Surinder Sarup, J.
1. The Himachal Pradesh State Industrial Development Corporation Ltd., hereinafter to be called 'the plaintiff-Corporation', has filed the present suit for recovery of Rs. 23,77,049.55 along with interest, costs, etc., against defendants Nos. 1 to 3. It may be stated here that the Himachal Pradesh Financial Corporation has also been impleaded as proforma defendant No. 4 in the suit.
2. The suit has been filed by the plaintiff-Corporation through its managing director, one Shri Yogesh Khanna at the relevant time, being also the principal officer, stated to be competent to file the suit on its behalf.
3. The facts, as pleaded, giving rise to the cause of action are that defendant No. 1 through its directors, i.e., defendants Nos. 2 and 3, applied to the plaintiff-Corporation for the grant of term loan of Rs. 21.49 lakhs for the construction of the factory building, purchase of land and plant and machinery, for setting up an industrial unit for the manufacture of intravenous fluids at Parwanoo, District Solan. The loan was sanctioned in favour of defendant No. 1 by the plaintiff-Corporation on March 24, 1984, and October 10, 1985, as a result of which amounts of Rs. 14.74 lakhs and Rs. 6.75 lakhs respectively were paid to the defendants from August 19, 1985, to June 4, 1986, in instalments. That loan was to be repaid with interest at the rate of 15 1/2 per cent, per annum with a rebate of 3 per cent, for timely payments.
4. It has been pleaded that for securing the repayment of the above-mentioned loan and interest thereon, the defendants executed loan documents dated July 30, 1985, and November 22, 1985, hypothecation agreement dated July 30, 1985, and November 22, 1985. Besides this, the defendants created equitable mortgage by deposit of title deeds with proforma defendant No. 4. In addition, defendants Nos. 2 and 3 also executed deeds of guarantee on July 30, 1985, and November 22, 1985, in favour of the plaintiff-Corporation for repayment of the principal amount, interest thereon and other monies found due from defendant No. 1 in connection with the said loan.
5. It has been pleaded that as per the terms and conditions incorporated in the loan documents, the principal, together with the agreed interest, was to be paid in half-yearly instalments, the first instalment commencing from August 10, 1985, and the last instalment being payable on or before September 10, 1992. According to the plaintiff, the defendants failed to comply with the terms and conditions aforementioned and failed to pay instalments of principal amount and interest thereon in accordance with the repayment schedule, thereby the entire outstanding amount became repayable at once. A notice asking the defendants to pay the entire outstanding amount of loan plus interest was given on July 26, 1988, asking them to pay the same within 30 days from the said notice, but to no avail.
6. The further case of the plaintiff-Corporation is that the industrial unit belonging to the defendants was financed by the plaintiff-Corporation jointly by it and the HPFC, proforma defendant No. 4, which sanctioned and disbursed financial assistance to them. They were thus in default in payment of the loan advanced by the HPFC, therefore, the HPFC in exercise of powers vested in it under Section 29 of the State Financial Corporations Act, 1951, issued a takeover notice on November 26, 1988, and subsequently possession of the mortgaged/hypothecated assets was taken over by the HPFC on December 30, 1988. Thereafter, the assets of the industrial concern were sold by the HPFC for Rs. 44 lakhs to M/s. Naunidh Nectors India (P.) Ltd., through its director, Shri J.P.S. Bhuller.
7. It has been stated in para. 8 of the plaint that after adjustment of the sale proceeds received in proportion to the term loans advanced by the plaintiff-Corporation and the HPFC, there still remained a shortfall to the tune of Rs. 20,53,729 due from defendants Nos. 1 to 3 to the plaintiff-Corporation, who were thus jointly and severally liable, being the principal debtors. They were asked to pay the said amount, including the interest up to September 10, 1991, vide legal notice dated January 14, 1992/April 24, 1992, within one month from the receipt of that notice, which was acknowledged by defendant No. 2 on May 8, 1992, as is evident from his letter. Despite the said period having expired, and nothing having been paid, it has given rise to the filing of the suit.
8. In para. 9 of the plaint it has been stated that after the adjustment of the said amount of sale proceeds the balance outstanding amount has now arisen to Rs. 23,77,049.55 as on July 31, 1992, including interest up to that date, which is due from and payable by the defendants. They are additionally to pay interest at the agreed rate of 15.5 per cent, per annum with half yearly rests and other miscellaneous expenses from July 31, 1992, till realisation of the entire amount.
9. In para. 10 of the plaint it has been stated that the cause of action accrued to the plaintiff-Corporation firstly on March 24, 1984, and October 10, 1985, when the loan amount was sanctioned ; then on July 30, 1985, and November 22, 1985, when the documents were executed ; and then on March 10, 1988, when the first default in payment of instalment of principal and interest was made by the defendants ; then on subsequent dates when instalments of payments fell due and were not paid. According to the plaintiff's case the entire amount became payable at once and then on July 26, 1988, on which date the defendants were called upon to pay the entire amount and thereafter on December 30, 1988, when possession of the mortgaged/hypothecated assets was taken and then on September 17, 1991, when the assets were sold and then on January 10, 1992, when Rs. 3,68,436 were paid to the plaintiff by pro-forma defendant No. 4 after adjusting its loan from the sale proceeds and finally on January 14, 1992/April 24, 1992, when defendants Nos. 2 and 3 were asked to pay the balance amount, but they failed to pay the same ; and on each day thereafter, hence the suit for a decree of Rs. 23,77,049.55, together with costs of suit and interest at the contractual rate of 15 1/2 per cent. per annum against defendants Nos. 1 to 3 jointly and severally.
10. In the written statement filed jointly on behalf of defendants Nos. 2 and 3, who are father and son respectively, it has been stated that the suit is bad for non-joinder of necessary parties. This objection has been taken on the ground that with the knowledge and consent of the plaintiff-Corporation defendant No. 4 and other financial institutions, being promoters of M/s. Manson (India) Pvt. Ltd., transferred their shares to M/s. Goverdhan Dass, Bhajan Lal and Ramesh Kumar in January, 1987. Thus, the shares of defendants Nos. 2 and 3 were transferred and the change of management was approved by the board of directors in the meetings held on January 23, 29, 1987. This arrangement was subsequently approved by an extraordinary general meeting held after due notice. After this approval, intimation was given to the HPFC and the plaintiff-Corporation on March 2, 1987. According to the defendants, the management had been taken over by the new directors of the company, namely, Bhajan Lal and Ramesh Kumar who gave their personal guarantees and the factum of transfer was accepted by the HPFC and the plaintiff-Corporation. Fresh documents were executed in this behalf resulting in novation of contract. It is the case of the defendants in their written statement that in this manner they were absolved of their guarantees and liabilities in respect of the documents executed with the plaintiff-Corporation and the HPFC. As regards this objection of the defendants in the written statement, it has been pleaded that in fact the suit ought to have been filed against Bhajan Lal and Ramesh Kumar aforementioned who are liable to pay the amount, and are thus necessary parties in the case.
11. It has been pleaded in the written statement that the plaintiff-Corporation is estopped from filing the suit on account of their acts, deeds, conduct, acquiescence and waiver against the defendants who were absolved from their liability, as explained above.
12. The third objection taken in the written statement to the suit is that defendant No. 1 has been wrongly sued through defendant No. 2, Major General K.S. Bajwa as managing director, when to the knowledge of the plaintiff-Corporation, he is no more the managing director nor has any shares in the company after Bhajan Lal aforementioned became its managing director. The nominee director of the plaintiff-Corporation had been attending meetings with the new management and had also inspected the factory during the year 1987-88 onwards, thus accepting the changed position.
13. The next objection which has been taken in the written statement is that in view of the above circumstances explained in respect of the above three objections in the written statement, the plaintiff-Corporation allowed the property of defendant No. 1 to dissipate and thus it lost, it also allowed the securities to be sold at a very low price. As such, the defendants, as original guarantors, though had been discharged of their liability, because of the change in the management, stood discharged of their liability due to the above acts of the plaintiff-Corporation,
14. On the merits, the case of the plaintiff-Corporation regarding sanction of loan and the terms and conditions of the loan documents has not been denied in the written statement, except to the extent that penal interest was not payable and cannot be awarded. As regards the alleged notice referred to in the plaint, the same has been denied in the written statement by submitting that no such notice dated July 26, 1988, was served on the defendants. On the merits of the case, the defendants in the written statement have reiterated their stand that they stood absolved of their liabilities, when, with the knowledge and consent of the plaintiff-Corporation and the HPFC and the other financial institutions, the promoters' shares were purchased by Bhajan Lal, Ramesh Kumar and Goverdhan Dass. In this manner it has been denied that a sum of Rs. 20,53,729 is due from them.
15. In para. 10 of the written statement it has been submitted that the suit against the defendants is barred by limitation inasmuch as the personal liability of the defendants ceased with the change of the liability and the execution of the fresh documents and repayment schedule. It has been stated that the defendants did not sign any document or confirm balances or admit their liability or make any payments after they had transferred their shares and ceased to be the directors of the company. They had been repudiating their alleged liability since March, 1987. On these pleaded grounds also the suit is stated to be barred by limitation against the defendants.
16. In the rejoinder filed by the plaintiff-Corporation to the written statement of defendants Nos. 2 and 3, it has been stated that the defendants suo motu effected changes in the management of their company, without obtaining prior written consent of the plaintiff-Corporation before effecting such changes in the constitution of defendant No. 1-company. It has, however, been admitted that on the representation made by the defendants, their proposal for change of management was considered by the plaintiff-Corporation and the same was approved subject to the compliance with the following conditions :
'(a) That the new group of promoters would purchase the entire shareholding of the outgoing promoters for their nomination ;
(b) The new promoters would execute all guarantees and undertakings and will comply with the other requirements of the financial institutions ;
(c) The company would also comply with the various requirements of the Companies Act, State Government etc. ; and
(d) The company would clear all the defaults of HPSIDC Limited.'
17. According to the stand of the plaintiff-Corporation in the rejoinder, the defendants did not get executed personal guarantees and other documents from incoming directors, the transfer of shares effected by them was thus in violation of the loan agreement, hence the suit against the defendants is maintainable. On the merits of the case the contentions raised in the written statement have been controverted and those pleaded in the plaint have been reiterated in the rejoinder :
On the pleadings of the parties the following issues have been framed :
(1) Whether the suit against defendants Nos. 2 and 3 is within limitation OPP
(2) Whether defendants Nos. 2 and 3 were absolved of their liability, as there being novation of contract in view of the change of management with the approval of the plaintiff OPD 2 and 3.
(3) Whether the suit is bad for non-joinder of necessary parties OPD 2 and 3.
(4) Whether the plaintiff is estopped from filing the suit on account of its acts, deeds, conduct, acquiescence and waiver against defendants Nos. 2 and 3 OPD 2 and 3.
(5) Whether the plaintiff has no cause of action to file the suit against defendants Nos. 2 and 3 OPD 2 and 3.
(6) To what rate of interest the plaintiff is entitled OPP.
(7) To what amount the plaintiff is entitled and from which of the defendants OPP
(8) Relief.
18. Learned counsel for the parties have been heard at length and the evidence led by them during the trial of the suit, both oral and documentary, have been perused in depth. The findings issuewise are as under :
Issue No. 1 : The onus of this issue is on the plaintiff. Now it is to be seen whether this onus has been discharged, within the legal parameters. As already indicated above, contents of para. 10 of the plaint relate to the point of limitation wherein starting from March 24, 1984, various dates have been mentioned as giving continued cause of action to the plaintiff to recover the amount alleged to be due from defendants Nos. 1 to 3. In so far as the evidence is concerned, P.W.-l, Shri Yogesh Khanna has not said a word about it P.W.-2, Pawan Kumar Bali has not stated anything about the suit being within limitation. Similarly, there is nothing in the statement of P.W.-3, Shri M.K. Chaudhuri about the question of limitation.
19. On the other hand on behalf of the contesting defendants, their counsel has vehemently argued that, admittedly, the loan was sanctioned and was availed of in the year 1985, Further, the case of the parties is that the amount was repayable in instalments as per the repayment schedule. In para. 6 of the plaint it has been averred that the defendants failed to adhere to the repayment schedule, while in para. 10 it has been stated that on the denial of payment in instalments towards principal and interest the entire amount became payable at once. The crucial and relevant date in this context, as per the averments contained in para. 10 of the plaint, is March 10, 1988, when, according to the plaintiff, the first default in payment of instalment of principal and interest was made by the defendants. In other words, the entire suit amount became payable at once on the said date of default, i.e., March 10, 1988. It necessarily follows that the suit ought to have been filed on or before March 9, 1991, but, in fact, it has been filed on September 17, 1992, thus, it was apparently time-barred. In this view of the matter, it was incumbent upon the plaintiff-Corporation to have complied with the provisions of Order 7, rule 6 of the Civil Procedure Code and to have stated the grounds of exemption from limitation, in order not only to plead but prove the same. Proceeding on this premise article 37 of the Limitation Act, 1963, straightaway comes into play, according to which the period of limitation is three years in respect of a suit relating to contract on the basis of a promissory note or bond payable by instalments, which provide that if default be made in payment of one or more instalments, the whole shall be due. It, admittedly, is the case here. As per article 37 the time from which the period begins to run is when the default is made, unless where the payee or obligee waives the benefit of the provision and then when fresh default is made in respect of which there is no such waiver.
20. An additional ground making the suit barred by limitation is that in view of the averments made in para. 10 of the plaint that the defendants were called upon to pay the entire amount on July 26, 1988, from that date also the suit ought to have been filed on or before July 25, 1991, the same having been filed in September, 1992, it becomes time-barred.
21. A perusal of the photostat copy of deeds of guarantee, i.e., exhibit D.W.-2/ P-14 and exhibit D.W.2/P-15 (the original of which are exhibit P.W.-2/4 and exhibit P.W.-2/5 respectively) dated July 30, 1985, and November 22, 1985, shows that it has been stipulated in Clause (i) of the same that the entire amount becomes payable at once on the default in payment of the first instalment. Further, this fact is borne from the contents of Clause (viii) 5 of exhibit D.W.-2/P-10 and exhibit D.W.-2/P-12 (being photostat copies of the loan agreement dated July 30, 1985, and November 22, 1985), the originals of which are exhibit P.W.-2/1 and exhibit P.W.-2/2.
22. P.W.-2, Shri P.K. Ball in his cross-examination has stated that he is not aware whether defendants Nos. 2 and 3 have not acknowledged any liability after March, 1987. This statement of the plaintiff-Corporation's own witness, who was very much associated with the execution of the loan documents and who deposed in his capacity as deputy manager of the plaintiff-Corporation, also strengthens the arguments raised on behalf of the contesting defendants that the suit is barred by limitation.
23. Learned counsel for the contesting defendants has placed reliance on a decision by a Division Bench of this court in the case of H.P. Financial Corporation v. Tek Chand (Civil Suits No. 72 of 1982 and 11 of 1985 decided on November 21, 1996) wherein it has been held that when the personal remedy on the mortgage debt is lost but the remedy against the mortgaged property survives, plaintiff-Corporation in that case can realise the mortgage debt by sale of the mortgaged property under Section 29 of the State Financial Corporations Act, 1951, and in case out of the realisation of the sale proceeds it is found that they are not sufficient to cover the whole claim, the right of the plaintiff to obtain a personal decree for the recovery of the balance outstanding dues after the expiry of three years from the date of breach of covenant contained in the mortgage deed shall become barred. There is force in the submission of learned counsel for the contesting defendants that this decision by a Division Bench of this court fully applies to the facts of the instant case. This is so because, as per the own case of the plaintiff as pleaded in para. 7 of the plaint, the HPFC in exercise of powers vested in it under Section 29 of the State Financial Corporations Act, 1951, issued a take-over notice on November 26, 1988, and subsequently the possession of the mortgaged/hypothecated assets was taken over by it. Thereafter, the assets were sold for Rs. 44 lakhs. In other words, having invoked Section 29 of the said Act, and having realized amount of Rs. 44 lakhs, as per its own case, by sale of the unit mortgaged/hypothecated by the contesting defendants in the present case, the claim of the plaintiff-Corporation as regards the shortfall in the amount due to it from the contesting defendants in the present case, would be barred after a period of three years from the date of the realisation of part of the amount due.
24. An additional reason for holding the suit to be time-barred is that the change in the management of defendant No. 1-company was intimated to the plaintiff-Corporation by the defendants by their letter dated March 2, 1987, which is exhibit P.W.-2/D-12 on the record. Once the change in the management had come to the notice of the plaintiff-Corporation the cause of action arose to it to file the suit for recovery against the contesting defendants and the suit ought to have been filed on or before March 1, 1990. At the cost of repetition, it be stated that having been filed in September, 1992, it is barred by limitation.
25. Lastly, there is yet another reason in coming to the conclusion that the suit is not within limitation. This is because by notice dated March 1, 1988, sent by defendants Nos. 2 and 3 to the plaintiff-Corporation, they had repudiated their liability. This fact is evidenced from the contents of exhibit D.W.-2/9, i.e., the reply filed by counsel for the plaintiff-Corporation to the notice aforementioned sent by counsel for defendants Nos. 2 and 3. That reply vide exhibit D.W.-2/9 is dated March 21, 1988.
26. As a result of the above discussion, there is no hesitation in holding that the suit against defendants Nos. 2 and 3 is not within limitation. This issue is accordingly answered against the plaintiff and in favour of the said defendants.
Issues Nos. 2 to 5 :
27. All these issues are interconnected and are thus being disposed of together. It has been submitted by learned counsel for the plaintiff-Corporation that as per Clause 5 of the loan agreement no transfer of undertaking or properties could take place at the instance of defendant No. 1, except with the prior written consent of the plaintiff-Corporation. It has further been submitted that assuming, though not admitting on behalf of the plaintiff-Corporation, any oral permission could not override the terms and conditions of the above clause. As a corollary of this submission learned counsel has gone to the extent of submitting that even otherwise, the liability of defendants Nos. 2 and 3 still remains intact in so far as the claim of the plaintiff-Corporation is concerned, in their capacity and status as guarantors of the loan. In this connection he has referred to the deeds of guarantees, vide exhibit P.W.-2/4 and exhibit P.W.-2/5. Stress has also been laid by him on the averments made in para. 3 of the plaint, the gist of which has been reproduced hereinabove.
28. On the face of it, the argument of learned counsel for the plaintiff-Corporation appears to be plausible. However, when considered in depth in the context of the pleadings and circumstances of the case as borne out from the evidence on the record, it cannot hold water.
29. It is the admitted case of the parties that the assets of the industrial concern-defendant No. 1 were taken over under Section 29 of the State Financial Corporations Act, 1951, and the same were sold for a sum of Rs. 44 lakhs. This is the plaintiff-Corporation's own case as per its pleadings and this fact has been admitted in cross-examination by P.W.-2, Shri P.K. Bali where it has been stated by him that the unit was taken over by the HPFC, and out of the sale proceeds plaintiff was paid Rs. 16.55 lakhs.
30. It is further the admitted case of the plaintiff-Corporation that the proceeds realised from the sale of the unit were appropriated by the plaintiff-Corporation and proforma defendant HPFC amongst themselves. Therefore, as rightly contended by learned counsel for the contesting defendants, by virtue of the provisions of Section 29(1) and (4) of the State Financial Corporations Act, 1951, that the money received from the sale of the industrial concern of defendant No. 1 was to be first applied towards the payment of costs, charges and expenses incurred in the matter of taking over of the industrial concern and the sale of its properties and thereafter the balance had to be applied for discharge of the debts due to the financial institutions, i.e., the plaintiff-Corporation and the HPFC in the present case. In other words, the law presupposes that before the time of taking over of the industrial concern or contemplating any action under Section 29 of the said Act, the plaintiff-Corporation and the HPFC ought to have ensured that the amount realised from the sale of the industrial concern and its properties would be far in excess of the amounts due from the defendants, and after deducting of expenses, as also the amount due, there would be some amount left over which shall be paid to the person entitled to the same. The word shall casts a mandatory duty on the financial institutions of such a contingency to ensure that the price received by them being in excess of what was due to them, and that there would be a balance/residue left over to be paid to the original owner of the industrial concern, or any other person who would be found entitled thereto, e.g., any other creditor. It necessarily follows that once the unit had been taken over under Section 29 of the said Act, no suit would lie by or against the industrial concern, except in the name of the financial corporation which had taken over the industrial concern, which in this case was, admittedly, the HPFC. In this view of the matter, there is no hesitation in holding that there plaintiff-Corporation is estopped from filing the present suit against the defendants, which if at all, could be filed only against the HPFC.
31. Now taking on the submission of learned counsel for the plaintiff-Corporation directly as referred to above, the last line of the cross-examination of P.W.-1., Shri Yogesh Khanna, is very significant. He has admitted therein that the board of directors of the HPSIDC, i.e., the plaintiff-Corporation, as such, has not taken any decision to file the present suit. If that be so, the very foundation and genesis of the present suit gets knocked out from its bottom.
32. The matter does not rest there. P.W.-2, Shri P.K. Bali in his cross-examination expressed ignorance whether the financial corporation has approved the change in the names of directors. At another portion of his cross-examination he has stated that the plaintiff-Corporation has been addressing letters to the directors of the company whether it was Bhajan Lal or Mr. Bajwa who can be either defendant No. 2 or 3. In the very next breath P.W.-2 has admitted that it is correct that letter exhibit P.W.2/D-1 was addressed to the plaintiff-Corporation by Ramesh Kumar, director, who, according to the case set up by the defendants, was one of the new directors. P.W.-2 has further stated in his cross-examination that vide resolution No. 16, dated June 2, 1988 (exhibit P.W.-2/D-5) the change in management of the defendant-company was approved by the board of directors of the plaintiff-Corporation subject to certain conditions.
33. The arguments raised on behalf of the plaintiff-Corporation by learned counsel do not find support from the documentary evidence on record which clearly establishes the fact that the plaintiff-Corporation had consistently been dealing with the new directors, i.e., Bhajan Lal and Ramesh Kumar on the change of the management of the company. This is also established from the cross-examination of P.W.-2, according to which, starting from April 28, 1987, onwards, the plaintiff-Corporation had been regularly exchanging correspondence with the new directors. One such document has already been referred to immediately hereinabove. Additionally, exhibit P.W.2/D-2, dated June 4, 1988, indicates that the plaintiff-Corporation informed that the new management had been approved by the plaintiff-Corporation although with certain conditions, significantly, that letter has not been addressed to defendants Nos. 2 and 3. Similarly, exhibit P.W.-2/D-3 is a letter dated November 17, 1988, which is again addressed by the plaintiff-Corporation to the new management. It has nowhere been shown on the record that a copy of this letter was endorsed by post or otherwise or even received by defendants Nos. 2 and 3. As per the admission made in cross-examination by P.W.-2 the plaintiff-Corporation maintains a despatch register, but he has not produced the same in court. It necessarily follows that an adverse inference must be drawn against the plaintiff-Corporation in this behalf, and it can be safely concluded that the said letter vide exhibit P.W.-2/D-3 was not posted to defendant No. 2 or 3.
34. A perusal of resolution No. 16 contained in exhibit P.W.-2/D-5, dated June 2, 1988, would show that a clear cut decision had been taken by the board of directors of the plaintiff-Corporation approving the change in the management and also for substitution of personal guarantees by S/Shri Bhajan Lal and Ramesh Kumar, new directors. The same further clearly shows that no conditions were imposed in so far as defendants Nos. 2 and 3 are concerned as they were not required to do anything. The conditions were imposed on the new promoters/directors, as indicated in resolution No. 16 ibid.
35. It can be seen from the contents of exhibit P.W.-2/D-4 that the managing director had represented to the board of directors of the plaintiff-Corporation that the promoters have cleared the previous default of the financial institutions after taking over the unit and have started production in the unit.
36. As a result of the above discussion, it is abundantly clear that the change in the management was duly approved by the plaintiff-Corporation in writing and the new directors/promoters were permitted to deal with the property of defendant No. 1 concern. Not only that, the plaintiff-Corporation should have in such circumstances got personal guarantees executed from the new directors. By trying to fasten the liability on defendants Nos. 2 and 3 it is apparent that the officials of the plaintiff-Corporation have failed to act in consonance with the decision taken by the board of directors as per the contents of exhibit P.W.-2/D-5. In other words, by trying to fasten the liability on the defendants, the concerned officials of the plaintiff-Corporation have tried to cover their own wrongs. In this context P.W.-2 in his cross-examination has categorically admitted that he is not aware whether any letter was written to the Bajwas i.e., defendants Nos. 2 and 3 and has further gone to admit that the letter was only issue to the company. In re-examination P.W.-2 has stated that he cannot give any reason why Bhajan Lal and Ramesh Kumar were permitted to operate the accounts by defendant No. 1 after Bajwa had left it. He has further stated that there is nothing on record to show as to who was operating the bank accounts.
37. To sum up, in view of the reasons aforementioned, the contents of clause 5 of the loan agreement vide exhibit D.W.-2/P-10 have been fully complied with vide resolution No. 16, dated June 2, 1988 (exhibit P.W.-2/D-5) meaning thereby that the change of management and transfer of assets of defendant No. 1 concern took place with the written consent of the plaintiff-Corporation. Thus, the argument raised by learned counsel and referred to above is wholly untenable. For the same reasons, as recorded in detail hereinabove, the plaintiff-Corporation cannot proceed to sue defendants Nos. 2 and 3 in their capacity and status as guarantors of the loan.
38. In so far as issue No. 3 is concerned, it has rightly been submitted by learned counsel for the contesting defendants that the suit is bad for non-joinder of necessary parties S/Shri Bhajan Lal and Ramesh Kumar as well as Shri Ghanshyam Dass who were admittedly the new directors/promoters and ought to have been impleaded as parties to the suit. At the cost of repetition, the contents of resolution No. 16, dated June 2, 1988, vide exhibit P.W.-2/D-5 clearly indicate that defendants Nos. 2 and 3 were released of their personal guarantees and the change in the management of defendant No. 1, was approved by the board of directors of the plaintiff-Corporation. Thereafter, it dealt with the new promoters and directors exclusively and permitted them to run the management of the industrial concern and production of the same. No further reasons are required to hold to this effect that they were necessary parties, all the more so because as a matter of fact notices have also been addressed to them. Therefore, the plaintiff-Corporation for all intents and purposes had all along treated them as the directors/promoters of defendant No. 1-concern.
39. Issue No. 5 also has to be answered in favour of the defendants inasmuch as once the unit was, admittedly, taken over under Section 29(1) of the said Act and sold under Section 29(4) thereof, a suit would only lie against the financial institution, i.e., HPFC in the present case and not against any of the present defendants as is provided in Section 29(5) of the said Act. Moreover, since the board of directors of the plaintiff-Corporation had accepted the change in management of defendant No. 1-company and had further approved that the personal guarantees given by defendants Nos. 2 and 3 be substituted by personal guarantees of the new promoters and directors (exhibit P.W.-2/D-5, resolution No. 16, dated June 2, 1988) it clearly follows that no cause of action can be said to have arisen in favour of the plaintiff-Corporation and against defendants Nos. 2 and 3.
40. The cumulative effect of the above observation leads only to the following conclusions :
(i) In so far as issue No. 2 is concerned, it is held that defendants Nos. 2 and 3 were absolved of their liability, there having been a novation of contract in view of the change of management with the approval of the plaintiff-Corporation ;
(ii) The suit is bad for non-joinder of necessary parties, i.e., the new promoters and directors, namely, Bhajan Lal and Ramesh Kumar, and issue No. 3 is decided accordingly ;
(iii) The plaintiff-Corporation is estopped from filing the suit on account of its acts, deeds, conduct, acquiescence and waiver against defendants Nos. 2 and 3, hence issue No. 4 is decided accordingly ;
(iv) The plaintiff has no cause of action to file the suit against defendants Nos. 2 and 3 and issue No. 5 is decided accordingly.
Issues Nos. 6 and 7 :
41. In view of the findings recorded under issues Nos. 1 to 5 above, these issues do not require any discussion. Both of them are accordingly answered against the plaintiff-Corporation.
Issue No. 8 :
42. In view of the cumulative findings under various issues involved above, the suit of the plaintiff-Corporation is dismissed but in the circumstances of the case the parties are left to bear their own costs.