IMPORTANT POINT
Liability of guarantors is co-extensive with that of borrowers.

J.M. Malik, Chairperson—This is the second appeal. The learned Presiding Officer, DRT-I vide his order dated 17.9.2009 dismissed the appeal filed by the appellants/guarantors against the order of the Recovery Office dated 29.8.2007 and 4.10.2007, wherein guarantors, too, were held amenable for the loan facility obtained by the principal borrower.

2. The principal borrower M/s Hygienic Food Limited took loan facilities from Canara Bank, Industrial Finance Corporation of India (IFCI) and Dena Bank. As per agreement all the plants, machinery, stocks and book debts of

M/s Hygenic Food Ltd. were hypothecated in favour of Canara Bank jointly with IFCI Ltd. and Dena Bank. The Canara Bank had a pari passu first charge on the abovesaid mortgaged property of the company along with IFCI and Dena Bank. The appellants had furnished their personal guarantees in favour of the Canara Bank in addition to the abovesaid securities.

3. The principal borrower M/s Hygienic Food Limited defaulted in its repayment commitment to the respondent Bank. IFCI initiated the recovery proceedings against M/s. Hygienic Food Ltd. before the Hon’ble High Court under Section 30 of the IFCI Act, 1948.

4. On 3.3.1994, the respondent Canara Bank gave its unequivocal consent to the prayer of IFCI in reply filed before the Hon’ble High Court. However, before giving the aforesaid consent the respondent Bank filed a suit of recovery against. M/s Hygienic Food Ltd. as the principal borrower as well as against the appellants before the Hon’ble High Court of Delhi which was subsequently transferred to DRT.

5. Vide order dated 12.3.1993 the Hon’ble High Court passed the following orders appointing Mr. M.M. Sudan as Receiver in this case:

“M.M. Sudan, Advocate is appointed as a Receiver with direction to forthwith take possession of the hypothecated and mortgaged properties with power to engage officers and staff for safety, protection and preservation of the said properties. The fee of the Receiver is tentatively fixed at Rs.15,000. Further present all expenses will be borne by the petitioners.”

6. Vide ex parte order dated 28.2.1997 the learned Presiding Officer decreed the respondent Bank’s original application and issued a recovery certificate in the sum of Rs. 85,28,141.13p against the appellants and in favour of the respondent Canara Rank alongwith pendente lite and future interest @ 23.25% p.a. from the date of filing of the suit till realization costs of Rs.1,90,948 were also awarded in favour of Canara Bank. The said order further mentioned that in case the appellants failed to pay decretal amount within the stipulated period of four weeks, the respondent Bank was entitled to recover the said amount by sale of hypothecated goods and it was further ordered that in the event the entire amount was not recovered from the sale of hypothecated goods, the balance amount would be recovered by sale of mortgaged property at Khasra No.21 and 26, Village Sandila, Mandhana, Bithoor Road, Mandhana, Tehsil Bilhour, Kanpur, U.P. belonging to M/s Hygenic Food Ltd., the principal borrower. The recovery certificate dated 31.3.2000 was drawn up.

7. The principal borrower company was declared to be sick industrial company by the Board of Industrial and Financial Reconstruction (BIFR) under the Sick Industries Company (Special Provision) Act, 1985. By virtue of Section 22(1) of SICA proceedings before the learned Recovery Officer were adjourned sine die on 27.11.2001 and reopened vide order dated 18.5.2004.

8. In the meantime, its letter dated 12.7.2003 a proposal for one-time settlement was submitted to IFCI, it being operating agency alongwith co-promoter viz. M/s. Surya Foods Agro Limited, who had already consented to one-time settlement of dues of the lenders in principle. The company sought directions of the BIFR to IFCI to arrange for visit of the proposed co-promotors to inspect the plant and machinery.

9. BIFR vide order dated 1.8.2003, inter alia, directed as follows:

“(a) I