Case: United Bank of India Vs. Bengal Behar Construction Company Limited and Others

1. Special leave granted 2. On 28-11-1995, we passed an order setting aside the order of the Division Bench of the High Court which had set aside the decree passed against the principal debtor by the learned Single Judge and we restored that decree. Therefore, so far as the principal debtor is concerned, there is a decree on admission against him under Order 12 Rule 6 CPC 3. As regards the decree against the guarantors, we had deferred the issue regarding the confirmation of the decree against them but had directed them to file an undertaking within 7 days to the effect that they will not dispose of any of their personal properties, encumbered or otherwise to be indicated in the undertaking till further orders. Pursuant thereto, undertakings have been filed by the two guarantors which are far from satisfactory. They are identically worded except for the schedule of properties in which the equity shares and their value have been set out. The undertaking is to the following effect "In compliance of the said order, I annex hereto a schedule of properties and assets owned and possessed by me and I declare that I am the sole owner of the said properties and assets I give an undertaking that I will not alienate, transfer, dispose of or deal with the said properties and assets until further order of this Honble Court." * In the schedule, certain shares of a limited company and the value thereof has been stated. The deponent does not state that except the property shown in the schedule, he has no other property. The undertaking is, therefore, far from satisfactory 4. Apart from that, we now find that the guarantors have instituted Suit No. 281 of 1995 in the High Court for a declaration that the said 7 letters of guarantee are null and void and are not binding on the plaintiffs. It is clear that they have also sought relief against the enforcement of the guarantees by execution of any decree passed in Suit No. 223 of 1985 which is the suit which has given rise to the present proceedings. The aforesaid Suit No. 281 of 1995 was filed by the guarantors during the pendency of the present proceedings and yet this fact has not been disclosed in the pleadings. It is, therefore, clear that the guarantors are trying to avoid any order that may be passed in the present proceedings for enforcement of the guarantees and have initiated separate proceedings notwithstanding the pendency of Suit No. 223 of 1985 5. In view of the above, the question regarding confirmation of the decree against the guarantors now needs to be settled. We had deferred the question by our order dated 28-11-1995 but now see no reason to further defer it. Since the decree has been confirmed against the principal debtor by virtue of the order of 28-11-1995, albeit on admission, we see no reason why the guarantors should not be made liable under the letters of guarantee, the terms whereof clearly stipulate that on the failure of the principal debtor to abide by the contract, they will be liable to pay the amount due from the principal debtor by the appellants. Clause 15 of the letter of guarantee, in terms states that any action settled or stated between the bank and the principal debtor or admitted by the principal debtor shall be accepted by the guarantors as conclusive evidence. In view of this stipulation in the letter of guarantee, once the decree on admission is passed against the principal debtor, the guarantors would become liable to satisfy the decree jointly and severally.

Decision:
1[ds]It is clear that they have also sought relief against the enforcement of the guarantees by execution of any decree passed in Suit No. 223 of 1985 which is the suit which has given rise to the present proceedings. The aforesaid Suit No. 281 of 1995 was filed by the guarantors during the pendency of the present proceedings and yet this fact has not been disclosed in the pleadings. It is, therefore, clear that the guarantors are trying to avoid any order that may be passed in the present proceedings for enforcement of the guarantees and have initiated separate proceedings notwithstanding the pendency of Suit No. 223 of 19855. In view of the above, the question regarding confirmation of the decree against the guarantors now needs to be settled.We had deferred the question by our order dated5 but now see no reason to further defer it. Since the decree has been confirmed against the principal debtor by virtue of the order of, albeit on admission, we see no reason why the guarantors should not be made liable under the letters of guarantee, the terms whereof clearly stipulate that on the failure of the principal debtor to abide by the contract, they will be liable to pay the amount due from the principal debtor by the appellants. Clause 15 of the letter of guarantee, in terms states that any action settled or stated between the bank and the principal debtor or admitted by the principal debtor shall be accepted by the guarantors as conclusive evidence. In view of this stipulation in the letter of guarantee, once the decree on admission is passed against the principal debtor, the guarantors would become liable to satisfy the decree jointly and severally.