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2008 Supreme(Jhk) 1080
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Rakesh Ranjan Prasad, J.
Dharam Chand Goyal – Appellants.
Vs.
Bihar State Financial Corporation through its Managing Director and Ors. – Respondent
W.P. (C) No. 4566 of 2007
Decided On : 04.09.2008
For Appellant/Petitioner/Plaintiff: A.K. Das, Adv.
For Respondents/Defendant: M.S. Mittal, Adv.
The main legal point established in the judgment is that a change in the position of the principal debtor can discharge the surety/guarantor from their obligations, as per Section 133 of the Indian Contract Act.
Headnote:
Guarantee - Recovery of Debt - Section 32(G) of Bihar State Financial Corporations Act - [Section 32G] - The court discussed the provisions of Section 32(G) of the Act, which allows the Financial Corporation to recover the amount due as an arrear of land revenue. The court interpreted the section and held that it does not stipulate any specific procedure for realizing the debt from the debtor and the authority is required to follow a procedure that is just, fair, reasonable, and in line with the principles of natural justice. The court also considered the petitioner's request to revoke his personal guarantee and held that the guarantee would be deemed to have been discharged due to a change in the position of the principal debtor, as per Section 133 of the Indian Contract Act.
Fact of the Case:
The petitioner, a former director of M/s. Chinar Foods Pvt. Ltd., sought to quash the order for recovery of a loan amount issued by the Bihar State Financial Corporation under Section 32(G) of the Act. The petitioner argued that he should not be liable to repay the loan as he had resigned from the company and requested to revoke his personal guarantee.
Finding of the Court:
The court found that the petitioner's resignation and request to revoke his personal guarantee should discharge him from the liability to repay the loan. The court also held that the Corporation's action of impleading the petitioner in the certificate proceeding for debt recovery was illegal.
Issues: The issues involved the liability of the petitioner to repay the loan amount and the legality of the Corporation's action in impleading the petitioner in the debt recovery process.
Ratio Decidendi: The court's decision was based on the interpretation of Section 32(G) of the Act and the application of Section 133 of the Indian Contract Act, which led to the discharge of the petitioner's personal guarantee due to a change in the position of the principal debtor.
Final Decision: The court set aside the order for recovery of the debt and quashed the certificate proceeding against the petitioner, thereby allowing the petitioner's application.
R.R. Prasad, J.
1. This writ application has been filed for issuance of a writ in the nature of certiorari for quashing the order as contained in Reference No. 386 dated 12.6.2006 (Annexure 10) whereby specified authority in exercise of power conferred under Section 32(G) of the Bihar State Financial Corporations Act issued a certificate for recovery of a sum of Rs. 2,36,78,313.94 along with pendente lite and future interest and made request from the Deputy Commissioner-cum-Certificate Officer to realize the said amount from all promoters of M/s. Chinar Foods Pvt. Ltd. Ranchi including the petitioner as arrears of land revenue and further to quash the entire certificate proceeding, bearing certificate case No. 03 (BSFC)/06-07, pending before the District Certificate Officer, Ranchi so far this petitioner is concerned.
2. The case of the petitioner is that M/s. Chinar Foods Pvt. Ltd. having its office at Ranchi to which petitioner was one of the Directors was sanctioned a term loan of Rs. 34,50,000/- on 26.6.1987 by the Corporation on mortgaging the title deeds with respect to immovable properties of the Company and on giving personal guarantee by the petitioner in the capacity of Director. The petitioner continued as Director of the said Company or some times but on account of his ill-health, he tendered his resignation on 1.11.1988 which was accepted by the Board of Directors of the Company in its meeting held on 29.11.1988 and the Board of Directors in the said meeting also decided to appoint one Jagdish Prasad Choudhary as one of the Directors. Subsequently, Praveen Kumar Agarwal was also appointed as Director of the Company and information to that effect was given to the respondent-corporation, upon which and they were allowed to be inducted as new Directors. Before that, the petitioner had informed about his resignation to the Corporation, vide his letter dated 6.12.1998 and also made a request to revoke his personal guarantee given by him in the capacity of the Director of the said Company. Upon which, the petitioner was called upon by the Corporation to clarify his stand but he could not make contact to the respondent. However, he again made request to revoke personal guarantee but all on a sudden, the petitioner received a notice dated 29.7.2002 intimating therein that an application under Section 32(G) of the State Financial Corporation Act has been filed against him and other Directors for recovery of the dues. Immediately thereafter the petitioner appeared before the concerned officer and placed his case that as the petitioner had tendered his resignation as back as on 1.11.1988 which had been duly accepted by the Board of Directors, he is not liable to repay the loan amount but the respondent without considering the case of the petitioner, issued a certificate for recovery of the aforesaid amount from M/s. Chinar Foods Pvt. Ltd and its Directors including the petitioner which is wholly illegal and arbitrary.
3. According to counter affidavit filed on behalf of Bihar State Financial Corporation, the Corporation is entitled to recover the amount from the petitioner as the petitioner was one of the Directors of M/s. Chinar Foods Pvt. Ltd. and had also given personal guarantee for securing the loan advanced by Bihar State Financial Corporation and as M/s. Chinar Foods Pvt. Ltd has failed to liquidate the dues, step has been taken by the Corporation for recovery of the dues in terms of Section 32(G) of the State Financial Corporation Act from the Company and also from the petitioner, as the petitioner on being retired from the Directorship has not been relieved from the guarantorship and as the guarantorship had not been revoked, the petitioner is liable to repay the loan.
4. Learned Counsel appearing for the petitioner submits that the petitioner on being retired from the Company communicated it to the authorities of Bihar State Financial Corporation and also made request to revoke his personal guarantee as he had
