absence of some special equity the surety has no right to restrain an action against him by the creditor. It has to be borne in mind that D3 is the guarantor and he executed the guarantee documents. The liability of the principal debtor and the guarantor is co-extensive. The decree-holder cannot be forced to first exhaust the remedy by way of execution of mortgage decree alone and then proceed against the guarantor.


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