Bank should proceed first against mortgage property then guarantor

Manku Narayana v/s Union Bank of India
Civil P.C. (5 of 1908), S. 47, 0.34, Rr.4, 5- Execution- Decree against principal debtor, guarantor and also against mortgaged property- Decree-holder Bank should proceed against guarantor. (Contract Act (9 of 1872), S. 126).
Where the decree in execution in execution is a composite decree personally against the principal debtor and the guarantor and also against the mortgaged property, and a portion of the decreed amount is covered by the mortgage, the decree-holder Bank has to proceed against the mortgage property first and then proceed against the guarantor.
Case Referred: Chronological Paras AIR 1969 SC 297: (1969) 1 SCR 620: 1969 A11 LJ 475
KHALID, J.: The Union Bank of India is the appellant. This appeal is directed against the order passed by a learned single Judge of the Andhra Pradesh High Court in Civil Revision Petition No. 1743 of 1979, directing the appellant to exhaust the remedies available in law, against the mortgaged property and the principal debtor in execution of decree obtained by it before proceeding to execute the same against the guarantor.
2. The appellant filed a Suit No. 87 of 1974, against the principal debtor and the guarantors, one of them being the respondent for recovery of a sum of Rs. 5,626.70. The principal debtor and borrowed a sum of Rs. 5100/- from the Bank on 21-10-1970, on the strength of the guarantee executed by the respondent and the principal debtor. By the said guarantee the respondent undertook to repay the sum in dependently. The principal debtor and others had executed a registered simple mortgage deed dated 16-10-1970, in favour of the Bank creating a mortgage in respect of their joint family property in order to secure due payment of a sum of Rs.2,300/- out of the loan amount of Rs. 5,100/-. Since the amount remained unpaid a suit was filed by the Bank for recovery of the amount. A decree was passed against the defendants including the respondent, making them personally liable for the decreed amount and also declaring that the amount due to the Bank on the mortgage mentioned in the plaint shall be the sum of Rs. 3093.25./- The Bank sought execution of the decree against the respondent-guarantor. Execution was resisted with the plea that the Bank should proceed first against the mortgage property and the principal debtor and it could proceed against the guarantor only after those steps were exhausted. A preliminary objection was also taken against execution stating that the decree was partially a decree on a mortgage under O, 34 which was preliminary in nature and that it could be executed only after the final decree was passed. The execution court upheld this plea. The Bank took the matter in revision before the high court. The High Court relied upon an earlier decision rendered in a similar petition where also the appellant Bank was the decree-holder and held that the appellant had to proceed first against the mortgage property and the principal debtor and then only against the guarantor. This appeal by special leave is directed against the said order.
3. The learned counsel for the appellant placed strong reliance upon a decision of this Court in Bank of Bihar Ltd v. Damodar Prasad, (1969) 1 SCR 620: (AIR 1969 SC 197), in support of his contention that it was not necessary to exhaust the remedies of a decree-holder against the principal debtor before proceeding against the surety. In that case this court was considering the correctness of a direction to the creditor to enforce his decree against the surety only after exhausting the remedies against the principal debtor. It was held that in the absence of some special equity the surety had no right to restrain execution against him until the creditor had exhausted his remedies against the principal. This Court observed that it would work injustice in some cases if action against the guarantee was postponed till remedies against the principal debtor were exhausted, for in certain cases it might take the long time before the remedies are exhausted. In that case also the decree-holder was a banking company. This court observed that the very object of the guarantee would be defeated if the creditor was asked to postpone his remedies against it and that guarantee being a collateral security, usually taken by a banker, would become useless if the rights of the bank or the creditor who took such surety were cut down by a direction in the decree curtailing the right of the decree-holder to proceed against the decree-holder (guarantee) only after remedies were exhausted against the principal debtor. This Court, on a consideration of the facts of that case, set aside the direction made by the decree that the “plaintiff-Bank shall be at liberty to enforce its due in question against defendant No.2 only after having exhausted its remedies against the defendant No.1” The appellant’s counsel pleaded before us seeking support from this judgment that the Bank could proceed against the guarantor without exhausting the remedies since the guarantee was an independent one. We have difficulty in accepting this case.
4. The decree in execution is a composite decree, personally against the defendants including the respondent and also against the mortgage property. We do not pause to consider whether the two portions of the decree are severable or not. We are of the view that since a portion of the decreed amount is covered by the mortgage, the decree-holder Bank has to proceed against the mortgage property first and then proceed against the guarantor. Since the High Court was not told that such steps were taken, we de not think we will be justified in holding that the High Court was in error in making the direction which is under challenge before us. The appeal, under these circumstances, has therefore to be dismissed.
5. However, we are told by the appellant’s counsel that the Bank had taken steps against the mortgage property and also against the principal debtor. We find the C1. H of the statement of facts in the S.L.P the following statement:
“The petitioners say that they made an application for sale of the mortgage property but there was no offer for purchase of the mortgage property. The petitioners also filed an execution application against the respondent for execution of the said decree by committing the respondent to civil prison. The respondent No. 1 filed a revision application being Civil Revision Application No. 1472 of 1979 against the order of the Court of District Munsiff, Gajapatingaram dated 17-2-1979 passed in Execution Application No.45 of 1978 filed by the petitioners.”
6. From this it is evident that the decree-holder proceeded against the mortgaged property and also against the principal debtor. If this is correct, execution against the guarantor was maintainable. In view of this disclosure, we remind the matter to the High Court giving opportunity to the appellant to plead this case before the High Court and seek execution of the decree against the respondent with liberty to the respondent to despite the correctness of this statement. The High Court will dispose of the matter in accordance with law. No order as to costs.





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