1. The plaintiff Bank filed the original application (OA) for recovery of Rs. 7.45,24.159/-against the defendants. During the pendency of that OA, the 2nd defendant filed IA-14 praying the Tribunal to delete his name from the OA as he is not a necessary party and to dismiss that OA against him stating that the 2nd defendant is not personally liable and the alleged personal guarantee executed is not valid and enforceable and at his request the applicant Bank has relieved him of his personal guarantee obligation by virtue of letters dated 29.7.1995 and 20.11.1995 communications of the Bank expressly relieving him of his personal guarantee and so the 2nd defendant is not liable for the suit claim. The applicant Bank filed objection stating that there was no communication made by the branch or any authority to relieve him of his personal guarantee and the 2nd defendant is also liable to pay that amount. This IA-14 was heard by the Presiding Officer, DRT, Bangalore, and he allowed that IA deleting the name of the 2nd defendant from the cause title of the application and dismissing the case against him.
Aggrieved against that order the appellant-applicant Bank has come forward with this appeal.
2. The learned Counsel appearing for the appellant Bank submitted that the IA-14 was ordered to be considered by the PO, DRT, on merits along with the main OA but the Tribunal had taken that IA suo motu and has passed that order and further the Bank neither wrote any letter nor supplied any copies of the letter to the 2nd defendant relieving him of his personal guarantee and the PO, DRT has passed orders based on the internal communication sent from the regional office to the branch office and it has not been admitted by the Bank and with regard to the release of personal guarantee and the past liability of the 2nd defendant as a guarantor was never given up by the appellant Bank and there is no official communication produced by the 2nd defendant that the Bank has written any such letter to him either by giving up his liability or giving up his personal guarantee as required under Clause-12 of Guarantee Agreement and so the dismissal of the case as against 2nd defendant is unsustainable and the matter has to be heard elaborately by letting in oral as well as documentary evidence and how the release of 2nd defendant of his personal guarantee came into existence and how the resolution passed to that effect also came into existence have all to be proved by a detailed enquiry by letting in oral as well as documentary evidence and this IA ought not to have been decided merely on the letter correspondence between the Bank officers and so the order passed by the PO, DRT is vitiated and it has to be set aside and this IA has to be heard alongwith the main OA and order to be passed on merits.
3. On the other hand. Counsel appearing for the respondent-2nd defendant submits that only based on the resolution passed and the communications sent by the regional office to the branch office releasing the personal guarantee of the 2nd defendant, the 2nd defendant was discharged of his liability and the OA was dismissed. She further submitted that originally the 1st defendant company was a Private Limited Company and then it was converted into a Public Limited Company and as the 2nd defendant was a non-executive Chairman who was not responsible or accountable for the day-to-day administration of the company including the finance, was managed and looked after by the Executive Director and the whole-time Director, the 2nd defendant was in no way connected with the responsibility of the business administration of the company and as such the 2nd defendant informed the Bank that he would not longer execute the personal guarantee and also he should be relieved and discharged entirely from his antecedent personal guarantee executed against the credit facilities extended by the Bank to the company and Bank Manager also recommended to waive the personal guarantee of the individual and accordingly the Head Office released the personal guarantee, and it was communicated to the branch and the 2nd defendant also received it from the Branch Manager and as such the order passed by the PO, DRT, is sustainable.
4. On a perusal of the records it is seen that on 19.1.2001, IA-14 originally was ordered to be considered alongwith merits but on 12.2.2002 this IA-14 was taken up separately and it was heard and order was passed on 19.3.2002. Counsel for the appellant Bank submitted that after having posted IA-14 to be heard on merits of 19.1.2001 that IA was taken up suo motu separately on 12.2.2002 and it was heard and order was passed. Counsel for the respondents submitted that nothing prevented the PO, DRT from taking up the IA separately and order being passed on that. IA-14 was taken up separately and PO, DRT has passed order on that IA. But from the submission made by the Counsel for the applicant Bank it has to be proved how the Bank released the personal guarantee of the 2nd defendant and the relevant documents for that have to be produced. Without conducting a detailed enquiry and letting in oral evidence in that aspect the order in the IA was passed. Of course, the PO, DRT is empowered to pass order separately in the IA. But all the relevant facts and materials have to be taken into consideration before passing order in that IA, When the applicant vehemently has contended and filed objections in that IA stating that there was no communication made by the branch or by any authority to release the 2nd defendant of the personal guarantee and the contention of the 2nd defendant that fresh documents were taken from the 1 st defendant and his liability were extinguished is incorrect, it is for the Tribunal to go in detail with regard to the contentions and with regard to the communication between the Banks and they have to be proved by letting in oral as well as documentary evidence and also with regard to the release of the personal guarantee. When such serious objection has been raised by the applicant Bank in the objections, the Tribunal ought to have considered that application on merit after detailed enquiry along with the main application.
5. The PO, DRT, has passed the order based merely on the letter communication sent by the branch office to the regional office and from the regional office to the branch office. The Inter-office Memo by Deputy General Manager to Regional Manager reveals that the Chairman of that Company is quiet opposed to give individual guarantee for a Public Limited Company and accordingly has requested the Regional Manager to arrange to waive the condition of personal guarantee of Directors. The communication of the Regional Manager to the Branch Manager in No.11091/95 dated 20.11.1995 states that release of personal guarantee of Shri R.N. Shetty, only in regard to credit limits are sanctioned for M/s. Murudeshwara Foods and Exports Ltd., as confirmed by the Management Committee in its Resolution dated 26.9.1995. That Resolution is not filed. Of course, the letter addressed by the Regional Manager to the Branch Manager reveals with regard to the release of personal guarantee of Shri R.N. Shetty, the 2nd defendant herein. But it is not known whether the same letter was communicated to the 2nd defendant.
Counsel for the appellant Bank submits that no such release of personal guarantee was made and no communication was sent to the party and the PO, DRT has passed order merely based on the internal communication from the regional office to the branch office. It is not known whether such communication was sent to the 2nd defendant relieving him of his personal liability.
6. Counsel for the respondent-2nd defendant drew my attention to the objections filed by the 2nd defendant and submitted that in the objections raised by the 2nd defendant, the 2nd defendant has clearly set out all the details with regard to the release of personal guarantee and the communication sent to the 2nd defendant. There is no documentary proof with regard to the communication of the letter regarding release of the personal guarantee of the 2nd defendant, to the 2nd defendant. It may be that the regional office had sent letter to the branch office. But that internal communication between the two offices will not prove that the 2nd defendant was informed about that communication and he was absolved of the personal liability, If it has been proved by oral as well as documentary evidence how the release of personal guarantee was ordered by the Bank, how it came into existence and it was also communicated to the 2nd defendant and 2nd defendant was absolve of his liability of course. based on those materials the matter cannot be decided. As rightly pointed out by the Counsel for the appellant Bank there is no documentary proof filed with regard to the passing of the Resolution and the release of the personal guarantee of the 2nd defendant and it was also communicated to the 2nd defendant. In the absence of any such proof it will be very difficult to sustain the case of the 2nd defendant with regard to release of his personal guarantee merely based on the internal communication of the Bank from the regional office to the branch office. All these things can be decided only after letting in oral as well as documentary evidence.
With regard to how these documents came into existence and how D-2 was discharged of his liability, all these things can be gone into only after an elaborate enquiry by letting in oral as well as documentary evidence. When the applicant Bank has seriously objected with regard to the release of personal guarantee of the 2nd defendant and has also filed objections to that effect, the PO, DRT ought to have gone into in detail and should pass order only after full trial in the main OA after giving opportunity to both the parties to let in oral as well as documentary evidence. When the Bank seriously disputes with regard to the internal communication between the regional office and the branch office with regard to release of personal guarantee of the 2nd defendant, it is just and appropriate that the matter has to be heard in detail after giving opportunity to both the parties to let in evidence in that aspect. No documents with regard to requesting the Bank to release the 2nd defendant's personal guarantee and further action taken on that and order passed on that and sent to 2nd defendant, has been filed to have proper adjudication in this IA.7. For the foregoing discussions, I find that the order passed by the PO, DRT, is liable to be set aside and this IA-14 has to be heard alongwith the main OA and order to be passed after elaborate enquiry by giving opportunity to both the parties by letting in oral as well as documentary evidence.
8. Appeal allowed with the above said observations. Order passed by the PO, DRT. Bangalore, is set aside and PO, DRT, Bangalore, is directed to dispose of the main OA along with this I A-14 within a period of six months. No costs.