1998 (7) TMI 553 - HC - Companies Law

Issues Involved:
1. Overdraft facility of Rs. 16 lakh granted to Sea Transportation Enterprises (P.) Ltd.
2. Execution of hypothecation deed dated 21-9-1984 by the company.
3. Execution of guarantee dated 21-9-1984 by defendant No. 2.
4. Execution of hypothecation of book debts dated 23-4-1987 by the company.
5. Execution of promissory note dated 23-4-1987 by the company for Rs. 16 lakh with interest.
6. Joint and several liability of defendants to pay Rs. 22,41,426.02 and interest at 18.5% from the date of filing of the suit until payment.

Detailed Analysis:

1. Overdraft Facility of Rs. 16 Lakh:
The plaintiff-bank granted an overdraft facility of Rs. 16 lakh to Sea Transportation Enterprises (P.) Ltd. on 23-4-1987. The company executed a promissory note and a deed of hypothecation of book debts as security for repayment. However, the hypothecation agreement was not registered with the Registrar of Companies (ROC) within the stipulated time, rendering the charge void and unsecured against the official liquidator. The plaintiff-bank's assistant manager, K. Balakrishna, erroneously affirmed the registration of the charge, which was later corrected with an apology.

2. Hypothecation Deed Dated 21-9-1984:
The company executed a hypothecation deed on 21-9-1984, creating a first charge on its products, movable property, and book debts. This deed was part of the security for the credit facilities provided by the plaintiff-bank.

3. Guarantee Dated 21-9-1984 by Defendant No. 2:
Defendant No. 2, in his personal capacity, executed a letter of guarantee on 21-9-1984, guaranteeing payment of all amounts due by the company to the plaintiff-bank up to Rs. 12 lakh plus interest. The court found this guarantee valid and enforceable against defendant No. 2.

4. Hypothecation of Book Debts Dated 23-4-1987:
The company executed another hypothecation deed on 23-4-1987, hypothecating its present and future book debts as security for the overdraft facility. However, due to the failure to register this charge with the ROC, it was deemed void and unsecured against the official liquidator.

5. Promissory Note Dated 23-4-1987:
The company executed a promissory note on 23-4-1987, promising to pay Rs. 16 lakh with interest to the plaintiff-bank. This note was part of the security for the overdraft facility.

6. Joint and Several Liability of Defendants:
The court held that the plaintiff-bank established the liability of the company and defendant No. 2 for the sum of Rs. 22,41,426.02 with further interest of Rs. 11,66,178.74 at 18.5% per annum from the date of filing the suit until realization. However, the official liquidator was not liable for the unsecured charge of Rs. 16 lakh due to non-registration. The plaintiff-bank was allowed to enforce the personal guarantee of defendant No. 2 up to Rs. 12 lakh plus interest and to realize the secured amount of Rs. 15.50 lakh from the company's book debts.

Conclusion:
The court decreed the suit partly, granting the plaintiff-bank the right to enforce the personal guarantee and realize the secured amount from the company's book debts. The bank was instructed to take disciplinary action against negligent officials and to update the confidential dossier of K. Balakrishna. The judgment was also forwarded to the RBI for further action.

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