CWP No.972 of 1988 and :1: CWP No.714 of 1988 In the High Court of Punjab and Haryana at Chandigarh. Date of decision: 24.10.2008. (1) CWP No.972 of 1988 Mr.Parkash Tapase and others ... Petitioners Versus Managing Director, H.F.C. and another ... Respondents (2)CWP No.714 of 1988 Mrs.Rajni Dhawan ... Petitioner Versus Managing Director, H.F.C. and another ... Respondents Present: None for the petitioners. Mr.Kamal Sehgal, Advocate,for the respndents. PERMOD KOHLI, J. (Oral): This judgment of mine will dispose of CWP Nos.972 and 714 of 1988 as in these petitioners question of law and facts involved are similar. The petitioners in this case were, admittedly, the Directors of the Company, namely, M/s.Rukmini Enterprises (Private) Limited, Sector IV, Urban Estate, Gurgaon, Haryana. The company had borrowed loan from respondent Nos.1 and 2. It appears that on account of inability to pay the loan, respondent No.2 issued Show Cause Notice dated 19.08.1987 to M/s.Rukmini Enterprises (Private) Limited with copy to the petitioners as is evident from Annexure P-1, with Civil Writ Petition No.972 of 1988. A similar notice of even date was also issued to the Company with a copy to CWP No.972 of 1988 and :2: CWP No.714 of 1988 Mrs. Rajni Dhawan, petitioner in Civil Writ Petition No.714 of 1988. The petitioners were informed the if the amount is not received within 15 days of the issue of this notice, the same would be recovered from them as arrears of the land revenue as provided in the guarantee deed executed by them in favour of the Corporation. At the time of the admission of the Civil Writ Petition No.972 of 1988, a Division Bench of this Court passed the following order on 01.02.1988:- “Writ petition is admitted. There will be stay of arrest of the petitioners for recovery of the money due to the respondents as also stay of all the proceedings against the individual petitioners or their properties for the recovery of money due from the company-Rukmini Enterprises (Private) Limited. It is, however, made clear that the respondents are entitled to take all other actions in respect of the company and its properties for the recovery of the money. Notice regarding stay” The respondents in the reply have stated that after granting personal hearing to the petitioners by the Managing Director of the State Financial Corporation, recovery notice under Section 32 G of the State Financial Corporation Act was issued by the specified authority which has been forwarded to the Collectors, Mumbai and Meerut for effecting recovery from the borrowers and guarantors of the Company. The petitioners are shown to be the guarantors of the company. CWP No.972 of 1988 and :3: CWP No.714 of 1988 None appears on behalf of the petitioners. I have perused the paper-book and heard the learned counsel for the respondents. It is settled law that the Promoters/Directors, in the capacity of guarantors, are liable to pay if any recovery is to be made from the company. Recovery can be made from the properties and assets of the company and the Directors/Promoters are not individually liable unless it is shown that they are personally liable either in their capacity as guarantors or they are responsible for mismanagement of the affairs of the company and/or they have utilized the assets and properties of the company for their personal benefit. In the present case, the company is the borrower and even the notices impugned were issued to the company and the petitioners in their capacity as guarantors. In terms of the interim order mentioned above, the respondents were permitted to take all other actions in respect of the company and its properties for the recovery from the company except the personal properties of the petitioners. It is stated by Mr. Sehgal learned counsel appearing on behalf of the respondents that during the pendency of these petitions, properties and assets of the company have already been sold to recover the dues of the Haryana Financial Corporation and the Haryana State Industrial Development Corporation by initiating proceedings under Section 29 of the State Financial Corporation Act. It is further stated that Recovery Certificates have been issued by the competent authority for recovery of the balance amount from the personal property of the petitioners in their CWP No.972 of 1988 and :4: CWP No.714 of 1988 capacity as guarantors. The petitioners have challenged the Show Cause Notices. There was no interim stay except the arrest of the petitioners and recovery from their personal properties. However, in view of the settled law that the Promoters and Directors if they are guarantors, they are liable for discharge of the liability against the company. In view of the above circumstances, these petitions are disposed of with the following direction:- The respondents may sell the assets and properties of the borrower company. After adjustment of the amount from the sale proceeds, if any, amount still remains due and payable by the company, the respondents may proceed against the properties of the petitioners who are guarantors and have executed valid deeds of guarantee in accordance with law. No costs. 24.10.2008 (PERMOD KOHLI) BLS JUDGE Note: Whether to be referred to the Reporter? NO