Debt Recovery Appellate Tribunal - Madras
B.V. Venkatesh vs Canara Bank And Ors. on 21 June, 2005
Equivalent citations: III(2005)BC190
JUDGMENT
K. Gnanaprakasam, J. (Chairperson)
1.The 4th defendant in OA No. 8597 1999, on the file of DRT, Bangalore, is the appellant.
2. The respondent Bank advanced three types of loan (1) Overdraft Facility, (2) Foreign Discounting of Bills/Foreign Bills of Exchange, and (3) Term Loan, to the Shibumi Computer Systems Pvt. Ltd., who is the respondent in the OA and 2nd respondert in this Appeal. As the company had defaulted in payment, the respondent Bank filed the OA in which defendants 1,2,3 and 5, remained ex pane and 4th defendant namely, the appellant herein, alone contested the matter and the OA was decreed as prayed for against all the defendants including the appellant herein. Aggrieved by the same, the appellant had preferred this appeal.
Heard the learned Advocate for the appellant and the 1st respondent Bank.
3. For the purpose of convenience, the parties will be referred in this appeal as they have been arrayed in the OA.
4. The learned Advocate for the appellant would submit that the 1st defendant company is a company promoted and owned by the defendants 2, 3 and 5 and the 4th defendant was appointed only as a professional Managing Director of the 1st defendant company for a period of five years by letter dated 9.5.1989. His monthly basic salary was fixed apart from other terms. No doubt, the appellant/4th defendant stood as a surety for the liabilities of the 1st defendant company as required by the respondent company and his liability was only to the extent of Rs. 30 lakhs as per the deed of guarantee executed by him. It is further case of the appellant that he tendered his resignation from the company on 12.11.1990, and the same was accepted by the company. The appellant also sent a letter to the respondent Bank on 30.11.1990, informing about his resignation and also stated that he will not continue in the services of the company from 1.12.1990 and also requested the Bank of relieve him of the personal guarantee offered by him towards the loan facilities offered to the company. He has also requested written confirmation from the Bank and the said letter was duly acknowledged by the respondent Bank on 4.12.1990 under Ex. D6 and, in fact, the copies of the said letter were sent to the Divisional Manager, Canara Bank and also to other Directors of the Company. It is, therefore, contended that on and from 30.11.1990, the appellant is not at all liable to any extent of the liabilities of the 1st defendant company to the Bank. But, however, the Bank has filed the OA against the company and as against the appellant also.
5. It is further submitted that the appellant filed proof affidavit before the DRT setting forth his case wherein he has specifically stated about his resignation and also the sending of the letter to the Bank to relieve him from the surety, which was marked as Exhibit D6. It is, therefore, contended on behalf of the appellant that the Bank having acknowledged the letter submitted by the appellant informing about his resignation and also requesting the Bank to relieve him from the suretyship, the Bank should have exonerated him at the time of filing of the OA itself, but they have not done so. Even otherwise, if at all the appellant is liable, he is liable till a period of six months from the date of resignation as per the deed of guarantee executed by him in favour of the respondent on 29.3.1989. Further, as his liability was personal in nature, any claim should have been filed within a period of three years from thereafter, but whereas the OA was filed on 31.5.1999 and, therefore, the claim against the appellant is barred by time. As such, the appellant is not at all liable to pay any amount to the respondent Bank.
6. On the contrary, the learned Advocate for the respondent Bank would contend that they are not aware the appointment of the appellant was only as professional Managing Director. But the appellant stood as a guarantor by having executed the letter of guarantee on 29.3.1989. As per the guarantee letter, the appellant stood guarantee to the extent of Rs. 30 lakhs repayable with interest as stipulated and his guarantee shall to the extent as stated in the guarantee letter be a continuing guarantee for payment of the ultimate balance to become due to the Bank by the borrower, until the expiry of six months after a notice in writing of the revocation of the guarantee is received by the Bank. As the appellant's guarantee is a continuing guarantee, even though the appellant has informed about his resignation as a Director from the company and also requested to relieve him from the guaranteeship, it cannot be done and the appellant is liable as a guarantor, as his guarantee is co-extensive with that of the principal debtor, as provided under Section 128 of the Contract Act. '
7. Now, the only question that arises for consideration of the Tribunal is whether the appellant is liable to the claim of the respondent Bank as a guarantor.
8. The appellant offered himself as a guarantor by executing a guarantee letter is not in dispute. The said guarantee letter has been marked as Exh. A27. Under Exh. A27, the appellant stood guarantee only to the extent of Rs. 30 lakhs together with interest payable thereon as stipulated in the guarantee letter. No doubt, one of the conditions in the guarantee letter says that the guarantee offered by him is a continuing guarantee for payment of the ultimate balance to become due to the Bank by the borrower. The very same clause provides further that the said guarantee would be valid until the expiry of six months after notice in writing of the revocation of guarantee is received by the Bank, as evidence under Exh. D6 letter dated 30.11.1990, sent by the appellant to the Bank, wherein, he had requested the Bank to relieve him of the personal guarantee provided by him to the company and the same was duly acknowledged by the Bank and without any murmur or demur. Therefore, the request of the appellant to relieve him from the guaranteeship is deemed to have been accepted by the respondent Bank. No doubt, the appellant's liability would be in force for a period of six months from 12.11.1990, which expires by the end of May, 1991. As per the terms and conditions of the guarantee letter, the appellant's liability would come to an end after the expiry of six months from the date of the request to relieve him from the guarantee. The respondent Bank could have claimed the amount which was found due as on that date, that too, to the extent of Rs. 30 lakhs with accrued interest thereon as against this appellant. As the said claim would amount to a money claim as against this appellant, the period of limitation would start to run from May, 1991, for a period of three years under Article 20 of the Limitation Act. If the respondent Bank had filed the suit within aperiod of three years from May, 1991, then the Bank's claim would be considered. But, whereas, the respondent Bank filed the OA only on 31,5.1999, which is long after the expiry of the time to enforce the liability and, therefore, the claim as against this appellant is barred by time.
9. The learned Advocate for the appellant has further pointed out that he has stated his defence in the Proof Affidavit before the DRT and the same was marked as Ex. D2, and the DRT has not taken into consideration the defence raised by the appellant herein. The learned Advocate for the appellant has further pointed out that the DRT has not given any finding on the issues raised by the appellant. It is further submitted that the DRT after having extracted a portion from the reply statement of the appellant, had straightaway observed that the appellant had taken prevaricating versions about the execution of documents in an unfair manner and they are false. The DRT had also observed that the appellant had accepted his liability to the extent of Rs. 30 lakhs as per Exh. A-27, and he cannot abridge his liability as he stood guarantee for the entire borrowing and suddenly came to the conclusion that the defence of defendant No. 4 cannot be accepted, The DRT has not chosen to give any finding about the withdrawal of the appellant's surety and the letter submitted to that effect under Exh. D6 and thereby, The DRT has fallen into error by holding that the entire defence of the appellant cannot be accepted. On going through the guarantee letter executed by the appellant Ex. A27, and also his letter informing the Bank about the resignation of the Director and requesting the Bank to relieve him from the guarantee, had amply proved that the appellant made out a case that he had relinquished his post as Director and also to relieve from the guaranteeship as requested in Exh. D6. As it has already been pointed out that the OA was not filed within time to fasten the liability as against the appellant and that, therefore, I have to necessarily hold that the claim against the appellant is barred by time and, therefore, the appellant is not liable to pay any amount to any extent.
10. The appellant in one of his grounds of appeal in Para 6.7, has taken a plea challenging that the finding of the Tribunal holding that there is no valid equitable mortgage of the property in favour of respondent No. 1, as the Bank has not filed the original documents of title to the mortgaged property before the "Tribunal at the time of filing of the OA and in support of the said grounds, the appellant has filed an application in IA-2/2004, to give a finding by this Tribunal that the mortgage of immovable property by way of deposit of title deeds as created by the 5th respondent is valid, subsisting and enforceable. It is seen that the aggrieved party of the said observation has not chosen to challenge the same and in the absence of the same, I do not think that the application filed by the appellant is warranted and, therefore, it is dismissed.
11. In the result, the appeal is allowed as against D4 only and the order and decree dated 31.10.2003, passed by the DRT, Bangalore, is set aside.