Guarantors remain liable for outstanding loan dues despite alleged negligence by the lending bank.

The petitioners were guarantors to a loan transaction entered into between M/s. Jay Ambe Steel Corporation, its proprietor, and Bhagy aLaxmi Cooperative Bank Ltd.

The Gujarat State Cooperative Tribunal, in Appeal No. 432 of 2001, by judgment dated 15 January 2008, held the petitioners liable for the outstanding dues arising from the loan transaction.

The petitioners challenged that decision under Article 226 of the Constitution, alleging, inter alia, illegality, violation of natural justice, and infringement of Article 14.

During the proceedings, the High Court noted that a connected matter had considered the Bank’s alleged negligence and that the issue concerning the liability of guarantors vis-à-vis the Bank’s duties was pending before the Supreme Court in SLP No. 926 of 2008.

The petitioners subsequently informed the Court that, in the connected matter, the Supreme Court had set aside the High Court’s order and had decided the relevant issue in Civil Appeal No. 3200 of 2016 by judgment dated 27 February 2026.

Whether the petitioners, as guarantors, were liable for the outstanding dues arising from the loan transaction despite the Bank’s alleged negligence?

Whether the judgment dated 15 January 2008 passed by the Gujarat State Cooperative Tribunal in Appeal No. 432 of 2001 was liable to be quashed under Article 226 of the Constitution?

Whether the Supreme Court’s decision in the connected proceedings concerning the liability of guarantors and the Bank’s duty conclusively governed the present petitions?

The High Court exercised its jurisdiction under Article 226 of the Constitution of India, which permits judicial review of decisions of statutory tribunals on grounds such as jurisdictional error, illegality, violation of natural justice, or manifest arbitrariness.

The Court applied the principle that the liability of a guarantor vis-à-vis the duties or alleged negligence of the lending Bank must be determined in accordance with the binding decision of the Supreme Court on the same issue and arising from the same loan transaction.

The Court also followed the binding effect of the Supreme Court’s judgment in the connected proceedings, identified as Civil Appeal No. 3200 of 2016, decided on 27 February 2026.

The petitioners’ challenge depended substantially on the contention that the Bank’s negligence affected or displaced their liability as guarantors.

However, the High Court found that this precise issue had already been conclusively determined by the Supreme Court in proceedings arising from the same loan transaction.

Since the Supreme Court had set aside the High Court’s contrary order in the connected matter and had settled the relationship between the guarantors’ liability and the Bank’s duty, that determination was directly applicable to the present petitioners.

Consequently, no basis remained for the High Court to interfere with the Tribunal’s judgment under Article 226.

Both writ petitions were therefore dismissed, the Rule was discharged, and the interim order staying implementation and execution of the Tribunal’s judgment was vacated.