A personal guarantor remains liable for a company’s debt despite resignation from directorship if no novation of contract occurred allowing liability release.

ORDER

1. These appeals are filed under Section 20 of the RDDB & FI Act, challenging the order passed in OA 237/2015 dated 7.10.2015 on the file of DRT-II, Chennai.

2. Appellants are Defendants 4 and 5 in OA No.237/2015 on the file of DRT- II, Chennai who filed these appeals separately against the Order passed in the said OA on 07.10.2015.

3. The first respondent bank in these appeals filed OA 237/2015 against defendants 1 to 5seeking to recover Rs.25,44,107.25p along with interest at 15.25% per annum with monthly rests from the date of OA till the date of realisation, together with costs from the defendants 1 to 5 jointly and severally.

4. The first defendant in the OA viz., M/s Brand Portrait Consulting Private Limited is a Private Limited Company and defendants 2 to 5 are its Directors. The Directors bound themselves as Directors and in their individual capacity to repay the loan advanced to the first defendant company to the tune of Rs.25.00 lakhs sanctioned vide sanction letter dated 25.7.2007. This amount was not paid, therefore, the applicant bank (R1 bank herein) issued legal notice dated 12.04.2010 to the defendants to pay the entire dues. When there is no response from defendants, OA was filed for recovery of above said amount.

5. It appears that the appellants in these appeals, who are defendants 4 and 5 in the OA, have not filed their written statements. Further, they have not produced any evidence before the Tribunal. The first Respondent bank produced Ex.A1 to A11 in proof of its claim. On the basis of the oral and documentary evidence produced, Ld. Presiding Officer allowed the OA claim and held that first respondent bank is entitled to recover a sum of Rs.Rs.25,44,107.25p with further interest at 12% per annum (simple) from the date of OA till the date of realization from defendants 1 to 5 jointly and severally.

6. Challenging this Order, these appeals i.e. RA 151/2017 and RA 152/2017 are filed by Defendants 4& 5 viz., Mr.B.S.Raj Narain and Mr. C. ARo Taffline respectively.

7. Ld. Counsel for the appellants submitted that appellants are signatories to the loan sanction proceedings dated 27.07.2007 and appellants also gave personal guarantee to the loan on 27.07.2007. It is further submitted that on 22.2.2008 and 25.02.2008 through a letter sent to Mr.Venugopal Nayar, Subash Rambhav Bhokre, the other Directors, appellants in these appeals had resigned from their position of Directors. This resignation was informed to the first Respondent bank through e- mail dated 22.02.2008. After resignation of the appellants, first Respondent bank had entered into a fresh and new agreement with the borrower company, and other directors altering the terms of the earlier contract. The rate of interest was enhanced from 13.5% - 15% to 14.25% - 15.75%. Thus, through this new agreement, the appellants are exonerated from paying the loan on the principle of novation.

8. It is further submitted that appellants were not given opportunity for producing evidence before the Tribunal. If there is change in the contract without the concurrence and confirmation of sureties, sureties can be discharged in terms of Section 133 of Indian Contract Act. Thus contending, Ld. Counsel for appellants prays this Tribunal to set aside the order of Ld. Presiding Officer, DRT-II, Chennai dated 7.10.2015 and allow these appeals.

9. Refuting the submissions of the Ld. Counsel for the appellants, Ld. Counsel for first respondent bank subm