The court reiterated that a guarantor's liability is co-extensive with that of the principal debtor and emphasized that a settlement with the principal discharges the guarantor unless explicitly preserved.

JUDGMENT

Neena Bansal Krishna, J.

I.A. 9870/2017

1. An application under Order XIV Rule 5(1) and (2) read with Section 151 Code of Civil Procedure, 1908 (hereinafter referred to as CPC) has been filed on behalf of defendant No.4 for reframing of the issues.

2. It is submitted in the application that the issues were framed ex-parte vide Order dated 07th May, 2015 against defendant No.4, three years after the suit was settled between the plaintiff and defendant No.1 to 3 and a compromise decree was passed on 04th September, 2012. The defendant No.4 filed an application for recall of the Order dated 07th May, 2015, but the same was disallowed vide Order dated 29th March, 2016. FAO (OS) 140/2016 was filed by the defendant No.4 which was allowed and the defendant No.4 was granted leave to approach this Court for reconsideration of the issues as framed on 07th May, 2015.

3. The plaintiff had filed a suit for recovery of its dues along with interest from defendant No.1 and 2 on account of non-payment of financial assistance availed by them. The suit was filed by the plaintiff with the following prayers:

"(i) pass a decree in favour of the Plaintiff and against Defendants No.1 to 8 jointly and severally as under:

a. for a sum of Rs. 9,84,07,792.39 (Rupees Nine Crore Eightv Four Lacs Seven Thousand Seven Hundred Ninty Two & Paise Thirty Nine only) against Defendants 1 to 4;

b. for a sum of Rs.3,52,62,754.08 (Rupees Three Crores Fifty Two Lakhs Sixty Two Thousand Seven Fifty Four & Paise Eight only) against Defendant No. 5;

c. for a sum of Rs.1,38,46,777.54 (Rupees One Crore Thirty Eight Lakhs Forty Six Thousand Seven Hundred Seventy Seven & Paise Fifty Four only) against Defendant No.6;

d. for a sum of Rs.54,50,938/-(Rupees Fifty Four Lakhs Fifty Thousand Nine Hundred Thirty Eight only) against Defendant No.7;

e. for a sum of Rs.41,56,450/- (Rupees Forty One Lakhs Fifty Six Thousand Four Hundred Fifty only) against Defendant No.8..."

4. During the pendency of the suit, the plaintiff along with defendant No.1 to 3 moved a joint application dated 23rd August, 2012 for settlement whereby defendant No. 1 to 3 agreed to pay a sum of Rs.8,55,00,000/- towards full and final settlement of the claim of the plaintiff, which was duly recorded in the Order dated 04th September, 2012. The settlement recorded that a sum of rupees 6.50 Crores was already paid through various demand drafts by defendant No.1 to 3. The balance amount of rupees 2.05 Crores was agreed to be paid on or before 31st December, 2012 along with interest @ 11.25% w.e.f. 19th May, 2012. In the event of non-payment of the full settlement amount, the entire amount along with interest and cost as claimed in the original suit No.2613/2000 after adjusting the payments made by the defendants, shall become due and payable by defendant No.1 to 3 and a decree was directed to be drawn in terms thereof. It was further agreed that in case the balance amount was not paid, the plaintiff shall be entitled to recovery of the entire suit amount from defendant No.1 to 3 along with the interest. It was further agreed in terms of the Agreement that the plaintiff would have right to continue against other defendants who were not part of this settlement.

5. The defendant No.4 has claimed that the plaintiff was aware that defendant No.4 had no dealings with the plaintiff nor did defendant No.4 borrow any money or signed as a Guarantor or executed any mortgage and had nothing to do with the amount that was due and payable from defendant No.1 to 3. For this reason the plaintiff entered into a sett