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2025 Supreme(Online)(Mad) 55311
IN THE HIGH COURT OF JUDICATURE AT MADRAS
K.R. Shriram, CJ, Sunder Mohan, J
Manoharlal Tandon – Appellant
Versus
The Debts Recovery Tribunal At Chennai – Respondent
W.P.No.31542 of 2018 | W.M.P.No.36758 of 2018
For the Appellants/Petitioners: P.S. Raman, Krithika Jaganathan, Deepika Krishnan
For the Respondents: Rajendran Raghavan, B. Rabu Manohar
The waiver of personal guarantee was found to be unconditional and independent of corporate guarantees, establishing liability not on the Petitioner.
Headnote:The Petitioner, as Chairman of JTS Technology Limited, challenges the Debt Recovery Appellate Tribunal's order which found him liable despite a waiver of his personal guarantee. The Court interprets the waiver letter from 1998 as unconditional and independent of any corporate guarantees. It ruled the Appellate Tribunal erred in its conclusion. The final ruling is in favor of the Petitioner, granting him costs of legal proceedings.
| Table of Content |
|---|
| 1. background facts establishing the petitioner's role and waiver of guarantee. (Para 2 , 3) |
| 2. arguments regarding the conditionality of the waiver. (Para 4 , 5) |
| 3. court's interpretation of the waiver letter and its implications. (Para 7 , 8 , 9 , 10 , 11) |
| 4. final ruling on the appeal and cost award. (Para 12) |
For Petitioner: Mr.P.S. Raman Senior Counsel for Ms. Krithika Jaganathan and Ms. Deepika Krishnan for M/s.Lakshmi Kumaran and Sridharan Attorneys For Respondents: R1- Tribunal Mr.Rajendran Raghavan for respondent No.2 Mr.B.Rabu Manohar Sr. Central Govt. Standing Counsel for respondent No.4 R3 - No Appearance ORDER (Order of the Court was made by Sunder Mohan, J.)
The writ petition impugns an order of the first respondent dated 2nd August, 2017 in R.A.No.4 of 2010.
2. The short facts leading to the filing of the writ petition are as follows:
(a) Petitioner was the Chairman and Managing Director of a Company by name JTS Technology Limited, formerly known as Modular Electronics (Bombay) Private Limited, the third respondent herein [hereinafter referred to as 'the company'].
(b) Second respondent herein had sanctioned working capital facilities to third respondent after taking a personal guarantee from petitioner, which also covered the enhanced limits sanctioned to third respondent. Third respondent, thereafter, decided to collaborate with JTS Corporation, a company incorporated under the laws of United States of America (USA). Subsequent to the investment made by JTS Corporation, USA, the Board of Directors of the Company was reconstituted and three Directors were inducted into the Company.
(c) Petitioner's share in the Company was reduced after the investment made by JTS Corporation, USA and, therefore, on 14.11.1997, he resigned as Chairman and the Managing Director of the Company. Pursuant to his resignation, petitioner had sent a letter dated 14.11.1997 to second respondent requesting the bank to release him from personal guarantee with immediate effect. On 25.11.1997, the Company also requested the bank to release petitioner from personal guarantees. In the said letter, the Company had stated that the corporate guarantee of third respondent is available and, therefore, it would not be in the fitness of things to request a minority shareholder to stand as the guarantor. Second respondent addressed a letter dated 19.06.1998, to third respondent stating that the personal guarantee of Mr.M.L.Tandon is waived. It also stated that the corporate guarantee of JTS Corporation, USA, is to be obtained by the Company/borrower.
(d) When the Company defaulted in repayment of the loan, the second respondent filed O.A.No.543 of 1999 before the Debts Recovery Tribunal. The Debts Recovery Tribunal found that petitioner would not be liable, as he was released from his guarantee and, therefore, a certificate of recovery cannot be issued against him.
(e) Aggrieved by the said finding of the Debts Recovery Tribunal, second respondent filed an appeal before the Debt Recovery Appellate Tribunal being R.A.No.4 of 2010. The Debt Recovery Appellate Tribunal inter alia found that second respondent had not released petitioner from his guarantee and, therefore, he would also be liable to pay the debt.
Petitioner, therefore, is before us challenging the said order.
3. (a) Shri P.S.Raman, learned Senior Counsel for petitioner, would submit that, by the letter dated 19.06.1998, second respondent had waived the personal guarantee of petitioner and it was not a conditional waiver; that the bank had only asked the borrower to obtain corporate guarantee of JTS Corporation, USA; that the Debts Recovery Tribunal held that petitioner severed his relationship with second respondent; that he ceased to be a Director; that he therefore revoked his guarantee on 14.11.1997; that the Debts Recovery Tribunal also found that the waiver is unconditional and it is independent of the obligation of second respondent stipulated in the letter dated 19.06.1998; and t
