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Issues Involved:
1. Maintainability of company appeals vs. Letters Patent Appeals. 2. Liability of guarantors for deferred payment guarantee and subsequent cash credit accounts. 3. Banker's lien and right of appropriation. 4. Impact of subsequent contracts on original guarantee agreements. 5. Interest rate applicable on delayed payments. 6. Adjustment of sale proceeds of the borrower-company's machinery. Detailed Analysis: 1. Maintainability of Company Appeals vs. Letters Patent Appeals: The bank raised a preliminary objection regarding the maintainability of company appeals, arguing that Letters Patent Appeals should have been filed with ad valorem court-fee. The court found no merit in this contention, citing Section 446 of the Companies Act, which allows the court handling the winding-up to entertain and dispose of suits against the company. The court concluded that the appeals were maintainable under Section 483 of the Companies Act, as the suits related to the winding up of the company. 2. Liability of Guarantors for Deferred Payment Guarantee and Subsequent Cash Credit Accounts: The borrower-company, Depro Foods Ltd., entered into multiple agreements with the State Bank of India, with different guarantors for various accounts. The court examined the liability of each guarantor, particularly focusing on defendant No. 8, B. P. Gupta, who had mortgaged his property for the deferred payment guarantee. The court held that his liability was limited to the value of the property mortgaged and did not extend to subsequent cash credit accounts. The liability of other guarantors was similarly assessed based on their specific guarantees. 3. Banker's Lien and Right of Appropriation: The court recognized the bank's right to amalgamate different accounts of the customer and recover amounts due by appropriating funds from one account to another. This principle was supported by various judicial pronouncements, including Halesowen Presswork and Assemblies Ltd. v. Westminster Bank Ltd. The court noted that such rights are subject to the terms and conditions of the contract between the bank and the customer. 4. Impact of Subsequent Contracts on Original Guarantee Agreements: The court addressed the argument that subsequent contracts of cash credit limits varied the original guarantee agreement without the consent of the guarantors, thereby extinguishing their liability. The court rejected this argument, stating that the new guarantees furnished for cash credit limit accounts did not reference the deferred payment guarantee. Therefore, there was no variation in the original agreement. 5. Interest Rate Applicable on Delayed Payments: The court clarified that the interest rate on delayed payments under the deferred payment guarantee was the bank rate, subject to a minimum of 10%, as per the agreements and Section 21(2)(e) of the Banking Regulation Act. The court rejected the argument that the interest claimed was excessive, citing relevant case law. 6. Adjustment of Sale Proceeds of the Borrower-Company's Machinery: The machinery of the borrower-company was sold during the pendency of the suit, and the sale proceeds were to be adjusted against the liability of the guarantors. The court agreed that this amount should be adjusted at the time of passing the final decree. Judgment Summary: - The appeals filed by defendant No. 8, B. P. Gupta, were allowed, and the decree against him was set aside except for the liability of the seventh instalment. - The appeal of defendant No. 2 was dismissed, holding him liable for the amount due under the seventh account. - The appeal of defendant No. 3 was partly allowed, adjusting the amount of four instalments in the cash credit account. - The appeal of defendant No. 6 was partly allowed, fixing his liability at Rs. 44,59,737.66. - The appeals of other defendants were dismissed. - The sale proceeds of the machinery and any excess amounts were to be adjusted at the time of passing the final decree. - The parties were left to bear their own costs.
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