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TMI Blog2002 (3) TMI 828X X X X Extracts X X X X X X X X Extracts X X X X ..... 001. On the same date, the Court granted an interim protection to the effect that no coercive action shall take place against the petitioner for realization of the dues claimed by PICUP and for which certificate of recovery has been sent by PICUP to Collector, Aligarh. On 16-4-2001, this Court by detailed order found that prima facie at that stage the claim set up by the applicant can be examined under section 446(2)( d ) of the Act, and required PICUP to file a detailed counter-affidavit. Counter-affidavit was filed by PICUP to which a rejoinder-affidavit has also been filed. The facts giving rise to the above application are stated as below : 3. PICUP sanctioned a term loan of Rs. 30 lacs to the company (in liq.), out of which Rs. 29,75 lacs was disbursed to the Company. Sri Khalid Mukhtar, Dr. Aslam Qadeer and Sri Khursheed Ahmad Khan were promoters of the company for setting up a project for manufacturing of dry cells at Sikandrapur, District Aligarh. On 30-4-1999, the accounts position of the company with PICUP stood as follows : ( i ) Disbursed term loan Rs. 29.45 lacs ( ii ) Loan Repaid Rs. 12.67 lacs ( iii ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Corpn. as aforesaid and will indemnify the Corpn. against all loss of principal sum interest or other moneys secured by the mortgage and all costs charges and expenses whatsoever which the Corpn. may incur by reasons of any default on the part of the company, its successors or assignees. The other clauses of the bond or guarantee shall be discussed while considering the submissions in support of the application. 7. It is admitted that the charge created by mortgage in favour of PICUP was not registered with the Registrar of the Companies. Canara Bank made an application for having first charge over the assets of the company. The application was allowed against which Special Appeal No. 618 of 1997 has been filed. By an interim order in Special Appeal, the Official Liquidator has been restrained to disburse any money. Sections 446 and 447 of the Companies Act are quoted as below : "Section 446. Suits stayed on winding up order . (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 winding up order, shall be proceeded with, ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the PICUP cannot charge interest from the company and as a consequence from guarantors. According to Sri Manish Goyal, the question with regard to liability of the company for the purpose of determining the liability of the guarantor, in the facts and circumstances of the case, can be considered as any other question which arises in the winding up of the company under section 446(2)( d ). 9. On the other hand, Sri Anurag Khanna, the counsel for the PICUP submits that an application under section 446 is maintainable only at the instance of the company (in liq.) and not by a guarantor. The applicant along with other guarantors on the execution of bond of guarantee have promised to pay the loan in case of default committed by the company and that the entire liability of the guarantor is co-extensive with the liability of company. PICUP is free to recover its dues from the guarantor and in case the amount is not recovered, the guarantor can recover the same from the assets of the company in the hands of the official liquidator. The failure to register the charge under section 125 cannot restrict the right of PICUP to realize the amount from the guarantors. 10. The Court has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the surety must be ascertained at that time when he makes an application. The fact, however, is that no demand has been made on either the principal or surety is no bar to quia-timet relief. A guarantor is generally discharged if the debtor is discharged by operation of law, for example a short payment of loan to be discharged; disclaimer of the lease by the debtor s trustee in bankruptcy, or by a company liquidator or by the dissolution of the tenant corporation or where a mortgagee forecloses, and thereafter sells the mortgaged property, a guarantor of the mortgage debt is discharged by operation of law because the mortgage debt is itself discharged in these circumstances. If the guarantee is given in breach of the provisions of the Hire-Purchase Act, where the borrower is discharged, the guarantor is also discharged. However, a surety liable under a contract of indemnity is not necessarily discharged, if the debtor is discharged by operation of law; but if the creditor is tainted with any illegality, the surety is protected under a contract of indemnity as well as under the contract of guarantee. If the creditor is guilty of breach of contract as against the debtor, and as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Khursheed Ahmad Khan and Mr. Khalid Mukhtar termed as guarantors, and PICUP. The guarantee takes into account that the guarantors are the promoters of the company. The second paragraph of the description of the bond of guarantee and paragraphs 1, 6, 7, 11 and 15 which are relevant for the purposes of this application, are quoted as below : "1. If at any time default shall be made by the company/borrower in the payment of the principal sum interest at 17.5 per cent per annum and/or any other moneys for the time being due to the Corporation upon the security of the mortgage, the Guarantors on demand shall pay to the Corporation the whole of such principal sum, interest and/or other moneys which shall then be due to the Corporation as aforesaid and will indemnify the Corporation against loss of principal sum, interest or other moneys secured by the mortgage and all costs, charges and expenses whatsoever which the Corporation may incur by reason of any default on the part of the company, its successors or assigns. 6. The Guarantee herein contained shall be enforceable against the guarantors notwithstanding that the securities specified in the Mortgagor or any of them shall at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any other question whatsoever whether of law or fact which may relate to or arise in course of the winding up proceedings, whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises, is within the jurisdiction of the Court, to be entertained and to be disposed of before or after the order of winding up of the company. 16. In Patheja Bros. Forgings Stamping v. ICICI Ltd. [2000] 26 SCL 404 1 the Court while examining the provisions of sections 22, 17(3), 18(2) and 22-A of the Sick Industrial Companies (Special Provisions) Act, 1985, held that the words under section 22 of the Act clearly and unambiguously provide that no suit for the enforcement of guarantee in respect of any loan or advance granted to the Industrial Company concerned will lie or can be proceeded with or without the consent of the Board or appellate authority and, thus, the words of the Legislature being clear, the Court must give effect to them as they stand and thus the suit for enforcement of guarantees in respect of the loan cannot be provided unless consent as required under section 22 is obtained. In Hazi Raunak Ali Khan v. UCO Bank [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intended to file a Civil Suit in Bombay High Court against the Company and the guarantor and thereafter filed an application under section 446 seeking leave of the Company Court to file a civil suit against the company and against the guarantor. The High Court on its original side, rejected the contention that since guarantor was also defendant in the suit, the Company Court have no power to decide the suit under section 446(2). The Company Judge granted leave to the applicant to file suit before the Company Court in Goa before whom the winding up proceeding of the Company (in liq.) will also continue. The Bombay High Court held that in appropriate cases, the Company Court can, in its discretion, itself entertain and dispose of a suit in which there are defendants other than the company (in liq.). In such cases, the Company Court has full power to pass the decree against the guarantor also which could be enforced against him under section 634. 17. In Sudarsan Chits (India) Ltd. v. O. Sukumaran Pillai [1985] 58 Comp. Cas. 633 (SC ) the Supreme Court considered in Para 7, historical evolution of the provisions under section 446(2) as well as its present setting and its scope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is eventuality and to keep all incidental proceedings in winding up before the Court which is winding up the company, its jurisdiction was enlarged to entertain a petition, amongst others, for recovering the claims of the company. In the absence of a provision like section 446(2) under the repealed Indian Companies Act, 1913, the official liquidator in order to realize and recover the claims and subsisting debts owed to the company, had the unenviable fate of filing suits. These suits, as is not unknown, dragged on through the trial Court and Courts of appeal resulting not only in multiplicity of proceedings but in holding up the progress of the winding up proceedings. To save the company, which is ordered to be wound up, from this prolix and expensive litigation and to accelerate the disposal of winding up proceedings. Parliament devised a cheap and summary remedy by conferring jurisdiction on the Court winding up the company to entertain petitions in respect of claims for and against the company. This was the object behind enacting section 446(2) and, therefore, it must receive such construction at the hands of the Court as would advance the object and at any rate not thwart it." ..... X X X X Extracts X X X X X X X X Extracts X X X X
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