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IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Sanjay Karol, J.
Himachal Pradesh State Industrial Development Corporation Limited - Plaintiff.
Versus
Sh. Ravinder Soni, - Defendants.
Civil Suit No. 32 of 2008.
Decided On : September 24 , 2012
Companies Act - Recovery of Loan - Section 128 of the Indian Contract Act, 1872, Article 55 of the Limitation Act, 1963 - The court found that the plaintiff, a company incorporated under the Companies Act, 1956, was entitled to recover a loan amount from the defendants as guarantors. The court relied on Section 128 of the Indian Contract Act, which states that the liability of the surety is co-extensive with that of the principal debtor, and Article 55 of the Limitation Act, 1963, which determines the period of limitation for recovery of the amount due after the sale of the mortgage property. The court held that the cause of action to maintain the suit against the guarantors arose after the sale of the company's assets, and only if there was any shortfall, and then on the failure of the guarantors to indemnify the plaintiff.
Fact of the Case:
The plaintiff, a company incorporated under the Companies Act, 1956, sought to recover a loan amount from the defendants as guarantors. Despite demands, the defendants failed to meet their liability as guarantors and pay the suit amount.
Finding of the Court:
The court found that the plaintiff was entitled to recover the loan amount from the defendants as guarantors based on the provisions of the Indian Contract Act and the Limitation Act.
Issues: The issues included the plaintiff's entitlement to recover the loan amount, the competence of the plaintiff to file the suit, the validity of the contract of guarantee, and the applicability of the period of limitation for recovery of the amount due.
Ratio Decidendi: The court relied on Section 128 of the Indian Contract Act, which establishes the co-extensive liability of the surety with that of the principal debtor, and Article 55 of the Limitation Act, 1963, which determines the period of limitation for recovery of the amount due after the sale of the mortgage property.
Final Decision: The court decreed the suit in favor of the plaintiff, awarding the loan amount and interest against the surviving defendants, and held their liability to be joint, several, and coextensive.
Sanjay Karol, J.
Briefly stated, facts as they emerge from the record of this case are, that plaintiff is a Company incorporated under the Companies Act, 1956, having its registered office at New Himrus Building, Cart Road, Shimla.
2. M/s Lalji Paper Mills Private Limited (hereinafter referred to as the Company) was promoted by original defendants No. 1 to 6. With a view to obtain financial assistance from the plaintiff, through its Directors the Company approached the plaintiff for grant of term loan of a sum of Rs.48.85 lakhs for construction of factory building, purchase of land and machinery, setting up an industrial unit for manufacturing writing and printing paper at Barotiwala, District Solan, H.P. The said defendants moved an application for loan which is Ext. PW-2/E, dated 11.9.1980. Correspondence with regard to the same is Ext. PW-2/F (17.12.1980), Ext. PW-2/G (6.1.1981), Ext. PW-2/H (26.6.1984) and Ext. PW-2/J (23.9.1981). Acting on the representations of the promoters, plaintiff issued sanction letters Ext. PW-2/K (17.2.1981), Ext. PW-2/L (22.2.1984) and Ext. PW-2/M (28.2.1981). The loan was duly sanctioned. The resolution of the Company is Ext. PW-2/N (27.2.1981) and Ext. PW-2/O (14.3.1984). Two loan agreements were executed between the plaintiff and the Company. Ext. PW-2/R is the loan agreement dated 22.9.1981 with respect to loan amounting to Rs.40.45 lakhs and Ext. PW-2/S is the loan agreement dated 3.4.1984 with respect to additional sum of Rs.8.85 lakhs. The promoters also executed hypothecation agreement Ext. PW-2/T dated 22.9.1981 and Ext. PW-2/U dated 3.4.1984. In relation to the aforesaid loan amounts, the original defendant No. 1 to 6 namely Sh. Ravinder Soni, Sh. Satish Soni, Sh. Vinod Soni, Sh. Parmod Soni, Sh. Ajit Soni and Sh. Inder Jit Kehar executed deeds of guarantee dated 22.9.1981 and 3.4.1984 and the same are Ext. PW-2/V and Ext. PW-2/W. Defendants Sh. Ravinder Soni and Sh. Satish Kumar Soni also issued promissory notes which are Ext. PW-2/P (22.9.1981) and Ext. PW 2/Q (3.4.1984).
3. With respect to the property of the Company there was a parri passu charge between the plaintiff, Punjab National Bank (proforma defendant No. 8) and the Himachal Pradesh Financial Corporation (proforma defendant No. 7). The parri passu agreement is Ext. PW-2/X (13.8.1987).
4. The Company vide resolutions Ext. PW-2/N (27.2.1981) and Ext. PW-2/O (14.3.1984) authorized its promoters to execute the various agreements referred to hereinabove.
5. There were serious defaults by the Company in making payments to the various financial institutions and meet its liability. Also the Company was not doing well.
6. The Managing Director of the Company vide letter dated 26.9.1988 (Ext. PW-2/Y) informed the decision of taking up the matter before the appropriate authority(s) under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985. Proceedings in relation to the Company, under the provisions of the said Act are Ext. PW-2/Z-1 to Ext. PW-2/Z-10 and Ext. PW-2/Z-12. It cannot be disputed that the Company was eventually wound up and its assets liquidated. A Liquidator was appointed in terms of order passed by the High Court of Delhi. The plaintiff was asked by the Official Liquidator to surrender the title deed in terms of order Ext. PW-2/Z-14 passed by the High Court of Delhi in CWP No. 2577/91. The details of such proceedings under the provisions of BIFR are not being referred to and discussed in detail. Suffice it to say that in terms of various directions issued by the High Court of Delhi, plaintiff received a sum of Rs.42,32,700/- on 20.8.2007 which was credited to the account of the Company.
7. The fact of the matter is that despite adjustment of the aforesaid amount a sum of Rs.1,29,24,743/- still remained outstanding against the Company. Since the original defendants No. 1 to 6 stood guarantors for the loan account, they were also liable to pay the same. The fact of the matter is that none cam
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