Case: Punjab National Bank Vs. State of Uttar Pradesh &amp; Others

The appellant had, after respondent No. 4s management was taken over by the U.P. State Textile Corporation Limited (respondent No. 3) under the Industries (Development and Regulation) Act, advanced some money to the said respondent No. 4. In respect of the advance so made, respondents Nos. 1, 2 and 3 executed deeds of guarantee undertaking to pay the amount due to the bank as guarantors in the event of the principal borrower being unable to pay the same.  Subsequently, respondent No. 3 which had taken over the management of respondent No. 4 became sick and proceedings were initiated under the Sick Textile Undertakings (Nationalisation) Act, 1974 (for short the Act). The appellant filed suit for recovery against the guarantors and ther of the amount claimed by it.  The following preliminary issue was, on the pleadings of the parties, framed :  Whether the claim of the plaintiff is not maintainable in view of the provisions of Act No. 57 of 1974 as alleged in para. 25 of the W.S. of defendant No. 2 ? *  The trial court as well as the High Court both came to the conclusion that in view of the provisions of section 29 of the Act, the suit of the appellant was not maintainable.

Reasoning: In our opinion, the principle of the aforesaid decision of this court is equally applicable in the present case. The right of the appellant to recover money from respondents Nos. 1, 2 and 3 who stood guarantors arises out of the terms of the deeds of guarantee which are not in any way superseded or brought to a naught merely because the appellant may not be able to recover money from the. It may here be added that even as a result of the Nationalisation Act the liability of ther does not come to an end. It is only the mode of recovery which is referred to in the said Act.