M. VENUGOPAL J.

1. Heard the Learned Counsel for the Appellant.

2. Since this Court is disposing of the main Original Side Appeal at the admission stage itself, this Court is not inclined to issue notice to the Respondents.

3. The Appellant/Plaintiff has preferred the present Original Side Appeal against the order dated 01.02.2017 in Application No.2809 of 2012 in C.S.No.786 of 2011.

4. Earlier, the Learned Single Judge, while passing the impugned order in Application No.2809 of 2012 in C.S.No.786 of 2011 [filed by the 1st Respondent/Defendant against the Appellant/1st Respondent/Plaintiff and another seeking to reject the Plaint in C.S.No.786 of 2011 under Order XIV Rule 8 of the Madras High Court Original Side Rules read with Order VII Rule 11(C) of the Civil Procedure Code, 1908], on 01.02.2017, at paragraph 17, had observed the following:

“17. Though the learned counsel for the original plaintiff/1st respondent herein has relied upon the judgment of the Hon'ble Supreme Court reported in (2009) 8 SCC 646 (NAZAR INDUSTRIAL ENTERPRISES LIMITED v. HONG KONG AND SHANGHAI BANKING CORPORATION), the same is not applicable to the facts of the present case. In the said judgment, the issue was with regard to the derivative contracts, which were alleged to be the violation of Foreign Exchange Management Act, 1999 as well as the circulars and guidelines issued by the Reserve Bank of India. Only taking note of the derivative contracts, the civil Court Jurisdiction was retained by the Hon'ble Supreme Court. Therefore, this Court is of the view that the present suit is nothing but abuse of process of law. The plaintiff, having approached the DRT for the similar issue can very well agitate the same before it.”

and allowed the application.

5. According the Learned Counsel for the Appellant/Plaintiff, he was the Managing Director of M/s Subhiksha Trading Services Limited (STSL) a subsidiary company of ICICI Bank and its subsidiary M/s ICICI Venture Fund Management Company Limited. The version of the Appellant is that STSL had entered into agreements for borrowings from Banks for its expansion programmes and for financing its working capital requirements. Further, the loans were sanctioned to STSL to the extent of Rs.800 Crores by various banks including the 1st Respondent/Bank.

6. It comes to be known that since STSL had entered into loan agreements for Rs.800 Crores with the banks the guarantees of the Appellant were also obtained for such amount despite the net worth of the Guarantor having been between Rs.2 to 5 Crores in the said periods when the Guarantees were taken. Because of the reason that loans were not being borrowed by the Appellant, according to him, the funds in his hands were no manner altered by the loans granted by the lender banks to STSL and as such, the lack of his ability to meet the demands if any under the Guarantee by the Banks was known both to the Appellant and to the banks at all times.

7. The stand of the Appellant is that the Guarantees were taken by the Banks only for reasons of procedural compliance and there was no expectation of the banks of any ability to recover the monies intended to be advanced by them to STSL from the Appellant as the Appellant's limited resources were always known to the lender banks to STSL so much, so that not even any security was ever sought by the lender banks of STSL from Appellant despite the large amounts for which guarantees were obtained from the Appellant. In fact, it is the plea of the Appellant that STSL underwent serious financial difficulties in the year 2009 and the operations came to be suspended. Thereafter, STSL had to face claims by the lenders banks at Debts Recovery Tribunal and in the said proceedings, the Appellant was arrayed as Guarantor and the monies claimed as due by STSL were also claimed from the Appellant as though under the Guarantee.

8. The principle stand on behalf of the Appellant is that the ‘Guarantees were void ab initio’ under Part 1 of Section 5