2001 (1) TMI 998 - SC - Indian Laws

Summary

Issues Involved:
The appellant advanced money to respondent No. 4 after its management was taken over by respondent No. 3. Subsequently, respondent No. 3 became sick, and proceedings were initiated under the Sick Textile Undertakings (Nationalisation) Act, 1974. The appellant filed a suit for recovery against the guarantors and the principal-debtor.

Summary:

Preliminary Issue:
The preliminary issue framed was whether the claim of the appellant was maintainable in view of the provisions of the Sick Textile Undertakings (Nationalisation) Act, 1974.

Court's Analysis:
The trial court and the High Court concluded that the suit of the appellant was not maintainable based on Section 29 of the Act. However, the Supreme Court disagreed, stating that the Act deals with the liabilities of a nationalized company and does not affect the liability of a guarantor bound by a deed of guarantee. Referring to a previous decision, the Court emphasized that the liability of a guarantor continues even if the principal-debtor's liability is discharged under insolvency or company law.

Decision:
The Supreme Court allowed the appeal, deciding in favor of the appellant. The case was remanded to the trial court for a decision on merits. The Court dismissed an application filed by respondent No. 3 under the Sick Industrial Companies (Special Provisions) Act, 1985, with liberty to move the appropriate application before the trial court.