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2001 Supreme(Cal) 202
High Court Of Calcutta
Dilip Kumar Seth
HINDUSTHAN MAGCOBAR CHEMICALS LTD. - Appellant
Versus
O.P.RAJGARHIA - Respondent
C. S. 83 Of 2000
Decided On : 04/11/2001
PRATAP CHATTERJI, S.N.MUKHERJEE
A decree obtained against a defendant-judgment-debtor cannot be enforced or proceeded with or could be treated to be a valid decree, against the defendant-judgment-debtor by the plaintiff, in view of the fact that the claim that was sought to be enforced arises out of a guarantee given by the defendant against recovery of an advance made to a company against which proceedings under Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) was initiated and referred to the Board for Industrial and Financial Reconstruction (BIFR).
Headnote:
SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 - SECTION 22(1) - GUARANTEE - ENFORCEABILITY - JURISDICTION - NULLITY OF DECREE - EXECUTION - MAINTAINABILITY OF APPLICATION - RES JUDICATA - INHERENT LACK OF JURISDICTION. Whether a decree obtained against the defendant-judgment-debtor can be enforced or proceeded with or could be treated to be a valid decree, against the defendant-judgment-debtor by the plaintiff, in view of the fact that the claim that was sought to be enforced arises out of a guarantee given by the defendant against recovery of an advance made to a company against which proceedings under Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) was initiated and referred to the Board for Industrial and Financial Reconstruction (BIFR).
Fact of the Case:
The plaintiff advanced Rs. 75 lakhs as loan to VHEL Industries Ltd. (VHEL) by way of an intercorporate deposit. J. K. Rajgarhia (JKR) executed a deed of guarantee as guarantor for repayment of the said loan by VHEL. On September 11, 1998, terms of settlement, between the plaintiff and the two defendants in the Vadodara suit, were agreed. A further security for repayment of the loan was executed through a deed of guarantee by O. P. Rajgarhia (OPR). On the same date three cheques, covering the entire amount, issued by OPR were handed over to the plaintiff, on the alleged understanding that in the event VHEL or JKR fails to pay, the plaintiff would be entitled to encash the cheques. On presentation by reason of non-payment by VHEL and JKR the cheques were dishonoured. Thereafter on September 30, 1998, a consent decree was obtained in the Vadodara suit, wherein the defendant agreed to pay the entire amount in instalments. On October 15, 1999, VHEL was referred to the BIFR under the SICA. On March 13, 2000, the plaintiff filed a suit (C. S. No. 83 of 2000) against OPR being a guarantor for recovery of the loan availed of by VHEL and guaranteed by JKR. The said suit was decreed on June 9, 2000. Admittedly at that time the enquiry under the SICA against VHEL was pending before the BIFR.
Finding of the Court:
1. The suit being C. S. No. 83 of 2000 was not maintainable and the court had lacked inherent jurisdiction to entertain and proceed with the same in view of Section 22 (1) of the SICA. 2. Consequently the decree, though passed in the presence of the defendant, is void and a nullity and as such inexecutable.
Issues: 1. Whether the decree obtained against the defendant-judgment-debtor can be enforced or proceeded with or could be treated to be a valid decree, against the defendant-judgment-debtor by the plaintiff, in view of the fact that the claim that was sought to be enforced arises out of a guarantee given by the defendant against recovery of an advance made to a company against which proceedings under Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) was initiated and referred to the Board for Industrial and Financial Reconstruction (BIFR). 2. Whether in a suit filed by the plaintiff against the defendant OPR excluding JKR and VHEL the mischief of Section 22 (1) could be attracted; 3. If attracted could that question be raised by the defendant after the decree was passed in his presence or in other words whether the question is hit by constructive res judicata, thereby making these applications non-maintainable; 4. Whether the guarantee sought to be enforced against OPR without making JKR and VHEL parties to the suit is an enforcement of a guarantee against a private individual without affecting the loan or advance made to VHEL or in other words whether the mischief of Section 22 (1) could be extended in the case of a guarantor of a guarantor; 5. Whether all these questions could be gone into in execution proceedings where the court cannot go behind the decree or whether it is one of the exceptions to the rule.
Ratio Decidendi: 1. Section 22(1) of the SICA bars a suit, for recovery of money or for enforcement of any security against the industrial company or of any guarantee in respect of any loans, or advance granted to the industrial company, shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the appellate authority, where an enquiry under Section 16 is pending or a revival/scheme under Section 17 is being framed or is under implementation or an appeal under Section 25 relating thereto is pending. 2. The guarantee given by OPR was in respect of default by VHEL or JKR in payment of the loan or advance made to VHEL. Therefore, the mischief of Section 22 (1) is attracted in the present case. 3. The distinction sought to be made by Mr. Chatterjee is of no substance. The guarantee specifically mentions that OPR agreed to guarantee payment and was liable to pay in default of payment by VHEL or JKR in respect of loan advanced by the plaintiff to VHEL. 4. The guarantee was given to the creditor, the plaintiff, in respect of repayment of loan or advance given to VHEL. Thus he was not a guarantor of a guarantor but a guarantor of a borrower in respect of repayment of loan given to VHEL, the borrower. 5. The guarantee being in respect of a loan or advance given to the industrial company, it is protected and the mischief of Section 22 (1) is attracted, even if such guarantee is sought to be enforced against the guarantor alone without impleading the industrial company or the other guarantor.
Final Decision: G. A. No. 99 of 2001, upon being treated as an application under Section 47 read with Section 151 of the Civil Procedure Code succeeds. It is declared that the suit being C. S. No. 83 of 2000 was not maintainable and the court had lacked inherent jurisdiction to entertain and proceed with the same in view of Section 22 (1) of the SICA as discussed above and consequently the decree, though passed in the presence of the defendant, is void and a nullity and as such inexecutable. In view of the above G. A. No. 100 of 2001 also succeeds. The execution proceedings are rejected and all orders passed in the execution are hereby recalled.
( 1 ) THE moot question that arises in these two applications being G. A. No. 99 of 2001 and G. A. No. 100 of 2001 is as to whether the decree obtained against the defendant-applicant can be enforced or proceeded with or could be treated to be a valid decree, against the defendant-judgment-debtor by the plaintiff, in view of the fact that the claim that was sought to be enforced arises out of a guarantee given by the defendant against recovery of an advance made to a company against which proceedings under Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the SICA) was initiated and referred to the Board for Industrial and Financial Reconstruction (hereinafter referred to as the BIFR ). In order to appreciate the question first we may refer to the facts of the case in short, before we note the respective arguments advanced by learned counsel for the respective parties. The plaintiff-decree holder on February 9, 1996, allegedly advanced Rs. 75 lakhs as loan to one VHEL Industries Ltd. (hereinafter referred to as VHEL) by way of an intercorporate deposit. One J. K. Rajgarhia (hereinafter referred to as JKR) executed a deed of guarantee as guarantor for repayment of the said loan by VHEL. On August 13, 1998, the plaintiff filed a suit at Vadodara for recovering the alleged amount from VHEL and JKR. On September 11, 1998, terms of settlement, between the plaintiff and the two defendants in the Vadodara suit, were agreed. A further security for repayment of the loan was executed through a deed of guarantee by O. P. Rajgarhia (hereinafter referred to as OPR ). On the same date three cheques, covering the entire amount, issued by OPR were handed over to the plaintiff, on the alleged understanding that in the event VHEL or JKR fails to pay, the plaintiff would be entitled to encash the cheques. On presentation by reason of non-payment by VHEL and JKR the cheques were dishonoured. Thereafter on September 30, 1998, a consent decree was obtained in the Vadodara suit, wherein the defendant agreed to pay the entire amount in instalments. On October 15, 1999, VHEL was referred to the BIFR under the SICA. On March 13, 2000, the plaintiff filed a suit (C. S. No. 83 of 2000) against OPR being a guarantor for recovery of the loan availed of by VHEL and guaranteed by JKR. The said suit was decreed on June 9, 2000. Admittedly at that time the enquiry under the SICA against VHEL was pending before the BIFR. On September 26, 2000, certain orders were passed in the execution application being G. A. No. 3752 of 2000. On November 8, 2000, further order was passed in the said execution. After having obtained change in favour of the present advocate-on-record on December 12, 2000, it came to the notice of the advocate-on-record that while obtaining the decree the court was not informed of the proceedings against VHEL pending before the BIFR. In the circumstances no suit could be proceeded with against a guarantee covering the loan advanced to VHEL and the decree passed therefor being a nullity, the same could not be proceeded with. Therefore, these two applications have been filed by the judgment debtor. G. A. No. 99 of 2001 was filed seeking recalling and/or setting aside of the decree dated June 9, 2000, passed in C. S. No. 83 of 2000 and also for dismissal of the said C. S. No. 83 of 2000, G. A. No. 100 of 2001 was filed for stay of proceedings of G. A. No. 3752 of 2000 being the execution of the decree passed in C. S. No. 83 of 2000, and for dismissal of the said execution proceedings and recalling of the orders dated September 26, 2000, November 8, 2000, and December 13, 2000, respectively, passed in the said execution proceedings, as well as for stay of operation of the respective orders. Thus, how the present matters have come up before this court.
( 2 ) MR. S. N. Mukherjee, learned counsel appearing on behalf of OPR being the defendant-judgment-debtor herein contends that C. S. No. 83 of 2
