M/S H.D.F.C. versus GAUTAM KUMAR NAG & ORS.

M/S H.D.F.C. versus GAUTAM KUMAR NAG & ORS.

The liability of the guarantors is co-extensive with the borrower and is not affected by the borrower's execution of a promissory note or creation of an equitable mortgage. The guarantee deed contains explicit waivers of any rights the guarantors may have had under Section 139, Indian Contract Act; therefore, the defense under Section 139 is untenable. The High Court's grant of leave on this ground was incorrect, and the trial court's decree in favor of the lender is restored.

Parties
Appellant: M/s HDFC; Respondent: Gautam Kumar Nag; Respondents: Other Respondents (Defendant Nos.2 & 3)
Jurisdiction
India
Judgment Date
20 January 2012
Procedural Posture
Civil Appeal / Appeal Against High Court Order; Restoration of Trial Court Decree
Outcome
Appeal allowed; High Court judgment set aside; trial court decree restored
Legal Topics
Liability of Guarantor, Surety Rights, Enforcement of Guarantees, Section 139 of the Contract Act, Order 37 CPC Summary Suits
Contract Law Liability of Guarantor Surety Rights Enforcement of Guarantees Section 139 of the Contract Act Order 37 CPC Summary Suits

Case Brief

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Parties

M/s HDFC

Appellant

Gautam Kumar Nag

Respondent

Other Respondents (Defendant Nos.2 & 3)

Respondents

Procedural Posture

Civil Appeal / Appeal Against High Court Order; Restoration of Trial Court Decree

Legal Issues

  1. 1 Whether the guarantors' liability under the guarantee is affected by the creation of an equitable mortgage and promissory note by the borrower.
  2. 2 Whether Section 139 of the Indian Contract Act absolves guarantors in such circumstances.
  3. 3 Whether leave to defend should have been granted under Order 37 CPC.

Ratio Decidendi

The liability of the guarantors is co-extensive with the borrower and is not affected by the borrower's execution of a promissory note or creation of an equitable mortgage. The guarantee deed contains explicit waivers of any rights the guarantors may have had under Section 139, Indian Contract Act; therefore, the defense under Section 139 is untenable. The High Court's grant of leave on this ground was incorrect, and the trial court's decree in favor of the lender is restored.

Court Disposition

Appeal allowed; High Court judgment set aside; trial court decree restored

Orders

  • The impugned judgment of the High Court is set aside.
  • The decree and order passed by the trial court is restored.