PER JUSTICE J.M. MALIK

1.      Dr. Vipin Bihari Shukla & Smt. Gayatri Devi, his wife got issued on 18.05.2001 FDR of Rs. 1,00,000/- for 3 years from the OP, Punjab National Bank , Pilibhit Branch.  The date of maturity was 17.05.2004.

2.      In the meantime, Ajay Kumar Saxena and Ashok Vajpayee, partners of Ashok Medical Agency pledged the said FDR against C.C.Limit of Rs. 3,50,000/- in favour of Petitioner Bank. The Bank instead of making the payment of amount after maturity to the complainants, adjusted the amount of aforesaid FDR on 10.10.2003, before the date of maturity, in the CC Limit account of Ashok Medical Agency.

3.      On 13.02.2003, notices were sent to Ajay Kumar Saxena and Ashok Vajpayee because they had not paid back the sum of Rs. 3,50,000/- despite various requests made to them.  The account was due for renewal in May 2002 but the above said partners failed to get the account renewed.  They were asked to make the payment within one week, failing which, proceedings for recovery of balance amount lying in their account would be taken against them.

4.      The Guarantors, Vipin Bihari Shukla & Gayatri Devi sent the reply on 20.03.2003.  They informed the Bank that as per their knowledge, dis-trust has developed between Sh. Ajay Kumar Saxena and Ashok Vajpayee, over the distribution of profit, which is affecting the work of firm.  It was also mentioned that Sh. Ajay Kumar Saxena,

Advocate, is a very rich person and Ashok Vajpayee depends on Sh. Ajay Kumar Saxena.  In the last para, it was clearly mentioned “Due to distrust of Shri Saxena, the said firm may be dissolved and come to an end.  Hence, take appropriate action at the earliest.”

5.          Another notice was sent to the Guarantors by the Bank dated 15.07.2003.  In this letter, it was mentioned by the Bank, the relevant para of which is reproduced as follows:-

“As such, the account is irregular.  In view of this, FDR 85/2001 dated 18.5.01 of Rs. 1,00,000 (Rs. One lakh only)

pledged by you against the said C/C Limit will be adjusted (if the said Loan Account is not regularized prior to 30.07.2003).  Kindly meet the debtors and get the said loan recovered from them failing which action for recovery will also be initiated against you being the Guarantors.”

6.          Thereafter, the bank adjusted the amount of aforesaid FDR amount on 10.10.2003 for the C.C. Limit Account of Ashok Medical Agency. 

7.      The complaint was filed before the District Forum.  The District Forum allowed the complaint.  The Punjab National Bank filed an appeal before the State Commission against the order passed by the District Forum, which was partly allowed and the Bank was directed to pay Rs. 1,00,000/- to the respondents/complainants with interest @18% per annum we.f. 18.05.2001, till the date of final payment.  Further, costs of Rs. 5,000/- were also granted in favour of the complainants and against the OP.

8.      We have heard both the counsel for the parties.  Counsel for the respondents/complainants has cited an authority reported in  the case of  “Pawan Kumar Jain and Pradeshiya Industrial and Investment Corporation of U.P. Ltd. & Ors.” [2004(56) ALR 716 Supreme Court] where Apex Court was pleased to hold that “U.P. Public Moneys-(Recovery of Dues) Act, 1972- Sections 3  and 4-  Recovery of dues from gurantor- Cannot be initiated until property of principal debtor is first sold off.”

9.      The State Commission was pleased to place reliance upon this authority.  The State Commission also came to the conclusion that the respondent Bank had committed deficiency in service by violating

and disregarding the terms laid down in FDR, as much as the FDR was adjusted before its maturity.

10.    We are unable to subscribe to views of the District Forum as well as the State Commission.  It is not understood as to how the authority of “Pawan Kumar Jain and Pradeshiya Industrial and Investment Corporation of U.P. Ltd. & Ors. (Supra)”  is applicable to this case.  That case was under U.P. Moneys Recovery Act 1972] that authority has no application to this case.

11.          Section 128 of Indian Contract Act, 1872 clearly states as under:-

 “128.  Surety’s liability- The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.”

12.       It is the sweet will of the creditor to proceed first of all against the borrower or the Guarantor.  There lies no rub in case, the creditor first of all proceeds against the Guarantor.

13.          Counsel for the petitioner has also invited our attention towards the authority reported in the case of “Iqbal Naseer Usmani Versus Central Bank of India and Others” [(2006) 2 Supreme Court Cases 241].

14.          Under the circumstances, we hereby set aside the order passed by both the Fora below and dismiss the complaint. However, there shall be no order as to costs.