2000 (2) TMI 713 - HC - Companies Law

Summary

Issues Involved:
1. Recovery of money based on dishonoured bills of exchange and cheques.
2. Application of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) to the proceedings.
3. Liability of acceptors and partners under the Negotiable Instruments Act, 1881.
4. Distinction between principal debtor and guarantor under the Indian Contract Act, 1872.

Issue-wise Detailed Analysis:

1. Recovery of Money Based on Dishonoured Bills of Exchange and Cheques:
The plaintiff sought a judgment for Rs. 1,34,498.61 against the defendants, including interest and costs. The claim was based on three bills of exchange drawn by the 1st defendant and accepted by the 2nd defendant, which were dishonoured upon presentation. Subsequently, cheques issued by the 1st defendant to cover the amount were also dishonoured. Despite repeated demands, the defendants failed to pay the due amount, leading to the filing of the present suit.

2. Application of Section 22 of SICA:
The 1st defendant, being registered as a sick company under SICA, invoked Section 22, seeking a stay on the suit. The court acknowledged that proceedings against a sick company must be stayed under SICA. However, the plaintiff's counsel withdrew the summons for judgment against the 1st defendant with liberty to initiate appropriate proceedings post-SICA proceedings. The court dismissed the summons for judgment against the 1st defendant as withdrawn with liberty as prayed.

3. Liability of Acceptors and Partners under the Negotiable Instruments Act, 1881:
The plaintiff pressed for judgment against the 2nd to 5th defendants. The court noted that the 2nd defendant, as the acceptor of the bills of exchange, and the 3rd and 5th defendants, as partners of the 2nd defendant, were liable as principal debtors under Section 37 of the Negotiable Instruments Act. This section unequivocally states that the acceptor of a bill of exchange is liable as the principal debtor, independent of any contract to the contrary.

4. Distinction between Principal Debtor and Guarantor under the Indian Contract Act, 1872:
The court distinguished the roles of principal debtor and guarantor, emphasizing that the acceptor of a bill of exchange cannot be considered a guarantor. Section 126 of the Indian Contract Act defines a contract of guarantee, requiring distinct roles for the principal debtor, surety, and creditor. The court clarified that the liability of the acceptor is independent and does not fall under the purview of guarantees as contemplated under Section 22 of SICA.

Conclusion:
The court concluded that Section 22 of SICA did not apply to the 2nd defendant or its partners, as they were principal debtors under the Negotiable Instruments Act. No other plausible defence was raised by the defendants. Consequently, the court made the summons for judgment absolute against the 2nd, 3rd, and 5th defendants, while dismissing it as withdrawn against the 1st and 4th defendants.