Judgment:
Anoop V. Mohta, J.
1. This is a plaintiff's Summary Suit under Order 37 of Code of Civil Procedure (CPC) for decree and order against the defendant in the sum of Rs. 12,01,00,654/as set out in the particulars of claim annexed to the plaint as Exhibit E together with interest on the principal sum of Rs. 8,60,00,000/.
2. The plaintiff has filed supporting affidavit as well as supporting documents as well as rejoinder. The defendant has denied the same by a reply.
3. The basic events are as under:
In October, 2001, the plaintiffs were approached by one Supreme Telecommunications Ltd. (' the Company') with a request to advance a sum of Rs. 14 crores for meeting its Short Term to MediumTerm working capital requirement.
4. On 27.9.2001, a Finance Agreement executed between the plaintiffs and the company. The plaintiffs duly advanced to the Company Rs. 14 crores. The defendant and her husband Shri Venkatesh was the promoter/ director of the Company.
5. On 21.09.2002, a Deed of Confirmation was executed between the plaintiffs and the Company modifying certain terms and conditions of the facility granted to the company which was also signed by late Shri Venkatesh Lakshman Prabhu, Managing Director of the Company as a Guarantor. The Managing Director of the Company late Shri Venkatesh Prabhu expired.
6. On 15.03.2003, the defendant executed a Personal Guarantee in favour of the plaintiffs guaranteeing the due repayment of the amount advanced by the plaintiffs to the company.
7. On 30.01.2006 the plaintiffs addressed a Demand Notice interalia to the defendant and the company calling upon them to make payment of their outstanding dues under the facility and invoked the Guarantee given by the defendant.
8. On 10.03.2006, the said Notice was replied by Company's Advocate informing the company that the company had initiated a dialogue with its consortium lenders headed by Canara Bank for a restructuring and/or One Time Settlement proposal of all outstanding dues with the creditors and this included the indebtedness to the plaintiffs.
9. The Advocate for the company therefore requested the plaintiffs not to resort to any legal proceedings since the company needed the plaintiffs' support.
10. On 05.07.2006, as no response was forthcoming from the company or the defendant nor any amount was paid for almost three months, the plaintiffs addressed a further letter to the Advocate for the Company informing him that since the plaintiffs had not heard anything from the company about the restructuring proposals, the plaintiffs had no option but to initiate legal action. In September, 2006 the present Suit is filed.
11. On 15th March, 2003, the defendant executed the document entitled 'Deed of Guarantee' ('the Guarantee'), guaranteeing the repayment of the amounts advanced to the company. The Guarantee admits the amounts lent to the company. The Guarantee inter alia provides that
a) That the defendant agrees and undertakes to make, without delay, demur or protest on first demand and without recourse to the company within 24 hours of demand by the plaintiff..... even if the company in any way refuses, defaults, denies, disputes or fail to pay/reimburse the amount to the plaintiff.
b) That the defendant's obligation is to arise first when the notice in writing is given by the plaintiff requiring the defendant to make payment and once a notice is given, the plaintiff may proceed to enforce the defendant's obligations without first proceeding against and resorting to its remedies against the company.
c) That the defendant would not be exonerated by the plaintiff not suing the company.
d) The defendant shall be treated as guarantor only qua the company and in so far as the between the plaintiff and the defendant, the defendant shall be treated as principal debtor to the plaintiff.
12. The relevant clauses of the Personal Guarantee dated 15.03.2003 (for guarantee) by defendant No. 1 in favour of the plaintiff are as under:
(1)The Guarantor doth hereby agrees and undertakes to make, without delay, demur or protest and on first demand, and without recourse to the Borrower within 24 hours of demand by IL&FS;, the payment of the principal amount not exceeding Rs. 140,000,000/, alongwith interest and other monies payable by the Borrower as per the said Agreement and/or as per the relevant Bills of Exchange or Promissory Notes towards the outstanding principal amount and interest and other monies and such other costs, charges and expenses which may become due and payable at any point in time, even if the Borrower in any way refuses, defaults, denies, disputes or fails to pay/reimburse the due amounts to the Guarantor or to IL&FS; or otherwise.
(3) This Guarantee shall be subject to the following general conditions:
(i) The Guarantor's obligation to pay is to arise first when notice in writing is given by IL&FS; and/or its successors, agents, trustees, nominees or assigns requiring the Guarantor to make payment hereunder and after such notice is given by IL&FS;, IL&FS; may if necessary proceeding to enforce the Guarantor's obligations and liabilities hereunder without first proceeding against and resorting to all or any of IL&FS;'s remedies against the Borrower.
(ii) The Guarantor hereby confirms and declares that notwithstanding anything between the Borrower and the Guarantor, the Guarantor shall be considered as surety only for the Borrower, yet as between IL&FS; and the Guarantor, the Guarantor be considered as principal debtor to IL&FS; to the extent mentioned above for payment of all the monies as specified in the said Agreement and/or in the relevant Bills of Exchange or Promissory Notes.
(4)Neither the Guarantor nor heirs, executors, successors or administrators of the Guarantor shall be discharged or exonerated, (except to the extent of the payments actually made to IL& FS or its Nominees by or on behalf of the Guarantor):
(d) by IL&FS; making a composition with, or promising to give time to sue or not to sue the Borrower without any previous consent of the Guarantor thereto, or(5)The Guarantor agrees and confirms that:
(f) For the purpose of limitation any admission or acknowledgment in writing given or part payment made by the Borrower/s or any payment made by the Borrower/s to IL&FS; in respect of or towards repayment of the Borrower's/s dues or otherwise in relation to the facility shall be binding on the Guarantor/s and, notwithstanding that the same may be made by the Borrower/s shall be treated as given on behalf of the Guarantor/s also;(9)A certificate in writing under the hand of any of the Officers of IL&FS; stating the designated amount at any particular time is due and payable to it under the Guarantee shall be conclusive and binding evidence as against the Guarantor and heirs, executors , successors, administrators or assigns of the Guarantor.
(11)This Guarantee is a continuing guarantee and is without prejudice to and in addition to any other security or security documents already held or which IL&FS; may hold hereafter on account or in relation to the financial assistance to the Borrower in terms of said Agreement, as amended from time to time.
13. The company defaulted in payment of Rs. 86 million (Rs. 8.6 crores). The company by a letter dated 7th February, 2003 while admitting its defaults requested for a reschedulement. It was granted by the plaintiff. The Company even failed to pay the rescheduled debts. Instead by letters dated 29th May, 2003, 12th June, 2003 and 17th November, 2003, the company while admitting and acknowledging its liability sought time to pay.
14. In the Annual Accounts of the Company, the liability to the plaintiff has been admitted. The Annual Accounts for the years 200405, 200506 and 200607 are annexed to the Affidavit in support of Notice of Motion No. 360 of 2009. The Balance Sheet of 200405 admits that two amounts of Rs. 1.9187 crores and Rs. 8.6 crores (towards the suit claim) are payable to the plaintiff. The aggregate of these two amounts being Rs. 10,51,86,591 is admitted as outstanding and payable to the plaintiff. It is further stated that the said amount is 'secured by ... personal guarantees of directors'. These accounts have been duly signed by the defendant. These admissions have been repeated in the subsequent Balance Sheets for the years 1005-06, 2006-07, 2007-08.
15 In light of the persistent defaults, the plaintiff by letter dated 30th January, 2006 invoked the guarantee and called upon the defendant to pay the outstanding amounts. The Company responded by a letter dated 10th March, 2006 wherein it did not dispute its liability and merely requested the plaintiff not to initiate action since it was trying to restructure its debts. The plaintiff therefore did not precipitate matters. The Company however made no payment whatsoever.
16. Admittedly, the defendant has not disputed the lending to the company and the execution of the Guarantee document. The dues of the Company to the plaintiff are admitted and acknowledged from time to time including in the correspondence and annual account of the company. It is also acknowledged that outstanding amount is secured by a Guarantee of the Director. The accounts have been signed by the defendants. The defendant failed to make the payment though demanded as per the Deed of Guarantee and the Undertaking to make the payment. As noted, the defendant ought to have been, without delay, demur or protested and without recourse to the company made the payment within 24 hours of the demand by the plaintiff.
17 The defendant has no defence in view of the above. The liability of the defendant as a Guarantor is joint and several with that of the company. The defendant is, therefore, personally liable to make the payment to the plaintiff as prayed. The defendant in reference to paragraphs 10 to 14 not even denied the averments with regard to the default, liability and the payment besides amount. In totality, therefore, the claim of the plaintiff against the defendant has not been disputed.
18. From the above, it is clear that the document at Exhibit A3 is a deed of guarantee and the defendant is a guarantor. The defendant has guaranteed the repayment of the amounts payable by the company. The notice of demand was issued on 30/01/2006. The suit was filed on 03/10/2006. The liability of a guarantor commences from the invocation of the guarantee (SICOM Ltd. v. Padmashri Mahipatrai J. Shah and Ors. : 2005 (3) Mh. L. J. 125. There are the liability arising out of the same has been admitted and acknowledged from time to time also. The suit is within the limitation and based upon the personal guarantee and therefore, it is maintainable.
19. As per the guarantee document itself the defendant has been considered as a principal debtor (Clause 3 (ii). The plaintiff is, therefore, entitled to enforce the guarantee without first suing the company (clause 1, 3(i) and 4(d)). The cause of action to sue as a guarantor is independent of the cause of action against the principal borrower. The guarantor can be sued in respect of whether the principal borrower has been sued or not? (The Bank of Bihar Ltd. v. Dr. Damodar Prasad and Anr., : AIR 1969, S.C. 297) and Mukesh Gupta v. SICOM Ltd. : 2004 (2) Bom. C.R. 290 and SICOM Ltd. (supra)
20. The contention based upon the order 29 Rule 1 of the Code of Civil Procedure (CPC) has no force. The suit has been signed and verified by Mr. Nitin Lokhande, Vice President, Legal of the plaintiff who is clearly a principal officer of the defendant. He also conversant with the facts of the case from the papers and documents available with the plaintiffs. Even otherwise, they have filed an additional affidavit dated 6th November, 2009 and thereby even removed the technical objection, so raised with regard to the authorization. The Apex Court has observed in United Bank of India v. Naresh Kumar and Ors. AIR 1997 S.C. 3, that such a technical reason as a plaint is not signed by competent person which does not go to the root of the matter and even if any, such defects are curable basically in a suit filed by a bank for recovery of the amount from the borrower, as well as, the guarantors.
21. The submission with regard to the Bombay Stamp Act, has also no force. The suit is based on the guarantee. There is no serious dispute about the guarantee and its terms. The lending of money is not in dispute. In view of article 5(h) of Schedule I of the Bombay Stamp Act, when the document was executed, it was adequately stamped Exhibit A1 is on stamp paper of Rs. 50 and Exhibit A2 is on stamp paper of Rs. 20/. The Apex Court has held that a stamp Act is enacted to secure revenue to the State at certain classes of instruments but it cannot be permitted to allow the opponent to raise such technical objections for dismissal of the suit.
22 The plaintiff had taken a Summons for Judgment No. 518 of 2006 which was withdrawn with liberty to file afresh Summons for Judgment. The amendment to the plaint was allowed by order dated 11th December, 2008. The present Summons for Judgment, therefore, was filed on 6th January, 2009 after amending the plaint. Even otherwise, the delay in filing the summons for judgment is not fatal. (Bankey Bihari B. Agarwal and Ors. v. Bhagwanji Meghji and Ors. : 2001 (2) Bom. C.R., 86. Even considering the facts and circumstances of the case and as the Plaintiff is a financial institution and as the amount as claimed is not in serious dispute, and as the documents referred reflects admitted liability upon the defendants, the delay, even if any, in filing the present summons for Judgment is not fatal to dismiss the same on such ground.
23 The Apex Court has reiterated in Industrial Investment Bank of India Limited v. Biswanath Jhunjhunwala (2009) 9 S.C.C. 478 by referring to Section 128 of the Contract Act as under:
27. The legal position as crystallized by a series of cases of this Court is clear that the liability of the guarantor and principal debtors is coextensive and not in alternative.
18. The term 'coextensive' has been defined in the cerebrated book of Pollock & Mulla on Indian Contract and Specific Relief Act, 10th Edn., at p. 728 as under:
Coextensive Surety's liability is coextensive with that of the principal debtor.
A surety's liability to pay the debt is not removed by reason of the creditor's omission to sue the principal debtor. The creditor is not bound to exhaust his remedy against the principal before suing the surety, and a suit may be maintained against the surety though the principal has not been sued.
19. In Chitty on Contracts, 24th Edn., Vol. 2 at pp. 103132, para 4831 it is stated as under:
4831. Conditions precedent to liability of surety. Prima facie the surety may be proceeded against without demand against him, and without first proceeding against the principal debtor.20. In Halsbury's Laws of England, 4th Edn., Vol 20, Para 159 at p. 87 it has been observed that:159. ...It is not necessary for the creditor, before proceeding against the surety, to request the principal debtor to pay, or to sue him, although solvent, unless this is expressly stipulated for.
In view of above, therefore, the present suit as filed only against the guarantor is well within the framework of law and the record.
24 In view of above, the defence so raised by the Defendant has no force and unsustainable.
25 Resultantly, the Summons for Judgment made absolute.
26 The suit is decreed against the defendants for Rs. 12,01,00,654/as per the particulars of the claim Exhibit 'E' together with further interest on the principal sum of Rs. 8,60,00,000/@ 12% p.a. from the date of filing of the suit till the payment and/or realization. No order as to costs.