Novation of contract--Liability of guarantor--If the alterations in the instrument of guarantee are to the benefit of the guarantor then it would not result into discharge--Contract Act, 1872, Section 62.

M.M.KUMAR, J.

1. This petition filed under Article 226 of the Constitution prays for quashing summons dated 24-5-2007, issued by respondent No. 3 (P-4 and P-5) and for issuance of directions to the respondents not to recover an amount of Rs. 2,77,85,429/- or any other amount from the petitioners, who are guarantors of the loan obtained by M/s. Kurukshetra Paper Mills Pvt. Limited.

2. Brief facts of the case are that M/s. Kurukshetra Paper Mills Pvt. Limited, Kurukshetra (for brevity, the borrower), obtained a term loan of Rs. 120 lacs from the Haryana Financial Corporation-respondent No. 1, vide loan agreement dated 7-8-1997 and the petitioners stood as guarantors against that loan. The loan was to be repaid in 27 quarterly instalments along with interest @ 19% per annum. The 27th instalment was to be paid by 1-8-2005. It was also stipulated that if the last instalment was paid on 6-8-2005, no penal interest was to be added. In July 1999, the unit of the borrower started production. On 4-10-2001, respondent No. 2 accepted the request of the borrower for re-scheduling the entire outstanding amount as well as extension for 2 years till 6-8-2007, subject to the conditions that the borrower was to pay Rs. 1,00,000/- as down payment (which were received on 28-9-2001), Rs. 3,00,000/- in October, 2001, Rs. 2,80,000/- each per month from November, 2001 to March, 2001. It was further manifested that after extending the period of 2 years, balance outstanding amount including accrued interest was to be paid in 22 equal quarterly instalments of Rs. 12.32 lacs starting from April, 2002 till 6-8-2007. Balance, if any, was to be paid within currency of loan. It was specifically mentioned in the letter dated 4-10-2001 that even a single default was to attract legal action including taking over possession of the unit and the Corporation was to charge higher rate of interest on the amount rescheduled (P-2). It is alleged that the petitioners were not called upon to give their consent regarding variations in the terms of original loan agreement. On 11-1-2002, respondent No. 2 further accepted the request 6f the borrower and currency period of loan amount was further extended up to 6-8-2008 (P-3).

3. It is claimed that respondent No. 1 Corporation forced the borrower to pay an amount of Rs. 9,62,856/- in December 1998 before start of production and from 4-8-1998 to 27-12-2001, an amount of Rs. 44,82,656/-was paid by it. On 19-2-2002, possession of the unit was taken over by the respondent-Corporation and on 24-2-2003, entire property including plant, machinery and additional machinery of the unit of M/s. Kurukshetra Paper Mills Pvt. Limited was sold for an amount of Rs. 47,50,000/- in favour of one Shri Sanjay Singla. The respondent- Corporation further sold other collateral securities and properties of the guarantors valuing Rs. 98,85,000/-. In this manner, Rs. 1,43,67,656/- are stated to have been recovered by the respondent-Corporation. It has still further been claimed that on 16-7-2004, two plots measuring 2178 sq. ft. with residential constructed building, situated in Ward No. 6, Pehowa, being House No. 542, belonging to the petitioner No. 3 had been sold for an amount of Rupees 13,00,000/-. Now, summons dated 24-5-2007 (P-4 and P-5) have been issued by the Tehsildar, Thanesar (respondent No. 3) requiring the petitioners to pay an amount of Rs. 2,77,85,429/- being outstanding amount towards the respondent-Corporation.

4. In the written statement filed on behalf of the respondent-Corporation, the stand taken is that the petitioners have executed a Bond of Guarantee, dated 7-8-1997, owing their liability for repayment of loan jointly and severally, unconditionally to the respondent-Corporation. It has been pointed out that the petitioners have submitted absolutely an irrevocable guarantee agreeing that the Corporation shall have sole discretion to make disbursement or to make interim disbursement on such conditions as the Corporation