Madras High Court
K.A.Anand vs Indian Overseas Bank on 8 February, 2023
Author: C.Saravanan
Bench: C.Saravanan
C.S(Comm Div)No.24 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on 08.12.2022
Pronounced on 08.02.2023
CORAM
THE HON'BLE MR.JUSTICE C.SARAVANAN
C.S(Comm Div) No.24 of 2021
and A.No.1713 of 2022
K.A.Anand ... Plaintiff
vs.
1.Indian Overseas Bank,
Rep.by its Branch Manager,
No.7, Chennai House,
Esplanade Branch,
Chennai 600 108.
2.M/s.DRA Industries Ltd.,
106, Ten Square Mall,
III Floor, Shop No.423 & 424,
Inner Ring Road, Jawaharlal Nehru Salai,
Koyambedu, Chennai 600 107. .. Defendants
PRAYER : Civil Suit filed under Order IV Rule 1 the Original Side
Rules r/w Order VII Rule 1 of Code of Civil Procedure, 1908 Section 7 of
the Commercial Courts Act, 2015 to pass a Decree and Judgment, jointly
and severally, against the defendants:-
_____________
https://www.mhc.tn.gov.in/judis
Page No.1 of 32
C.S(Comm Div)No.24 of 2021
a) For a Mandatory Injunction directing the 1st defendant to
return to the plaintiff the Title Deeds of his properties bearing Plot
No.209 and 210, Burma Colony comprised in Survey No.136/1, situated
at No.112, Palavakkam Village, Tambaram Taluk, Kancheepuram District
deposited vide Memorandum of Deposit dated 01.04.2011, morefully set
out in schedule hereunder, within a date to be fixed to this Court;
b) Direct the 1st defendant and 2nd defendants, to pay damages
of Rs.1,01,00,000/- to the plaintiff for unlawful and illegal retention of
the plaintiff's Title Deeds together with interest at 18% per annum from
date of plaintiff till date of date of return of original title documents;
c) direct the defendants to pay costs of the suit; and
d) Grant such further or other reliefs as this Court may deem fit
and proper in the circumstance of the case and thus render justice.
For Plaintiff : Mr.K.Manoj Menon
for M/s.Menon Karthik
For 1st Defendant : Mr.Rajendran Raghavan
For 2nd Defendant : Ex-parte
JUDGMENT
The plaintiff has filed the above suit for the following relief:-
a) For a Mandatory Injunction to directthe 1st defendant to return to the plaintiff the Title Deeds of his properties bearing Plot No.209 and 210, Burma Colony comprised _____________ https://www.mhc.tn.gov.in/judis Page No.2 of 32 C.S(Comm Div)No.24 of 2021 in Survey No.136/1, situated at No.112, Palavakkam Village, Tambaram Taluk, Kancheepuram District deposited vide Memorandum of Deposit dated 01.04.2011, morefully set out in Schedule hereunder, within a date to be fixed to this Court;
b)Direct the 1st defendant and 2nd defendants, to pay damages of R.1,01,000/- to the plaintiff for unlawful and illegal retention of the plaintiff’s Title Deeds together with interest at 18% per annum from the date of plaint till date of return of original title documents;
c)Direct the defendants to pay costs of the suit.
2. This application has been filed by the plaintiff for a summary disposal of the suit by decreeing the suit without regular trial under Order XIII-A Rule 4 of CPC as inserted for the purpose of speedy disposal of commercial disputes within the meaning of the provisions of the Commercial Courts Act, 2015.
3. According to the plaintiff, the first defendant bank has no real prospect of successfully defending the claim of the plaintiff in the present suit. For the sake of uniformity, the parties shall be referred to their ranks in the above suit.
_____________ https://www.mhc.tn.gov.in/judis Page No.3 of 32 C.S(Comm Div)No.24 of 2021
4. The plaintiff joined the second defendant company in 2011 on 01.09.2011 as its director. The plaintiff was required to invest in the second defendant company. The plaintiff offered his immovable property as a collateral security for the loan taken/banking facility offered to the second defendant by the first defendant bank.
5. The plaintiff had guaranteed the loans availed by the second defendant company from the first defendant bank during 2011. The plaintiff decided to exit from the Board of the second defendant company and resigned from its Directorship with effect from 30.11.2013.
6. The specific case of the plaintiff is that the plaintiff resigned from the Board of the second defendant company with effect from 30.11.2013, neither the plaintiff subscribed to nor the securities offered by the plaintiff could be utilized for subsequent liability incurred by the second defendant company to the first defendant bank. _____________ https://www.mhc.tn.gov.in/judis Page No.4 of 32 C.S(Comm Div)No.24 of 2021
7. It is submitted that the securities offered during 2011 by the plaintiff to the first defendant bank cannot be used against the plaintiff for subsequent liability incurred by the second defendant after the plaintiff’s resignation from the Board of the second defendant company with effect from 30.11.2013 in absence of any renewal of liability and/or valid authorization by the plaintiff.
8. It is submitted that for fresh sanctions given by the first defendant to the second defendant company subsequent to the resignation of the plaintiff from the board with effect from 30.11.2013, the plaintiff has also not signed any documents to revive his liability for any past dues.
9. It is therefore submitted that the plaintiff cannot be held responsible for the subsequent loss sustained by the first defendant bank in respect of defaults committed by the second defendant company for loan transaction/facility extended and liability incurred subsequent to the plaintiff’s resignation in November 2013. _____________ https://www.mhc.tn.gov.in/judis Page No.5 of 32 C.S(Comm Div)No.24 of 2021
10. The resignation was also intimated to the Registrar of Firms by filing Form-32 before the Registrar of Companies on 11.12.2013 under the provisions of the Companies Act, 1956.
11. It is further submitted that the plaintiff also sent notices to the defendants and requested the defendants to discharge the plaintiff of all liabilities and to return the document which was deposited by the plaintiff as a collateral security.
12. It is submitted that as on the date of resignation from the second defendant company, the total outstanding due of the second defendant company was only Rs.13.37 crores which was repaid back by the second defendant company over a period of time.
13. It is submitted that term loan which was sanctioned between 2011-2013 was also fully repaid by the second defendant company to the first defendant bank and that by letter dated 28.02.2014(document No.8) the fresh credit facilities were granted _____________ https://www.mhc.tn.gov.in/judis Page No.6 of 32 C.S(Comm Div)No.24 of 2021 without any authorization of the plaintiff on the strength of mortgage created by the plaintiff earlier in 2011.
14. The first defendant bank in its reply dated 21.07.2014 has admitted that as on 06.06.2014, the amounts outstanding for various loans and credit facilities were as follows:-
Sl.No. Loan Exposure
1 Term Loan -1 6,24,90,206.00
2 Term Loan -2 10,83,31,831.00
3 Cash Credit 24,77,40,362.00
4 Letter of Credit 47,25,96,937.00
15. It is submitted that the first defendant bank have illegally retained the title deeds of the property which was offered on a collateral of property in 2011.
16. The learned counsel for the plaintiff has drawn attention to several documents to state that there were successive enhancement of credit limits and fresh sanctions to the second defendant company to which the plaintiff was not a party. The plaintiff has neither given any authorization nor any latter was obtained from the plaintiff. _____________ https://www.mhc.tn.gov.in/judis Page No.7 of 32 C.S(Comm Div)No.24 of 2021
17. The fact also indicate that the first defendant bank had also enhanced fresh limits. It is therefore submitted that securities offered by the plaintiff in 2011 cannot be used recover liabilities incurred by the second defendant after his resignation during 20.11.2013.
18. It is therefore submitted that securities offered by the applicant-plaintiff ought to have been returned after his resignation from the second respondent- defendant.
19. It is submitted that the first defendant bank however kept enhancing the credit limits and facilities from time to time to the second defendant on its own volition and therefore plaintiff cannot be held responsible for the failure of the first defendant bank to service the loan and outstanding dues.
20. In this connection, the learned counsel for the plaintiff has drawn attention to several documents to substantiate that the periodical renewals and enhancement of the credit limits and credit facilities. That apart, it is submitted that almost Rs.655 crores was repaid upto _____________ https://www.mhc.tn.gov.in/judis Page No.8 of 32 C.S(Comm Div)No.24 of 2021 21.12.2020 by the second defendant company to the first defendant bank since 2013 after the plaintiff’s resignation.
21. It is therefore submitted that though the plaintiff had given a personal guarantee and offered security in 2011 and since the plaintiff has not any offered fresh security for any of the subsequent enhancement of credit limits and credit facilities or fresh loans/sanction given to the second defendant company, the plaintiff cannot be made liable for the subsequent loss sustained by the first defendant bank.
22. The learned counsel for the first defendant bank submits that collateral proceedings have been initiated before the Debt Recovery Tribunal against the second defendant company in which latter has remained ex-parte.
23. The learned counsel for the first defendant bank has also drawn attention to Form -32 filed by the plaintiff on 11.12.2013. It is stated that the address of the plaintiff is the same address as that of the second defendant Company.
_____________ https://www.mhc.tn.gov.in/judis Page No.9 of 32 C.S(Comm Div)No.24 of 2021
24. A reference was also made to a reply of the plaintiff from the same address to the first defendant bank. Hence, it is submitted that the application filed under Order XIII-A of CPC as amended for the purpose of Commercial Courts Act, 2015 is liable to be dismissed as the plaintiff was very much part of the second company and therefore the case at best warrants a trial , if not a dismissal.
25. The learned counsel for the first defendant bank submits that the second defendant company availed various banking facilities. The liability as on 31.12.2021 is Rs.89,30,60,294.84. The account of the second defendant company with the first defendant bank has been declared as an NPA.
26. It is submitted that both the plaintiff and the second defendant submitted a proposal for release of the mortgaged property of the plaintiff, on the condition that it would be substituted with a security of equal market value. The learned counsel for the first defendant bank referred to letter dated 22.12.2017 of the second defendant wherein it was assured that it would substitute and replace security with a cash deposit _____________ https://www.mhc.tn.gov.in/judis Page No.10 of 32 C.S(Comm Div)No.24 of 2021 of equal amount or provide alternate property within 3 months from thereon. However, till date the said offer has not been acted upon either by the plaintiff or the second defendant company.
27. The learned counsel further submits that the plaintiff had expressed desire to revoke his guarantee. However, same was not accepted by the first defendant bank.
28. It is further submitted that the the second defendant has also filed a suit before the City Civil Court, Chennai and has obtained an exparte order of injunction restraining the first defendant Bank against release of property mortgaged by the plaintiff.
29. Since the plaintiff has already expressed his desire to opt out of the guarantee for the loans availed by the second defendant further to the other concerned parties including the second defendant, the guarantee of the plaintiff has been restricted now only to the value of the mortgage created by him with his specific property situated at Perungudi. _____________ https://www.mhc.tn.gov.in/judis Page No.11 of 32 C.S(Comm Div)No.24 of 2021
30. The learned counsel further submits that the plaintiff was aware of the liabilities of the second defendant company and offered security in 2011. All the Directors are together jointly and severally liable for the dues to the first defendant bank. It is submitted that without repaying the dues, the plaintiff desires to resile his contractual obligation and his liabilities contracted.
31. By way of rejoinder, the learned counsel for the plaintiff admits that the address in Form-32 dated 11.12.2013 shows the address of the plaintiff and the second defendant Company. It is however submitted that both the address are in the commercial complex and that the plaintiff has an independent office in the Second floor, whereas, the second defendant company has its office in First floor. It is submitted that the plaintiff is a resident of Virugambakkam and not a resident of the address given in Form-32 and it is therefore submitted it is of no relevance.
32. I have considered the arguments advanced by the learned counsel for the plaintiff and the learned counsel for the first defendant bank.
_____________ https://www.mhc.tn.gov.in/judis Page No.12 of 32 C.S(Comm Div)No.24 of 2021
33. The plaintiff has filed this suit for a Summary Disposal of the present suit under Order XIII-A Rule 4 of CPC as inserted as a special dispension for the purpose of Commercial Courts Act, 2015 without trial.
34. Order XIII-A of C.P.C. under which the present application has been filed reads as under:-
Grounds for summary judgment.— The Court may give a summary judgment against a plaintiff or defendant on a claim, if it considers that––
(a)the plaintiff has no real prospect of succeeding on the claim or the defendant has no real prospect of successfully defending the claim, as the case may be; and
(b)there is no other compelling reason why the claim should not be disposed of before recording of oral evidence.
35. Thus, if the defendant or defendants has/have no real prospect of defending the claim of the plaintiff in a suit, then the suit can be decreed summarily. Like wise, if the plaintiff has no real prospect of succeeding in the suit, the suit can be dismissed without trial.
36. However, before summarily allowing or dismissing the _____________ https://www.mhc.tn.gov.in/judis Page No.13 of 32 C.S(Comm Div)No.24 of 2021 claim, the Court should record a satisfaction that there are no compelling reason for the claim to be disposed after recording of oral evidence.
37. Though suit summons has been served on the second defendant company, the second defendant has not entered appearance. The second defendant has therefore forfeited the right to file a written statement. No relief is sought against the second defendant company. The second defendant is only a formal party.
38. The first defendant bank on the other hand though had filed a written statement has however failed to re-present the written statement after it was returned on 2.12.2012. Written Statement of the first defendant is thus not available in the Court file.
39. The point that arises for consideration is whether the plaintiff is entitled to short circuit the entire trial and is entitled to secure a decree under Order XIII-A Rule 4 of CPC as inserted for the purpose of Commercial Dispute Act, 2015?
40. The facts on record indicate that the plaintiff joined the _____________ https://www.mhc.tn.gov.in/judis Page No.14 of 32 C.S(Comm Div)No.24 of 2021 Board of the second defendant company in the year 2011 as its Director and had offered as a security to the first defendant bank in the form of a mortgage a vacant land in Plot No.209, measuring to an extent of 2736 sq.ft.and 2574 sq.ft. at Palavakkam Village for the loan/ credit facility offered by the first respondent-defendant bank to the second respondent/defendant Company on 01.04.2011. Apart from the above, the applicant/plaintiff had also signed a letter guarantee.
41. In the letter of guarantee dated 01.03.2013, the details of the plaintiff are as follows:-
Name KA. ANANDH
Father’s Name/Husband’s : Sri.Kannaiah Naidu
Name
Residential Address &Tel.No. : 42, Balaji Nagar, 2nd Street, Virugambakkam, Chennai-92 Office Address &Tel.No. : 18/26, 2nd Street, Loganathan Nagar, Choolaimedu, Chennai- 94.
Ph.2361826
PAN & IT Circle : AcwPA 3673 R
42. The facts on records indicate that the plaintiff has in no uncertain term informed the second defendant company vide letter dated _____________ https://www.mhc.tn.gov.in/judis Page No.15 of 32 C.S(Comm Div)No.24 of 2021 26.10.2013 that he wished to resign from the Board of the second defendant Company and wished to be relieved of all liabilities.
43. The plaintiff also requested to the second defendant Company to take steps for release of his landed property offered as a collateral security to the first defendant bank and discharge him of all personal guarantee extended by the plaintiff for the various banking facilities offered to the first defendant bank till then.
44. Similar letter was also addressed to the Board of Directors of the second defendant Company. A physical copy of the said letter was also handed over to the Chief Manager of the first defendant Bank. Apart from the aforesaid intimation, the plaintiff had also filed Form-32 in terms of Section 303 (2) , 264(2) or 266(1)(a) and 266(1)(b)(iii) of the Companies Act, 1956.
45. The plaintiff has clearly stated that he was no longer the _____________ https://www.mhc.tn.gov.in/judis Page No.16 of 32 C.S(Comm Div)No.24 of 2021 Director of the second defendant Company. The address of the plaintiff and the second defendant company in Form -32 are as follows:-
Address of the registered Present residential address office of the company No.18/26, Loganathan No.26, Loganatha Nagar, Nagar, Second Street, II Street, Choolaimedu Choolaimedu, Chennai, Chennai, Tamil Nadu, Tamilnadu India India 600 094. 600 094.
46. No doubt there is a mistake in the address given in Form-32 filed before the Registrar of Companies on 11.12.2013. However, it is not fatal. The intention of the plaintiff is clear.
47. The facts however remains that the plaintiff has informed the defendants that he was no longer the Director of the second defendant company. In my view, trivial mistakes regarding the address in Form-32 are not relevant, if the plaintiff is otherwise entitled to a relief as the initial stock. It would not be disentitle the plaintiff the relief under Order XIII-A of C.P.C. as amended if the plaintiff is other wise entitled to the relief.
_____________ https://www.mhc.tn.gov.in/judis Page No.17 of 32 C.S(Comm Div)No.24 of 2021
48. Though the plaintiff had informed the first defendant Bank on 06.03.2013, that he would like to restrict the personal guarantee to the value of the property offered as a collateral, the plaintiff has given a notice vide letter dated 26.9.2013
49. In para 2 of letter dated 26.9.2013, the plaintiff has stated as follows:
“As I have decided to resign from the Directorship of M/.DRA Industries Limited and to sell the shares held by me, I request you to kindly release my landed property mentioned above and to relieve .”
50. The first defendant bank has also not denied letter dated 26.09.2013 of the plaintiff. In reply dated 28.2.2014, the 1st defendant bank has replied as follows:-
“As we have granted the credit facilities to M/s.DRA Industries Ltd based on the mortgage security furnished by you, as guarantor, it may not be possible for us to release the mortgage security and to relieve you from your guarantee liability. Please note that your guarantee and mortgage security will continue _____________ https://www.mhc.tn.gov.in/judis Page No.18 of 32 C.S(Comm Div)No.24 of 2021 till complete repayment and closure of the credit facilities and it is nothing to do with the position whether you remain as a Director or shareholder in the Borrower Company”.
51. Despite the same, the first defendant bank has however continued to sanction fresh loans and sanctioned enhanced the credit limits to the second defendant company.
52. The first defendant bank has given fresh sanction after 28.02.2014 as detailed below:-
S.No. Date
1 28.02.2014
2 02.03.2016
3 03.11.2016
4 25.10.2017
5 07.11.2017
6 20.05.2019
53. In the said Credit Sanction Advice dated 02.03.2016, it has been stated that guarantee of the plaintiff was restricted to the value of security offered for Rs.15.43 crores as on 31.03.2013 in the said Credit Sanction Advice only the signature of one guarantor. The plaintiff was not a party to the same.
_____________ https://www.mhc.tn.gov.in/judis Page No.19 of 32 C.S(Comm Div)No.24 of 2021
54. On 07.11.2017, a fresh credit was sanctioned as detailed below:-
Nature of facility Amount Margin/Rate of Interest/Prime Security Cash Credit against 25.00 Margin 25% on stocks and hypothecation of (Rupees Twenty 50% on receivables fully paid stocks five Crores Only) Interest : 1yr MCLR and receivables (Renewal) (8.55%) ((0.20% + 3.80% upto 80 days.
(i.e.12.55% at present)
Security : Exclusive
Charge on the entire
current assets of the
company including
hypothecation of inventory
& receivables
Term Loan towards 3.63 Margin : 25% on the Hard
part financing their (Rupees Three cost comprising Building,
expansion project P & M &Misc FA : 100%
Crores sixty three
costing Rs.23.24 on other Project items
lakhs only)
Crores Overall margin on the
(Renewal at DP) project cost 43.76%
Original limit 13.07
Crores (3.25) Interest : 1yr MCLR
(8.55%)+0.20% + 3.80%
(i.e. 12.55% at present)
Security : Exclusive charge
on the entire FA of the
company including
expansion assets and EM
_____________
https://www.mhc.tn.gov.in/judis
Page No.20 of 32
C.S(Comm Div)No.24 of 2021
Nature of facility Amount Margin/Rate of
Interest/Prime Security
of factory land at
Naidupet.
Letter of Credit 50.00 Margin : 10%
(I/F) on DP/DA (Rupees Fifty Commission : As per
terms with usance Crores only) circular in force
upto 180 days for (Renewal)
import/purchase of Security : Documents of
RM with title to goods/Accepted
permission to issue hundies/Exclusive charge
LG(F)/Letter of on current assets
comfort to enable
the company to
avail Buyers’ credit
upto 180 days from
B/L date.
Sub limit – (15.00) Margin : 10%
Letter of Credit (1) (Rupees Fifteen Commission : As per circular on DA terms with crores ) (Fresh) in force.
usance upto 180 days Security : Exclusive charge
for EB payment to on current assets.
private power
supplier
Forward Sale 24.00 Margin : Nil
Contract (Rupees Twenty Commission : Applicable
four Crores only) rate
( Renewal)
55. The records available before this court also indicate that fresh limits, loans etc. were sanctioned after the plaintiff resigned in 2013 till 2019 by exposing the first defendant bank to higher exposure of risk.
_____________ https://www.mhc.tn.gov.in/judis Page No.21 of 32 C.S(Comm Div)No.24 of 2021 There are no records filed by the first defendant bank that the plaintiff offered to renew his liability and allowed the security offered earlier in 2011 as a security for the loans advanced to the second defendant company till 2019.
56. Vide Credit Sanction Advice dated 20.05.2019, fresh facility was sanctioned to the second defendant bearing Reference:
ESP/ADV/0482/2019-20. It reads as follows:-
“HLCC (ED) at its meeting held on 26.04.2019 has accorded sanction for the following credit facilities to the above company subject to terms and conditions stipulated in this letter”.
Nature of facility Amount)
(Rs.in Crores)
Cash Credit (Enhancement from Rs.25 Cr) 30.00
Letter of Credit (I/F) (Reduction from 45.00
Rs.50 Cr.)
Total 75.00
Forward Sale Contract (Renewal) 24.00
57. The fact remains that there was a clear and unambiguous intimation given to the first defendant Bank by the plaintiff that the _____________ https://www.mhc.tn.gov.in/judis Page No.22 of 32 C.S(Comm Div)No.24 of 2021 plaintiff was no longer associated with the second defendant after 30.11.2013.
58. The first sanction letter dated 28.02.2014 was itself after the resignation of the plaintiff and was restricted to the value of the collateral property which was offered earlier in 2011 without any fresh authorisation and any of letters of guarantee by the plaintiff.
59. After the plaintiff resigned from the Board of Directors of the second defendant Company with effect from 30.11.2013, no fresh letter of guarantee was obtained from the plaintiff after he resigned. The first defendant bank has continued to sanction fresh credit and loan facility as detailed above.
60. The guarantee given by the plaintiff to the first defendant Bank for the loans/credit facility offered in 2011 and 2013 cannot be used against the plaintiff for the subsequent loan facilities given to the second defendant company by the first defendant Bank.
_____________ https://www.mhc.tn.gov.in/judis Page No.23 of 32 C.S(Comm Div)No.24 of 2021
61. Unless, the plaintiff offered a continuing guarantee and renewed his liability or the plaintiff offered the said security offered earlier for subsequent liability incurred by the second defendant company the plaintiff cannot be mulcted with liability for the fresh sanctions and fresh loan to which the plaintiff was not a signatory.
62. Even otherwise, a continuing guarantee can be revoked at any time after due notice in terms of Section 130 of the Indian Contract Act1872, Section 130 of the Indian Contract Act, 1872. which the plaintiff has done. Reads as under:-
“A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor”.
63. As per Section 133 of the Indian Contract Act, 1872, any variation in the terms of the contract made without the consent of the suretly concerned will discharge the security of all liability for the subsequent transactions. Section 133 of the Indian Contract Act, 1872 reads as under:-
133. Discharge of surety by variance in terms of contract.—Any variance, made without the _____________ https://www.mhc.tn.gov.in/judis Page No.24 of 32 C.S(Comm Div)No.24 of 2021 surety’s consent, in the terms of the contract between the principal 1[debtor] and the creditor, discharges the surety as to transactions subsequent to the variance.
Illustrations :
(a) A becomes surety to C for B’s conduct as manager in C’s bank. Afterwards, B and C contract, without A’s consent, that B’s salary shall be raised, and that he shall become liable for one-fourth of the losses on overdrafts. B allows a customer to over-draw, and the bank loses a sum of money. (a) A becomes surety to C for B’s conduct as manager in C’s bank. Afterwards, B and C contract, without A’s consent, that B’s salary shall be raised, and that he shall become liable for one-fourth of the losses on overdrafts. B allows a customer to over-draw, and the bank loses a sum of money." A is discharged from his suretyship by the variance made without his consent, and is not liable to make good this loss. A is discharged from his suretyship by the variance made without his consent, and is not liable to make good this loss."
(b) A guarantees C against the misconduct of B in an office to which B is appointed by C, and of which the duties are defined by an Act of the Legislature. By a subsequent Act, the nature of the office is materially _____________ https://www.mhc.tn.gov.in/judis Page No.25 of 32 C.S(Comm Div)No.24 of 2021 altered. Afterwards, B misconducts himself. A is discharged by the change from future liability under his guarantee, though the misconduct of B is in respect of a duty not affected by the later Act. (b) A guarantees C against the misconduct of B in an office to which B is appointed by C, and of which the duties are defined by an Act of the Legislature. By a subsequent Act, the nature of the office is materially altered.
Afterwards, B misconducts himself. A is discharged by the change from future liability under his guarantee, though the misconduct of B is in respect of a duty not affected by the later Act."
(c) C agrees to appoint B as his clerk to sell goods at a yearly salary, upon A’s becoming surety to C for B’s duly accounting for moneys received by him as such clerk. Afterwards, without A’s knowledge or consent, C and B agree that B should be paid by a commission on the goods sold by him and not by a fixed salary. A is not liable for subsequent misconduct of B.
(c) C agrees to appoint B as his clerk to sell goods at a yearly salary, upon A’s becoming surety to C for B’s duly accounting for moneys received by him as such clerk. Afterwards, without A’s knowledge or consent, C and B agree that B should be paid by a _____________ https://www.mhc.tn.gov.in/judis Page No.26 of 32 C.S(Comm Div)No.24 of 2021 commission on the goods sold by him and not by a fixed salary. A is not liable for subsequent misconduct of B."
(d) A gives to C a continuing guarantee to the extent of 3,000 rupees for any oil supplied by C to B on credit.
Afterwards B becomes embarrassed, and, without the knowledge of A, B and C contract that C shall continue to supply B with oil for ready money, and that the payments shall be applied to the then, existing debts between B and C. A is not liable on his guarantee for any goods supplied after this new arrangement. (d) A gives to C a continuing guarantee to the extent of 3,000 rupees for any oil supplied by C to B on credit. Afterwards B becomes embarrassed, and, without the knowledge of A, B and C contract that C shall continue to supply B with oil for ready money, and that the payments shall be applied to the then, existing debts between B and C. A is not liable on his guarantee for any goods supplied after this new arrangement."
(e) C contracts to lend B 5,000 rupees on the 1st March. A guarantees repayment. C pays the 5,000 rupees to B on the 1st January, A is discharged from his liability, as the contract has been varied, inasmuch as C might sue _____________ https://www.mhc.tn.gov.in/judis Page No.27 of 32 C.S(Comm Div)No.24 of 2021 B for the money before the first of March. (e) C contracts to lend B 5,000 rupees on the 1st March. A guarantees repayment. C pays the 5,000 rupees to B on the 1st January, A is discharged from his liability, as the contract has been varied, inasmuch as C might sue B for the money before the first of March."
64. The above illustrtion are applicable to the facts of the present case. They make it clear that the plaintiff as a surety who had offered a collateral by way of deposit of title deed of schedule property was discharged after fresh sanctions were made after the plaintiff resigned from the Board of the second defendant company.
65. It is thus clear that fresh loans were without any letter of guarantee from the plaintiff from 2014. It was incumbent on the part of the first defendant bank to have given no objection for canalisation of security offered by the plaintiff and substituted with a fresh security from other directors after the plaintiff wished his desire to leave the second defendant company.
_____________ https://www.mhc.tn.gov.in/judis Page No.28 of 32 C.S(Comm Div)No.24 of 2021
66. It cannot be construed that the plaintiff had offered continuing guarantee for all credit facilities sanctioned by the first defendant Bank to the second defendant Company for all times to come especially when the plaintiff has been writing letters right from 26.9.2013.
67. No letter of guarantee was obtained from the plaintiff for any of the subsequent sanctions such as forward sales contract, fresh sanction enhancing the risk. There was also no letter of guarantee given by the plaintiff.
68. The unilateral decision of the first defendant Bank to utilize the security offered by the plaintiff in 2011 for all the fresh sanctions are illegal, arbitrary and contrary to law.
69. The plaintiff cannot be made liable for any of the debts incurred by the second defendant company for fresh loans sanctions subsequent to the resignation of the plaintiff from the Board of the _____________ https://www.mhc.tn.gov.in/judis Page No.29 of 32 C.S(Comm Div)No.24 of 2021 second defendant company with effect from 30.11.2013.
70. The collateral offered by the plaintiff in 2011 cannot be used as a continuing security for fresh sanction of loans/facilities from 28.02.2014. Therefore, all the subsequent sanctions of credit facility and loans cannot bind by the plaintiff.
71. Thus, the first defendant Bank has harassed the plaintiff by unilaterally treating the security given in 2011 as a continuing security for the sanctions given after the plaintiff resigned with effect from 30.11.2013.
72. In the counter filed by the first defendant, it is clear that the first defendant bank has not made out any plausible case to defend the the plaintiff in the above suit. There is therefore no point in relegating the parties to trial as no triable issue arises for the court to determine. Even, if the parties are relegated to trial, it is clear that the plaintiff will succeed.
_____________ https://www.mhc.tn.gov.in/judis Page No.30 of 32 C.S(Comm Div)No.24 of 2021
73. Therefore, the plaintiff is entitled for a partial relief as prayed for. Therefore, this application stands allowed. There shall be however no decree for damages on account of the retention of the plaintiff’s Title Deeds together or/for interest at 18% per annum. Therefore, the prayer No.2 is dismissed. The first defendant Bank is directed to take steps to return the Title Deeds of the suit schedule property which was offered as security in 2011 by the plantiff within a period of 30 days from the date of receipt of a copy of this order.
74. In view of above, the suit is decreed inso far as relief No.1 as prayed for. Accordingly, the suit is partly decreed. Parties to bear their own cost.
08.02.2023
Index : Yes/No
Internet : Yes/No
Speaking : Non-speaking Order
kkd
_____________
https://www.mhc.tn.gov.in/judis
Page No.31 of 32
C.S(Comm Div)No.24 of 2021
C.SARAVANAN, J.
kkd
Pre-delivery Judgment in
C.S(Comm Div) No.24 of 2021
and A.No.1713 of 2022
08.02.2023
_____________
https://www.mhc.tn.gov.in/judis
Page No.32 of 32