The bank has the right to appropriate money from different accounts of the customer and the liability of the guarantors is not affected by subsequent contracts of cash credit limits.

Headnote:
Section 446 of the Companies Act empowers the court to entertain and dispose of suits and proceedings by or against a company in the course of winding up. Section 483 of the Companies Act provides for appeals from orders and decisions in the matter of winding up of a company. Section 21(2)(e) of the Banking Regulation Act gives the Reserve Bank the power to give directions to banking companies regarding the rate of interest and other terms and conditions on which advances or guarantees may be made.
Fact of the Case:
The State Bank of India filed a suit against a borrower-company and its guarantors for non-payment of instalments under a deferred payment guarantee. The bank debited the amount of the instalments in the borrower-company's cash credit accounts. The guarantors argued that their liability was extinguished by the debiting of the amounts. The court held that the bank had the right to appropriate money from different accounts of the customer and that the liability of the guarantors was not affected by subsequent contracts of cash credit limits. The court also held that the bank was entitled to interest at the bank rate. The court allowed the appeals of some of the guarantors and modified the judgments and decrees of the single judge.
Finding of the Court:
The court analyzed the rights of the bank to appropriate money from different accounts of the customer and the liability of the guarantors. The court also considered the provisions of the Companies Act and the Banking Regulation Act in relation to the case. The court referred to various judicial pronouncements on the rights of the bank and the liability of guarantors. The court concluded that the bank had the right to appropriate the amounts due under the deferred payment guarantee and that the liability of the guarantors was not affected by subsequent contracts of cash credit limits.
Ratio Decidendi: The bank has the right to appropriate money from different accounts of the customer and the liability of the guarantors is not affected by subsequent contracts of cash credit limits.
Result: The court allowed the appeals of some of the guarantors and modified the judgments and decrees of the single judge. The court dismissed the appeals of other guarantors. The court held that the bank was entitled to the amount of the seventh instalment under the deferred payment guarantee and that the amount could be adjusted at the time of passing the final decree. The court also held that the bank was entitled to interest at the bank rate. The parties were left to bear their own costs.

Judgment

A.L.Bahri, J.

1. Vide this judgment four company appeals (C. A. Nos. 8 to 13 of 1986) are being disposed of as they have arisen out of the common judgment and decree dated November 1, 1985*, of the company judge in two company petitions (C. P. Nos. 69 and 75 of 1982). While allowing the aforesaid petitions, the company judge passed a decree in favour of the plaintiff, State Bank of India, against the borrower-company (now in liquidation) and others, guarantors. The present appeals have been filed by the different guarantors.

2. The borrower-company is defendant No. 1, Depro Foods Ltd. It entered into an agreement with the State Bank of India, New Delhi branch, which was to stand as guarantor for payment of the money to a foreign company from whom Dcpro Foods Ltd. was to import machinery. The price of the machinery was payable in instalments and the company was to make payment to the State Bank of India in instalments. This agreement was entered into on June 26, 1970, and this contract is known as "deferred payment guarantee". Defendants Nos. 2 to 6 stood guarantee and property of defendant No. 8 was equitably mortgaged. When two instalments became due, the bank recovered the amount of the same by debiting the amount in the account of the company. Thereafter some more instalments fell due and the company was unable to pay the amount. In the meantime, the company got a cash credit limit to the extent of Rs. 6,00,000 on February 26, 1972, in the State Bank of India branch at Bahalgarh. This limit was increased to Rs. 6,50,000 on March 14, 1973. For the liability of this account only defendants Nos. 2 and 3 were guarantors. This account would be known as the second account. The bank debited this account in respect of four instalments of the amount of deferred payment guarantee. Another account was opened on March 16, 1974, with a cash credit limit of Rs. 1,00,000. In this account only defendant No. 2 was the guarantor. The fifth account with a cash credit limit of Rs. 7,50,000 was opened on March 21, 1975, and the guarantors were defendants Nos. 2, 4, 5 and 6. Subsequently, the cash credit limit was increased to Rs. 15,00,000 on December 13, 1976, known as the sixth account for which defendants Nos. 2, 4, 6 and 7 stood guarantee. It was in this account that the previous accounts Nos. 2, 4 and 5 were amalgamated. Subsequently, the limit was raised to Rs. 45,00,000 on January 8, 1977, and for this account the guarantors were only defendants Nos. 2 and 4. This is to be known as the seventh account. The plaintiff-bank filed a suit for the recovery of Rs. 70,26,642.23 which was pending in the High Court of Delhi. The winding-up proceedings of the borrower company, Depro Foods Ltd., were commenced in this High Court and subsequently, under orders of the company judge, the suit pending in the Delhi High Court was transferred to this High Court and it was registered as C. P. No. 69 of 1982. During the pendency of the aforesaid petition/suit, since more instalments under the "deferred payment guarantee" became due, the plaintiff-bank filed another suit which was registered as C. P. No. 75 of 1982, in this court for the recovery of Rs.2,08,616.29. These two petitions/suits were tried together and disposed of by one judgment. C. A. Nos. 10 and 8 have been filed by defendant No. 8-B. P. Gupta in the aforesaid C. P. Nos. 69 and 75 of 1982, respectively, whereas other guarantors have filed appeals Nos. 11 and 9 in the aforesaid cases, respectively.

3. A preliminary objection has been raised on behalf of the bank stating that the company appeals aforesaid are not maintainable and instead Letters Patent Appeals should have been filed on payment of ad valorem court-fee on the amounts involved in the appeals. It has been argued by Shri R. K. Chhibber. advocate, that the civil suit pending in the High Court at Delhi stood transferred to this court as such and though it was wrongly registered as C. P. No. 69, the same was disposed of by a jud