JUDGMENT Sanjay Karol, J. Briefly stated, facts as they emerge from the record of this case are, that plaintiff is a Company incorporated under the Companies Act, 1956, having its registered office at New Himrus Building, Cart Road, Shimla. 2. M/s Lalji Paper Mills Private Limited (hereinafter referred to as the Company) was promoted by original defendants No. 1 to 6. With a view to obtain financial assistance from the plaintiff, through its Directors the Company approached the plaintiff for grant of term loan of a sum of Rs.48.85 lakhs for construction of factory building, purchase of land and machinery, setting up an industrial unit for manufacturing writing and printing paper at Barotiwala, District Solan, H.P. The said defendants moved an application for loan which is Ext. PW-2/E, dated 11.9.1980. Correspondence with regard to the same is Ext. PW-2/F (17.12.1980), Ext. PW-2/G (6.1.1981), Ext. PW-2/H (26.6.1984) and Ext. PW-2/J (23.9.1981). Acting on the representations of the promoters, plaintiff issued sanction letters Ext. PW-2/K (17.2.1981), Ext. PW-2/L (22.2.1984) and Ext. PW-2/M (28.2.1981). The loan was duly sanctioned. The resolution of the Company is Ext. PW-2/N (27.2.1981) and Ext. PW-2/O (14.3.1984). Two loan agreements were executed between the plaintiff and the Company. Ext. PW-2/R is the loan agreement dated 22.9.1981 with respect to loan amounting to Rs.40.45 lakhs and Ext. PW-2/S is the loan agreement dated 3.4.1984 with respect to additional sum of Rs.8.85 lakhs. The promoters also executed hypothecation agreement Ext. PW-2/T dated 22.9.1981 and Ext. PW-2/U dated 3.4.1984. In relation to the aforesaid loan amounts, the original defendant No. 1 to 6 namely Sh. Ravinder Soni, Sh. Satish Soni, Sh. Vinod Soni, Sh. Parmod Soni, Sh. Ajit Soni and Sh. Inder Jit Kehar executed deeds of guarantee dated 22.9.1981 and 3.4.1984 and the same are Ext. PW-2/V and Ext. PW-2/W. Defendants Sh. Ravinder Soni and Sh. Satish Kumar Soni also issued promissory notes which are Ext. PW-2/P (22.9.1981) and Ext. PW 2/Q (3.4.1984). 3. With respect to the property of the Company there was a parri passu charge between the plaintiff, Punjab National Bank (proforma defendant No. 8) and the Himachal Pradesh Financial Corporation (proforma defendant No. 7). The parri passu agreement is Ext. PW-2/X (13.8.1987). 4. The Company vide resolutions Ext. PW-2/N (27.2.1981) and Ext. PW-2/O (14.3.1984) authorized its promoters to execute the various agreements referred to hereinabove. 5. The parri passu agreement is Ext. PW-2/X (13.8.1987). 4. The Company vide resolutions Ext. PW-2/N (27.2.1981) and Ext. PW-2/O (14.3.1984) authorized its promoters to execute the various agreements referred to hereinabove. 5. There were serious defaults by the Company in making payments to the various financial institutions and meet its liability. Also the Company was not doing well. 6. The Managing Director of the Company vide letter dated 26.9.1988 (Ext. PW-2/Y) informed the decision of taking up the matter before the appropriate authority(s) under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985. Proceedings in relation to the Company, under the provisions of the said Act are Ext. PW-2/Z-1 to Ext. PW-2/Z-10 and Ext. PW-2/Z-12. It cannot be disputed that the Company was eventually wound up and its assets liquidated. A Liquidator was appointed in terms of order passed by the High Court of Delhi. The plaintiff was asked by the Official Liquidator to surrender the title deed in terms of order Ext. PW-2/Z-14 passed by the High Court of Delhi in CWP No. 2577/91. The details of such proceedings under the provisions of BIFR are not being referred to and discussed in detail. Suffice it to say that in terms of various directions issued by the High Court of Delhi, plaintiff received a sum of Rs.42,32,700/- on 20.8.2007 which was credited to the account of the Company. 7. The fact of the matter is that despite adjustment of the aforesaid amount a sum of Rs.1,29,24,743/- still remained outstanding against the Company. Since the original defendants No. 1 to 6 stood guarantors for the loan account, they were also liable to pay the same. The fact of the matter is that none came forward to liquidate this liability. Consequently plaintiff filed the instant suit for recovery of the said amount on 7.4.2008 against its promoters/guarantors. 8. Notices in the suit were issued and Sh. Ravinder Soni (defendant No. 1) filed written statement on his behalf. Defendant No. 2 was directed to be deleted from the array of parties vide order dated 14.5.2009 for the reason that he had expired. Defendants No. 1 and 3 to 6 were represented by the learned counsel but did not file any written statement. However, vide order dated 21.6.2012 even they were proceeded ex-parte. Defendant No. 2 was directed to be deleted from the array of parties vide order dated 14.5.2009 for the reason that he had expired. Defendants No. 1 and 3 to 6 were represented by the learned counsel but did not file any written statement. However, vide order dated 21.6.2012 even they were proceeded ex-parte. Defendants No. 7 and 8, who were proforma in nature decided not to contest the proceedings and were also proceeded ex-parte on 14.5.2009. No relief is actually claimed against them. 9. On 23.11.2009 following issues were framed in the suit:- “1. Whether the plaintiff Corporation is an incorporated company as claimed? OPP 2. Whether Shri P. K. Bali is authorized and competent to file the present suit on behalf of the plaintiff company as claimed? OPP 3. Whether the plaintiff company is entitled to recover the suit amount or any other amount from the defendants as claimed by it? OPP 4. Whether suit in the present form is neither competent nor maintainable as alleged by the defendants? OPD 5. Whether the suit is bad for mis-joinder of the necessary parties and if so, who are the necessary parties? OPD 6. Whether there is no proper contract of guarantee between the plaintiff company and the defendants as alleged? OPD 7. Whether the Deeds of Guarantees are under stamped and if so, what is the proper stamp duty payable on them? OPD 8. Whether defendants no. 1 to 6 executed the Deeds of Guarantee under duress and coercion as alleged? OPD 9. Whether the loan documents are forged and fabricated as claimed by the defendants? OPD 10. Whether the plaintiff Corporation has concealed relevant facts, information and documents from this Court and if so, to what effect? OPD 11. Whether the plaintiff Corporation has charged excessive rate of interest as alleged? OPD 12. Whether this Court has no jurisdiction to try the suit? OPD 13. Whether the claim of the plaintiff Corporation is barred by time? OPD 14. Whether the plaintiff Corporation got blank documents signed from the defendants as claimed by the defendants? OPD 15. Relief.” Issues No. 1 to 3: 10. Since all these issues are interconnected and interlinked, as such they are taken up and decided together. 11. For deciding these issues, it be only noticed that plaintiff has examined two witnesses namely Sh. Santosh Sharma (PW1) and Sh. Pawan Kumar Bali (PW-2). OPD 15. Relief.” Issues No. 1 to 3: 10. Since all these issues are interconnected and interlinked, as such they are taken up and decided together. 11. For deciding these issues, it be only noticed that plaintiff has examined two witnesses namely Sh. Santosh Sharma (PW1) and Sh. Pawan Kumar Bali (PW-2). They have proved on record various documents, reference of which has been made in the earlier paragraphs. 12. Sh. Santosh Sharma (PW-1) who is working as Manager, Finance & Accounts with the plaintiff has clearly deposed that the accounts of the Company are maintained under his supervision. He produced the true copy of the ledger which is Ext. PW-1/A and the statement of account of the Company which is Ext. PW-1/B. That a sum of Rs.1,29,24,743/-is outstanding against the Company, after waiving off the amount of penal and compound interest and adjusting the amounts so received in terms of the judgment passed by the High Court of Delhi, is evidently clear and stands proved on record. 13. Sh. Pawan Kumar Bali (PW-2) who is working as Manager Project (Legal) in the plaintiff company, in addition to proving the documents referred to in the earlier paragraphs, has also proved on record the loan agreements Ext. PW-2/R and Ext. PW-2/S. He has also clearly proved the factum of disbursement of loan to the Company in relation to which original defendants No. 1 to 6 stood guarantors and executed various documents such as promissory notes and deeds of guarantee. He has also proved the fact that the plaintiff issued legal notice Ext. PW-2/Z-19 (29.2.2008) calling upon the original defendants No. 1 to 6 to repay the suit amount and settle the accounts of the plaintiff. Acknowledgement dues with respect to the same are Ext. PW-2/Z-20 to Ext. PW-2/Z-29. 14. Sh. Pawan Kumar Bali (PW-2) has also proved on record the fact that the plaintiff-Corporation stands incorporated and certificate of such incorporation is Ext. PW-2/A (21.10.1986). Pursuant to the resolution (Ext. PW-2/B) passed by the plaintiff and the authorization letter (Ext. PW-2/D) Sh. Pawan Kumar Bali, who has instituted the suit has been authorized to do so. 15. Thus the plaintiff has been able to fully establish its case. 16. PW-2/A (21.10.1986). Pursuant to the resolution (Ext. PW-2/B) passed by the plaintiff and the authorization letter (Ext. PW-2/D) Sh. Pawan Kumar Bali, who has instituted the suit has been authorized to do so. 15. Thus the plaintiff has been able to fully establish its case. 16. This Court in Civil Suit No. 9 of 2002, titled as H.P. State Industrial Development Corporation Limited versus Hari Mohan Dewan & others, decided on 16.11.2004 has held as under:- “While examining the liability of a guarantor in terms of contract of guarantee vis-à-vis Section 128 of the Contract Act, a Division Bench of Kerala High Court in Grindlays Bank Limited vs. M. Joy Mathew and Another, [1990 (1) Bank CLR 343] held as under:- “26 Under Section 126 of the Contract Act, a contract of guarantee is a contract to perform the promise, or discharge the liability of a third person in case of his default and therefore the cause of action against the guarantor can arise only when the principal debtor fails to perform his promise or to discharge his liability and a demand is made to the guarantor to discharge the liability. Section 128 of the Indian Contract Act lays down that the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.” While holding so, it was further held that Article 115 of the Schedule to Limitation Act, 1908, which is pari-materia to Article 55 of the Limitation Act, 1963, would be applicable in such a situation. Reliance was placed on a decision of the Supreme Court in Mrs. Margaret Lalita Samuel vs. Indo Commercial Bank Limited, AIR 1979 SC 102 , wherein it was observed as under:- “The guarantee is seen to be a continuing 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. 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. Limitation would only run from the date of breach under Article 115 of the Schedule to the Limitation Act, 1908.” To similar effect is another Division Bench judgment of the said Court in Canara Bank vs. Gokuldas Shenoy, [1989 (1) Bank CLR 364]. Relevant paragraph is as under:- “12. The learned Counsel for the appellant contended that it is Article 55 of the Limitation Act 1962 that would be applicable to the present case. It is not disputed that if it is so, there is no bar of limitation. Ext. A-19 is the agreement of guarantee executed by the 2nd defendant in favour of the first defendant and it is a continuing guarantee and what is agreed upon by the 2nd defendant thereby is to indemnify the Bank against all loss and to pay and satisfy the Bank on demand “general balance” due from the borrower upto a limit of Rs.2 lakhs. Therefore, the cause of action against the 2nd defendant will arise only on demand and period of limitation of 3 years will start only when a breach in respect of the contract to pay on demand occurs under Article 55 of the Limitation Act.” In this decision also reliance was placed on the decision of the Supreme Court in AIR 1979 SC 102 (supra). An unreported judgment of the Supreme Court in H.P. financial Corporation vs. Smt. Pawna and others, Civil Appeal No.1971 of 1998 decided on 18.12.2003 also supports the case of the plaintiff on the plea that the suit is within time. What was held in this judgment and is relevant is as under:- “ Whilst considering the question of limitation the Division Bench has given a very lengthy judgment running into approximately 50 pages. However they appear to have not noticed the fact that under Clause 7 an indemnity had been given. Therefore the premises on which the Judgment proceeds i.e. that the loan transaction and the mortgage deed, are one composite transaction which was inseparable is entirely erroneous. However they appear to have not noticed the fact that under Clause 7 an indemnity had been given. Therefore the premises on which the Judgment proceeds i.e. that the loan transaction and the mortgage deed, are one composite transaction which was inseparable is entirely erroneous. It is settled law that a contract of indemnity and/or guarantee is an independent and separate contract from the main contract. Thus the question which they required to address themselves, which unfortunately they did not, was when does the right to sue on the indemnity arose. In our view, there can be only one answer to this question. The right to sue on the contract of indemnity arose only after the assets were sold off. It is only at that stage that the balance due became ascertained. It is at that stage only that a suit for recovery of the balance could have been filed. Merely because the Corporation acted under Section 29 of the Financial Corporation Act did not mean that the contract of indemnity came to an end. Section 29 merely enabled the Corporation to take possession and sell the assets for recovery of the dues under the main contract. It may be that on the corporation taking action under Section 29 and on their taking possession they became deemed owners. The mortgage may have come to an end, but the contract of indemnity, which was an independent contract, did not. The right to claim for the balance arose, under the contract of indemnity, only when the sale proceeds were found to be insufficient. In this case, it is an admitted position that the sale took place on 28th March, 1984 and 14th March, 1985. It is only after this date that the question of right to sue on the indemnity (contained in Clause 7) arose. The suit having been filed on 15th September, 1985 was well within limitation. Therefore, it was erroneous to hold that the suit was barred by limitation. Even otherwise, it must be mentioned that the Division Bench was in error in standing that the right to personally recovery the balance terminates after the expiry of three years. It must be remembered that the question of recovery of balance will only arise after the remedy in respect of the mortgage deed has first been exhaustive. Even otherwise, it must be mentioned that the Division Bench was in error in standing that the right to personally recovery the balance terminates after the expiry of three years. It must be remembered that the question of recovery of balance will only arise after the remedy in respect of the mortgage deed has first been exhaustive. If a mortgage suit was to be filed, the period of limitation would be 12 years. Of course, in such a suit, a prayer can also be made for a personal decree on the sale proceeds being insufficient. Even though such prayer may be made, the suit remains a mortgage suit. Therefore, the period of limitation in such cases will remain 12 years. For all above reasons, we are unable to sustain the judgment of the Division Bench. It is accordingly set aside. As stated above, OSA No.2/1997 was dismissed with liberty to revive the same if appellants succeeded in this appeal. We set aside the order of dismissal in OSA No.2/1997 and restore that appeal to the file of the High Court. The High Court shall now dispose of that appeal in the light of this judgment. This appeal stands disposed of accordingly. No order as to costs.” Even on a plain reading of Articles 55 of the Limitation Act, 1963 and also keeping in view the facts set out in paragraph 13 of the plaint, as well as after taking note of the oral and documentary evidence in this case, I am satisfied that the cause of action to maintain the suit against defendants No.1 to 5 who are guarantors, was to arise after the sale of assets of the company, and only if there was any shortfall, and then on the failure all of them, having been called upon to indemnify the plaintiff in terms of the personal guarantees executed by them vide Exts. P-21 to P-24.” 17. The Apex Court in H.P. Financial Corporation vs. Smt. Pawna and others, Civil Appeal No. 1971 of 1998, decided on 18.12.2003 has held that the period of limitation for recovery of balance of the amount due, after sale of the mortgage property would commence, under the contract of indemnity, only when the sale proceeds were found to be insufficient to meet the liability of the mortgagee. 18. 18. Plaintiff, in my considered view, has been able to establish its case to the effect that despite demands, the original defendants No. 1 to 6 failed to meet their liability as guarantors and pay the suit amount. Consequently issues No. 1 to 3 are answered accordingly. Issues No. 4 to 14: 19. Since the defendants have chosen not to contest the suit, onus of which was on them, as such these issues are deemed to have been decided against the defendants. Relief: Keeping in view the ex-parte evidence as well as documentary evidence it stands proved that as on date of filing the suit, a sum of Rs.1,29,24,743/- was due and outstanding and payable by the original defendants No. 1 to 6 to the plaintiff. However, since defendant No. 2 stands deleted as a party, the liability would rest upon the surviving defendants namely Sh. Ravinder Soni (defendant No. 1), Sh. Vinod Soni (defendant No. 3), Sh. Parmod Soni (defendant No. 4), Sh. Ajit Soni (defendant No. 5) and Sh. Inder Jit Kehar (defendant No.6). Since the transaction inter se between the parties was commercial in nature and the interest claimed on the suit amount is @ 12.5% per annum, the same is also awarded and decree passed against the surviving defendants. The interest shall be payable on the decretal amount pendente lite and future. Liability of defendants No. 1 and 3 to 6 shall be joint, several and coextensive. Suit of the plaintiff is decreed with proportionate costs to this extent. Decree sheet be drawn accordingly.