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TMI Blog1991 (9) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... nch, which was to stand as guarantor for payment of the money to a foreign company from whom Depro Foods Ltd. was to import machinery. The price of the machinery was payable in instalments and the company was to make payment to the State Bank of India in instalments. This agreement was entered into on June 26, 1970, and this contract is known as "deferred payment guarantee". Defendants Nos. 2 to 6 stood guarantee and property of defendant No. 8 was equitably mortgaged. When two instalments became due, the bank recovered the amount of the same by debiting the amount in the account of the company. Thereafter some more instalments fell due and the company was unable to pay the amount. In the meantime; the company got a cash credit limit to the extent of Rs. 6,00,000 on February 26, 1972, in the State Bank of India branch at Bahalgarh. This limit was increased to Rs. 6,50,000 on March 14, 1973. For the liability of this account only defendants Nos. 2 and 3 were guarantors. This account would be known as the second account. The bank debited this account in respect of four instalments of the amount of deferred payment guarantee. Another account was opened on March 16, 1974, with a cash c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat too on payment of ad valorem court-fee and not fixed court-fee under the Companies Act. This contention has no merit. Section 446 of the Companies Act reads as under: "446(1). When a winding up order has been made or the official liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the court and subject to such terms as the court may impose. (2) The court which is winding up the company shall, not with standing anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of: ( a )any suit or proceeding by or against the company, ( b )any claim made by or against the company (including claims by or against any of its branches in India), ( c )any application made under section 391 by or in respect of the company, ( d )any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company; whether such suit or proceeding has been instituted or is instituted, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act as reproduced above as it relates to matter of winding up of a company. The present appeal is, therefore, held to be maintainable under section 483 of the Companies Act. The other suit was filed in the High Court itself as winding up proceedings were pending against the company in this court. The suit was tried in view of section 446 of the Companies Act and the decision made therein is appealable in view of section 483 of the Act aforesaid. In C. P. No. 69 of 1982, the liability of Shri B. P. Gupta, defendant No. 8, was fixed at Rs. 2,27,466.05 out of the total amount of instalments Nos. 3 to 7 of the "deferred payment guarantee". Credit was given for Rs. 62,000 which was recovered by the bank in order to arrive at the aforesaid figure. Likewise the liability of the guarantors of the "deferred payment guarantee" was also fixed. The details are not necessary at this stage, some of the arguments addressed related to defendant No. 8 and other guarantors of the "deferred payment guarantee" who had not stood guarantee in the subsequent agreements of cash credit limit accounts. The reasons being recorded in respect of defendant No. 8 could also be attracted to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIR 1965 Mad 266. The right of the bank to adjust the amount of cheque collected in the account in which money was due to the bank was recognised. It was also observed that the bank had the right to combine different accounts of the customer. While referring to the aforesaid rights of the bank, it is to be noticed that such a right is to be governed by the terms and conditions of the contract entered into between the batik and the customers in individual cases. In other words, such a general right is subject to the terms and conditions to the contrary mentioned in the contract. Defendant No. 8, Shri B. P. Gupta, with respect to the "deferred payment guarantee" had mortgaged his property. His liability as correctly held by the learned single judge is to the extent of the value of the property mortgaged with respect to the amount due to the bank from the borrower-company in respect of payment of the amounts to the foreign-company for which the plaintiff-bank had stood as a guarantor. Defendant No. 8, Shri B.P. Gupta, is not concerned with other accounts of the defendant company opened and operated with any branch or branches of the plaintiff-bank. Even if the liability of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the account of the borrowing company which was opened in the Bahalgarh branch. The further contention of Shri Chhibber is that factually the borrowing company did not make payment of the instalments either to the New Delhi branch of the bank where the "deferred payment guarantee" agreement was entered into or to the Bahalgarh branch of the bank. In order to keep the accounts straight, entries of debit were made in the cash credit account of the borrowing company in the Bahalgarh branch which was debited to that extent by the New Delhi branch. For all intents and purposes the amount remained due to the bank under the "deferred payment guarantee" agreement. The argument appears to be fanciful and attractive but the same is not tenable in law, as far as defendant No. 8 and other guarantors are concerned, who did not stand guarantee in the subsequent cash credit limit accounts. Qua them the appropriation made from the cash credit limit account of the company amounted to payment in the "deferred payment guarantee" account of the New Delhi branch. Up to the limit sanctioned in the cash credit accounts at Bahalgarh, the borrower-company could also withdraw the amount and then deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the protested bills account and the bank stops making further entries of interest due from time to time in the original account. It is only when the amount has to be claimed by filing a suit that calculations are made of the interest due which are added to the amount due under the contract. The contention of learned counsel for the appellant that the borrower-company or the guarantors, the appellant had no knowledge of the protested bills account or has no concern therewith is of no consequence. The suit of the plaintiff is based on non-payment of instalments of the amount due under the "deferred payment guarantee" and as such is maintainable. The bank was not supposed to keep any separate account of the "deferred payment guarantee" and even if any such account was prepared and not produced in the court, it is of no consequence. The dates on which the instalments fell due are mentioned in the agreements. Admittedly, the amount of the instalments was not paid on the due dates. The rest is a matter of calculation of interest as per agreement aforesaid to which the plaintiff-bank would be entitled in case of passing of the decree. On the facts it was not disputed that the amount of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tee". As a matter of fact subsequent guarantees related to different new cash credit accounts opened which correlated with the limits allowed under such accounts. The contention of learned counsel for the appellant-guarantors is that by entering into subsequent contracts of cash credit limits the guarantee furnished by the guarantors in respect of the "deferred payment guarantee" agreement stood extinguished as it amounted to variation of the contract without consent of such guarantors. In support of this contention reference has been made to the judicial pronouncements on the subject. The basic decision is of the Privy Council in Seth Pratapsingh Moholalbhai v. Keshavlal Harilal Setalwad, AIR 1935 PC 21. It was observed as under (headnote): "The surety, like any other contracting party, cannot be held bound to something for which he has not contracted. If the original parties have expressly agreed to vary the terms of the original contract no further question arises. The original contract has gone, and unless the surety has assented to the new terms there is nothing to which he can be bound, for the final obligation of the principal debtor will be something different from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the borrower-company at Bahalgarh did not make any reference to the "deferred payment guarantee". The bank in the plaint referred to the interest payable in case of default of payment of the instalments of the amount under the "deferred payment guarantee" at 2 %. However, the agreements entered into disclose that the interest was payable at the minimum bank rate at the rate of 10%. It seems the rate of 2 % was incorrectly mentioned which was payable by the bank to the foreign-company if there was any default in payment of the instalments. As far as payment of late deposit of the amount of instalments by the borrower-company is concerned, the interest payable was the bank-rate minimum of 10%. On the same ground, as discussed above, the bank would be entitled to interest at the bank rate. In this context reference may also be made to section 21(2)( e ) of the Banking Regulation Act, which reads as under: "21. (2) Without prejudice to the generality of the power vested in the Reserve Bank under sub-section (1), the Reserve Bank may give directions to banking companies, either generally, or to any banking company or group of banking companies in particular, as to ( e )the rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000 total in the cash credit limit account, apart from his liability under the original guarantee submitted to the "deferred payment guarantee" account with respect to the seventh instalment which was not paid. Defendant No. 5 stood guarantee to the cash credit limit account which was up to the limit of Rs. 7,50,000 (account No. 5). His liability was rightly fixed by the single judge. Defendants Nos. 6 and 7 stood guarantors in the cash credit limit account of Rs. 15,00,000 (account No. 6). Their liability would be to that extent in the cash credit limit account whereas the liability of defendant No. 6 in the "deferred payment guarantee" account would also be there in respect of the amount due with respect to the amount of the seventh instalment. On behalf of the appellants, it was argued that as and when the cash credit limit was increased and new documents were executed including fresh pronotes and endorsements made thereon in favour of the bank, the previous agreements and guarantees furnished became part of history and cannot be enforced. This contention cannot be accepted as far as the cash credit limit accounts are concerned. Similar documents were executed in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... single judge are modified. In C. P. No. 69 of 1982, the suit shall stand dismissed qua defendant No. 8, B. P. Gupta. Defendant No. 8 was liable to pay the amount of the seventh instalment, i.e., Rs. 55,233.03. A sum of Rs. 62,000 deposited by the borrower-company was to be adjusted and in this manner a sum of Rs. 6,766.97 was still in excess. The amount of four instalments, as already held above, cannot be recovered from him in the "deferred payment guarantee" account. This excess amount as found above can well be adjusted in the other suit along with the sale proceeds of the machinery. Thus, in this suit (C. P. No. 69 of 1982) the decree passed against him stands set aside. Civil Appeal No. 11 of 1986, has been filed by defendants Nos. 2 to 6 in C. P. No. 69 of 1982. The appeal of defendant No. 2 stands dismissed as he is liable for the amount found due from defendant No. 1 to the extent he stood guarantee for the seventh account to the extent of Rs. 45,00,000. The appeal of defendant No. 3 would stand partly allowed. He is to be given benefit of appropriation of amounts of four instalments in the cash credit account. Thus, in "deferred payment guarantee" account his liabil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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