ORDER
A.M. Khanwilkar, J.
1. This summary suit is filed on the assertion that the plaintiffs had advanced term loan, corporate loan and short term loan to one Overseas Cables Limited, of which all the 4 Defendants herein are Directors. Various documents were executed in respect of the said transaction. The Defendants stood guarantors for the said transaction and executed four separate continuing guarantee deeds. The said Overseas Cables Limited failed to repay the loan amounts, for which demand was raised by the Plaintiffs on 17th March 2001 and also on 13th November 2000 and, once again on 17th November 2000, As no response was received from said Overseas Cables Limited, the Plaintiffs invoked the guarantees against the Defendants on 12th June 2001. As the Defendants failed to comply with the demand raised by the Plaintiffs, which was founded on the conditions of the agreements arrived at between the parties, the plaintiffs have filed the present suit for the following reliefs :
“(a) that the Defendants be jointly and severally ordered and decreed to pay the plaintiffs a sum of Rs. 1,56,86,428/- under the said Term Loan as per Particulars of Claim being Exhibit ‘F-1’ with further interest of the principal sum of Rs. 86,00,000/-as more particularly stated under Exhibit ‘F-1’ hereto from the date of filing of the suit and/or realisation;
(b) that the Defendants be jointly and severally ordered and decreed to pay the plaintiffs a sum of Rs. 4,56,33,121/- under the said Corporate Loan as per Particulars of Claim being Exhibit ‘F-2’ with further interest of the principal sum of Rs. 2,50,00,000/- as more particularly stated under Exhibit ‘F-2’ hereto from the date of filing of the Suit and/or realisation;
(c) that the Defendants be jointly and severally ordered and decreed to pay the plaintiffs a sum of Rs. 1,53,59,735/- under the said Short Term Loan as per Particulars of Claim being Exhibit ‘F-3’ with further interest of the principal sum of Rs. 1,00,00,000/- as more particularly stated under Exhibit ‘F-3’ hereto from the date of filing of the Suit and/or realisation; and
that the costs of this Suit be provided for,”
2. However, during the course of arguments, counsel for the Plaintiffs, relying on the decision of the Full Bench of our High Court in the case of SICOM v. Prashant Tanna, made oral submission that the Plaintiffs would forego the claim for penal interest and restrict the claim of Interest strictly on the basis of dictum of the Apex Court in Central Bank of India v. Ravindra, . Counsel for the Plaintiffs placed on record statement to show the modified claim, which the Plaintiffs would press into service against the Defendants on the basis of dictum of Central Bank of India’s case (supra). As per this statement, the principal amount of the claim towards term loan, corporate loan and short term loan in aggregate is in the sum of Rs. 4,36,00,000/- and the permissible interest thereon is Rs. 3,17,02,635/- till the institution of the suit and the further claim of interest is at the rate of 18 per cent, per annum from the date of institution of the suit till payment or realisation of the suit claim amount. Accordingly, the suit claim is now for Rs. 7,53,02,635/- (being principal amount of Rs. 4,36,00,000/- and Rs. 3,17,02,635/- being interest component) till the institution of the suit and future interest at the rate of 18 per cent, per annum from the date of institution of the suit till payment and/or realisation.
3. The claim put forth by the plaintiffs has been resisted by the Defendants, inter-alia, by raising following defences:
4. In the first place, it is contended that leave to institute the present suit under Clause 12 of the Letters Patent has been wrongly granted by this Court. It is stated on behalf of the Defendants that the leave granted by this Court is on the basis of documents executed in Chandigarh and, more so, the Defendants are residents of Chandigarh. According to the Defendants, no part of cause of action has arisen in Mumbai or within the jurisdiction of this Court.
5. It is next contended that the suit is barred by limitation as against the Defendants, because the guarantee deeds were executed as back as between March and November 1998, whereas the suit has been instituted on 19th December 2002.
6. It is next contended that the plaintiffs have not sued the principal debtor, namely, Overseas Cables Limited, for which reason, the present suit against the defendants cannot be maintained.
7. It is next contended that no particulars of suit claim have been furnished and the basis on which the suit claim has been arrived at is also not provided for.
8. It is next contended that the principal debtor had provided security, which was more than sufficient to cover the claim amount, but the plaintiffs, instead of proceeding against the principal debtor, to enforce the security so provided, have chosen to file the present suit against the Defendants, who are only the guarantors. According to the Defendants, for these reasons, the suit as filed was impermissible.
9. It is next contended that the documents relied upon by the plaintiffs purported to have been signed by the Defendants cannot be enforced against the Defendants, because the Plaintiffs had obtained signature on blank documents.
10. It is also contended that the statement of claim as tendered across the Bar has not been certified as is required by the amendments to the Bankers’ Books (Evidence) Act, 1891, the change brought about by the Information Technology Act, 2000.
11. It is then contended that the Plaintiffs have not maintained books of accounts in regular course of business and there is no such case made out in the plaint, for which reason also, the statement of claim submitted to the Court cannot be acted upon.
12. Having considered the rival submissions and the pleadings, as filed, I shall proceed to deal with the objection regarding maintainability of the suit on the ground that leave under Clause 12 of the Letters Patent has been wrongly granted in favour of the Plaintiffs. According to the Defendants, ho part of cause of action has arisen within the jurisdiction of this Court and in particular within Mumbai. It is, however, not in dispute that the plaint has been entertained pursuant to leave granted by my predecessor under Clause 12 of the Letters Patent. In the first place, that order is still operating and has not been assailed before the appropriate forum nor any formal application has been moved for setting aside the same, as is now argued on behalf of the Defendants. In any case, I find no substance in the argument that leave under Clause 12 has been wrongly granted in this case. Leave has been granted, as is rightly contended on behalf of the Plaintiffs, because the dues of the Plaintiffs were due and payable by the Defendants to the plaintiffs at Mumbai, the deeds of guarantee as well as the term loan, the deed of mortgage in respect of corporate loan and the short term loan agreement specifically stipulated and provided that, if any dispute arises between the parties as regards the enforcement of the said agreement, the Courts in Mumbai shall have exclusive jurisdiction to try and deal with such dispute and also because the said moneys were repayable in Mumbai, as was agreed between the parties and recorded in the agreements in question. If that is the basis on which leave under Clause 12 has been granted and which basis cannot be doubt, rather the same are made good from the record before this Court, there is no substance in the objection under consideration.
13. That takes me to the next objection taken on behalf of the Defendants. According to the Defendants, the suit claim is barred by limitation as against the Defendants. There is no substance in this argument as well. Counsel for the Plaintiffs rightly contends that the present suit against the Defendants has been filed after the plaintiffs had invoked the continuing guarantee on 12th June 2001 and the suit has been lodged on 12th December 2001, which is well within the limitation. To buttress this submission, reliance has been placed on the decision of the Apex Court in Mrs. Margaret Lalita Samuel v. Indo Commercial Bank Ltd., of the said decision, the Apex Court observed thus :
“The guarantee is seen to be a continuing guarantee and the undertaking by the defendant is to pay any amount that may be due by the Company at the foot of the general balance of its account or any other account whatever. In the case of such a continuing guarantee, so long as the account is a live account in the sense that it is not settled and there is no refusal on the part of the guarantor to carry out the obligation, we do not see how the period of limitation could be said to have commenced running.”
14. The dictum of the Apex Court, referred to above, squarely applies to the fact situation of the present case, because there is express condition in the guarantees executed by the defendants agreeing for continuing guarantee and undertaking to pay the amounts due and payable by the principal debtor Company. In the circumstances. I find no substance in this argument.
15. The other contentions pressed into service on behalf of the Defendants will have to be stated to be rejected in the light of the decision of the Division Bench of our High Court in the case of Mukesh Gupta v. SICOM Ltd., Mumbai, reported in 2004 (1) Mah LJ 159 : (AIR 2003 Bom 104). Similar contentions were raised in that matter as can be discerned from para 2 of the decision, which reads thus;
“………..The company as a security has pledged its share with the respondent. According to the respondent, as default has been committed by the company, the amount has become recoverable as per the agreement and hence the summary suit has been filed by the respondent against the appellant. In reply to the Summons for Judgment taken out by the respondent, the appellant has inter-alia contended (i) that the suit is bad for non-joinder of the necessary party i.e. the company; (ii) that since the respondent has not instituted any suit against the company, present suit cannot be maintained by the respondents; (iii) that respondent has not enforced its security and has also not called for additional security to which it was entitled under the agreement between the respondent and the company, present suit is therefore not maintainable; (iv) that the loan is secured by pledging shares, therefore, the present summary suit is not maintainable; and (v) that charging of additional interest is charging penal interest and, therefore, the summary suit is not maintainable.”
16. The Division Bench in the said judgment has rejected all those contentions. The said decision is binding and squarely applies to the fact situation of the present case. In the circumstances, I find no substance in the argument as canvassed on behalf of the Defendants that since no suit is instituted against the principal debtor, the present suit is impermissible, or, for that matter, that the Plaintiffs have failed to enforce the security against the principal debtor company. Reliance has been rightly placed on the decision of the Apex Court in the case of Bank of Bihar Ltd. v. Dr. Damodar Prasad. . It would be apposite to reproduce paras 3 and 4 of the said decision, which read thus :
“The demand for payment of the liability of the principal debtor was the only condition for the enforcement of the bond. That condition was fulfilled. Neither the principal debtor nor the surety discharged the admitted liability of the principal debtor in spite of demands. Under Section 128 of the Indian Contract Act, save as provided in the contract, the liability of the surety is co-extensive with that of the principal debtor. The surety became thus liable to pay the entire amount. His liability was immediate. It was not deferred until the creditor exhausted his remedies against the principal debtor.
4. Before payment the surety has no right to dictate terms to the creditor and ask him to pursue his remedies against the principal in the first instance. As Lord Eldon observed in Wright v. Simpson, (1802) 6 Ves Jun 714 at p. 734 : 31 ER 1272 at p. 1282. But the surety is a guarantee and it is his business to see whether the principal pays, and not that of creditor. In the absence of some special equity the surety has no right to restrain an action against him by the creditor on the ground that the principal is solvent or that the creditor may have relief against the principal in some other proceedings.”
17. Accordingly, the aforesaid arguments canvassed on behalf of the Defendants will have to be stated to be rejected.
18. The next argument that requires to be considered is that there is no basis or particulars furnished regarding the claim for interest. As mentioned earlier, the Plaintiffs have restricted the claim with regard to permissible interest as per the dictum of the Apex Court in the case of Central Bank of India (supra). The details have been furnished in the statement produced before the Court. The correctness of the amounts stated therein is not disputed. The only argument is that there is no basis as to how the plaintiffs have computed the interest at the rate of 20.5 per cent, per annum. This submission has been rightly countered by the Plaintiffs by relying on the guarantee deeds as executed by the Defendants. The guarantee deeds make clear reference to the terms and conditions contained in the loan agreement and the other documents contemporaneously executed between the parties. Clause 1 of the recital of the guarantee deeds clearly provides that for the sake of brevity, all documents executed, including loan agreement, promissory note, deed of hypothecation, etc., will be referred to as security documents. Condition No. 1 of the guarantee deed executed by the Defendants concedes the position that amount has been lent and advanced by the Plaintiffs to the principal borrower and also acknowledging liability to pay the said amount along with interest thereon or any other moneys for the time being due and owing by the Company to SICOM under the said security documents. Viewed in this perspective, the liability of the Defendants to pay interest on the principal amount is crystallised by the guarantee deed itself, which makes reference to the security documents. Security documents have been produced before me as the plaintiffs have craved leave to refer to and rely upon them in the plaint. The security documents clearly provide the rate of interest at 20.5 per cent, perannum of, as may be in force at the time of execution of the documents. Understood thus, the claim of interest pressed into service on behalf of the Plaintiffs at the rate of 20.5 per cent, per annum is founded on the condition in the security documents, to which the Defendants have agreed and have undertaken to pay the same, being the liability of the principal borrower. Hence, I find no substance in the argument about the claim of interest as pressed into service.
19. The next argument that requires to be considered is that the statement of claim produced on behalf of the Plaintiffs cannot be relied upon for non-compliance of certification as required by the amended provisions of the Information Technology Act, 2000. In the first place, as rightly contended on behalf of the plaintiffs, the said provision would apply to the “bankers” books of accounts”. There is nothing on record to suggest that the Plaintiffs are bankers, or, a banking institution. In any case, the statement, which has been produced on behalf of the Plaintiffs is not a statement of accounts from the books of accounts maintained by the plaintiffs. Assuming that the said provision was applicable, that would apply only to print-outs taken of the entry or a copy of print-out from the accounts maintained with the aid of computer and not to books of accounts maintained in regular course of business manually. Moreover, it is seen that the statement is merely in a tabular form and the figures have been extracted from different books of accounts maintained by the plaintiffs in regular course of business. Accordingly, the argument canvassed on behalf of the Defendants about application of the amended provisions of the Information Technology Act, 2000 and non-compliance thereof does not commend to me.
20. The Counsel appearing for the defendants, however, argued that the plaintiffs have failed to assert that they are maintaining regular books of accounts and since that is lacking, the statement as produced by the Plaintiffs cannot be reckoned. Once again, this submission, to my mind, is only out of desperation. No specific grievance has been made in the reply affidavit as filed. There is no assertion in the reply filed by the Defendants that the Plaintiffs are not maintaining books of accounts in the regular course of business. Accordingly, I find no substance in this argument.
21. It is asserted in the reply filed by the defendants that the plaintiffs obtained signature of the plaintiffs on the blank documents. To my mind, even this submission is one of desperation and obviously not bona fide. On the other hand, no such grievance has been made by the defendants since 1998, who were directors of the principal borrower. This grievance has been made for the first time in the reply affidavit filed before this Court. Accordingly, I find no substance even in this objection or so-called defence taken on behalf of the defendants.
22. For the aforesaid reasons, in my opinion, the defendants have no plausible defence; however, can be granted leave to defend on condition that they deposit sum of Rs. 7,53,02,635/- in this Court within three months from today.
23. To get over this position, learned counsel for the defendants placed reliance on the decision of out High Court (single Judge) reported in, 1990 Mah LJ 74 in the case of State Industrial and Investment Corporation of Maharashtra Ltd. v. Hargovind Vithaldas. I find no reason to accept this argument. In the case, which has been relied upon, there was no express condition in the guarantee deed executed by the defendants therein, as is the case on hand, which position has been considered by the Division Bench of our High Court in the case of Mukesh Gupta (supra). In other words, if the argument canvassed on behalf of the defendants was to be accepted, that would run counter tp the view taken by the Division Bench of this Court in the abovereferred decision, which clearly provides that it was open to the plaintiffs to institute summary suit against the defendants for the nature of agreement arrived at between the parties. Since the defendants are jointly and severally liable to pay the amount, which was the liability of principal borrower and the plaintiffs being entitled to enforce that liability against the defendants independently, by virtue of contract between the parties, there is no reason to grant unconditional leave to the defendants as prayed. For the view that I have taken, the decision pressed into service on behalf of the defendants in the case of Hargovind Vithaldas (supra) is in my opinion, distinguishable on facts. In fact, I am inclined to decreed the suit for the aforesaid reasons, but, with a view to give an opportunity to the defendants, I proceed to pass the following conditional order.
“The Summons for judgment is made absolute on the following condition :
“The defendants shall deposit sum of Rs. 7,53,02,635/- in this Court within three months from today. On such deposit being made, it will be open to the plaintiffs to withdraw the same on giving undertaking that the said amounts or any other amount will be brought back and deposited in this Court, if such an order was to be passed by this Court in the pending suit. If the amount is deposited in time, the suit to stand transferred to “Commercial Causes”. If the amount is not deposited in time, the Summons for judgment be deemed to have been made absolute by this order, and the suit decreed for the aforesaid sum along with interest at the rate of 18% per annum thereon from the date of institution of suit till payment or realisation with cost of the suit.”
24. All concerned to act on the copy of this order duly authenticated by the Court Stenographer of this Court.
