Karnataka High Court
Central Bank Of India vs Shri Kailash Chandra Gaur on 3 January, 2013
Author: K.Sreedhar Rao
Bench: K.Sreedhar Rao
-: 1 :-
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 3RD DAY OF JANUARY 2013
PRESENT
THE HON'BLE MR.K.SREEDHAR RAO, ACTING CHIEF JUSTICE
AND
THE HON'BLE MRS.JUSTICE B.V.NAGARATHNA
WRIT PETITION NO. 9590/2006 (GM-DRT).
BETWEEN:
CENTRAL BANK OF INDIA,
A BODY CORPORATE ESTABLISHED
UNDER THE BANKING COMPANIES
(ACQUISITION & TRANSFER OF
UNDERTAKINGS) ACT, 1970,
HAVING ITS HEAD OFFICE AT
"CHANDERMUKHI", NARIMAN
POINT, MUMBAI, AND A BRANCH
INTER-ALIA AT "JAYAM COMPLEX",
NOS.100-107, SAMPIGE ROAD,
MALLESHWARAM, BANGALORE-
560 003, REP.BY ONE OF ITS
PRINCIPAL OFFICERS, NAMELY,
THE BRANCH MANAGER OF
BANGALORE, MALLESHWARAM
BRANCH - SHRI NAGARAJ C.
HASYAGAR. ..PETITIONER
(BY Y.V.PARTHASARATHY, ADV.)
AND:
SHRI KAILASH CHANDRA GAUR,
S/O.LATE MADANLAL GAUR,
NO.6, MARISAMAPPA LANE,
4TH CROSS, NEW TIMBER YARD
LAYOUT, MYSORE ROAD,
BANGALORE - 560 026. ..RESPONDENT
(BY SRI SUHAS T.L., ADV.)
*****
-: 2 :-
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER
DATED 21/07/2005 PASSED BY THE HON'BLE DRAT, CHENNAI
IN R.A.NO.7 OF 2005 VIDE ANNEX.K.
THIS WRIT PETITION COMING ON FOR ORDERS THIS
DAY, NAGARATHNA J., MADE THE FOLLOWING:
ORDER
NAGARATHNA J.:
This writ petition is filed, assailing the order dated 21/07/2005, in R.A.No.7/2005, passed by the D.R.A.T., Chennai.
2. M/s.Movers Limited ("Company", for short), had obtained certain credit facilities from the petitioner - Bank, by hypothecation of stocks, trade and machinery. The respondent herein stood as one of the guarantors in respect of the credit facilities so obtained by the Company. The said Company is in liquidation pursuant to an order passed by this Court on 01/09/1989 in Company Petition No.20/1988. The Company was engaged in the business of manufacturing of material handling equipment and mini cement plants. The respondent was one of the Directors of the said Company. As the Company and its guarantors -: 3 :- failed to pay some amount to the Bank, O.S.No.5000/92 was filed before the City Civil Court, Bangalore, for recovery of certain sums of money. The respondent was arrayed as defendant No.6 in the said suit. The suit was contested by the respondent contending that he is ceased to be a Director of the Company w.e.f. 06/07/1984 and that he had informed this fact to the Bank on the same day and also on 15/05/1985. But on 12/06/1985, the Bank replied stating that he could not be relieved of his liabilities. After the establishment of the D.R.T. at Bangalore, the said suit was transferred to the Tribunal and renumbered as O.A.No.382/1988. After recording of evidence, the Tribunal allowed the original application by order dated 21/11/2003 but restricted the liability of the respondent to an extent of the amount ascribed in the guarantees executed by him (Ex.A.23 and A.24) and a direction for issuance of a recovery certificate was issued. Being aggrieved by the said order, the respondent filed R.A.No.7/2005 before the D.R.A.T. Chennai. The respondent had also deposited a sum of Rs.15 lakhs on 17/01/2005 which is in Fixed Deposit with the Bank and the same has been renewed from time-to-time. The -: 4 :- D.R.A.T. allowed the appeal filed by the respondent and held that the respondent had revoked the guarantee on 06/07/1984 and that the suit filed on 30/07/1982 was barred by time and thereby, dismissed the claim of the Bank against the respondent. Being aggrieved by the said order, this writ petition has been filed by the Bank.
3. We have heard the learned counsel appearing on both sides and perused the material on record.
4. It is mainly contended on behalf of the petitioner that the Appellate Tribunal was not right in allowing the appeal filed by the respondent and dismissing the claim of the Bank against him; that the guarantees executed by the respondent are continuing guarantees and is not subject to revocation. As such, the respondent could not be absolved of his liabilities under the guarantees. In the light of the various clauses in the guarantee, the liability of the respondent was not discharged. Merely because the respondent ceased to be a Director of the Company in debt, there was no novation of the contract of guarantee executed by the respondent. Therefore, the order passed -: 5 :- by the D.R.A.T. is required to be quashed and the liability ought to be fastened on the respondent.
5. Per contra, learned counsel for the respondent while supporting the order of the D.R.A.T. submitted that there is no merit in this writ petition and the same may be dismissed.
6. The petitioner had stood guarantee under Ex.A.23 and A.24 for a sum of Rs.76 lakhs dated 08/08/1983 and for a sum of Rs.4,70,000/- dated 07/06/1983 respectively and the said guarantees are continuing guarantees. Section 129 of the Indian Contract Act speaks about a continuing guarantee which extends to a series of transactions but Section 130 of the said Act states that continuing guarantee could be revoked at any time in respect of future transactions by notice to the creditor. Therefore, a continuing guarantee is also subject to revocation and would not be a perpetual guarantee when once executed. In the instant case, the respondent by letter dated 08/07/1984 informed the Bank about his resignation from the Directorship of M/s.Movers Limited, stating that he had resigned on 06/07/1984. The -: 6 :- Appellate Tribunal has noted that the said letter is marked as Ex.D.7 but no reliance is placed on the said letter in view of there being no acknowledgement but it is noted that Ex.D.8 is a letter dated 15/05/1985 addressed to the Bank wherein the respondent informed about his resignation from the Company and that he be relieved of his liabilities to the Bank. To this letter, the Bank replied on 12/06/1985 wherein, they state that they are in receipt of letter dated 15/05/1985 and that the matter is being considered by the higher authorities of the Bank and until then, the liability would continue.
7. Infact, after the resignation of the respondent as the Director of the Company, one Sri V.Nandakumar, to whom the shares of the respondent were transferred, executed letters of acknowledgement and other documents in favour of the Bank. Therefore, there is a substitution in the Directorship of the respondent in the Company. Therefore, the said Sri V.Nandakumar, not only stepped into the shoes of the respondent in the Company but also substituted him vis-à-vis the liabilities of the respondent. This act of the Bank in obtaining fresh guarantees from Sri V.Nandakumar, amounts to absolving the respondent from -: 7 :- his liability under the guarantees executed by him. If the respondent's guarantees were to continue despite his resignation from the Company, then in that case, there was no necessity to obtain fresh guarantee agreement from Sri V.Nandakumar, who substituted the respondent in the Company. By this act of seeking fresh guarantees from Sri V.Nandakumar, the Bank has discharged the liability of the respondent under the guarantee agreement executed by him. Therefore, the respondent was discharged of his liability. Infact, letter dated 12/06/1985 addressed by the Bank to the respondent clearly speaks about relieving the respondent from the liability as the guarantor for the credit facilities granted to M/s.Movers Limited. The said letter also states that the respondent shall be released from his liability under the guarantee agreements in view of the acceptance of the guarantee of Sri V.Nandakumar, Director of the Company. Infact, the guarantee was given by the respondent in view of his being one of the Directors of the Company. When he ceased to be such a Director and his place was filled by Sri V.Nandakumar, the Bank thought it fit to obtain fresh guarantees from the new Director, -: 8 :- Sri V.Nandakumar, on coming to know about this change in the Directorship.
8. Though no specific letter relieving the respondent has been addressed by the Bank to the respondent, on a totality of the circumstances what emerges is the fact that the respondent has been released of his liability under the guarantee agreement made by him on account of the fresh agreements executed by Sri V.Nandakumar, in substitution of the liability of the respondent, who also substituted the respondent as a Director in the Company. The Appellate Tribunal was therefore, right in allowing the appeal filed by the respondent and releasing the respondent of his liability under the agreement of guarantee. The said order would not call for any interference in this writ petition.
9. The writ petition is accordingly dismissed.
Sd/-
ACTING CHIEF JUSTICE Sd/-
JUDGE *mvs