Mahesh @APPELLANT@Hash Authorized Officer/ Deputy General Manager IDBI Bank Ltd. And Ors

In this Writ Petition, Petitioner has laid a challenge to the possession notice dated 06.03.2017 issued by the 1st Respondent Authorized

Office/Deputy General Manager of IDBI Bank Ltd., Gadag, whereby the possession of the Petitioner’s property is sought to be taken by way of

enforcing guaranty for the repayment of Bank debt.

Brief facts stated are ; Petitioner happens to be the guarantor for the repayment of the loans contracted by 3rd Respondent M/s.Hemagirish

Traders taken from the 2nd Respondent-Bank. By way of guarantee, Petitioner admittedly has executed a Memorandum of Equitable Mortgage of his

property in favour of lending Bank for securing the repayment of said loans, which have fallen over due.

The 3rd Respondent Principal borrower has failed to repay the entire loan amounts despite Demand Notice dated 20.12.2016 and therefore the

same occasioned the issuance of Possession Notice at Annexure-C to the Writ Petition under Section 13(12) of the Securitization and Reconstruction

of Financial Assets and Enforcement of Security Interest Act, 2002 Read with Rule-3 of the Security Interest (Enforcement) Rules, 2002. The same

is in challenge in this Writ Petition.

The learned counsel for the Petitioner submits that, he is only a guarantor for the repayment of the debts contracted by the 3rd Respondent

borrower who too has furnished his property by way of security for their repayment. Therefore without exhausting the coercive measures against the

principal borrower or his property, it is not open to the Respondent-Bank straight way to proceed against the guarantor.

The learned counsel for the Petitioner submits that, the 1st Respondent is an Authority exercising statutory power and therefore it answers the

definition of State given by Article 12 of the Constitution of India as interpreted by the Apex Court in R.D.Shetty’s case and therefore its actions

are liable to scrutiny under judicial review in exercise of extraordinary power vested in this Court Articles 226 and 227 of the Constitution of India and

consequently the action of the Respondent should fair and unarbitrary as required under Article 14. He submits that, the action of the 1st Respondent

is arbitrary and therefore is liable to be set at naught.

I have carefully considered the contentions of the Petitioner-Guarantor whose liability has always been coextensive with that of the principal

borrower. When the Bank enters into a loan transaction the matter is purely contractual in nature and therefore there is no element of public law

involved warranting invocation of writ jurisdiction vested in this Court under Articles 226 and 227 of the Constitution of India. It is well settled by the

decision of the Apex Court in the case of Life Insurance Corporation of India v. Escorts Ltd. And others, reported in AIR 1986 SC 1370 The relevant

paragraph reads as under :

“While it cannot be doubted that every action of the State or an instrumentality of the State must be informed by reason and that, in appropriate

cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Act.226 or Art.32 of the Constitution, Art.14 cannot be

construed as a charter for judicial review of State actions and to call upon the State to account for its actions in its manifold activities by stating

reasons for such actions. For example, if the action of the State is political or sovereign in character, the Court will keep away from it. The court will

not debate academic matters or concern itself with the intricacies of trade and commerce. If the action of the State is related to contractual obligations

or obligations arising out of the tort, the Court may not ordinarily examine it unless the action has some public law character attached to it. Broadly

speaking, the court will examine actions of State if they pertain to the public law domain and refrain from examining them if they pertain to the private

law field.â€​

The contention of the Petitioner that even otherwise also the Respondent-Bank is not entitle to proceed against the surety/guarantor without

exhausting its remedy against the principal borrower is legally incorrect. A surety is not entitle to dictate terms to the lending Bank. He cannot compel

either the Bank to exhaust its remedies against the borrower. It is always open to the Bank or lender to proceed against the guarantor without

exhausting remedy against the principal borrower.

The Apex Court in the case of State Bank of India v. Saksaria Sugar Mills Ltd and Others reported in 1986 2 SCC 145 has held at paragraph No.7

of the said Judgment which reads as under :

“7. It is unfortunate that the High Court erred in overlooking words “other than those relating to secured liabilities to banks and financial

institutions†referred to in the notification which had the effect of excluding the mortgage in favour of the State Bank of India from the scope of the

notification issued under Section 7 of the Act. The High Court further erred in not noticing that even when a notification is issued under Section 7(1)

(b) of the Act suspending the operation of any agreement or assurances of property to which a notified sugar undertaking or the person owning is a

party, any proceeding against the guarantor would remain unaffected by the issuance of such a notification. Under Section 128 of the Indian Contract

Act, 1872, save as provided in the contract, the liability of the surety is co-extensive with that of the principal debtor. The sureties thus became liable

to pay the entire amount. Their liability was immediate and it was not deferred until the creditor exhausted his remedies against the principal

debtor……………â€​

In these circumstances the Writ Petition is rejected at the stage of Admission. However this rejection will not come in the way of the Petitioner-

Guarantor or the 3rd Respondent-principal borrower negotiating some ease by way of One Time Settlement under the schemes obtaining in the Bank.

Since the 3rd Respondent principal borrower submits that, he shall make all efforts to settle the dues under such scheme within the time and subject to

the terms to be stipulated by the 2nd Respondent-Bank.