LexSOBRAN SINGH versus STATE OF U.P. & ORS.
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[2014] 10 S.C.R. 657 SOBRAN SINGH v. STATE OF U.P. & ORS. (Civil Appeal No. 9100 of 2014 etc.) SEPTEMBER 23, 2014 rr.s. THAKUR c. NAGAPPAN AND ADARSH KUMAR GOEL, JJ.) Uttar Pradesh Public Moneys (Recovery of Dues) Act, A B 1972: c s.4(2) rlw s. 3 - Guarantor claiming that recovery proceedings cannot be initiated against him unless properties mortgaged by principal borrower remain to be sold for payment of outstanding dues - The protection referred to in 0 s.4(2) has no application to guarantor, and the same is confined only to the principal debtor who has charged his properties in the manner indicated - Pawan Kumar Jain and Ashok Mahajan, overruled. Dismissing the appeals, the Court HELD: 1.1. Sections 3 and 4 of the Uttar Pradesh Public Moneys (Recovery of Dues) Act, 1972 make it clear that recovery of outstanding loan amount can be made E as arrears of land revenue only if there exists an F agreement to that effect. In the instant case, the agreement executed between the guarantor-appellant and respondent No.4-Corporation does provide for recovery of money due thereunder as arrears of land revenue. [para 5 & 6) [664-B-D] 1.2. In cases where there is a charge, mortgage or encumbrance referred to in s.4(2), the sale of such property is made a condition precedent for, recovery of 657 G H 658 SUPREME COURT REPORTS [2014] 10 S.C.R. A the balance amount, if any, by initiating proceedings against the defaulter in terms of clause (b) of s.4(2). It has no application to cases in which the person referred to in s.3 has not mortgaged, charged, pledged or encumbered in favour of the State Government or the B Corporation or a Government Company or a banking company, any property owned by any such person. I n the instant case, the guarantors have not created any mortgage, charge or encumbrance in regard to their immovable property in favour of the respondent- C Corporation. The bar against initiation of recovery proceedings till such time such mortgaged, charged or encumbered properties are sold can, therefore, have no application to them. The protection is confined only to the principal debtor who has charged his properties in the 0 manner indicated. [para 7-8) [665-B-E] 1.3. The legislature has made a conscious departure in the case of guarantors while providing protection to the borrowers whose properties stand mortgaged in connection with the loan transactions. The general E principle of law that the liability of the guarantor is co~ extensive with that of the principal borrower continues to hold good even when recovery proceedings are taken under a special enactment. There is nothing in s. 4(2) to suggest that the legal edifice on which the liability of the F borrower and the guarantor are made co-extensive stands altered. All that the statute provides is that while the liability of the guarantor remains enforceable coextensively with the principal borrower, the latter shall not be proceeded against so long as properties G mortgaged, charged or encumbered by him have not been sold. [para 9) [666-B-E] H 1.4. Pawan Kumar Jain's case laying down that the guarantors cannot be proceeded against unless the property mortgaged or charged by the principal debtors I SOBRAN SINGH v. STATE OF U.P. 659 is first sold, is overruled, and so also Ashok Mahajan's A case. This Court holds that the guarantors do not enjoy any protection against recovery of proceedings uls 4(2) of the U.P. Pub:ic Moneys (Recovery of Dues) Act, 1972. [para 10] [666-H; 667-A] Pawan Kumar Jain v. Pradeshiya Industrial and Investment Corporation of U.P. Ltd. and Ors. 2004 (3) Suppl. SCR 447 = (2004) 6 SCC 758, Ashok Mahajan v. State of U.P. 2006 (6) Suppl. SCR 657 = (2006) 10 sec 332 - overruled. Case Law Reference: 2004 (3) Suppl. SCR 447 overruled 2006 (6) Suppl. SCR 657 overruled para 2 para 2 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9100 of 2014. From the Judgment & Order dated 24.7.2006 of the High Court of Judicature at Allahabad in Civil Misc. Writ Petition No. 37172 of 2006. WITH C.A. No. 422 of 2008 & 9101 of 2014. Aditya Dewan, Lakshmi Raman Singh, Subramonium Prasad, Ashim Vachher, Rajiv Dalal, Sunil Kumar Jain, Pawan Shree Agrawal, Sachin Sharma for the Appellant. B c D E F P.V. Shetty, Aarohi Bhalla, Ardhendumauli Kumar Prasad, Mike P. Desai, Ajay Sharma, Rajeev Sharma, Neelam G Sharma, Ashok Kumar Singh, Gunnam Venkateswara
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