INT?fiCHKH§COURT(M?KARNATAKA
CHKHHTBENCHATCRHBARGA
DATED THIS THE 27m DAY OF SEPTE:MB£:R,.f2Oj1.O~v-V_
PRESENT
THE HONBLE MR.JUS'F1CE.N.KiUMAi黫 A'
AND
THE HONBLE MR.JUSTI_CE SUEHASH' "
MFA No.30O9.1/2008 A_ " O'
MFA N'e_.13m 73/2O':>8;Sf'_.C1
L 'A =
MISCCVL. 153316/201-0 3: IA: /'20Os-- FOR STAY
IN MFA
SI1vLA.RAD"§¥7;' SAMPATH '
S /O VALLABE?fDAS_. A
AGED ABOUT YEZARS
R/O L~"'1.46, NiJA£_.IN~GAPPA COLONY
" « LRs..
A 1'{a)'-T'CO12Ar§ 7.S;"'SAMPATH
A /O_LA"1jE SHARAD V. SAMPATH
AGEI) YEARS
OCC::BUS1NESS
A .-E;/O"NIJAI.INGAPPA COLONY
V._R'A1CHUR
" W) PRAGNESH SSAMPATH
S /O LATE SHARAD V. SAMPATH
AGED 40 YEARS
OCC: BUSINESS
R/O NIJALINGAPPA COLONY
RA_ICHUR
i{//
'NJ
ANUSUYA S. SAMPATH
W/O LATE SHARAD V. SAMPATH
AGED AEOIIT 68 YEARS
OCC; SIISINESS
R/O NIJALINGAPPA COLONY
RMCHUR
3. RAJANIKANTH P. TOPPRANI
S/O PARAMANAND
AGE: MAJOR
OCC: BUSINESS I .
R/O NIJALINGAPPA COLONY
RAICHUR .
DEAD BY LRs.,
3(1) RAMABAI~IEN_ I I
W/O LA"I*E IA» III _ *'IKANT}:I TOPPRANI
AGE:
R/0.12., IvIA';;IAI.A,'<IvII' TE'MPI;.E STREET
BIIUEAEI-IAI"EES;AIA;*--ABOI\/IEAY
3&1) KR'£SHNAI?.AJ« 'A M
S /O' LATE I"{AJANIK"A_N'TH TOPPRANI
AGE: 40 * "
Ia/O, I2, 1'viA_IfiALAXMI TEMPLE STREET
..' f:3~H_U_LABHAI DESAI, BOMBAY APPELLANTS
' I. :'C{I§y*1I'Sz§i: SHIVAKUMAR KALLOOR, ADV.,)
'AIIARNATAKA STATE FINANCIAL COIRPORATION
= HAVING 'ITS HEAD OFFICE AT No.25
'M.Q.ROAD, BANGALORE
IOj;R,EPRESENTED BY ITS MANAGER
" (LEGAL RECOVERY} RESPONIDENT
{By Sri ASHOK S KINAGI, AD'./'.,)
VI
FINANCIAL
3
MFA FILED UNDER SECTION 32(9) OF STATE
CODE PRAYING TO SET ASIDE_ THE
JUDGMENT AND ORDER OATEO 26.7.2008 PASSED
BY THE PRL. DISTRICT JUDGE. RAICHUR 1N._'C;'wr_rL
MISC. No.30/1993. E
IN MFA No.30173/2008:
BETWEEN
I.
JAYANTH V SAMPATH
S/O.VALLABHADAS
AGE: 54 YEARS
OCC:BUs1NESS ,
R/O.L- 143, NIJALI"N_GAPP§' YCQLONY
RAICHUR V "
W/O. V V Y
AGE: 33 YEARS C
OCC':'EvBU:'3INE:£3'S
R}iO.:_,Y143*;..N1JAL:NCAPpA COLONY
RAICHUR Y _
'V
, S/ O; VALLABHADAS
_ V-.CAG;?:3: 35% YEARS'"'
' V. 4' 'OC,C:Y.BUS.INESS
A " Y.r, BANGALORE
REPRESENTED BY ITS MANAGER
(LEGAL RECOVERY] RESPQNE_IEN.T
(By Sri ASHOK S KJNAGI, AD\;,f' A
MFA FILED UNDER SECTI»O--N¢ NOE GVSTATE A
EINANCLAL CODE PRAYING A.SI.D'E'Iw--LTHE
JUDGMENT AND ORDER DATED *:26.'?.20_O8.PAE3_S'ED,
BY THE PRL. DISTRICT J'U.QGE,'A.RAECH'{;JR.;vI.NWC;IVIL._*
MISC. No.30/1993.
MISCCVL. 153316120 I.VAO""FI.LED.._UNDER SECTION
5 OF THE LIMITATION' ACT TO CONDONE
THE DELAY OF 16 DAYS*I5N _...PRF;FEERRING THE
APPEAL. V. *
IA4I'/2Oof:3 F"fLED'».V'UNDERV ORDER 41 RULE 5
PRAYING TO' EAGPASS ._I1'JTERIM ORDER THEREEY
STAYING QPERATION*- AND EXECUTION OF THE
JUDGIVIENT DATED»',"2~6.?.2008 PASSED BY THE
PRLDISTRICT JUDGE OF RAICHUR IN
CIVL-L.M1SC.30/._1993,V DURING THE PENDENCY OF
* THE MFA." """
MISC.CVL.153316/2010 3: IA-
I/2QO8,,-COMING ON FOR FINAL HEARING THIS DAY.
U J., IDELIVERED THE FOLLOWING:
JUDGMENT
§VIiSCICV1.}53316/2010 in MFA NO30173/2008 is
fiieci to the delay Of 16 days in preI13r’riI1gg tI1i.S
E’:1ppE’;’.£:fi. AppI_iCatiOI1 I101. Opposed. Acoepiilhg the ciause
6
gtinning unit”; and additional loan of ?’5.6 lakhs was also
sanctioned on 7.3.1984, as a guarantee for the
repayment of the said loans, the Company exetiuted the
necessary agreement and also executed
in favour of Corporation. At the request
respondents No.1 to “7 gave their for-
repayment of the said loan and
dated 31.3.1984. The oeea,,§r.,,guafantee,,lexét§;it’ec1’i:is all
continuing deed of gu-arantee”‘tor’–al}»,.an1oun’ts advanced
including the interim ‘amounts to be
advanced by.-lthe toij’ the Company.
Corporation Ad’e.manded._seyerail times the amount due by
the Company, notices ,_\yereVissued. lnspite of the same,
Co11:pai’:y i”ai’ied”toV’ pay the amount. Corporation
power under Section 29 of S.F.C.Act has
of Company. Ultimately, the assets
.jree.oyered. on 21.10.1992. The said amount. was not
.’ sL.1lftiCfient. to satisfy the Claim of the Corporation. The
~ “Corporation issued a iiotice on 20.10.1992 invcikixig the
of the o,¢%np’5,11y were sold and a sum of ‘(’17 lakhs was
personal gua.ra11t:ee of respo1’1de.n_t.s l to 7 calling upon
them to pay a sum of ?46,tiO,655.25 paise as the
LL,/’
7
arno1.111t due as on 20.9.1992 with interest at 15% pa.
compounded at quart.erl_V rests till the date of
realisation. The said notice was served on someof the
respondents and some of the respondents hafvefi”‘eift:i.gie.d.
Before that, respondents I to 3 had
0.S.No.48/1986 on the file
which is re-numbered as
Civil Judge [Jr.Dr1] for a it
deed dated 31.3.1984: “Cor}poration
is Contesting the still pending.
When F€SpOI1_d.63r1t’S No.1,’ tjomake payment
inspite, of -Way of a legal notice, the
Corporation was to file the petition under
Se(:tii)ii Slfiiéaafiof State Financial Corporation Act, for
e1’1Vforee_n1Aei1tA”o.f the liability on respondents / sureties. In
A . zlppeared t.hro1,:gh their Advocate. Respondents No.4 to
“also appeared through their Advocate. However. it is
resporident No.2 has filed detailed St£11L€1’11€3T1’£ of
objections by (::(mt:est’.i.n.g the claim. some have filed
notice, respondents No.1 to 3
sta.iem.ent of ohjedions. some others adopti1’1g the said
Si”aiEEIIiel}i.. by reii.e::_’ai:.ir’1g whai.. has been said in the said
8
st.at:ement. They have raised the several ctontentions in
the said stat.ernent denying the claim. They contended
the deed of guarantee become enforceable, the moment
there is a default in making the payments'”by-«._.t*he
principai debtors. Therefore. the petition.-uhtiiedyjitn’theM’
year 1993 is cleariy barred by: “th–e_1a%.iv
Notice dated 20.10.1992 eannotibe
computing the iimitation.Vt”3eeo\nd1y, V_1’t’w:as dc:-ointendediii
Section 31(1.)[aa] of th–ezSFCi. ._introdu’cedV: into the
Act by Act No.43 of execution of
guarantee deyediiyjdated the said
provisions . ap_fi}ioa–b1e to them. if at 2111, the
Corporation iwan.ts””to the money, it is by way of
a sepaiate everi otherwise. suit is not fiied within 3
the date of said amendment. Therefore, on
the suit is barred by law of iimitation.
‘denied the amount. claimed. T hey contended
is sold behind their back and without:
. riotiee to them for the paltry sum, whereas the market
‘”V’al11e of the property aroimd ?’5O lakhs. Thus_. they
have been put to great loss. ‘1’heref()re. they sought for
dismissal of the ap_pI.ieatio1’1.
4. The District Court: on the basis of the
aforesaid pleadings framed the foilowing two for
consideration:~
enforce the Ziab»il»i£y’ f or;'”*.§i’ii€-j’,
resp0ndents/sureiies: ‘/or Ai.h”e._ }:imoLJ;:t’t.___
ciaimed in the pei”if,oiof:__ i “re£:;uiI’ed ‘
under Section; _31[I’j{aa;’ q,;f7* 1Sic_1te
Financial C0rpora_iio.Jji Act; I__95.l_?’, V’ V i
(1) Whether the appeliamfs are
{2} ‘/Vhai’ order?
5. The AV_CorpoAr217t:’i_on of its claim
examined Basavaraj &
and produced 17
docunieritsii as Exs P1 to P17′. On
behalf ofufihe one Rakesh Sampath was
e’*am’ined as R’.Tf.V1vanci no documents were produced.
District Judge on appreciation of
the Vaiforesaid; ‘oral and documentary evidence on record
‘and also taking into consideration the Various
of the Apex Court as well a.s our High Court
on by the parties held i:hai:_. the suit: is in time, the
(‘application in time and it is not barred. The cause of
action in so far as the ;,§;1.:a1*a1’it,(‘3rs are (.T()1’}C(:’I’I1€CI arise
12
towards principal and the entire Claim is regarding
interest and therefore it was ()O1′}i€}’1d(;’.d the statement of
accounts produced in the case do not reflect’ the ‘C<_Jrr_ect
state of affairs and the liability foisted on H
such Statement. of Accounts is illegal '»
be the basis for allowing the ap:plicatlig)_Th4.'–ll,.'i' 1.ierei1:ire_, "aria
the aforesaid grounds, the,Or.der Ibassed
Court requires to be set aside '*a:hd theiapgjlicatfioiq is to
be dismissed.
8. Per.-Qcontija, for the
C0 ora~tior.1uS’u alerted-the ir:l1″”‘1;1″”fi’1ed order.
T13’ PP, _ 5
9. ll in aforesaid facts and the
rival ;c0’i”2tent,i0’11.s,’the })0ints that arise for consideration
viii t.h’is a”p:pea”i._are as under:«
}’v4:””‘_!2i:/_liie:’ti’i.er the claim by the State F’inanc1’al
~ Corporatioii is barred by time as
coritended by the appellants?
‘{2} Whet’her the appellants are liable to pay
the an’1ounf: as claimed in the
application?’ 3
1.5
amount arose, on such idefault, both against the
principal debtor as well as against the guarantors.
Therefore, for the purpose of eom_p1.:iat.ionH
Limitation. that date which has to be _
consideration and not the date of seconci-»..n:otiC–e: datedw it
20.10.1992 as per EX P10. C3ou_r:t___:I’iasl
taken 20.10.1992 as the starting
so far as the guarantors are therefore it
requires to be set aside: __on the day. the
guarantee deedwas 1984, and as
on that d.a_,\/to Y under the Act
enabliiJ_:’v1li§’–V__ [to proceed against the
guarantlorsll before Court. Such a provision
Was’;ii1t.1’odue’e.d”oriiy in the year 1985 by way of
»am’e’1:dn1e.ntL«.._even if the said amended provision is
three years from the said date, these
21p}:i’Iieai:.i:onv:-itought: to have been filed. Admittedly, these
[applications are filed in the year 1993. Seen from any
. angle. the applications are barred by time.
12. Reliance was placed on the Judgrrierit: of ihe
Apex Court in the case of MAHARASHTRA STATE
A ‘ = .. _V ttatailityijvo}””_sureties had crystaiised t.hen.
16
FINANCIAL CORPORATION v. ASHOK KAGARWAL 8:
OTHERS reported in 2006 SAR (Civil) 399, xarhefte on
the facts of the case, the Apex Court held as p
“‘5. Article 137 of the I.iI}1iI(1._I,t’_t§)E1?;VV ._ it
applies in thefacts of the preéercttc case;
Article 13 7 is applied, the ‘:ntto,ved’
by the Appettant Corpor’a_tion on
I992for proceeding aggtaiiist ‘VtheV”sts.retiesVVft.e.
the respondents’ ~herein}W jctearlyh tfiarred
by time and the «correct in
holding so..a vTo recat-tithe’ present
case, the V ment o f the
arnoitnt against the
‘that’ ‘ M/s.V€rystat Marketing
Private ‘March, 1983 and the
applicatjon’v._tirtrier”}:’3ections 31 and 32 of the
State t4I3*tn_ar1ci-:it ACJovrporatior’r tuas filed against
v_’:”3’«thepAV’s-aid borrower on 25*” October, 1983. The
V. The amendment under Section 31 of
“t.he’W:_State Financial Corporation Act which
V ” ‘authorises the State Financiat Corporations to
–take action under Section 3] of the Act. _for
enforcing the liability again.i~’;t: the suret”ies.
was brought about in the g_.;ear 1985 by
intmditction of sub~seCtiori {aa} in Section
31(1) Qf the Act. Even after thiss’ aniendment
kw/.
_ ll: relying on these two Judgments, it was
we ::?.ontie_nded. when once a demand was made ag_§a1’nst the
“Principal Debtor, the anaount. get. cirystalised and the
.19
by the industrial concern in paying any
inst’at’lrnent or the Corporation requires the
industrial concern to make immediate
repayment of any loan under Section 30 arid.’
the industrial concern fails to make
repayment”. In the case, both these is
are specified inasrnuch as there is”‘a’
comrnitted by the industrial:iyeorlieern.2.:
Company herein, in payiny.__ the instralllrnent ”
inasmuch as paymerit«,o_j?.all
are defaulted. Secoridlyi: ‘Qorporatioiihas
called upon the ‘in_dustriali.eoncernrto make the
repayment by the year
1987’ itsyeelfg ‘eoe’n”faccording to
the pre’S§;r’iptiO’ri:ft’ylaidlmdoum under
Slectioril.l3″1..’f-t’he,rigtht– to” proceed against the
surety for liability of the surety
_ has upon- breach being: corrJnit’t’ed
lo”an’ee~~-«in paying the installment or
_vVwhen«.the___Corporation required or when the
called upon the Company to
n1al+ce_fthe payment” of the loan amount by
issuing notice in the year 1987. ”
cause of action to proceed eig,{aiI’1st the S1,1.T(‘f{‘.I’CS under
gv/,
20
the Deed of Guarantee accrues and the period of three
years has to be calculated from the said date i.e.. from
1985. the applicatiorl filed in the year 1993 is _c:_Iear1y
barred by time”
14. Per contra. learzzeti Cou_a.sejI’=,Vfor.. ‘V
Corporation relied on the Judgijner;.t.’g’o1″
in the case of
CHLANNAVEERAPPA BELEEI’ oTHEI1usi_’ reported in
AIR 2009 SC 1874i._._'”wi1ere Court held as
under» _ V
~~~~ tiabitiiy depends upon
the -. “£3-oritract. A continuing
gaarar1tee”v. from an ordinary
_ guarahtee.’ There aiso a differerice between
‘3¥:.a3_._:g:.tarariiee ——– -«which stipulates that the
liable to pay only on a demand
eifeditor. and a guarantee which does
not eoriiairsz such a condition. Further,
depending on the terms of guarantee, the
it ‘d”=,_liability of a guarantor may be limited to a
“bmt:ic’iiiar sum. Instead of the liability being
to the same extent as that of the principal
debtor. The iiabitiiy to pay rnay arise. on the
principal debtor and gi.z.aran.ior. at the same
time or at d if/E:-?rer1i points of time. A claim
21
may be even time«barred against the principal
debtor, but still ext/’orceable against the,
guarantor, The parties may agree that.
liability of a guarantor shall arise at 1-
point of ante than that of the__ T
debtor. ”
15. In View of thelaforesaiti .legal’-.po,.§itionj, ash’
enunciated by the Court and
this Court, the law onl_t}ie’ well settled
when the prii1cipal in payment
for the is made by the
creditor sai’ci”lamou11t as a rule i.e.,
startiiig_poi_i1tVof against both principal debtor
and the gi1aranto1f._ However, it is subject to
the parties. If the contract
against the guarantor before he
islea’llled_u’plo::i’ to pay the said amount, unless such a
r.§iemai1*cl “:.;’s made, the cause of action against the
‘.gtiara’ntor would not arise till such demand. However.
on? the day, the demand was made to the gua1’ant.or, the
ctause of action. against the principle borrower’ should be
live. if the loan is barter} by time on the date of
‘~ borrowe_r has mort
22
demand, the said demand would not revive a time
barred debt: against the gizarantors. But on the day. the
demand was made, if the loan was live. therea_fter=,–___even
if the limitation prescribed for proceedingpagéamst
principal debtor is time barred that would”-not
the way of enforcing the ciaim:”aga’i’i3st–.pthe.lgu_a.rai’itee’;.
Therefore, in order to find out a claini’ -is
by limitation or not, what isv-vr.t’o–i,be seen is _”‘£:he’.;cont1’act
between the parties -and depeiiidirullxg-._Qn snlch” contract
entered into the periodlof: be Computed
under Article: the V
116. l’ in the loan was advanced
in the year”-«1l9’84l. in dispute that the principal
.’.*.’..r.\.
gaged his properties as a security for
due-v.repa}:fnient. of the loan. It is in 1986 as per Ex
P.l*l__Da is made against the principal debtor
‘V.,CEl1lll’1g”‘]v.1£}f;0T1 him to pay the installment, which are due.
clear in the said legal notice, if those
de?fault.ed installments are not made. the Corporation
would be constrained to invoke Section 29 of the Act to
recall the entire loan and thereafter to proceed under
24
“1. If at any time c::lefault’ shall be
made by the Company in the payment of the
principal sums of ?’10.18.000/– & €356,000/~
and interests commitment charges and/
other moneys for the time being due
Corporation under the Security Dotrujnertt’$_’:”
the Guarantors on demcmcimshall pay
Corporation the whole ofsych:pri.r1ctpal’ C
interest. commitment vcharye__s1″and/orig other
moneys, which shall be
Corporation as ajoresaict xuwill. C irtdenirtyy
and keep inderrtrttfted C’orpora~t’tori against
all loss of principal
charge orjotrhergj n1oneys4V”s.;é(;ttreét’ under the
“all costs charges and
e9;pe’n-sest”‘Lo-hatsoeyer {as between attorney
and client) “JCorporat’ion may incur
by reagaron anyhalejault on the part of the
Wgcoriwpany “or.,.in..ftling any legal proceedings
aglainst’*~tI1e company and/ or the Guarantors
V _for.V4the reccvvery of the aforesaid amounts. “‘
1’7.,y__A3 ‘l’herefore, it is clear. it is only on the
debtor committing default, in payment of
u”-_mo1r1ey due to the Corporation and after 2:1 demand is
« made to the guarantors to make t.h£3 said paymer1t. if the
_g’1.1arar1t,<')rs failed to make pay'me:1t.. the cause: of.:a1<:tio:1
brought. to sale. sold in public auction
mi. a ?l7 lakhs is recovered, it is after
h ,.demandvV'was made against the guarantors. For the first
_' i:i1ne on 20.10.1992 as per EX P10, the said demand is
inade in conformiizy with clause {1} of the Guarantee
25
to proceed against. the guarantors, would arise.
Therefore. under the terms of contract, the cause of
action to proceed against the principal debtor and the
guaraiuor is not one and the same and cause
against the guarantors is depend on a
against, the principal debtor and’~t.he
conf1rnit.t,ing a default and after
Corporation making a derna.n:d._»agai11st’
and only when the giiarantors ddefa–V1lt~LVE it could
be said the Cause against the
guarantors. lt.:i;s.__jn issue of Ex: P1,
admitt.edly._AVpriiicipai’-debt.or did not pay the amount
due under the It is on record, proceedings
are initiated under Section 29 of the Act, assets of the
dedt’ictio.n.to”:?17 lakhs, it is for the balance amount, a
Deed. Wheii. the g;§1,i:«.u’ai’itc1)i’ did not make the paynierit.
_l_993 appiication is filed ll.I’idf:?I’ Sections 30 and $31 of
26
the Act. Therefore, applying the principles enunciated
in the aforesaid Judgments. the cause of action in far
as the guarantors are Concerned, did arise
year l992 and in the year 1993, the
been filed is well within t.:t1ree’«.yearsr A
contemplated under Article
On the day, the demand
the principal debtor” date of
borrowing is 1984!’ it mortgaged.
Therefore, tog. 316 Principal
debtor, thew . ‘off;li’mi,ta’tioi’1A was upto 1996.
‘l’herefore,_ in the year 1992, the loan
was live.’ Even the application is filed for
recon-ferye..agairistthe guarantor, the loan was live and
attliereforeitheiDistrict Court on a proper appreciation of
Cr_a’I’._ :arid.l””~dooi,ir15ent.ary evidence on record and also
_ iilind, the law laid down by the Apex Court
H »%:tIi(lst’h€VvI:”llgl1 Court and correctly applying the law to the
féir.?;ts’of the case. has come to the c:o1’1e1usior1 that the
” éipplieat:ioI1 is in time. V
30
23. In View of the fact: that, the appealw
I\/IFA30173/2008 it:s<3if is dismissed on merits, IA-
I/ZOO8 for stay does not survive for cionsideljatioia.
Accordingly, IAwI/2008 for stay is also dismissedjf
sa/#
s-JUDGE