Canara Bank Vs. Arbeit Platz (India) Pvt. Ltd. and - Court Judgment

Excerpt:
1. aggrieved against the order dated 31.1.2003 passed by the po, drt-i, chennai, in dismissing the ta as against d4 and d5 after 13.8.1990 and awarding simple pendente lite and future interest @ 10% p.a., the canara bank has come forward with the appeal ra-34/2003. the defendants 4 and 5 have preferred the appeal ra-6/2004 challenging the final order passed against them. the po, drt has found that d4 and d5 are jointly and severally liable to pay the amount due as on the date of their registration i.e. on 13.8.1990 and afterward they are not liable. the po, drt has found that d4 and d5 have resigned from the d1 company from 13.8.1990 and so they cannot be held responsible to pay the loan liability of the company which was availed after their resignation from the company.2. arguments of.....

Judgment:
1. Aggrieved against the order dated 31.1.2003 passed by the PO, DRT-I, Chennai, in dismissing the TA as against D4 and D5 after 13.8.1990 and awarding simple pendente lite and future interest @ 10% p.a., the Canara Bank has come forward with the appeal RA-34/2003. The defendants 4 and 5 have preferred the appeal RA-6/2004 challenging the final order passed against them. The PO, DRT has found that D4 and D5 are jointly and severally liable to pay the amount due as on the date of their registration i.e. on 13.8.1990 and afterward they are not liable. The PO, DRT has found that D4 and D5 have resigned from the D1 Company from 13.8.1990 and so they cannot be held responsible to pay the loan liability of the Company which was availed after their resignation from the company.

2. Arguments of the Canara Bank's Counsel already heard and the matter was again posted today for arguments on the defendants' side. No representation for the defendants. Counsel for the Bank alone present.

Order is being passed on merits.

3. Counsel for the Canara Bank pointed out that D4 and D5 have executed Continuing guarantee and as per the terms and conditions of the Continuing guarantee if the guarantors D4 and D5 want to revoke the guarantee they must follow the terms and conditions set out in the continuing guarantee and their Continuing guarantee can be revoked only as per the condition imposed therein. The terms and conditions set out in the continuing guarantee read as follows: "The liabilities of the guarantors under these presents shall be construed as joint and several. This guarantee shall be a continuing guarantee notwithstanding the death of any one or more of the guarantors and shall be binding on the representatives and the estates of the deceased guarantors until the expiry of six months after a notice in writing of revocation of the guarantee as hereinafter provided is received by the Bank." 4. The PO, DRT, has relied upon the letter of the company dated 8.11.1990 wherein it is stated that the company has accepted the resignation of D4 and D5 at the meeting of the Board of Directors held on 8.11.1990 and thereafter the other two persons Mr. S. Viswanathan and Mrs. V. Bhavani are the only Directors of that company. It has further been reiterated in the minutes of the meeting that it is resolved to accept the resignations of D4 and D5 Mr. D. Magesh and Mr.

M.B. Mohideen in pursuance of the resignations submitted by them on personal grounds on 13.8.1990 from the Additional Directorship and to relieve them of their responsibility with effect from 8.11.1990. So, The company has relied upon those resignation letters and has passed the minutes passing resolution that with effect from 13.8.1990, D4 and D5 ceased to be the Directors of the company and (hey me not liable. D4 and D5 did not send any letter to the Canara Bank with regard to the revocation of their guarantee. The Bank has sent letter dated 12.11.1996 to D4 and D5 stating that the Bank reserves its right to proceed against them for all their advances/loans granted to M/s.

Arbeit Platz India (P) Ltd., and Ist defendant company and they do not take cognizance of their resignation from the said Company and they shall treat them as Directors of the company as long as the company's liability is with them.

5. The terms and conditions set out in the guarantee document clearly indicate that the guarantors must issue a notice in writing of revocation of guarantee as provided in the conditions and is received by the Bank and the period of six months is prescribed for that: The wording in the guarantee that the "revocation of guarantee is received by the Bank", clearly indicate that the guarantors must send their revocation to the Bank in writing. Then only the guarantee will be revoked. D4 and D5 had chosen to send any revocation of guarantee to the Bank. On the other hand, they have sent letter only with regard to their resignation from the company and the company have accepted the resignation and have passed resolution. Nothing is sent to the Bank by the guarantors with regard to the revocation of guarantee. Any amount of resignation from the company by sending resignation letter to the company will not absolve the liability of D4 and D5 so long as the guarantee executed by D4 and D5 continues to be a Continuing guarantee and it will be valid until the expiry of six months after the issue of notice in writing of revocation issued by the guarantors and is received by the Bank. The terms and conditions set out in the guarantee with regard to the revocation of the guarantee were not followed by the guarantee and D4 and D5 did not revoke the guarantee as set out in the guarantee executed by them. So, any amount of resignation even though it was accepted by the Company will not absolve the liability of D4 and D5 in asmuchas the continuing guarantee executed by them in favour of the Bank continues and D4 and D5 will continue to be liable until they revoked the guarantee set put in the guarantee document. So, the finding of the PO, DRT, holding D4 and D5 not liable after 13.8.1990 is not sustainable and it is liable to be set aside and it is set aside.

As for the terms and conditions set out in the guarantee, D4 and D5 continue to be liable for the entire suit claim.

6. Counsel for the Canara Bank submitted that the Bank is also aggrieved with regard to the award of interest by the PO, DRT. The PO, DRT, has found that D1, D2, D3 and D6 are jointly and severally responsible to pay the sum till the date of filing of the TA and at 10% per annum simple pendente lite and future interest till the date of realization. The suit was decreed for Rs. 1,23,20,762.17 p. and the PO, DRT, has granted interest at 10% p.a. simple pendente lite and future interest from the date of filing of the suit till the date of realisation with costs. Counsel for the Canara Bank submits that even for this period the Bank is entitled for the contractual rate of interest.

7. The Hon'ble Supreme Court (Civil Appellate Jurisdiction) in SLP(C) No. 9298/2000 (State Bank of India v. Material Marketing Co. and Ors.) has held that Presiding Officers of the DRTs are empowered under the RDDB and FI Act, 1993 to exercise their discretion with regard to the award of rate of interest pendente lite and future interest. By exercising such discretionary power the PO, DRT has awarded interest at 10% simple pendente lite and future interest. So, there is nothing wrong in passing such order by the PO, DRT Section 19 Sub-section (20) of the RDDB and FI Act, 1993 states that the PO, DRT can pass order with regard to the payment including payment of interest in the interest of justice.

8. So, following the decision of the Apex Court, I find that the discretionary power is vested in the PO, DRT with regard to the award of interest pendente lite and future interest. I do not see any ground to interfere with the order passed by the PO, DRT-1, Chennai, with regard to the award of interest.

9. In the result, appeal RA 34/2003 is partly allowed. Appeal RA 6/2004 is dismissed.