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TMI Blog2002 (3) TMI 878X X X X Extracts X X X X X X X X Extracts X X X X ..... ee executed in favour of PICUP in Legal Form No. 2 was filed on April 12, 2001. 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 the Collector, Aligarh. On April 16, 2001, this court by a 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 Companies Act, 1956, 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 : PICUP sanctioned a term loan of Rs. 30 lakhs to the company (in liquidation), out of which Rs. 29.75 lakhs 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 April 30, 1999, the accounts position of the company with PICUP stood as follows : ( Rs. in lakhs ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon 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 all 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 assignees. The other clauses of the bond of guarantee shall be discussed while considering the submissions in support of the application. It is admitted that the charge created by mortgage in favour of PICUP was not registered with the Registrar of Companies. Canara Bank made an application for having a 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 : "446. Suits stayed on winding up order. ( 1 ) When a winding up order has been made, or the Official Liquidator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as such, the status of an unsecured creditor and has caused loss to the detriment of the guarantor. He further submits that the debt is barred by time, and that after the date of winding up, the PICUP cannot charge interest from the company and as a consequence from the 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 up in the winding up of the company under section 446(2)( d ) of the Act. On the other hand, Sri Anurag Khanna, counsel for the PICUP submits that an application under section 446 is maintainable only at the instance of the company (in liquidation) and not by a guarantor. The applicant along with other guarantors on the execution of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expressed or implied request of the principal. To exercise this right of relief it must be shown that this liability has accrued, in the sense that the creditor could proceed against him forth with, and that the liability of 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; bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with such security, the surety is discharged to the extent of the value of the security. In the present case, before considering the submissions, it is necessary to examine the terms of the bond of guarantee. The bond of guarantee dated September 16, 1983, is between Dr. Aslam Qadeer, Mr. 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 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 all losses of principal sum, interest or other moneys secured by the mortgage and all costs, charges and expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the PICUP is entitled to charge interest after the date of winding up ; it is necessary to examine whether this application by way of "quia-timet" relief is maintainable at the instance of guarantor. Section 446(2)( d ) quoted as above, provides that in the question of priorities, or any other question whatsoever whether of law or fact which may relate to or arise in the 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. In Patheja Bros. Forgings and Stamping v. I .C. I .C. I . Ltd. [2000] 102 Comp. Cas. 21; [2000] 6 SCC 545, the court while examining the provisions of sections 22, 17(3), 18(2) and 22A 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bombay High Court while examining the provisions of section 446 of the Companies Act and its object, 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, under liquidation. In such cases, the company court has full powers to pass a decree against the guarantor to be enforced under section 634 of the Companies Act. The bank intended to file a civil suit in the Bombay High Court against the company and the guarantor and thereafter filed an application under section 446 of the Companies Act 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 the guarantor was also defendant in the suit, the company court has no power to decide the suit under section 446(2) of the Companies Act. The company judge granted leave to the applicant to file suit a before the company court in Goa before whom the winding up proceeding of the company (in liquidation) will also continue. The Bombay High Court held that in appropriate cases, the company court can, in its discret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defend any suit, prosecution, or other legal proceedings, civil or criminal, in the name and on behalf of the company. Power is conferred upon him to sell the properties, both movable and immovable of the company, and to realise the assets of the company and this was to be done for the purpose of distributing the assets of the company amongst the claimants. Now, at a stage when a winding up order is made, the company may as well have subsisting claims and to realise these claims, the liquidator will have to file suits. To avoid this 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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