2001 (8) TMI 1248 - HC - Companies Law

Summary

Issues:
- Whether the applicant should be impleaded as a party respondent in the company application challenging the adjudication made by the official liquidator.

Analysis:
1. Impleadment of Applicant: The main issue in this case is whether the applicant, who is a guarantor in a debt recovery matter, should be impleaded as a party respondent in a company application challenging the adjudication made by the official liquidator. The respondents argued that the applicant is not a necessary party as he is contesting the claim before the Debt Recovery Tribunal. They contended that the company application is an appeal against the liquidator's decision and should only involve the liquidator. However, the applicant claimed that as per Section 128 of the Indian Contract Act, the liability of the guarantor is co-extensive with the principal debtor, and any decision in the appeal would affect him. The court noted that the applicant's liability had been reduced under the liquidator's order and if that order was set aside, the applicant would be adversely affected. Therefore, the court held that the applicant should be impleaded as a party respondent in the company application to ensure his rights are protected and he has a chance to be heard.

2. Legal Precedents: The court considered legal precedents cited by both parties, including the judgment in the case of Bank of India Ltd. v. Rustom Fakirji Cowasjee, which discussed the liability of a surety in relation to the principal debtor. The court acknowledged the arguments regarding the co-extensive liability of the guarantor with the principal debtor and the impact of the liquidator's decision on the applicant's liability. Despite the respondents' contentions that the applicant's cause of action was different from that of the company in liquidation, the court emphasized the applicant's stake in the final decision and the potential adverse effects on him if the liquidator's order was overturned.

3. Decision: After considering the arguments and legal principles, the court concluded that the applicant should be impleaded as a party respondent in the company application challenging the liquidator's adjudication. The court highlighted the applicant's interest in the matter and the possible consequences of the appeal on his liability as a guarantor. By allowing the applicant to participate in the proceedings, the court aimed to ensure fairness and protect the applicant's rights in a situation where the outcome could directly impact his financial obligations. The Judge's summons were made absolute in favor of the applicant with no orders as to costs, emphasizing the importance of his inclusion in the legal proceedings to safeguard his interests.