STATE BANK OF INDIA Vs. RESHA WIRES PVT LTD
LAWS(DR)-2004-3-2
DEBTS RECOVERY APPELLATE TRIBUNAL
Decided on March 09,2004

Appellant
VERSUS
Respondents

JUDGEMENT

A.Subbulakshmy, - (1.) THE Bank filed Original Application (O.A.) against the defendants 1 to 6 for realisation of the amount due to the Bank. THE O.A. was decreed for a sum of Rs. 1,68,29,174.90 p. as against defendant Nos. 1,2 and 4 jointly and severally with subsequent interest at 16.08.% p.a. and the O.A. was dismissed as against defendant Nos. 3,5 and 6. Aggrieved against the dismissal Order as against defendant No. 3 alone the Bank has preferred this appeal. THE respondents even though served, they did not appear. Hence, the arguments of the appellant Counsel is being heard and the Order is passed on merit.
(2.) Counsel for the appellant Bank submits that the 3rd defendant executed the guarantee under Ex. A-9 and as it is a counter guarantee the 3rd defendant is liable for the suit claim. On a perusal of Ex. A-9 document, it is seen that it is a continuing guarantee and defendant No. 3 has executed that continuing guarantee for a sum of Rs. 42 lacs along with defendant No. 2. The Presiding Officer, D.R.T., has found that the other defendant Nos. 1,2 and 4 have executed revival of the documents the guarantees and the revival letters are marked as Exs. A-35, A-36 and defendant No. 3 is not a party to these documents and since defendant No. 3 is not a signatory for the revival letters, defendant No. 3 is not liable even for the amount under Ex. A-9. The Presiding Officer, D.R.T., has observed in his Order that "As could be seen from Ex. A-9 the said guarantee was in respect of Cash Credit to the extent of Rs. 42 lacs but apart from the Cash Credit facility the Bank extended other facilities and even under Ex. A-9, defendant No. 3 is not liable". The Presiding officer, D.R.T. has further observed that the Bank unfortunately did not segregate and give a breakup of the liability corresponding to each facility and Ex. A-9 cannot be accorded the status of a continuing guarantee and there is no other document to which defendant No. 3 subscribed his signature and so the attempt of the applicant Bank to mulct defendant No. 3 with the liability of Cash Credit facility covered by Ex. A-9 as also other credit facilities on the false ground of Ex. A-9 being a continuing guarantee must fail and Ex. A-9 cannot be accorded the status of a continuing guarantee and inasmuch as Ex. A-9 did not provide for an authorisation in favour of defendant No. 1 to acknowledge the liability on behalf of the guarantors as well defendant No. 3 is bound to be absolved and the applicant Bank failed to show that the claim against defendant No. 3 remained in force. On a perusal of Ex. A-9, it is crystal clear that it is a continuing guarantee and it was executed for a sum of Rs. 42 lacs. The other alleged revival letters i.e. subsequent guarantees were in respect of enhanced facility for which defendant Nos. 1, 2 and 4 have executed the supplemental guarantees namely those revival letters. Defendant No. 3 is not a party to those documents. So, for the enhanced limit covered under the documents Exs. A-35 and A-36, the 3rd defendant is not liable. Since it is a continuing guarantee, defendant No. 3 is liable under Ex. A-9 to the extent of Rs. 42 lacs only and not for the enhanced facilities and of course not for the entire suit claim. Since Ex. A-9 is a continuing guarantee, defendant No. 3 is liable only to the extent of the amount covered under Ex. A-9 i.e., Rs. 42 lacs with interest at 16.08% p.a. with quarterly rests on the amount. Defendant No. 3 is not liable for the entire suit claim. So the Order passed by the Presiding Officer, D.R.T., is modified holding that defendant No. 3 is liable to the extent of Rs. 42 lacs with interest at 16.08% p.a. with quarterly rests.
(3.) APPEAL partly allowed. Order passed by the Presiding Officer, D.R.T., Bangalore, is modified to the extent indicated above.;


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