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TMI Blog2016 (11) TMI 1762X X X X Extracts X X X X X X X X Extracts X X X X ..... st August, 1991 a supplementary agreement was entered into between the parties where under the equipment worth Rs. 29,64,018/- was leased to the defendant and lease rentals were to commence w.e.f. 21st August, 1991, for a period of eight years i.e. up to 20th August, 1999; (v) the said plant and machinery were installed at the factory aforesaid of the defendant no.1; (vi) the said lease expired on 20th August, 1999 and the defendant became liable to pay the entire lease rentals along with interest as per the terms of the agreement; (vii) that on 27th September, 1991 another supplementary agreement was executed between the parties whereunder equipment worth Rs. 39,59,370/- was leased to the defendant and the leased rentals were to commence from 27th September, 1991 and till 26th September, 1999; (viii) the plant and equipment under the said agreement also was installed at the factory of the defendant no.1; (ix) the said lease has also expired on 26th September, 1999 and the defendant became liable to pay the entire lease rentals along with interest; (x) that both the supplementary agreements dated 21st August, 1991 and 27th September, 1991 were to form part and parcel of the Agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid under Section 8 and as a result whereof the order dated 12th May, 2004 of disposal of the suit was set aside and the suit restored to its original position. 6. On 8th May, 2012 it was informed that the defendant no.1 had been wound up pursuant to the order of Punjab & Haryana High Court. The plaintiff was accordingly directed to take steps to bring the Official Liquidator (OL) on record. 7. Notice thereof was issued to the OL who appeared through counsel before this court on 23rd April, 2013 and for few dates thereafter but then stopped appearing. 8. The defendant no.2 filed a written statement pleading (i) that the suit against the defendant no.2 as guarantor is not maintainable since the defendant no.1 as principal borrower had died a legal death and ordered to be wound up pursuant to the recommendations of the BIFR; (ii) that the OL attached to the High Court of Punjab & Haryana had sold all assets comprising of land, building, plant, machinery and equipment of the defendant no.1 for a sum of Rs. 4.91 crores and the sale stood confirmed; that the defendant no.2 even otherwise stood discharged as a guarantor because (a) the plaintiff had given up its right to enforce i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... October, 2016 it was further enquired from the counsel for the plaintiff whether a plea under Section 141 of the Contract Act was to be taken in execution or in suit. On a perusal of the Deed of Guarantee admittedly executed by the defendant no.2 in favour of the plaintiff it was found that the defendant no.2 had agreed that his liability would be joint and several with the defendant no.1 and it was thus enquired from the counsel for the defendant no.2 on 26th October, 2016 as to how defendant no.2 could oppose the claim in the suit. 12. Faced therewith, the counsel for the defendant no.2 on 26th October, 2016 had stated that the plaintiff had already recovered part of its claim. He was however unable to show any document to the said effect. The counsel for the plaintiff, on that day stated that no amount had been recovered and it was so evident from the report filed by the OL also. 13. The counsel for the defendant no.2 had then sought adjournment to place on record the latest report of the OL. 14. The defendant no.2 has filed an affidavit dated 3rd November, 2016 to the effect (i) that the OL in his report filed in these proceedings had disclosed as many as five secured credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee had a right to have and retain possession and use of the equipment for the full term of the lease, the equipment was to remain the property of the plaintiff; (ii) the defendant no.1 agreed not to sell, sublet, pledge or hypothecate or otherwise encumber or create any rights with respect to the said equipment; (iii) defendant no.1 agreed to provide "Collateral Security" to the plaintiff for full lease rental; (iv) the plaintiff was allowed, on occurrence of a default, to demand the entire amount due and to terminate the agreement and to demand return of the equipment and to take possession thereof at the cost and risk of the defendant no.1 and to sell the same and to demand the balance of its dues from the defendant no.1 or to avail any other remedy which may be available to it in law with neither of the two remedies being exclusive; and, (v) as per the Deed of Guarantee executed by the defendant no.2, the defendant no.2, in consideration of the plaintiff having agreed to grant lease to the defendant no.1, had agreed (a) to indemnify the plaintiff against all losses and to pay to the plaintiff on demand the balance due to the plaintiff not exceeding a sum of Rs. 109.75 lacs; (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said that the plaintiff, by not asserting its rights to take back possession of the leased equipment has lost a chance to recover any part of its dues from the defendant no.1 or has acted detrimentally to the defendant no.2. 21. Moreover, under the Lease Agreement as aforesaid, the plaintiff was not even obliged, in the event of default by the defendant no.1 to take possession of the leased equipment and had a choice either to take possession thereof or to take any other remedies against the defendant no.1. Similarly the defendant no.2 had in the Deed of Guarantee agreed that he shall not stand discharged by any such thing. The defendant no.2 is now estopped from raising pleas as have been raised. 22. Section 141 of the Contract Act as under: "141. Surety's right to benefit of creditor's securities-A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and if the creditor loses, or without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es payable. C does not sue B for a year after the debt has become payable. A is not discharged from his suretyship." and the illustrations to Section 141 are as under: "Illustrations: (a) C, advances to B, his tenant, 2,000 rupees on the guarantee of A. C has also a further security for the 2,000 rupees by a mortgage of B's furniture. C, cancels the mortgage. B becomes insolvent and C sues A on his guarantee. A is discharged from liability to the amount of the value of the furniture. (b) C, a creditor, whose advance to B is secured by a decree, receives also a guarantee for that advance from A. C afterwards takes B's goods in execution under the decree, and then, without the knowledge of A, withdraws the execution. A is discharged. (c) A, as surety for B, makes a bond jointly with B to C, to secure a loan from C to B. Afterwards, C obtains from B a further security for the same debt. Subsequently, C gives up the further security. A is not discharged." 27. The matter is put beyond any pale of controversy by the Supreme Court in Industrial Finance Corporation of India Ltd. Vs. Cannanore Spinning and Weaving Mills Ltd. (2002) 5 SCC 54. It was held that the intent of the la ..... X X X X Extracts X X X X X X X X Extracts X X X X
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