2001 (8) TMI 1275 - HC - Companies Law

Summary

Issues:
- Impleadment of applicant as a party respondent in a company application challenging the adjudication made by the Official Liquidator.

Analysis:
1. Impleadment of Applicant: The applicants sought to be impleaded as a party respondent in a company application challenging the adjudication by the Official Liquidator. The respondents argued that the applicant, being a guarantor, was not a necessary party as he was already contesting the claim before the Debt Recovery Tribunal. They contended that the company application was an appeal against the liquidator's decision and should only involve parties directly related to the company in liquidation. The cause of action against the applicant, based on a guarantee, was deemed separate from the company's liability to the respondents based on securities provided by the company in liquidation.

2. Legal Arguments: The applicant's counsel argued that as per Section 128 of the Indian Contract Act, the guarantor's liability is co-extensive with the principal debtor, making the applicant a vitally affected party in the appeal against the liquidator's decision. The respondent's counsel, however, cited a judgment highlighting that the liability of a surety may not extend to interest after the winding-up order unless specified otherwise. The judgment emphasized that the discharge of the principal debtor by law does not necessarily discharge the surety, and the creditor's remedy against the guarantor should not be limited to the debtor's obligations.

3. Court Decision: The court acknowledged that the applicant's liability was directly impacted by the liquidator's adjudication, with the reduction of liability benefiting the applicant. If the respondents succeeded in overturning the liquidator's decision, the applicant would suffer adverse consequences. Therefore, the court deemed it appropriate to include the applicant as a party respondent in the company application to ensure his right to be heard and safeguard his interests. The Judge's summons were made absolute in favor of the applicant, granting impleadment without costs.

In conclusion, the judgment emphasized the importance of considering the applicant's status as a guarantor and the potential impact on his liability in the company application challenging the liquidator's decision. The court's decision to implead the applicant as a party respondent aimed to uphold principles of fairness and protect the applicant's rights in the legal proceedings.