Syndicate Bank vs NAROTAM JENA

THE Branch Manager, Syndicate Bank, Jagatsinghpur, the sole opposite party in C. D. Case No. 9 of 1996, has filed this appeal challenging the orders dated 24. 7. 1996 of the District Forum, Jagatsinghpur directing him to pay compensation of Rupees 5,000 and cost of litigation Rupees 300 to the complainant within a month and also to allow complainant to withdraw the maturity value of his account bearing No. PDG-78 vide P. D. 199/94 dated 12. 12. 1994 after its maturity on 12. 12. 1996.

THE facts of the case in brief are that complainant/respondent filed the aforesaid C. D. Case stating therein that in order to meet emergent need he had opened daily savings account bearing No. G-78 in the opposite party Bank and deposited Rs. 5,300 in the said account in the year 1978. On 1. 8. 1991, the opposite party Bank converted said account into a fixed deposit accout viz. , Pigmy Deposit V. C. C. No. G-78 without his knowledge. On 10. 6. 1995, complainant applied to withdraw the entire amount Rupees 8,000 from his said P. D. VCC Account producing withdrawal form to meet the treatment of his wife who suddenly fell ill. But, opposite parties deferred payment and ultimately told him that unless the loan dues against Niranjan Naik for whose loan transaction he stands as a guarantor, are cleared up, they are not going to allow him to withdraw the amount under P. D. VCC Account No. G-78. But, for the loan taken by Niranjan Naik for which he stands as a guarantor, was of the year 1980 which has no connection with his said Account P. D. G-78. Said Account No. G-78 is an independent loan transaction of the complainant which is not mortgaged in respect to the loan transaction of Niranjan Naik. The opposite parties have caused deficiency in service to him by withholding his money under the aforesaid account without taking proper steps against Niranjan Naik for recovery of the loan amount. Therefore, complainant filed the C. D. case to direct opposite parties to make him payment the total sum as per Account No. G-78 with interest @ 18% per annum from 20. 1. 1994 and penalty Rupees 25,000 with cost of litigation as his wife has become seriously ill and bedridden in absence of proper treatment due to want of money. The stand of the opposite parties as per their writt version in brief is that complainant stood as a surety/co-obligant in respect to loan/over draft Account No. 26/80 in favour of loanee of the opposite party Bank - Niranjan Naik. Complainant executed an agreement on 10. 9. 1980 jointly with borrower Niranjan Naik making him jointly and severally liable to repay the loan dues further agreeing upon that if any money payable by the said borrower falls due and remains unpaid, the opposite party Bank will be entitled to recover the same from the surety/complainant notwithstanding the remedies of Bank have against the borrower. Complainant has also agreed through said agreement that if the guarantee obligation becomes inoperative or unenforceable for any reason whatsoever, the amount due under the said loan account shall be paid by him as the principal debtor and the Bank shall be at liberty to recover said dues from him. The opposite parties have denied all other allegations made by the complainant against them. They say that vide letter dated 12. 12. 1994 voluntarily, complainant offered his V. C. C. No. 770012 and Pigmy Deposit, in short, P. D. G. No. 78 as security for the above loan incurred by Niranjan Naik, in short, N. Naik. Vide said letter complainant authorisedopposite party Bank to adjust the proceeds of his account to the liability of N. Naik at any time without notice to him and agreed that Bank can exercise its general lien on his aforesaid deposit at any time without referring to him. Accordingly, opposite party Bank has exercised its general lien on the above deposit of the complainant and have informed complainant about this vide letter dated 17. 11. 1995. The complainant is not a consumer and the C. D. case is not maintainable and is barred by limitation. Only to harass opposite party, complainant has filed the C. D. case on false and baseless and concocted ground. Thus opposite parties had claimed to dismiss the C. D. case awarding cost in their favour.

As per order dated 24. 7. 1996, the District Forum observed that the loan amount Rupees 2,000 taken by N. Naik remained unpaid until date. That, P. D. G.-78 on the strength of written application (Ext. 1) dated 12. 12. 1994 of the complainant to the opposite party Bank has been convected to fixed deposit No. 199/1994, Ext. II dated 12. 12. 1994 amounting to Rs. 5,000 and its date of maturity is 12. 12. 1996. That, though the opposite party Bank claims that complainant had pledged the fixed deposit amount as against the loan bearing No. 26 of 80 in favour of N. Naik for whom complainant stood as a guarantor yet the District Forum found there is no mention of any pledged account of the complainant as a guarantor in the loan bond Ext. IV dated 10. 9. 1980. On verification of Ext. 1, District Forum hold that as per Ext. 1 dated 12. 12. 1994 when complainant has requested opposite party Bank to convert P. D. G. No. 78 to fixed deposit to fetch more money and thereby did not offer to pledge this account as against the loan account of N. Naik, complainant must not have free consent and willingness to pledge his account, though Ext. III dated 12. 12. 1994. Therefore, in absence of free consent and willingness of the complainant to pledge his fixed deposit amount as against the time barred loan account of N. Naik mention about pledge of his account as per Ext. III has not only shaken the pillar of justice, but also, goes against the principle of fair trade practice, humanity, equity and fairness of law in view of Section 36-A of Manopolies and Restrictive Trade Practices Act according to the District Forum. The District Forum at the same time no doubt has observed that the liability of a surety is co-extensive with that of the principal debtor and the surety is liable to pay the entire amount due on the debtor and the surety''s liability is immediate and his liability is not over until the creditor exhausts his remedies against the principal debtor. But, in the present case, as the bank has never tried to recover the loan dues from the principal loanee N. Naik within prescribed period of limitation of three years from the date of advancement of loan viz. , on 10. 9. 1980 and dues have become time barred and Bank has not exhausted all the steps to recover loan dues from N. Naik, the opposite party Bank cannot make complainant liable under Section 128 of the Indian Contract Act, in short, I. C. Act fixing lien under Section 171 of I. C. Act on the aforesaid unpledged account No. 199 of 1994. According to District Forum, opposite party Bank cannot realise loan dues of N. Naik basing on Ext. III dated 12. 12. 1994 which appears to have been manufactured after expiry of fourteen years from the date of loan taken by N. Naik. In this end of the view, District Forum held that the decision reported in C. L. T. 1992 Vol. 74 at page 241, OLR Vol. I 1993 at page 9 and AIR 1992 at page 1815 cited by opposite party Bank are of no help to them more particularly when opposite party Bank failed to prove that it has exhausted all remedies to recover loan dues from the principal loanee-N. Naik and the claim of loan dues against N. Naik is barred by limitation, whereas liability on the complainant has been fixed after expiry of fourteen years. In view of these observations, District Forum decided that opposite party Bank thus caused deficiency in service to the complainant in not allowing to withdraw money from his Account viz. , P. D. 199 of 1994 and thereby brought him mental agony and physical and financial loss and, accordingly, passed the aforesaid orders dated 24. 7. 1996.

WE have heard the learned Counsel from both sides. Perused the pleadings of the parties, Exts. I to IV and grounds as per appeal memo challenging the impugned orders of the District Forum. Unless it is otherwise proved by contract, the liability of a surety is co-extensive with that of principal debtor in view of Section 128 of the I. C. Act. Undisputedly, complainant stood as a surety/guarantor in respect to loan dated 10. 9. 1980 taken by N. Naik as per loan Account No. 26/80, Ext. 1 is clear in this respect. Now question arises as to whether complainant created lien in favour of opposite party Bank over his amount deposited as per P. D. G. 78 which has been later on converted to fixed deposit account No. 199/94 dated 12. 12. 1994 and creation of lien over this account in favour of opposite party Bank as per Ext. III is the voluntary act of the complainant on free will and whether opposite party Bank can realise the debt dues of N. Naik from complainant exercising lien over the amount under Account No. 199 of 1994.

A Division Bench of the Hon''ble High Court in a decision, reported in 1992 (74) Con. LT 241 in a case in between Sukur Pradhan and Others v. Orissa State Financial Corporation and Others, relied upon by the opposite party Bank, it has been decided that: ". . . . . . . a surety is liable to the creditor irrespective of the remedy which the creditor may have against the principal debtor and the creditor may proceed against the surety without exhausting his remedies against the principal debtor. "

But, a surety can only be liable to the creditor provided that the surety has agreed upon for the same and the Bank/creditor can adjust with the debt due of the principal loanee, the maturity amount of fixed deposit of the guarantor who has pledged his fixed deposit as security towards said loan even though at the time of maturity of the fixed deposit the debt has become barred by limitation. In a decision reported in 1992 Crl. LJ at page 2916 relied upon by opposite party Bank, the Hon''ble Apex Court has decided that where the guarantor has bound down/allowed his fixed deposit as a security towards the debt of a principal loanee, even if the debt was barred by limitation, the creditor Bank can adjust the maturity value of the fixed deposit of the guarantor though the debt was time barred under Section 3 of the Limitation Act at the time of maturity of the fixed deposit of the guarantor. The Hon''ble Apex Court has observed while deciding like this that ". . . . time barred debt does not cease to exist by reason of Section 3". . . . . "though remedy to recover the debt from the principal debtor is barred by limitation, the liability still subsists. . . . ". The Hon''ble Apex Court has decided like this in a case before the Hon''ble Apex Court where the guarantors of the principal loanee jointly executed security bond and made the F. D. R. as security to adjust the outstanding debt from it at its maturity. In the instant case, in the guarantee bond/agreement dated 10. 9. 1980 (Ext. IV) complainant has not made Account No. G-78 as security towards repayment of debtor''s said loan. So also, in his application dated 12. 12. 1994 (Ext. 1), complainant, while requesting opposite party Bank to convert Account No. G-78 into a fixed deposit, in short, F. D. he has not requested also to keep the F. D. as security towards the debt due of the principal loanee. Rather, a note at the top portion of Ext. 1 dated 12. 12. 1994 discloses that an official of the opposite party Bank has proposed to create lien of the opposite party Bank over the said account after the P. D. Account is converted into F. D. Such endorsement of an official staff in absence of request by the complainant to create lien over the F. D. is definitely an arbitrary act of the opposite party Bank who appears to have shown unilaterally the F. D. of the complainant as per Ext. III as security to adjust the outstanding debt due of N. Naik from this F. D. at its maturity when the debt due against N. Naik was barred by limitation. Complainant when applied as per Ext. 1 on 12. 12. 1994 almost 14 years had elapsed in the meantime from the date i. e. , 10. 9. 1980 when N. Naik took loan and no remedy to recover the loan dues against him was exhausted and no attempt was made during these years to recover the same from the guarantor viz. , the complainant. In the circumstances, it can be safely held that without the consent and knowledge of the complainant, the F. D. of the complainant has been made security as per Ext. III as against the time barred loan dues of N. Naik. Till Exts. I and III creditors remedy against debtor was not exhausted and no steps were taken against the guarantor (complainant) to discharge his liability though period of limitation against the guarantor ran from the date of execution of guarantee. Ext. IV, in the worst case, was executed when the opposite party Bank had already lost his right against the debtor and remedy against the guarantor due to passage of period of limitation. In these end of the view, when the P. D. G. No. 78 and the aforesaid F. D. were not made security to the loan dues of the principal debtor, in no circumstance, opposite party Bank can proceed with to recover the debt due of N. Naik from the F. D. of complainant at its maturity. The opposite party Bank in the circumstance, cannot exercise lien over the F. D. account No. 199 of 1994, since no loan liability subsists against the complainant. We find that the District Forum has properly appreciated the case before him in legal and factual aspect and has rightly held that opposite party Bank is seized to exercise his remedy against the complainant as the guarantor to recover the debt due of N. Naik from the F. D. of the complainant. Therefore, the impugned order of the District Forum needs no interference. In the result, we confirm the impugned orders dated 24. 7. 1996 of the District Forum in C. D. Case No. 09 of 1996 and dismiss the appeal on contest without cost. Records received from the District Forum may be sent back forthwith. Appeal dismissed.