Guarantors remain jointly and severally liable for loan defaults regardless of the principal debtor's separate legal status, as established under Sections 29 and 31 of the State Financial Corporations Act, 1951.

JUDGMENT :

T.M. NADAF, J.

1. This appeal is by appellants/respondent nos.2 and 4 before the trial court, calling in question the judgment and decree dated 18.03.2021, in COM.MISC NO.279/2004, passed by the LXXXIII Additional City Civil And Sessions Judge, Bengaluru, only against the appellants herein (respondents Nos.2 and 4) and also to allow the counter claim of appellant No.1.

2. Com.Misc.No.279/2004 registered on the application filed by respondent No.1 - Karnataka State Finance Corporation (‘Corporation’ for short) under Sections-31(1) and 32(2) of the State Financial Corporations Act, 1951 (‘SFC Act’ for short) for recovery of Rs.1,63,28,999/- as on 10.12.2003 from respondent No.2, M/s. Vishwaroopa Visions Private Limited, with future interest at 22.5% per annum, compounded at quarterly rests till realisation of the entire amount and to pass orders, to enforce liabilities of the appellants and respondent Nos.3 to 8 as guarantors to pay Rs.1,63,28,999/- due from respondent No.2, as on 10.12.2003 payable with future interest at 21.5% compounded at quarterly rest till the payment of the entire amount; also for confirmation of prohibitory order of injunction in respect of petition Schedule Nos.I, II and III properties and such other relief and cost.

3. The trial court by a judgment and decree dated18.03.2021, allowed the Misc. Application in part along with cost as follows:

“It is declared that the respondent No.1 is due in a sum of Rs.1,63,28,999/- (One Crore Sixty three lakhs twenty eight thousand Nine Hundred Ninety Nine) (as on 10.12.2003) with future interest @ 22.5% per annum compounded at quarterly rests.

The respondent No.2 to 9 being guarantors are jointly and severally liable to pay Rs.1,63,28,999/-(One Crore Sixty three lakhs twenty eight thousand Nine Hundred Ninety Nine) (as on 10.12.2003) with future interest @ 21.5% per annum compounded at quarterly rests till the date of realization.

The prayer of Petitioner Corporation with respect to confirmation of order of injunction dated 31.03.2004 is hereby dismissed.

The set off and counter claim made by respondent No.2 is hereby dismissed.

The office is hereby directed to send a copy of the judgment to the petitioner through email as per Order XX Rule 1 CPC as amended by Section 16 of Commercial Courts Act, 2015.”

4. The parties will be referred to as per their ranking before the trial court for easy reference.

FACTS OF THE CASE:

5. That Karnataka State Financial Corporation is established by the Government of Karnataka for the State of Karnataka u/s 3 of the S.F.C. Act and is carrying on its functions specified in section 25 r/w section 24 of the Act. The Corporation is the only statutory public financial institution established in the State of Karnataka with an object of rendering financial assistance to institutions established in the State of Karnataka and is wholly owned by the State Government. The money advanced and lent to the Industrial concerns are in the nature of public money collected by way of refinance loans from the Industrial Development Bank of India and other Central Public Financial Institutions, in addition to money made available by the State Government and also raised by way of debentures, public deposits. The Corporation has to deal with these funds on business principles, with due regard being had to the interest of indu