LexH.R. BASAVARAJ (DEAD) BY HIS L. R. S & ANR. versus CANARA BANK & ORS.
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\ [2009] 15 (ADDL) S.C.R. 504 A H.R. BASAVARAJ (DEAD) BY HIS L. R. S & ANR. v. ~ .... CANARA BANK & ORS. (Civil Appeal No. 233 of 2003) OCTOBER 28, 2009 B [TARUN CHATTERJEE AND AFTAB ALAM, JJ.] Bombay Public Trust Act, 1950: y c Public Trust - LST, a public trust engaged in publication work - LST running in loss and unable to properly manage its affairs - Publication, printing rights and machineries transferred to private limited companies - By order of court, trust property vested in the administrator appointed by the · D Government - Loan granted for proper functioning of trust and hypothecation of properties of trust itself - Liability to repay ,. the loan - Held: Trust would be liable to repay the loan - All -.. the transactions were entered into for running the trust - Even appointment of receivers and the subsequent transactions " E entered into by the administrators was for furthering the business concerns of LST itself - Trust being the sole beneficiary would not only be liable for the repayment but is also estopped from denying its liability under the contract - Principle of estoppel. ' .,-, F Contract Act, 1872: s. 129 - Continuing guarantee - Meaning of - Discussed - On facts, agreement to the effect, that guarantee to continue to all future transactions except when guarantor disclaimed G from his liability through a written document - Deed clearly mentioning that between the guarantor and borrower, the guarantor is only a surety - Held: Liability of guarantor would ,._., be co-extensive to that of the boffower since between the bank and the guarantor, the surety is the principal debtor - H 504 ~ H.R. BASAVARAJ (DEAD) BY HIS L. R. S & ANR. v. 505 CANARA BANK & ORS. Guarantee would thus stand and legal representatives of A .., ~ deceased surety would be liable to repay the loan. s. 62 - Alteration or variation in terms of contract can be B only when both parties voluntarily agree to change terms of agreement. Doctrines/Principles: Principle of estoppel - Applicability of - Discussed. c Lokashikshana Trust (LST), a public trust was engaged in publication work. In 1974, Board of trustees of LST, entered into an agreement with KPP for transfer of publication and printing rights and also to create lease D 'f in building owned by the trust. Some interested persons filed suit O.S.4/1977 praying for removal of trustees and ~ formulation of scheme for managing the affairs of trust. During the pendency of the suit, KPP entered into an agreement with M/s JKNP, appellant no.2 for transfer of E all its rights, interests and liabilities. There was a loan transaction between JKNP and the respondent-Bank. Appellant No.1 alongwith the other office bearers of JKNP ' allegedly executed a demand note. On the same day, ' JKNP obtained overdraft facility of Rs.5 lacs. Appellant No.1 alongwith the Executive Director of JKNP also F ..... executed a hypothecation agreement to provide collateral security to the bank. Subsequently JKNP and its Executive Director executed a pronote for a term loan of Rs.2.86 lacs. G The appellants also executed an agreement of 4- guarantee to the tune of Rs.13 lacs. Respondent-bank filed recovery suit against appellants which was decreed. Meanwhile an interim order was passed in O.S.No. 4/1977 appointing JKNP as the receiver of the properties in its H 506 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R. A possession. O.S.No. 4/1977 was dismissed. On 9.9.1980, Charity Commissioner was appointed as a new receiver. )... ~ Again the Court relieved Charity Commissioner of receivership of property and instead appointed a retired District Judge to be the receiver and manage the Trust B Publication. Meanwhile LST Act was enacted which aimed at taking over the management of trust by Government due to prolonged litigation pending before the courts. Accordingly trust properties came to be vested in the administrator appointed by the Government. This ·;.1 c action of Government was validated by High Court. The present appeal arose out of three different suits filed by the lending banks in three different courts for recovery of money. The alleged loan transactions took D place between the respondent bank and appellants between 1917 ·and 1981. The first loan was taken by KPP r from respondent bank in 1977. The second loan was secured by JKNP in 1978 after it had purchased the rights -( acquired by K
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