2008 (3) TMI 743 - SC - Companies Law

Summary

Issues involved:
The judgment involves the interpretation of a guarantee agreement and the applicability of Section 130 of the Indian Contract Act, 1872.

Interpretation of Guarantee Agreement:
The appellant, a guarantor, contested liability for a loan advanced by the bank to the defendants, claiming revocation of the guarantee before the loan disbursement. The agreement of guarantee stated it was continuous and not affected by account status. The High Court upheld the bank's claim based on the agreement's terms.

Applicability of Section 130 of the Act:
The appellant argued reliance on Section 130, which allows revocation of a continuing guarantee for future transactions by notice. However, the court found the agreement lawful and binding, emphasizing the appellant's waiver of rights under the Act by entering into the guarantee agreement.

Precedents and Legal Principles:
Citing legal precedents, the court affirmed that parties can waive statutory benefits unless against public policy. The appellant's agreement to a continuing guarantee precluded invoking Section 130 post-revocation. The court rejected the appellant's claim and upheld the High Court's decision, dismissing the appeal.

Conclusion:
The Supreme Court dismissed the appeal, emphasizing the binding nature of the guarantee agreement over statutory provisions. The appellant's attempt to revoke the guarantee after agreeing to its continuity was deemed invalid, leading to the affirmation of liability to pay the loan amount to the bank. No other grounds were raised, and no costs were awarded in the case.