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2002 DIGILAW 1263 (ALL)

RAJ RANI v. UTTAR PRADESH FINANCIAL CORPORATION

2002-09-13

M.KATJU, RAKESH TIWARI

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M. KATJU, J. ( 1 ) THIS writ petition has been filed for a writ of mandamus restraining the respondents from initiating any recovery proceeding against the petitioner for the alleged dues of the company/metro Rims India Private Limited, Industrial Area, G. T. Road, Ghaziabad. ( 2 ) HEARD learned Counsels for the parties. The facts of the case are that there was a partnership firm named Metro Wheels India (hereinafter referred to as partnership firm) having three partners, Pawan Agarwal, Ashwani kumar and Subhash Chandra Gupta. This partnership firm carried on the business of manufacture and sale of rims of cycle and rickshaw. The partnership firm took a sanction term loan of Rs. 17. 75 lacs and Rs. 2. 22 lacs for the purchase of generator. The petitioners stood sureties for the loan and also furnished an affidavit on 23. 4. 1988 in respect of the properties in this connection to the U. P. Financial Corporation, respondent No. 1. ( 3 ) THE aforesaid partnership firm was dissolved, and with the permission of the respondent No. 1 a private limited company, namely, Metro Rims India Private Limited (hereinafter referred to as the Company) was constituted and registered on 1. 12. 1989 under the Companies Act. Thereafter the U. P. Financial Corporation entered into a fresh loan agreement with the Company on 2. 7. 1991, and also took a personal guarantee from the Directors of the Company. These directors of the Company were the three partners of the erstwhile partnership firm. It is alleged, in paragraph 5 of the writ petition that since the partnership firm ceased to exist and a fresh loan agreement was entered into between the parties to which the Directors (not the petitioners) stood as guarantors, the petitioners in the capacity of the sureties of the loan of the partnership firm were automatically discharged. ( 4 ) THE respondent No. 1 served a notice dated 11. 12. 1998 on the petitioners stating that they had executed the personal bond of guarantee dated 23. 4. 1998 as security of the term loan of Rs. 17. 75 lacs in favour of Company and called upon the petitioners to pay a sum of Rs. 72,88,897 and paise 83 within 15 days. True copy of the notices are Annexures 1 and 2 to the writ petition. 4. 1998 as security of the term loan of Rs. 17. 75 lacs in favour of Company and called upon the petitioners to pay a sum of Rs. 72,88,897 and paise 83 within 15 days. True copy of the notices are Annexures 1 and 2 to the writ petition. The petitioners replied to the notice that they stood guarantors for repayment of the loan taken by the partnership firm and their guarantees stand automatically discharged on the dissolution of the partnership firm. However, the Regional Manager of the respondent No. 1 again informed the petitioners on telephone on 20. 12. 2001 calling upon them to deposit the dues of the Company within a week otherwise personal recovery certificate will be issued against them. In reply the petitioners sent a representation dated 22. 12. 2001 to the Managing Director of respondent No. 1 vide Annexure-3 to the writ petition. ( 5 ) IN paragraph 9 of the writ petition it is stated that the petitioner never stood sureties for the loan taken by the Company. In fact the Company was not in existence on 23. 4. 1988 when the petitioners stood as sureties. The petitioners were sureties for the loan taken by the partnership firm which was dissolved in 1989 with the consent of the respondent No. 1. The guarantors of the loan taken by the Company are the partners of the Company, who were partners of the erstwhile partnership firm. The petitioners were not the guarantors of the loan taken by the company and hence they cannot be proceeded against. ( 6 ) A counter affidavit has been filed by the respondent No. 1 and we have perused the same. It is admitted in paragraph 2 of the petition that the petitioners had given the guarantee for the loan taken by the partnership firm. However, it is alleged that the guarantee given by the petitioner is still subsisting. ( 7 ) IT may be noted that in the bond of guarantee dated 23. 4. 1988 executed in respect of the loan taken by the partnership firm, the guarantors are the petitioners in the present writ petition vide annexure C. A. 3 to the counter affidavit. ( 7 ) IT may be noted that in the bond of guarantee dated 23. 4. 1988 executed in respect of the loan taken by the partnership firm, the guarantors are the petitioners in the present writ petition vide annexure C. A. 3 to the counter affidavit. However, in the bond of guarantee executed in respect of the loan taken by the Company, the guarantors are not the petitioners in the present writ petition but are the Directors of the Company (partners in the erstwhile partnership firm ). Thus, the guarantors in the two loans are different. The present petitioners are not the guarantors in respect of the loan taken by the Company. Hence the stand taken by the petitioners appears to be correct. The petitioners guarantees were only in respect of the loan taken by the partnership firm and not in respect of the loan taken by the Company. Since the partnership firm had been dissolved the petitioners guarantee stood automatically discharged. ( 8 ) THE petitioners are the father and mother of the partners of the Company and they have not given any guarantee in respect of the loan taken by the Company. ( 9 ) THE recovery proceedings are in respect of the loan taken by the Company and thus recovery cannot be enforced against the petitioners but can only be enforced against the Company or its directors who had given the personal guarantees. This view gets support from the decision of the supreme Court in Satish Chandra Jain v. National Small Industries Corporation Ltd. , 2002 (46)A. L. R. 293. ( 10 ) FOR the reasons given above this writ petition is allowed. The recovery proceedings against the petitioners for the alleged dues of the Company are hereby quashed. No order as to costs. .