LexINDUSTRIAL INVESTMENT BANK OF INDIA LTD. versus BISHWANATH JHUNJHUNWALA
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.. .f [2009] 13 (ADDL.) S.C.R. 391 INDUSTRIAL INVESTMENT BANK OF INDIA LTD. v. BISHWANATH JHUNJHUNWALA (Civil Appeal No. 4613 of 2000) AUGUST 18, 2009 [DALVEER BHANDARI AND H.L. DATTU, JJ.] A B Debt - Recovery of - Liability of guarantor vis-a-vis principal debtor - Default in loan payment - Lending Bank initiating proceedings against principal debtor as well as C guarantor in different forums - High Court in exercise of jurisdiction under Article 227 of Constitution of India staying proceedings before Tribunal till the right of the lending Bank was established against the principal debtor - On appeal, held: Order of High Court not justified - Liability of guarantor D and principal debtor are co-extensive and not alternative - Industrial Reconstruction Bank of India Act, 1984 - s. 40 - Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - s. 19 Constitution of India, 1950 - Article 227. Appellant-Bank sanction~d loan to a company. E Respondent, the Director of the borrower company stood guarantor. On default, appellant-Bank initiated proceedings u/s. 40 of Industrial Reconstruction Bank of India Act, 1984 against the borrower company. During pendency thereof, it also initiated proceedings against F the respondent-Guarantor before Debts Recovery Tribunal. Respondent filed application before the Tribunal to stay the proceedings before the Tribunal on the ground that the right of the Bank against the guarantor did not crystallize till the rights of the Bank against the G borrower company was not established. Tribunal dismissed the application. High Court in exercise of its jurisdiction under Article 227 of Constitution of India stayed the proceedings before the Tribunal. Hence the 391 H 392 SUPREME COURT REPORTS [2009] 13 (ADDL.) S.C.R. A present appeal. Allowing the appeal, the Court HELD: The liability of the guarantor and principle debtors are co-extensive and not in alternative. Th~ High B Court under its power of superintendence under Article 227 of the Constitution of India was not justified to stay further proceedings in the application before the Tribunal. [Para 30] [400-E-G] c State Bank of India v. Mis. lndexport Registered and Ors. AIR 1992 SC 1740, relied on. Bank of Bihar Ltd. v. Damodar Prasad and Anr.(1969) 1 SCR 620; Lachhman Joharimal v. Bapu Khandu and Tukaram Khandoji (1869) 6 Bombay High Court Reports D 241; Jagannath Ganeshram Agarwala v. Shivnarayan ~ Bhagirath and Ors. AIR 1940 Bombay 247; Hukumchand Insurance Co. Ltd. v. The Bank of Baroda and Ors. AIR 1977 Kant 204; Transcore v. Union of India and Anr. (2008) 1 SCC 125; A.P. State Financial Corporation v. Mis Gar Re-Rolling E Mills and Anr. (1994) 2 SCC 647, referred to. Polock and Mui/a on Indian Contract and Specific Relief Act, TenthEdition, p. 728; Chitty on Contracts, 24th Edition, • Volume 2p.1031; Halsbury's Laws of England, Fourth ,.__ F · Edition,Vol. 20,paragraph 159 p. 87, referred to. - i - G H Case Law Reference: (1969) 1 SCR 620 Referred to. Para 19 (1869)6 Bombay High Court Reports 241 Referred to. Para 19 AIR 1992 SC 1740 Relied on. AIR 1940 Bombay 247 Referred to. Para 20 Para 24 -~· INDUSTRIAL INVESTMENT BANK OF INDIA LTD. v. 393 BISHWANATH JHUNJHUNWALA AIR 1977 Kant 204 Referred to. Para 25 A (2008) 1 sec 125 Referred to. Para 28 (1994) 2 sec 647 Referred to. Para 29 CIVIL APPELLATE JURISDICTION : Civil Appeal No. B 4613 of 2000. From the Judgment & Order dated 10.9.1999 of the High y Court of Calcutta in C.O. No. 1581 of 1999. J.L. Gupta, Sanjay Bhatt, Abhishek Kumar, Manjula Gupta c for the Appellant. S.K. Bhattacharya, B.P. Yadav for the Respondent. ~ The Judgment of the Court was delivered by D ~ DALVEER BHANDARI, J. 1. This appeal is directed against the judgment of the High Court of Calcutta in Civil Revisional Jurisdictior. dated 10.9.1999 in C.O. No. 1581 of 1999. 2. Briefly stated the facts are as follows: E The appellant industrial Investment Bank of India Ltd. ~ (hereinafter referred to as "the appellant") on 27.9.1994 ~· sanctioned the first short term working capital loan of Rs.3 crores in favour of Modern Maileables Limited (hereinafter F referred to as ·"the borrower company"). 3. The loan agreement was entered into between the appellant and the borrower company on 03.10.1994 in respect of the first short term working capital loan of Rs.3 crores. The G said loan agreement wa
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