Debt Recovery Appellate Tribunal - Delhi
Popular Packing Pvt. Ltd. And Ors. vs Bank Of Punjab Ltd. on 3 August, 2001
ORDER
Mr. Justice A.K. Srivastava, Chairman
1. These three appeals were filed with a common Memorandum of Appeal against a common order dated 30th April, 2001 passed on a common prayer for stay of proceedings in all the three Original Applications, namely, 572 97, 573/97 and 574/97.
2. By the impugned order the prayers of all the defendants in the aforesaid three suits for stay of the proceedings in the C. As. have been negated. Feeling aggrieved the defendants in the aforesaid O. As. have filed these appeals.
2. Since the impugned order is a common order in the aforesaid three O. As. for recovery, all these three appeals are being decided by this one common order.
3. The short question involved in all these appeals is as to in the three claim applications who is the principal borrower and who are the guarantors. According to the appellants, M/s. Peacock Industries Limited is the principal borrower in all the three claim applications whereas the plea of the respondent Bank is that M/s. Popular Packing Pvt. Ltd., M/s. Rajasthan Chemicals and M/s. Alliance Plastic (P) Ltd. are the respective principal borrowers and the rest of the respective defendants are the guarantors.
4. The aforesaid issue is material for deciding whether claim applications pending before the Tribunal below should be stayed against the appellants in view of the provisions, of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. Admittedly, M/s. Peacock Industries Limited is a sick company and is registered with BIFR. Therefore, if in all the three claim applications the Peacock Industries Limited is the principal borrower, then the claim applications in all the three matters shall remain stayed against the rest of the defendants as well till the consent of the BIFR is obtained to prosecute the claims or till the proceedings before the BIFR in respect of M/s. Peacock Industries Ltd. comes to an end, whichever is earlier. On the other hand, if M/s. Popular Packing Pvt. Ltd., M/s. Rajasthan Chemicals and M/s. Alliance Plastic (P) Ltd. are respectively the principal borrowers, then the three claim applications will remain stayed qua M/s. Peacock Industries Ltd. only and be proceeded against the rest of the defendants. Therefore, now, I will proceed to examine as to who is the principal borrower in all the aforesaid three claim applications of the respondent Bank.
5. The facts of the case in all the three claim applications are similar and the only change is in respect of the names of the defendants. In all the three claim applications the case of the respondent Bank is that the respondent Bank granted bill discounting limit to M/s. Popular Packing Pvt. Ltd., M/s, Rajasthan Chemicals and M/s. Alliance Plastic (P) Ltd. respectively and M/s. Peacock Industries was the guarantor for that facility and its liability was stated to be co-extensive with the party to whom bill discounting facility was granted. On the other hand, the contention of the appellants is that the appellants were the makers of the bill of exchange and M/s. Peacock Industries Ltd. was the accepter of those bills of exchange and, therefore, in view of the provisions of Section 37 of the Negotiable Instruments Act, 1881, the accepter of the bill of exchange becomes liable thereon as principal debtor and the drawer of the bill of exchange becomes liable thereon as surety.
6. Section 37 of the said Act reads as follows :
"The maker of a promissory note or cheque, the drawer of a bill of exchange until acceptance, and the accepter are, in the absence of a contract to the contrary, respectively liable thereon as principal debtors, and the other parties thereto are liable thereon as sureties for the maker, drawer or accepter as the case may be."
7. Learned Counsel for the respondent Bank vehemently controverted the proposition advanced by the learned Counsel for the appellants and urged that in the present cases in hand the drawer of the bill of exchange was and continued to be the principal borrower and the accepter of the bill of exchange was and continued to be the guarantor. Therefore, according to him, M/s. Popular Packing Pvt. Ltd., M/s. Rajasthan Chemicals and M/s. Alliance Plastic (P) Ltd. are the principal borrowers and M/s. Peacock Industries Pvt. Ltd. is one of [he guarantors.
8. I have gone through the provisions of the said Section 37 and J find that though in that section the accepter of the bill of exchange has been made liable as principal debtor and the drawer of the bill of exchange has been made liable as sureties yet there is a rider in that very section which says that the above proposition of law would be three 'in the absence of a contract to the contrary'.
9. Therefore, in the present cases in hand, it has to be examined whether amongst [he parties there did exist a contract to the contrary to the general law enacted in the said Section 37.
10. In order to examine the aforesaid I had to revert to the pleadings of me parties and the documents filed by them before the concerned Tribunal. Since copies of such pleadings and documents were not in the Paper-Book of these appeals. Learned Counsel appearing for the parties came out with a solution that copies of the pleadings and the documents had been filed in earlier appeals filed by the appellants here and the numbers of those decided appeals were 209/2000, 210/2000 and 211/2000 and, therefore, the records of those appeals be requisitioned from the Record Room of this Appellate Tribunal and the copies of the pleadings and documents filed there may be read in these appeals. Since an offer was made by learned Counsel for both the parties, I resorted to that solution and had the benefit of the records of the aforesaid three appeals. Learned Counsel appearing for the parties stated that the pleadings in all the aforesaid three claim applications and the nature of the pleadings and the documents in all the three claim applications were similar with only change of names and therefore, if the pleadings and documents relating to claim application No. 572/97 were looked into, they would suffice for decision in these appeals and there would be no need to look into the pleadings and documents of the rest of the claim applications of the respondent Bank.
11. On perusal of the copies of the aforesaid pleadings and documents, it is to be found that the contract amongst the parties consisted of the offer, the counter offer and the acceptance of the counter offer by taking action as per the counter offer: From the pleadings it is apparent that the respective parties applies to the Bank of Punjab Ltd. for grant of bill discounting facility. In response, the Bank sanctioned the bill discounting facility on conditions. Limit was fixed, rate of interest was fixed and the following stipulations were made in respect of primary security, collateral security and guarantee :
"Principal Security :
Usance Bills of 60-90 days accompanied by RR/TR covering the geunine trade transaction bills are to be duly accepted by M/s. Peacock Industries Ltd.
Collateral Security :
Pledge of shares of M/s. Peacock Industries Ltd. having market value not less than Rs. 120 lakhs.
Guarantors :
1. Corporate Guarantee of M/s. Peacock Indutries Ltd.
2. All the directors, namely.
(a) Mr. Mohd. Hussain Dawood,
(b) Mrs. Batool Dawood.
(c) Mrs. Surail Umari Murdia."
12. From the documents it is to be found that after the aforesaid bill discounting facility sanction order was received :
(i) a promissory note of the amount of limit with interest was issued by the party which had applied for the discounting facility,
(ii) an indemnity bond was also given by that very party in favour of the respondent Bank.
(iii) a letter of continuity was also given by the party to the respondent Bank.
(iv) another letter was issued by the party to the respondent Bank in which it was stated that "since this loan is sanctioned essentially for the purpose of bills discounting limit I/We note that I/we am/are prohibited from using the loan amount or any part thereof for the purpose otherwise than as specified by me/us. If the Bank apprehends or it has reason to believe that I/we have violated or am/are violating this undertaking the Bank shall have a right to recall the entire loan amount or any part thereof at once nothwithsanding anything to the contrary contained in the loan document".
(v) M/s. Peacock Industries Ltd. executed an agreement of guarantee in favour of the respondent Bank regarding the bill discounting limit granted to the party,
(vi) the guarantors named in the sanction letter issued by the respondent Bank also executed agreements of guarantee in favour of the respondent Bank. In those agreements of guarantee the mention relates only to the bill discounting limit granted to the party and there is no mention that the guarantors were executing the gurantee in respect of the liability of the accepter of the bill of exchange, namely, M/s. Peacock Industries Ltd.
(vii) bills of exchange were drawn by the respective parties and the same were accepted by M/s. Peacock Industries Ltd.
13. From the above, I am very clear in my mind that the contractual relationship between M/s. Popular Packing Pvt. Ltd., M/s. Rajasthan Chemicals and M/s. Alliance Plastic (P) Ltd. respectively and the respondent Bank was that a loan had been advanced to these three companies by the respondent Bank and M/s. Peacock Industries Ltd. was the gurantor. In my view, M/s. Peacock Industries Ltd. was asked to become the acceptor of the bill of exchange only for the prupose of creating a co-extensive liability on it for the loan advanced to the aforesaid three companies. The Bank as well as the aforesaid three companies appear to have intended to make M/s. Peacock Industries Ltd. as the principal borrower. If that had not been the understanding between the parties, M/s. Peacock Industries would not have been asked to be a guarantor for the bill discounting facility granted to the aforesaid three companies. The principal borrower can execute a bond of indemnity as has been executed by the aforesaid three companies but the principal borrower cannot be a gurantor as well. The guarantor has to be a third person. In the cases before hand, the three companies have not stood as guarantors for the loan advanced but have only given a bond of indemnity. The guarantor is M/s. Peacock Industries Limited.
14. Further in one of the letters issued by the aforesaid three companies to the Bank they themselves have specifically said that "since this loan is sanctioned essentially for the purpose of bills discounting limit I/we note that I/we am/are prohibited from using the loan amount or any part thereof for the purpose otherwise than as specified by me/us. If the Bank apprehends or it has reason to believe that I/we have violated or am/are violating this undertaking the Bank shall have a right to recall the entire loan amount or any part thereof at once notwithstanding anything to the contrary contained in the loan document". It shows that the aforesaid three companies had taken a loan from the respondent Bank in the form of bill discounting facility.
15. To me it appears that the appellants are trying to delay the proceedings before the Tribunal below by raking up one or the other issues and then come in appeal
16. In view of above, I am of the view that M/s. Popular Packing Pvt. Ltd., M/s. Rajasthan Chemicals and M/s. Alliance Plastic (P) Ltd., the appellants are the principal borrowers and M/s. Peacock Industries Ltd. is the guarantor. Consequently, the claim applications cannot be stayed against M/s. Popular Packing Pvt. Ltd., M/s. Rajasthan Chemicals and M/s. Alliance Plastic (P) Ltd. Regarding the res: of other guarantors who are also appellants, since they are not guarantors for M/s. Peacock Industries and are guarantors for M/s. Popular Packing Pvt. Ltd., M/s. Rajasthan Chemicals and M/s. Alliance Plastic (P) Ltd. respectively, the claim applications will proceed against them as well. The proceedings in the claim applications are stated to have already been stayed against M/s. Peacock Industries Ltd. being a sick company, by the Tribunal below. Therefore, no order is being passed in respect of M/s. Peacock Industries Ltd., in these appeals.
17. Accordingly, the appeals are dismissed. The granted interim stay dated 25.5.2001 is hereby vacated.
18. Since the claim applications of the respondent Bank are of the year 1997, the Tribunal below is directed to decide them expeditiously.