SM 1 920.wp.2250.11 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 2250 OF 2010 D. R. Tatke ....Petitioner Versus Central Bank of India and 5 others ....Respondents ____________ Mr. Paritosh Jaiswal with Mr. Vikhil Dhoka i/b M/s. Bharat Shah & Co. for the Petitioner. Ms. Usha Srivastava i/b M/s. Consulta Juris for the Respondent No.1. CORAM: DR. D. Y. CHANDRACHUD & A. A. SAYED, J.J. DATED : AUGUST 29, 2011. P.C.: In these proceedings under Article 226 of the Constitution, the Petitioner has impugned an order dated 4 August 2010 passed by the Debts Recovery Appellate Tribunal on an application for waiver of deposit under Section 21 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. 2. The Petitioner was in appeal before the Appellate Tribunal against an order of the Tribunal. The Tribunal has held that the First Respondent is entitled to a recovery certificate in the total amount of Rs.2.38 Crores and Rs.18.99 Lakhs against Defendant Nos. 1 to 5 to the proceedings before the Tribunal, in respect of a cash credit and term loan facility. The Tribunal awarded a simple interest of 12% per annum. The Petitioner before the Court was the Fifth Defendant before the Tribunal. SM 2 920.wp.2250.11 3. The Debts Recovery Appellate Tribunal, on the application for waiver of deposit directed the Petitioner to deposit an amount of Rupees One Crore in two installments, each of Rupees Fifty Lakhs. The deposit was to be effected on or before 1 October 2010. 4. The Petitioner was a guarantor under a personal guarantee executed on 18 May 1989. The Deed of Guarantee, prima facie, indicates that the total liability of the Petitioner shall be restricted to an amount of Rs.36,00,000/- (Rupees Thirty Six Lakhs) and in addition thereto, the Petitioner would be liable to pay interest at the rate chargeable by the Bank. Clause-2 of the guarantee provides that any admission or acknowledgment by the principal borrower would bind the guarantor. Under Clause-7, the guarantee was not to be revoked until all the amounts due and payable were paid up. According to the Petitioner, he had resigned as a Director of the borrower with effect from 18 August 1990 and Form 32 was filed under Section 303 (2) of the Companies Act, 1956 on 31 August 1990. The Bank by its letter dated 12 July 1991 informed the principal borrower that while the existing cash credit facilities had been enhanced all the existing Directors, should continue as guarantors in their personal capacity besides the personal guarantee of the Petitioner. According to the Petitioner, on 28 August 1991 the Bank was informed by the principal borrower that the Petitioner had resigned as Director and that his resignation was accepted as he was assigned for project work in Vietnam under a Government of India Sponsorship Scheme. The Bank had on 18 September 1991 recorded in a letter to the principal borrower that the personal guarantee of the Petitioner would continue until replaced by a fresh guarantor with acceptable networth. SM 3 920.wp.2250.11 5. The Tribunal in its decision noted that the principal borrower had acknowledged the liability on 31 December 1994 and 9 March 1995. In this view of the matter and having regard to the contents of the guarantee, the Tribunal came to the conclusion that there was no question of absolving or discharging the Directors. 6. Counsel appearing on behalf of the Petitioner submitted that the Debts Recovery Appellate Tribunal, while directing a deposit of an amount of Rupees One Crore has not had due regard to the contentions of the Petitioner. The contention of the Petitioner, before the Court is that: (i) The total liability of the Petitioner under the guarantee was to be restricted to an amount of Rupees Thirty Six Lakhs exclusive of interest; (ii) The claim of the Bank against him was barred by limitation; and (iii) There was a breach of contract on the part of the Bank. 7. On the other hand, it is urged on behalf of the Respondent that the merits of the case would be dealt with by the Debts Recovery Appellate Tribunal at the final hearing and in the circumstances, no case for interference under Article 226 of the Constitution has been made out. 8. We are of the view that at this stage, it would neither be appropriate nor proper for this Court to express a final opinion on the merits of the rival submissions. All the submissions including the question as to whether the claim is barred by the limitation qua the Petitioner would be enquired into. There is an order of the Tribunal after adjudication under which the Petitioner has been ordered and SM 4 920.wp.2250.11 directed, together with the other Defendants, to pay an amount of Rs.2.38 Crores and Rs.18.99 Lakhs with further interest @ 12% per annum. 9. The Petitioner, prima facie, has executed a guarantee on 18 May 1989. Even if, as is contended on behalf of the Petitioner, the total liability was to be restricted to an amount of Rupees Thirty Six Lakhs, that was to be exclusive of interest at the rate chargeable by the Bank. The Tribunal has recorded that the principal borrower had acknowledged liability on two occasions, namely, on 31 December 1994 and 9 March 1995. Therefore, on the basis of the material before the Court, we are of the view that while an order for complete dispensation of deposit was not warranted, a suitable modification of the impugned order of the Debts Recovery Appellate Tribunal would be necessary in view of the interests of justice, and having regard prima facie to the terms of the guarantee. 10. Accordingly, we modify the order passed by the Debts Recovery Appellate Tribunal by directing that the Petitioner shall, within a period of four weeks from today deposit an amount of Rupees Fifty Lakhs instead and in substitution of the order passed by the Debts Recovery Appellate Tribunal. Upon deposit, in terms as directed, the amount shall be invested in a fixed deposit as directed by the Debts Recovery Appellate Tribunal subject to further renewals. In the event that the Petitioner fails to effect deposit within four weeks from today, the necessary consequences under the law shall ensue. Accordingly, we direct that the appeal shall be placed before the Tribunal for recording compliance with the aforesaid directions on 26 September 2011. In the event of a breach of compliance, the SM 5 920.wp.2250.11 necessary consequences shall ensue without further reference to this Court. 11. The Petition is disposed of with no order as to costs. (A. A. SAYED, J.) (DR. D. Y. CHANDRACHUD, J.)