Guarantor Bound by Executed Guarantee: Appeal Dismissed for Lack of Contrary Evidence
- REEDLAW
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REEDLAW Legal News Network reports: In a significant ruling delivered on 21 November 2025, the Debts Recovery Appellate Tribunal, Allahabad, reaffirmed that a guarantor who has duly executed a guarantee cannot later evade liability through unsupported claims of misuse of blank documents. The Tribunal held that, in the absence of contrary evidence, the executed guarantee remains binding and the guarantor is answerable for the borrower’s outstanding dues.
The Debts Recovery Appellate Tribunal, Allahabad, headed by Justice R.D. Khare (Chairperson), while adjudicating an Appeal, held that a guarantor who has duly executed the guarantee documents cannot escape liability by alleging misuse of blank signed papers. The Tribunal observed that, in the absence of substantiating evidence to rebut execution, the guarantee remains enforceable, and the guarantor continues to be liable for the borrower’s outstanding dues.
The Appellant filed an appeal under Section 20 of the Recovery of Debts and Bankruptcy Act, 1993, challenging the judgment dated 07.12.2019 by the Debts Recovery Tribunal, which had allowed the Original Application filed by the Respondent-Bank for recovery of dues arising from a cash credit facility of Rs. 25 lakhs granted to the borrowers. The loan was secured by hypothecation of stock and book debts, and the Appellant, along with the borrowers, had been shown as guarantors. Upon the borrowers’ failure to maintain financial discipline, the loan account was classified as NPA, leading to the issuance of a demand notice and subsequent filing of recovery proceedings. The Tribunal admitted the claim and allowed recovery with interest, following which the Appellant, who was arrayed as defendant No. 3 in the original proceedings, approached the appellate forum.
The Appellant contended that no guarantee had ever been executed for the loan sanctioned to the borrowers and asserted that certain blank documents, earlier signed and submitted for enhancement of the Appellant’s own credit limit, were misused by the Respondent-Bank in collusion with the borrowers. It was claimed that various documents showed interpolation, manipulation, and fraudulent entries, including changes in the terms of cash credit facilities and insertion of conditions indicating the Appellant as guarantor. The Appellant relied on references to a criminal case allegedly lodged against a Bank officer and argued that no document existed showing the voluntary execution of any guarantee for the borrowers’ loan.
The Respondent-Bank opposed the appeal and pointed to the sanction letter and guarantee documents filed on record, where the Appellant’s name appeared as guarantor. It was argued that the general form of guarantee bore the Appellant’s signatures, duly notarised, and that the Appellant’s story of fraud and misuse of documents was an afterthought, unsupported by any evidence. The Respondent-Bank further submitted that no criminal proceedings had been initiated in relation to the present loan, and the Appellant’s allegations lacked credibility.
Upon examining the record, the Tribunal found that the general form of guarantee placed on record contained the Appellant’s signatures, and these signatures were consistent with those on other documents filed during the appeal. The appellate authority noted that the sanction-related documents also reflected the Appellant as guarantor, and no documentary evidence had been produced to rebut this material. The Appellant’s claim of never having signed the guarantee documents was held to be unsubstantiated in the absence of proof to the contrary.
In view of the evidence, the appellate authority concluded that the Appellant had indeed executed the guarantee for the loan advanced to the borrowers and that the findings of the Tribunal below did not suffer from any infirmity. The appeal was accordingly dismissed, with no order as to costs, and directions were issued for communication of the judgment to the concerned Tribunal and for uploading on the e-DRT portal.
Smt. Jaishree Pandey, Advocate, holding the brief of Shri D.N. Awasthi, Advocate, represented the Appellant.
Shri Maneesh Mehrotra, Advocate, appeared for the Respondent No. 1/Bank of Baroda.
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