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Incidentally, the introduction of the Nationalisation Act has obviously weighed with the High Court in particular the mechanism provided in terms of Sections 20 and 21 of the Act.
Before however adverting thereto certain further factual details ought to be noticed for correct appreciation of the matter in its proper perspective. The facts disclose:
Having intended to set up another spinning unit at Mahe (Pondicherry State), the first respondent approached the appellant/plaintiff for financial assistance and obtained sanction for Term Loan Facility for Rs.35,00,000/-. Pending legal formalities, the appellant/plaintiff granted Rs.15,00,000/- as interim loan on 25.3.1963 on which date the first respondent deposited the title deeds of certain immoveable properties with the plaintiff's branch at Madras and thus, agreed to create an equitable mortgage thereby. The first respondent also executed a deed of hypothecation in respect of moveable assets such as plant, machineries, etc. and a promissory note for the said amount of Rs.15,00,000/-. This, however, later was merged in the Term Loan amount of Rs.35,00,000/- secured by a deed of mortgage executed by the first respondent on 2.5.1963. The first respondent executed a legal mortgage under a document registered with the then Notary of Pondicherry as security for the repayment of the entire term loan of Rs.35,00,000/- on 30.4.1963, which also included the deferred payment guarantee facility of Rs.5,62,230.40. This was followed by an equitable mortgage by the deposit of title deeds in respect of the moveables at Cannanore as security for the Deferred Payment Guarantee facility for Rs.5,62,230.40 on 3.8.1963, in addition to a promissory note for the said amount. The first defendant also executed bipartite agreement embodying the terms and conditions contained in the memorandum of final terms and conditions for the Deferred Payment Guarantee amount.

According to the plaintiff, they granted additional loan of Rs.17,00,000/- to meet the urgent financial need of the first defendant on the same terms and conditions as contained in the memorandum dated 2.11.1964. The first defendant executed a deed of further charge dated 4.5.1965 once again creating a mortgage. This document created a mortgage over Mahe unit and another deed of further charge dated 29.4.1965 over its Cannanore Unit. Defendants 2 to 6 and late K. Damodaran also executed a personal guarantee on 8.12.1964 undertaking a joint several liability to repay the sum of Rs.62,00,000/-. Out of the second loan of Rs.17,00,000/-; Rs.13,00,000/- were paid on 8.12.1964 and Rs.6,00,000/- were paid on 2.6.1965 at Madras. At the request of the first defendant, on their representations about the financial difficulties, the plaintiff revised the schedule of repayment with effect from 15.10.1966 under four separate deeds of modifications dated 31.7.1968; 31.7.1968; 27.1.1970 and 27.1.1970 respectively.

Indian Rupee was devalued on 6.6.1966 which increased the liability of the plaintiff under the Deferred Payment Guarantee by Rs.2,37,580.33. According to the plaintiff, in terms of the bi- partite agreement read with amendatory agreement, the above increase also became the liability of defendants 1 to 6, for which the plaintiff again obtained an equitable mortgage by deposit of title deeds pertaining to the Cannanore and Mahe Units on 11.7.1970. The total contingent liability on account of the default at that time was worked out at Rs.1,11,199.11 the total Deferred Payment Guarantee thus increased to Rs.6,73,429.51.

The plaintiff-corporation has stated that the first defendant repaid only Rs.3,50,000/- towards the first loan and the additional loan advanced by the plaintiff and certain amounts towards interest due on the two loans and under the Deferred Payment Guarantee, the total interest paid was Rs.16,03,224.47. The Central Government, however, took over the management of Mahe and Cannanore Units under the Industrial Development and Regulation Act. The foreign suppliers invoked the Deferred Payment Guarantee against the Plaintiff, as the first defendant paid instalments under the Deferred Payment Guarantee contract to the foreign suppliers upto January, 1972 and thereafter defaulted to pay any installment. As a result of this default of the first defendant, the plaintiff was obliged to make the installment payment to the foreign suppliers.