H B JAYARAJ Vs. STATE BANK OF HYDERABAD
LAWS(DR)-2006-2-16
DEBTS RECOVERY APPELLATE TRIBUNAL
Decided on February 16,2006

Appellant
VERSUS
Respondents

JUDGEMENT

K.Gnanaprakasam, - (1.) THIS Regular Appeal is directed against the Order dated 23.11.2004 in OA 981/1997, passed by the DRT. Bangalore.
(2.) The appellant herein is the Legal Representative (LR) of the original 3rd defendant in the OA. The 3rd defendant died during the pendency of the OA, And the appellant was brought on record as the LR of the 3rd defendant and who had contested the OA. The 1st defendant is a Company and defendants 2 and 3 were its Directors. The fact that the 1st defendant Company borrowed the amount claimed in the OA is not in dispute. The claim of the 3rd defendant is that he resigned from the directorship on 24.1.1997 and, therefore, he is not liable to pay any amount. The second objection is that the 4th defendant in the OA namely, State of Karnataka, had executed a Deed of Guarantee in favour of the Applicant Bank on 16.1.1988 and, therefore, the liability if any, has been absolved and the 3rd defendant is not at all liable to pay any amount to the applicant Bank, Originally the Bank filed the suit before the VIII Additional City Civil Court, Bangalore, in OS No. 4455/80, and the same was decreed on 18.1.1982. E.P. No. 46/1994 was filed before the Civil Court and consequent to the constitution of the DRT at Bangalore, the E.P. came to be transferred and taken on file as OA before the DRT, Bangalore, for the issuance of the Debt Recovery Certificate (DRC) and the learned PO rejected the contention of the 3rd defendant and granted DRC. As against the same, this appeal has been filed. I have heard the learned Advocate for the appellant and the 1st respondent.
(3.) BEFORE this Tribunal also, the appellant did not dispute the amount due to the applicant Bank. The contention of the learned Advocate for the appellant is that after passing of the decree in the year 1982, the applicant Bank and the State of Karnataka entered into a Deed of Guarantee on 16.1.1988, by which the State of Karnataka came forward to afford an opportunity to the borrower to restart its unit and the lenders, at the request of the guarantors, agreed to withdraw the recall notices and sanction further working capital, provided the borrower procures a Government guarantee guaranteeing the repayment of the said loans together with interest and all other monies by the borrower and the State of Karnataka came forward to give guarantee and had executed the Deed of Guarantee. The said guarantee was entered into between the State of Karnataka and the applicant Bank to which neither the appellant nor the original borrower was a party. Contention of the appellant is that, this guarantee was no doubt subsequent to the decree having been passed on 18.1.1982, but the Bank had agreed to withdraw the recall notices and also agreed to sanction further working capital to the borrower and the "recall notices" would amount to recall of the Suit and, therefore, the decree passed by the Civil Court was no longer subsisting and the entire matter was reopened and the Bank having accepted the guarantee given by the State of Karnataka, there is a deviation, novation of the original contract, and therefore the 3rd defendant, who was the original borrower, was not liable to pay any amount. Under the Deed of Guarantee, the applicant Bank agreed to recall the notices in respect of the loans granted for which the suit was laid, is not entitled to get a DRC and the DRT committed an error in issuing the DRC. It is further submitted that the Deed of Guarantee obtained from the State of Karnataka amounts to the discharge of the appellant herein, as the decree was satisfied.;


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