The liability of a surety or a guarantor to repay the loan of the principal debtor arises only when a default is made by the latter and the limitation for enforcing the liability of the guarantors starts running from the date of invocation of guarantee and not from the date of the notice issued on the principal debtor.

This appeal has been filed by the West Bengal Industrial Development Corporation Limited against the judgment and order of the learned single Judge dated 22nd January, 2008, whereby the learned single Judge allowed a recalling application, being G.A. No. 1939 of 2006, taken out by five of the six guarantors sued by the West Bengal Industrial Development Corporation Limited. While allowing the guarantors' application, the learned single Judge also dismissed the petition filed by the West Bengal Industrial Development Corporation Limited under Section 31(1)(aa) of the State Financial Corporations Act, 1951, by ASFC No.3 of 2005.

2. Briefly stated, case of the appellants is that the appellant No.1 had given financial assistance to the respondent No.1, a private limited company. West Bengal Industrial Development Corporation Limited (hereinafter referred to as WBIDC) sanctioned and disbursed a term of loan of Rs. 55,00,000/(Rupees fifty five lakhs) to the respondent No.1, which was subject to the interest @ 14% per annum, for setting up of a gramophone record manufacturing plant.

3. The term loan agreement contained, inter alia, the terms and conditions of sanction, disbursement, interest, repayment, security and guarantee for the term loan which were executed by respondent Nos. 2 and 6, who were the Chairman and Managing Director of the respondent No.1. respectively). The term loan was executed on 24th November, 1983.

4. The respondent Nos. 2 to 7 executed a deed of their personal guarantee on 24th November, 1983, in respect of the term loan availed by respondent No.1. By the said deed of guarantee, the aforementioned guarantors guaranteed to WEIDC that in case of any default on the part of the respondent No.1 in repayment of the principal term loan or in payment of interest thereon and any other monies accrued thereon and covered under the terms of the loan agreement, the said respondents would, on demand, pay the said amount to WBIDC and would indemnify WBIDC.

5. On the failure on part of respondent No.1 to pay dues of WBDIC, a notice under Section 29(1) read with Section 30 of the State Financial Corporations Act, 1951 (for short, "the Act") was issued on 29th September, 1995, asking the respondent No.1 to liquidate the dues within a stipulated period, but as the respondent No. 1 filed to liquidate its dues in accordance with the said notice. WBIDC took over all secured assets of the respondent No.1 on 14th February, 1996.

6. After taking possession of the fixed assets of the respondent No. I, WBIDC issued advertisement for sale of the assets in various newspapers on various occasions and ultimately the assets were sold to the highest bidder for Rs. 12,00,000/- (Rupees twelve lakhs). The assets were handed over to the highest bidder on 15th March, 2004.

7. After adjusting the sale proceeds of the fixed assets of respondent No.1 amounting to Rs. 12,00,000/- (Rupees twelve lakhs) in the loan account of respondent No. 1, the WBIDC fixed liability upon the respondents as per the following particulars :-

Principal : Rs. 36,03,000.00

Interest and other charges : Rs. 7,01,48,411.00

Total Rs. 7,37,51,411.00

8. Consequently, the WBIDC sent demand notices dated 7th June, 2005, invoking guarantee of respondent Nos. 2 to 7. By the said notices, WBIDC called upon the said respondents to pay the sum of Rs. 7,37,51.411,00/-, which sum of money was due and payable to WBIDC as on 31st March, 2005, within a fortnight from date of the notices.

9. Subsequently, WBIDC also filed an application before the learned single Judge under Section 31(1)(aa) read with Section 32(1A), Section 32(4A). Section 32(6) and Section 32(7)(da) of the Act. The following principal reliefs were claimed by WBIDC in their application filed before the learned single Judge, being ASFC No.3 of 2005 :

"a) The liability of the respondent Nos. 2 to 7 as surety for the loan granted by the appellant No. 1 to respondent No. 1 be enforced, by selling the assets and properties of r