2002 (3) TMI 828 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of application under section 446 of the Companies Act, 1956 by a guarantor.
2. Liability of the guarantor in relation to the company's debt.
3. Impact of non-registration of charge under section 125 of the Companies Act.
4. Right to charge interest post winding-up order.
5. Applicability of 'quia-timet' principle for the guarantor.

Detailed Analysis:

1. Maintainability of Application under Section 446:
The court examined whether an application under section 446, at the instance of the guarantor, is maintainable. It was argued by the respondent that such an application is maintainable only at the instance of the company (in liquidation) and not by a guarantor. The court referred to several precedents, including *Patheja Bros. Forgings & Stamping v. ICICI Ltd.*, which held that suits for enforcement of guarantees require consent under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. The court concluded that the determination of the guarantor's liability is not incidental to the winding-up proceedings and hence, the application under section 446 by the guarantor was dismissed.

2. Liability of the Guarantor:
The court analyzed the bond of guarantee executed by the guarantor, which included clauses that made the guarantor's liability co-extensive with the principal debtor. The bond stated that the guarantor would indemnify the Corporation against all losses and that the guarantee would remain binding until full repayment. The court noted that the guarantor's liability is enforceable even if no action has been taken against the company and that the guarantor agreed to pay on demand.

3. Impact of Non-Registration of Charge:
The applicant argued that the failure to register the charge under section 125 of the Companies Act rendered the charge void against the liquidator, thus making PICUP an unsecured creditor. The court did not find this argument sufficient to discharge the guarantor's liability, as the bond of guarantee was independent of the registration of the charge.

4. Right to Charge Interest Post Winding-Up Order:
The applicant contended that PICUP could not charge interest from the company or the guarantor after the winding-up order. The court did not specifically address this issue in detail but implied that such matters could be defended by the guarantor in appropriate proceedings, rather than in the winding-up proceedings.

5. Applicability of 'Quia-Timet' Principle:
The applicant invoked the 'quia-timet' principle, which allows a surety to seek relief before payment. The court referred to legal texts and precedents explaining that a surety can compel the principal debtor to relieve him from obligations even before discharging them. However, the court found that the determination of the guarantor's liability using this principle was not incidental to the winding-up proceedings and thus, could not be adjudicated under section 446.

Conclusion:
The court dismissed the application under section 446 of the Companies Act, 1956, filed by the guarantor, on the grounds that the relief claimed did not relate to or arise in the course of the winding-up proceedings. The court held that the determination of the guarantor's liability is not necessary for the effective winding-up of the company and refused to exercise its discretion to adjudicate the matter. The application was dismissed with no order as to costs.