A.Subbulakshmy, - (1.)THE Bank filed Original Application (OA) before the DRT, Hyderabad, and the PO, DRT, partly allowed the OA declaring that the defendants 1, 2, 3, 8, 10, 11, 13 and 14 are liable to pay the decree amount and dismissed the claim as against the defendants 4, 5, 6 and 7. Aggrieved against that order dismissing the claim of the Bank as against defendants 4 to 7, the Bank has come forward with this appeal.
(2.)Counsel for the appellant Bank submits that the defendants 4, 5, 6 and 7 are the previous Directors of the Company and they are also liable for the claim till the end of the guarantee period i. e. till 19.10.1982 because they executed the guarantee till that period and only afterwards the new Directors will be liable for the suit claim and till the period of the guarantee the defendants 4 to 7 are also liable i.e. till October, 1982 and the order passed by the PO, DRT, is liable to be set aside, Counsel for the respondents-defendants 4 to 7 submitted that subsequent to the Agreement entered into between the old Directors and the new Directors, the old Directors, namely D4 to D7 executed the guarantee only for a period of one year i.e. upto 19.10.1982 and afterwards they are no longer liable and within that period the Bank did not make any claim and only in the year 1987 the Bank filed the Suit and after the guarantee period executed by defendants 4 to 7, D4 to D7 are no longer liable being the old Directors and only the new Directors will be liable for the Suit claim and after the expiry of the guarantee period they are no longer liable and the order passed by the PO, DRT, is perfectly justified and it does not require any intervention by this Appellate Tribunal.
To substantiate the contention of defendants 4 to 7, Counsel for the defendants-respondents relied upon the Agreement entered into between the old Directors, namely the respondent and the new Directors and also the letters executed by D4 to D 7 to the Bank. The Agreement was entered into between the old Directors and the new Directors on 30.9.1981. The First Part represents the old Directors and the Second Part represents the new Directors. It is reiterated in the Agreement that the Second Part have agreed to purchase the said Shares for consideration and thus take over the entire Company and the First Part also agreed they shall transfer to the parties of the Second Part the entire block of the shares and the manner of payment and taking away of the shares are stated in that Agreement. Clause 7 of the Agreement provides that--

The above said damages, compensation, penalty have been specifically agreed to insofar, as the parties of the First Part have given personal guarantees for securing the loans obtained from the Andhra Bank for and on behalf of the Company M/s. Deccan Solvent Oil Extractions Ltd. and though the parties of the Second Part is taking over the entire block of shares belonging to the parties of the First Part and taking over possession of the Company along with its assets, liabilities, etc., the Bankers have not agreed to release the personal guarantees given by the parties of the First Part and the parties of the First Part having agreed to divest themselves of the interests whatsoever they have in the said Company, are not interested in continuing their personal guarantees but so as to accommodate the parties of the Second Part, they have agreed to do so. Therefore, the parties of the Second Part shall be bound to relieve the parties of the First Part of their personal guarantees given by them, to M/s. Andhra Bank for and on behalf of the said Company as early as possible in such manner as is acceptable to the Bankers so that the parties of the First Part are completely relieved of their obligations whatsoever vis-a-vis the said Company and the Bankers.

(3.)CLAUSE 7 of the Agreement specifically reads that the parties of the Second Part shall be bound to relieve the parties of the First Part of their personal guarantees given by them to M/s. Andhra Bank as early as possible in such manner as is acceptable to the Bankers so that the parties of the First Part are completely relieved of their obligations. Relying upon this CLAUSE 7 that "in such manner as is acceptable to the Bankers", Counsel for the respondents submitted that after his Agreement the Bankers wanted the old Directors namely, D4 to D7 to execute the guarantee for a period of one year and accordingly Ex. A52 Guarantee was executed by defendants 4 to 7 for a period of one year only from 19.10.1981 and after the expiry of the period of one year i.e. 19.10.1982, the defendants 4 to 7 are no longer liable for the claim of the Bank and they are absolved of their liability. Much reliance is placed upon by the Counsel for the respondents D4 to D7 on the last clause in Para 16 of the Ex. A52 Guarantee which states that "Notwithstanding any thing mentioned in the above recitals this guarantee shall be valid for one year insofar as old promoters, directors and their associates are concerned". The defendants 4 to 7 have also given letter Exs. A83, A84, A85 and A86 to the appellant Andhra Bank stating that they agree to continue the personal guarantee to the Andhra Bank for one year. They have specifically stated in the letters that they are agreeable to continue the guarantees for the existing liability of the Company, namely M/s. Deccan Solvent Oil Extractions Ltd., in their personal capacity for one year.