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2011 (11) TMI 407 - HC - Companies LawAppeal u/s 10F - the appellant had offered its guarantee vide its letter dated 2nd March, 2005 for credit limits sanctioned to M/s. Naturex Oils (P) Ltd. by Union Bank of India and Indian Overseas Bank - A perusal of the Letter of Guarantee executed by the appellant, in particular, the Clauses referred to hereinabove, reveals that the appellant was legally bound to register the charge in favour of the respondent - the underlying reason for filing an application for interrogatories, namely, violation of Section 69 of the Indian Partnership Act, 1932 is misconceived on facts and untenable in law inasmuch as when two banks form a consortium to give a loan to a borrower on the strength of a guarantee document, it can never be said that the two banks have entered into a partnership as contemplated under the Indian Partnership Act, 1932 - Held that the Clause 7 of the Letter of Guarantee, appellant cannot rely upon Section 134(2) of the Indian Contract Act, 1872 - Applications are dismissed
Issues: Challenge to Company Law Board's order under Section 10F of the Companies Act, 1956; Withdrawal of guarantee by the appellant; Condonation of delay and registration of charge by the Company Law Board; Consortium agreement between banks and its legal implications; Applicability of Section 134(2) of the Indian Contract Act, 1872; Relevance of judgments in similar cases.
Analysis: 1. The appellant challenged the Company Law Board's order under Section 10F of the Companies Act, 1956, regarding the withdrawal of a guarantee. The appellant had initially offered a guarantee for credit limits sanctioned to a company, but later withdrew it before the charge was registered. The Company Law Board allowed the respondent's petition for condonation of delay and registration of the charge. 2. The appellant's withdrawal of the guarantee was based on alleged non-performance by the borrowing company. However, the bank rejected the withdrawal, stating it was not in line with the agreement. The bank filed a petition for registration of the charge due to the appellant's failure to register it. The delay in filing the charge was attributed to the appellant's default and negligence. 3. The appellant argued that the respondent had no right to file the petition under Section 141 of the Act due to a consortium agreement between banks. The appellant also cited Section 134(2) of the Indian Contract Act, 1872, regarding their rights as a guarantor. The appellant relied on previous judgments to support their case. 4. The respondent contended that the appellant could not unilaterally withdraw the guarantee after the loan was advanced, emphasizing the appellant's continued liability. The respondent justified the need for charge registration based on the terms of the agreement and the Letter of Guarantee. 5. The Court found that the loan was advanced based on the guarantee executed by the appellant, making them legally bound to register the charge. The respondent satisfied the conditions under Section 141 of the Act for condonation of delay. The Court dismissed the appellant's arguments regarding the consortium agreement and the applicability of Section 134(2) of the Indian Contract Act, 1872. 6. The Court rejected the appellant's request for interrogatories, deeming them irrelevant and a tactic to prolong the proceedings. Previous judgments cited were distinguished based on the specific circumstances of the present case. The Court upheld the Company Law Board's decision, finding no grounds for interference. 7. The appeal and pending application were dismissed with no costs awarded, and interim orders were vacated.
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