9911796707
TMI Blog2000 (9) TMI 969X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 ('the SICA') is applicable to the suit against the guarantor of a loan or advance that has been granted to the concerned industrial company. Secondly, whether the permission granted under section 22 of the SICA by the Board for Industrial and Financial Reconstruction ('BIFR') by an order dated 29-3-2000, to proceed with the recovery suits filed against the company can be made use of by the creditor to proceed with the recovery suit filed against the guarantors of the company. 3. The sequence of events leading to the institution of the suit, by the respondents SICOM giving rise to this appeal may shortly be stated as follows : At the request of one DSJ Communicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing regular Civil Suit No. 2361 of 1998 against the guarantors for recovery of its dues in the sum of Rs. 1,20,00,302 advanced by the respondent to the company and guaranteed by the guarantors, the present appellants. 4. After the suit was filed, a writ of summons was served on the guarantors (defendants in the suit). They filed their appearance in time, chamber summons was taken out. The guarantors filed their reply. The respondents (plaintiffs) in the said suit prayed for a decree against the guarantors. The guarantors relying upon section 22 and contended that the suit filed against the guarantor, being a recovery suit, could not have been filed or proceeded with without the consent of the BIFR. The said contention was rejected by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt are reproduced herein below : "It remains to deal with the judgment of the Division Bench of the Bombay High Court in Madalsa International Ltd. v. Central Bank of India [2000] 99 Comp. Cas. 153. The Division Bench found no ground to so read section 22 as to hold that a suit against the guarantor also stands suspended. It was said (page 167 of Comp. Cas) : 'the guarantors could be absolute third parties or directors of an industrial company. However, in both cases it would be the guarantors, whether third parties or directors, who would be affected personally; and we see no reason to interpret the section in such a manner that apart from the properties of the industrial company, the Legislature intended to protect the personal int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r notice the order of the Board dated 29-3-2000, and contended that they are armed with permission of the Board to proceed with the recovery suit already filed. The order of the Board dated 29-3-2000, is on record. It reads as under : "The recovery suits already filed against the company could be continued but no fresh suit should be filed or decrees, if any, obtained executed without prior approval of the BIFR." 8. The learned counsel for the appellants in rejoinder contended that the aforesaid direction can only operate in respect of recovery suits filed against the company. It cannot be pressed into service to file or proceed with the recovery suit filed against the guarantor. He, therefore, went on to contend that unless specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case, the appellant furnished guarantee in favour of the respondents, the SICOM and guaranteed repayment of the debt due by the company. Section 128 of the Indian Contract Act provides that the liability of the surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract. It is, therefore, necessary to consider whether in the terms of the guarantee there is anything which shows that the liability of the surety is not coextensive with that of the principal borrower. Certain relevant clauses of the guarantee amongst others are reproduced herein below : "6. The guarantors hereby agree and declare that their liability under these presents shall be irrevocable, joint and several with the liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability of the guarantors shall be irrevocable, joint and several with that of the company for repayment for the said loan together with interest, costs charges and expenses; whereas clauses 8 and 16 record that the guarantors have agreed that in order to give effect to the guarantee SICOM shall be entitled to treat the guarantors as if they were and are the principal debtors to SICOM for all payments guaranteed by them and it shall not be necessary for SICOM to sue the company before suing the guarantors or any of them for the amount due under the security documents. The guarantee has been made enforceable against the guarantors notwithstanding no action has been taken by SICOM against the company. It is thus clear from the terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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