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2024 Supreme(Online)(MAD) 15214
HIGH COURT OF MADRAS
Honourable Mr Justice C.V. KARTHIKEYAN
TAMIL NADU INDUSTRIAL INVESTMENT – Appellant
Versus
M/S.MONTECH HYDRAULICS PVT LTD. – Respondent
A continuing guarantee binds the guarantor for repayment, but claims against legal heirs must establish asset inheritance to be maintainable.
Headnote:
Liability - Financial Corporations - State Financial Corporations Act, 1951 - Sections 31(a), 31(a)(a), 32 - The court analyzed the interpretation of continuing guarantees, the commencement of limitation periods concerning claims, and the proof of inherited assets, ultimately determining the dismissal of the petition against the legal heirs due to insufficient evidence.
Fact of the Case:
The petitioner sought a payment of Rs.3,77,10,063.71 from the respondents, including legal heirs of a deceased guarantor, following a loan issued in 1984. The loan had been secured by hypothecation, but the original debtor had been declared a sick industry and was wound up.
Issues: 1. Was the claim barred by the law of limitation? 2. Is the claim against the legal heirs of the deceased guarantor admissible?
Ratio Decidendi: The limitation period began from the date the claim was realized from the official liquidator. However, a party claiming against legal heirs must prove that the heirs inherited whatever asset could account for the liability.
Final Decision: The Original Petition stands dismissed with costs.
ORDER
The Original Petition has been filed under Sections 31(a), 31(a)(a)
and 32 of the State Financial Corporations Act, 1951 by the Tamil Nadu Industrial Investment Corporation Limited against the three respondents, M/s.Montech Hydraulics Pvt. Ltd., B.V.R.Achar and Ashok B. Rao seeking a direction to determine the liability and direct the 2nd and 3rd respondents to pay jointly and severally a sum of Rs.3,77,10,063.71/- to the petitioner with interest at 17% per annum from the date of the petition till the date of realization and for costs.
2.Pending the original petition, the 2nd respondent died and his legal heirs, Balebaid Rohit Achar and Balebail Gautham Achar were impleaded as 4th and 5th respondents. The 1st and 3rd respondents remained exparte. This original petition had therefore been contested only by the 4th and 5th respondents.
3.In the petition, it had been stated that the petitioner is a public financial institution incorporated under the Companies Act, 1956 with object to grant loans and advances to industries in the State of Tamil Nadu and Puducherry on the security of hypothecation and mortgages. The petitioner obtains funds from Apex Financial Institutions of India and lends the same to entrepreneurs at concessional rate of interest.
4.It had been further stated that the 1st respondent wanted to set up an Engineering Unit at SIPCOT Industrial Complex, Gummidipoondi, Tiruvallur District and sought loan from the petitioner. The petitioner had sanctioned loan of Rs.20/- Lakhs on 01.09.1984 towards construction of factory building and purchase and erection of machinery. The terms and conditions of the loan were also stipulated. The 2nd and 3rd respondents stood guarantee for the loan. The loan was repayable in 12 half yearly instalments with interest at the rate of 17% per annum. The machineries of the factory were hypothecated by a deed of hypothecation dated 04.01.1985.
5.It had been further stated that the 1st respondent then approached BIFR in 1992. The 1st respondent could not be revived and winding up was directed. This Court had appointed a liquidator on 22.03.2006 and assets were auctioned for Rs.1,72,00,000/- on 11.01.2008. The official liquidator released the prorata claim of the petitioner to a sum of Rs.1,55,55,632/- on 31.03.2010. This amount was credited to the account of the petitioner on 05.04.2010. It had been contended that the respondents were due and liable to pay the balance amount of Rs.3,77,10,063.71/- together with further interest. It had been stated that the cause of action had last arisen on
31.03.2010 when part amount was received from the official liquidator and it had therefore been contended that the petition which was filed on
20.10.2011 was filed within the period of limitation.
6.The 2nd respondent had filed a counter wherein, it had been stated that the petition has been filed with malafide intentions since the transactions relate to the year 1984 and more than 40 years have lapsed. The 1st respondent had been declared as sick industry. The 2nd respondent denied that any continuing guarantee as claimed by the petitioner had been executed. It had been stated that the petition was hopelessly barred by the law of limitation.
7.It had been further stated that as against the principal sum of Rs.20/- Lakhs, the petitioner had received from the official liquidator a sum of Rs.1,55, 55,632/- nearly eight times the principal amount. It had also been stated that the 2nd respondent had not been given any notice prior to sale of the land and machineries. It had been stated that the debt was a time barred debt. It had thus been stated that the original petition should be dismissed.
8.After the 4th and 5th respondents had been impleaded as parties, the
4th respondent had also filed a counter affidavit wherein, he had stated that the 4th and 5th respondents had not inherited any asset from their father, the 2nd respondent. It was also stated that the petitioner has also not disputed this contention. It h
