ORDER
K. Gnanaprakasam, J. (Chairperson)
1. The applicant Bank in the OA-22/ 1999 before DRT, Hyderabad, is the appellant herein. At the time of filing the OA, there were only three respondents. The applicant Bank filed the OA for recovery of a sum of Rs. 1,75,57,076.29 p. from the defendants together with interest and costs as prayed for. During the pendency of the OA, 3rd defendant namely R.S.N. Raju, filed an application praying to strike off his name as the 3rd defendant from the OA and also discharge him from the liability and add one B. Sitaramaiah, Managing Director of the 1st respondent company, and the said application was taken up for consideration by the DRT on 6.3.1996 and passed order, “Applicant filed affidavit with documents, Mr. B.V.R. has filed an application to implead one Sri B. Sitaramaiah as party. Applicant has no objection to implead Shri B. Sitaramaiah as defendant. Issue SS to him. Amendment made.” Pursuant to the said proceedings, B. Sitaramaiah was added as 4th respondent in the OA and all the respondents took up the trial. The DRT ultimately allowed the OA against defendants 1, 2 and 4 jointly and severally and discharged defendant No. 3.
2. Admittedly, the appellant Bank filed the OA only against three defendants and at the instance of the 3rd defendant, on his filing an application to implead B. Sitaramaiah and as per the proceedings dated 6.3.1996, B. Sitaramaiah was impleaded as the 4th respondent. It is so unfortunate that Bank has not given any reason in the OA for not having impleaded him originally nor has given any reason to make the 4th respondent as a party except the fact that the DRT by its proceedings dated 6.3.1996, passed certain orders. It is the contention of the learned Advocate for the appellant that though on the application filed by the 3rd respondent, 4th respondent was ordered to be impleaded, there was no order to strike off the 3rd respondent from the OA and as such the 3rd respondent is also equally liable along with other respondents and the reason given by the DRT to discharge the 3rd respondent from the liability is not valid and proper. Admittedly, the 3rd respondent was a Director on the relevant dates when the documents were executed in favour of the appellant Bank at the time of obtaining the loan. The loan was sanctioned on 17.1.1990 and D2 and D3 have executed personal guarantee on 12.4.1991 and they were also renewed on 5.1.1993 and the OA was filed in the year 1995. According to the appellant, though the 4th respondent was added on the application of the 3rd respondent, there is no order to discharge the 3rd respondent and, therefore, he is also equally liable to answer the claim of the appellant.
3. On the contrary, the learned Advocate appearing for the 3rd respondent would contend that there was an internal arrangement between the respondents 3 and 4, by which it was agreed that the 3rd respondent should be discharged from the liability and the 4th respondent namely, B. Sitaramaiah is answerable to the claim of the Bank. That only on the ground, the 3rd respondent has filed the petition and according to him, his petition was ordered as prayed for thereby meaning that his application to strike him off from the rank of the 3rd respondent and to implead the 4th respondent was allowed as prayed for.
Therefore, it is argued that the order passed by the DRT does not suffer from any infirmity and thereby argued in support of the order passed by the DRT. The learned Advocate for the respondents 2 and 4 has submitted that the 4th respondent is no doubt a Managing Director of the 1st defendant Company, but he had not executed any personal guarantee in favour of the Bank and, therefore, he is not personally liable to the appellant Bank. But, however, the guarantee executed by the 2nd respondent in favour of the appellant Bank is not in dispute.
4. After hearing the learned Advocates for all the parties, it is made out that originally the appellant Bank filed the OA only against three respondents and at the instance of the 3rd respondent, the 4th respondent was impleaded. The main attack of the learned Advocate for the 3rd respondent is that when his application to strike him off from the OA and to implead the 4th respondent was allowed, from that moment, he was no more liable and the order passed by the DRT is well in order. Now, we have to consider how far the said argument could be accepted. It is no doubt true that the 3rd respondent filed an application and at his instance, the 4th respondent was impleaded as a party to the OA. But at the same time, the fact that the 3rd respondent stood as a guarantor and he executed necessary documents in favour of the appellant Bank are not in dispute. The said guarantee is also a continuing guarantee as set forth in Section 129 of the Indian Contract Act, 1872. Continuing guarantee is no doubt not perpetual and permanent and it is subject to revocation as contemplated under Section 130 of the Contract Act which states, “A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor.” Now, let us see whether the 3rd respondent has complied with the necessary ingredients of the section. There is nothing on record to show that the 3rd respondent had revoked the guarantee executed by him and in the absence of the same, it is very difficult to accept the arguments advanced on behalf of the 3rd respondent i.e. the guarantee got revoked by filing an application to implead the 4th respondent. Continuing guarantee can be revoked only in a manner known to law, as more specifically set out under Section 130 of the Contract Act, which is not done by the 3rd respondent. As such, I am unable to accept the arguments advanced on behalf of the 3rd respondent that he is not liable from the moment when he filed an application to substitute the 4th respondent. There is also one more reason to support my above said observation, that the 3rd respondent continuously taking part in the proceedings and also gone to the extent of cross-examining the witnesses examined on behalf of the applicant and the respondent and when once the 3rd respondent was alive to the situation and has been taking active part in the proceedings of the OA, he cannot be heard to say that he was discharged by the proceedings of the DRT dated 6.3.1996. The observation of the DRT otherwise is not proper and the DRT has misunderstood the proceedings dated 6.3.1996, which resulted in discharging the 3rd respondent, which according to me is not correct. One more contention that has been raised by the 3rd respondent is that as there is an internal arrangement between respondents 3 and 4, the 4th respondent alone is liable and the 3rd respondent should be discharged. There may or may not be any internal arrangement between respondents 3 and 4, and how it will bind the appellant Bank is not made out. As a matter of fact, it is on record that the arrangement said to have been arrived at between the respondents 3 and 4 was not informed to the Bank also. When that be so, I am unable to agree the argument advanced on behalf of the 3rd respondent that the very fact that the Bank has chosen to implead the 4th respondent was added on the application of the 3rd respondent would not tantamount to discharge of the 3rd respondent, which is very much lacking in the sense. In the said circumstances, I hold that the order passed by the DRT discharging the 3rd respondent is vitiated and the same is liable to be set aside and it is set aside.
5. The learned Advocate for respondents 3 and 4 mainly argued that on the application filed by the 3rd respondent, though the DRT had also issued summons, no summons were issued upon them. It is further submitted that without issuing notice and without affording an opportunity to respondents 3 and 4, the order was passed and, therefore, it is not valid and binding on them. No doubt, if any order is passed against a party without notice, it is not proper. But the proceedings dated 6.3.1996 reveals summons have been ordered and it is not made out whether summons were served upon the 4th respondent or not. But the fact remains that on the impleadment of the 4th respondent, he had challenged the said order before the DRAT at Mumbai in Appeal No. 20/1996 and the said Appeal came to be dismissed by order dated 9.8.1996. But, however, the 4th defendant was given an opportunity to file reply on or before a particular date before the DRT at Bangalore, which had the jurisdiction over the matter at that point of time. In the wake of that situation, it cannot be contended by the 4th respondent that he was not given an opportunity to resist the OA. That apart, it is seen that respondents 2 and 4 had also taken active part in the day-today proceedings before the DRT in cross-examining the witnesses and in the said circumstances, I fail to understand how respondents 2 and 4 can say that they were not given any opportunity before the DRT.
6. As I have already observed that all the parties concerned in the OA were given fair and reasonable opportunity to defend their respective cases, it cannot at all be stated that the respondents were handicapped from defending the OA. As I have already held that there is no specific order discharging the 3rd respondent, I come to the conclusion that the 3rd respondent is also liable to answer the claim of the OA.
7. In the result, the Appeal is allowed against the respondent No. 3 also, and the remaining part of the order dated 25.2.2003 of the DRT, Hyderabad, is confirmed.