Mani Bhusan Debbarma vs Tripura Industrial Development Corporation And Ors

[1] Heard Ms. R. Purakayastha, learned counsel appearing for the petitioner as well as Mr. B.N. Majumder, learned counsel appearing for the Tripura Industrial Development Corporation [the TIDC, in short] and Mr. D. Sharma, learned Addl. G.A. appearing for the respondents No.4,5 & 6. None appears for the respondent No.7 when the matter is taken up for hearing.

[2] There is no dispute in respect of the relevant facts. The respondent No.7 was accorded a loan by the TIDC on 10.11.2014 for a sum of Rs.75,000/- for purchasing a Bajaj auto-rickshaw. It was agreed between the TIDC and the loanee that the said amount shall be repaid with interest @10.5% by 60 equal installments, meaning within 5[five] years from the date of taking the loan in terms of the sanction letter dated 10.11.2004. In the loan agreement, there was a provision for securing the loan by hypothecation, mortgage and by creating a guarantee. In terms thereof, the petitioner came forward and filed a statement on oath stating inter-alia as under:

"That, I have agreed to stand as Surety/Guarantor for Rs.75,000/- [Rupees Seventy five thousand] only vide sanction order No.TIDC/APPL/8620 dated 10.11.2004 in favour of Bikash Debbarma."

After the said declaration, the formal guarantee letter was signed by the petitioner. After taking the loan, the respondent No.7 had purchased a Bajaj auto-rickshaw and got the vehicle registered under the Motor Vehicles Act. But the loanee stopped paying instalments after 13.02.2007 and as a result, the outstanding bulged, but the petitioner as a guarantor did not get any information from the TIDC. For the first time, the Manager, TIDC by his letter dated 10.11.2016 [Annexure-G to the writ petition] asked the Drawing & Disbursing Officer [DDO], the Principal, Ramthakur College to realize the outstanding amount by 48 equal instalments at Rs.7,000/- per month. With the said letter, the Manager, TIDC had given the account outstanding as on 31.07.2016 against the said loan. The said letter dated 10.11.2011, as it appears, was brought to the notice of the petitioner by the DDO before commencing the recovery by instalment at Rs.7,000/- per month. The DDO, Ramthakur College had assured the Managing Director, TIDC that on the strength of the authorization made by the petitioner, he would have no difficulty to deduct the amount as proposed and remit the same to the account of the TIDC. In the guarantee letter signed by the petitioner it was categorically agreed and provided as follows:

"By this letter I am giving the consent and authorization that if the original borrower fails to repay as per the contractual obligation and I shall all times herein after until repayment of loan in full responsible to you for guarantee of payment of the loan sanctioned by TIDC together with interest specified in the loan agreement and/or such other sum/sums as may remain outstanding."

[3] Based on the said guarantee letter, the loan was sanctioned in favour of the respondent No.7. It appears that the respondent No.7 paid a sum of Rs.17,000/- towards the loan repayment. After the account supplied to the DDO, the outstanding principal was shown at Rs.69,824/-, interest at Rs.1,54,406/- and penal interest at Rs.40,232/- i.e. total Rs.2,64,462/-.

[4] Ms. R. Purakayastha, learned counsel appearing for the petitioner has submitted that after the last payment made by the loanee [the respondent No.7], the TIDC should have informed the petitioner to make payment against the outstanding loan but they had not informed him anything before that action as leveraged through the DDO, Ramthakur College, Agartala. Even the letter addressed to the DDO was not supplied to the petitioner by the TIDC. Therefore, till such recovery was started, the petitioner was quite at dark about the repayment against the loan. Be that as it may, for lack of knowledge of the guarantor, the liability cannot be deflated. It further appears that the petitioner had agreed by the guarantee letter that the petitioner shall stand as security for repayment of the dues with interest at 10.5% p.a. and/or any sum that may fall due and outstanding if the loanee, Bikash Debbarma failed to repay the loan amount along with interest specified in the loan agreement and the same shall be recovered from his salary. In this respect, he shall not have any objection. Ms. Purakayastha, learned counsel has submitted that not only that the TIDC did not inform the petitioner immediately after the respondent No.7 as the loanee stopped to repay the instalments in terms of the loan agreement but also the TIDC had failed in its duty to inform the petitioner to act according to the guarantee letter. It is apparent on the face of records that from 13.02.2007 to 10.11.2016 almost about 9 years, the petitioner was not apprised that the loanee had defaulted in making the repayment. According to Ms. Purakayastha, learned counsel, the recovery ought to have been made under Section 29 read with Sections 31 and 32 of the State Financial Corporation Act, not by direct recovery from his salary. That mode is impermissible in view of the said Act. That apart, Ms. Purakayastha, learned counsel has raised an objection that when the payment of instalments was stopped, the TIDC was under obligation to take action within 3 years therefrom in terms of the Limitation Act, but no such action was taken and hence, the right to recovery the loan has become time barred. When the recovery has become time barred against the loanee, the outstanding against the said loan cannot be recovered from the guarantor.

[5] In support of her contention, Ms. Purakayastha, learned counsel has referred a decision of the apex court in Syndicate Bank vs. Channaveerappa Beleri & Ors., reported in AIR 2006 SC 1874, where it has been held as under:

"When the demand is made by the creditor on the guarantor, under a guarantee which requires a demand, as a condition precedent for the liability of the guarantor, such demand should be for payment of a sum which is legally due and recoverable from the principal debtor. If the debt had already become time-barred against the principal debtor, the question of creditor demanding payment thereafter, for the first time, against the guarantor would not arise. When the demand is made against the guarantor, if the claim is a live claim (that is, a claim which is not barred) against the principal debtor, limitation in respect of the guarantor will run from the date of such demand and refusal/non compliance. Where guarantor becomes liable in pursuance of a demand validly made in time, the creditor can sue the guarantor within three years, even if the claim against the principal debtor gets subsequently time-barred. To clarify the above, the following illustration may be useful :

Let us say that a creditor makes some advances to a borrower between 10.4.1991 and 1.6.1991 and the repayment thereof is guaranteed by the guarantor undertaking to pay on demand by the creditor, under a continuing guarantee dated 1.4.1991. Let us further say a demand is made by the creditor against the guarantor for payment on 1.3.1993. Though the limitation against the principal debtor may expire on 1.6.1994, as the demand was made on 1.3.1993 when the claim was 'live' against the principal debtor, the limitation as against the guarantor would be 3 years from 1.3.1993. On the other hand, if the creditor does not make a demand at all against the guarantor till 1.6.1994 when the claims against the principal debtor get time-barred, any demand against the guarantor made thereafter say on 15.9.1994 would not be valid or enforceable."

[6] In order to elucidate further, the apex court in Syndicate Bank (supra) has examined and observed that 'on demand' as 'always payable' or 'payable forthwith without demand' is not one of universal application. The said meaning applies only in certain circumstances. The said meaning is normally applied to promissory notes or bills of exchange payable on demand. We may refer to Articles 21 and 22 of the Limitation Act. Article 21 provides that for money lent under an agreement that it shall be payable on demand, the period of limitation (3 years) begins to run when the loan is made. On the other hand, the very same words 'payable on demand' have a different meaning in Article 22 which provides that for money deposited under an agreement that it shall be payable on demand, the period of limitation (3 years) will begin to run when the demand is made. Thus, the words 'payable on demand' have been given different meanings with reference to 'money lent' and 'money deposited'. In the context of Article 21, the meaning and effect of those words are 'always payable' or payable from the day when the loan is made, whereas in the context of Article 22, the meaning is 'payable when actually a demand for payment is made'.

[7] Ms. Purakayastha, learned counsel has, however, quite succinctly submitted that the loan was time-barred and as such, no obligation has been shifted to the guarantor [the petitioner] to make repayment of the outstanding against the loan account of the respondent No.7. Ms. Purakayastha, learned counsel has also floated an alternative submission on contemplation that this court may not accept the argument in respect of the mode of the recovery and the limitation. She has quite categorically submitted that if immediately after the payment of the instalments was stalled by the loanee, the petitioner was apprised, the huge amount of interest and penal interest would not have accrued on the loan account and the petitioner would have discharged the liability quite conveniently. The TIDC was completely silent till 10.03.2017 till one of its Managers wrote a letter to the DDO of Ramthakur College for realization of the outstanding.

[8] Mr. B.N. Majumder, learned counsel appearing for the TIDC has submitted that in the letter of guarantee, there is no clause which obligates the TIDC to raise the demand. On the contrary, there is no provision of demand. Only provision that is available is to recover through the DDO who is the controlling authority of salary of the petitioner. Mr. Majumder, learned counsel has submitted that the petitioner cannot be allowed to claim that that he is not liable to pay the outstanding that has fallen due in the account of the respondent No.7. Mr. Majumder, learned counsel has further submitted that at the instance of this court, in the 193rd meeting of the Board of Directors the issue of one time settlement was deliberated upon on 25.06.2019. The Board of Directors has adopted the following resolution:

"RESOLVED THAT Sri Mani Bhusan DebBarma guarantor of Sri Bikash DebBarma, S/O- Sri Kalindra DebBarma, Vill: Tufaniamura, P.O.+P.S. Takarjala, Dist: Sepahijala, Tripura be and is required to pay Rs.89,648/- as a settlement amount which includes outstanding Principal amount (Rs.44,824/-) plus lumpsum interest equivalent to the outstanding Principal amount (Rs.44,824/-) within 3[three] months from the date of communication of Board's decision and rest of the interest and/or penal interest be waived and loan account be closed, security documents be released on recovery of settled amount considering it as a Special Case."

[9] Mr. Majumder, learned counsel has further submitted that the guarantor cannot negate his obligation to repay the outstanding amount inasmuch in the agreement of guarantee it has been clearly laid down that it is an open and unambiguous obligation.

[10] Mr. D. Sharma, learned Addl. G.A. appearing for the respondents No.4,5 & 6, who are the formal respondents in this case, has only stated that in terms of the agreement and the authority created by the petitioner, those respondents have cooperated with the TIDC-respondents for recovering their loan.

[11] In order to repel the submission of the counsel for the respondents, Ms. Purakayastha, learned counsel appearing for the petitioner has submitted that in equity, the TIDC cannot demand the huge outstanding interest or penal interest from the petitioner as they were sleeping for more than 10 years in claiming the re-payment from the petitioner as the guarantor.

[12] This court has, as observed before, initiated a process of mediated settlement and the final outcome of that process has been recorded in the resolution taken by the Board of Directors [of the TIDC]. According to the resolution of the Board of Directors, the petitioner is required to pay a sum of Rs.89,648/-as one time settlement. Out of the said amount, a sum of Rs.44,824/- is the principal amount.

[13] Having appreciated the submissions made by the learned counsel appearing for the parties, this court is of the view that the law of limitation may take its way differently in the case of a loanee and in the case of a guarantor. The limitation so far the obligation of the guarantor is concerned, will be definitely guided by the agreement. Whatever as provided in the agreement will be the basis for determining whether the debt is hit by limitation or not. In Syndicate Bank (supra) what the apex court has illustrated is quite interesting inasmuch as the only point for the limitation that can be set up is that if in the agreement there is a provision that within certain days of the demand that the payment has to be made and that is not done, then the day of raising such demand would be treated as the first point of limitation to calculate the period as has been provided in the Limitation Act. In this case, there is no question of giving any notice. No obligation has been created for the TIDC to the effect that they must give a notice of demand. On the contrary, it has been agreed that whenever the outstanding fell, the TIDC-respondents will be in a position to recover the said outstanding from the petitioner. After the recovery had started, the petitioner rushed to this court for protection from such recovery. This court before further analyzing the reason raised by the counsel of the petitioner, one of the relevant paragraphs from Syndicate Bank (supra) may be reproduced:

"9. A guarantor's liability depends upon the terms of his contract. A 'continuing guarantee' is different from an ordinary guarantee. There is also a difference between a guarantee which stipulates that the guarantor is liable to pay only on a demand by the creditor, and a guarantee which does not contain such a condition. Further, depending on the terms of guarantee, the liability of a guarantor may be limited to a particular sum, instead of the liability being to the same extent as that of the principal debtor. The liability to pay may arise, on the principal debtor and guarantor, at the same time or at different points of time. A claim may be even time-barred against the principal debtor, but still enforceable against the guarantor. The parties may agree that the liability of a guarantor shall arise at a later point of time than that of the principal debtor. We have referred to these aspects only to underline the fact that the extent of liability under a guarantee as also the question as to when the liability of a guarantor will arise, would depend purely on the terms of the contract."

[14] From the passage as reproduced, it is evident that the guarantee as provided by the petitioner is that he will be obligated to repay the money all the time to come. It does not set out any period of limitation. As such, the second contention as raised by Ms. Purakayastha, learned counsel does not appear to have any substance. So far the mode of recovery is concerned, when there is an unambiguous clause in respect of the recovery which has been agreed freely by the parties, here the TIDC and the petitioner, it does not fit in the mouth of the petitioner to take a stand that the mode to be taken in terms of the State Financial Corporation Act. He is obliged to recovery in the mode as provided by the letter of guarantee. Thus, the said contention stands negated. What Ms. Purakayastha, learned counsel, has further advanced as an alternative argument has some substance in the given context of the case. It is true that there is manifest lapse on the part of the TIDC in commencing the recovery. It took about 10 years and during these 10 years, both the interest and the penal interest bulged and now the TIDC has been claiming the entire amount as the outstanding against the petitioner. That cannot be done. It is unconscionable and any un-conscionability makes the contract inoperative at any point of time. Therefore, the amounts proposed for the one time settlement, is unacceptable as that has deduced without consideration of inaction on the part of the TIDC.

Keeping all these facts and the factors on consideration, this court is of the view that the petitioner shall be at liberty to pay the remainder of the principal amount and the interest till 13.02.2007, if paid within 31.12.2019. What the principal amount and the interest stood as on account on 13.02.2007, the petitioner will be liable to pay the said amount. It is made absolutely clear that from the outstanding principal amount as stood on 13.02.2007, the amount as recovered already from the petitioner's salary account shall be adjusted.

In terms of the above, this writ petition stands disposed of.

In the event of failure of payment by 31.12.2019, the outstanding may be recovered on observing the agreed terms.

There shall be no order as to costs.