2009 (12) TMI 1065 - HC - Indian Laws

Summary

Issues Involved:
1. Validity and enforceability of the Personal Guarantee executed by the defendant.
2. Defendant's liability as a guarantor.
3. Compliance with procedural requirements under the Code of Civil Procedure (CPC).
4. Applicability of the Bombay Stamp Act.
5. Timeliness of the Summons for Judgment.
6. Coextensive liability of the guarantor and principal debtor.

Detailed Analysis:

1. Validity and Enforceability of the Personal Guarantee:
The plaintiff filed a Summary Suit under Order 37 of the CPC for a decree against the defendant for Rs. 12,01,00,654, with interest on the principal sum of Rs. 8,60,00,000. The core of the dispute revolves around the Personal Guarantee executed on 15.03.2003 by the defendant, which guaranteed repayment of the amounts advanced by the plaintiffs to the company. The Guarantee was clear in its terms, stating that the defendant would make payments without delay, demur, or protest upon the plaintiff's first demand, even if the company defaulted.

2. Defendant's Liability as a Guarantor:
The court found that the defendant's liability as a guarantor was joint and several with that of the company. The defendant admitted the lending to the company and the execution of the Guarantee document. The company defaulted in payment, and the defendant failed to make the payment despite the demand. The Guarantee explicitly stated that the defendant would be treated as the principal debtor in relation to the plaintiff, allowing the plaintiff to enforce the Guarantee without first proceeding against the company.

3. Compliance with Procedural Requirements under the CPC:
The defendant raised a technical objection under Order 29 Rule 1 of the CPC, arguing that the suit was not signed and verified by a competent person. However, the court noted that Mr. Nitin Lokhande, Vice President, Legal of the plaintiff, was a principal officer and conversant with the case facts. An additional affidavit was filed to remove any technical objections. The court referenced the Supreme Court's observation in United Bank of India v. Naresh Kumar and Ors., stating that such technical defects are curable and do not go to the root of the matter.

4. Applicability of the Bombay Stamp Act:
The defendant contended that the documents were not adequately stamped under the Bombay Stamp Act. The court found no merit in this argument, noting that the suit was based on the Guarantee, which was adequately stamped when executed. The court emphasized that the Stamp Act is intended to secure revenue for the state and should not be used to raise technical objections to dismiss the suit.

5. Timeliness of the Summons for Judgment:
The plaintiff initially took a Summons for Judgment No. 518 of 2006, which was withdrawn with liberty to file afresh. The amended plaint was allowed, and the present Summons for Judgment was filed on 6th January 2009. The court held that the delay in filing the summons for judgment was not fatal, referencing Bankey Bihari B. Agarwal and Ors. v. Bhagwanji Meghji and Ors., which allowed for some leniency in such cases, especially when the plaintiff is a financial institution and the defendant's liability is not in serious dispute.

6. Coextensive Liability of the Guarantor and Principal Debtor:
The court reiterated the legal position that the liability of the guarantor and the principal debtor is coextensive and not in the alternative, as established by a series of cases, including Industrial Investment Bank of India Limited v. Biswanath Jhunjhunwala. The creditor is not required to exhaust remedies against the principal debtor before proceeding against the guarantor. The court cited multiple authoritative texts and precedents to support this view, including Pollock & Mulla on Indian Contract and Specific Relief Act, Chitty on Contracts, and Halsbury's Laws of England.

Conclusion:
The court found the defendant's defenses unsustainable and decreed the suit in favor of the plaintiff for Rs. 12,01,00,654 with further interest on the principal sum of Rs. 8,60,00,000 at 12% per annum from the date of filing the suit until payment or realization. No order as to costs was made.