STATE OF GUJARAT Vs. STATE BANK OF SAURASHTRA

JUDGEMENT

(1.) These two First Appeals are filed by the appellants in their respective First Appeals against the judgment and decree passed by the learned Civil Judge (S.D.) at Bhavnagar on 31st January, 1978 in Special Civil Suit No. 45 of 1968. The First Appeal No. 718 of 1978 is filed by the State of Gujarat as well as the Gujarat State Textile Corporation Limited, who were the defendant Nos. 12 and 13 in the Special Civil Suit No. 45 of 1968 and were aggrieved by and dissatisfied with the judgment and decree of the learned Civil Judge (S.D.) holding them liable only to the extent of Rs. 38,00,614-30 ps., as specified in Deed of Guarantee. The First Appeal No. 930 of 1978 is filed by the original-defendant Nos. 2 to 10. The original-defendant Nos. 2 to 7 who are the appellant Nos. 1 to 6 in the First Appeal No. 930 of 1978 have challenged the judgment and decree holding them liable for the amount of Rs. 95 lakhs. The original-defendant Nos. 8 to 11, who are the appellant Nos. 7 to 10 in First Appeal No. 930 of 1978, have challenged the judgment and decree holding them liable to the extent of Rs. 25 lakhs. They have also challenged the direction of the learned Civil Judge (S.D.) to the effect that the decretal amount only to the extent of Rs. 25 lakhs could be recovered from the properties of Industrial Engineering Company. In both the appeals, the appellants have also challenged the finding of the learned Civil Judge (S.D.) to the effect that the original-plaintiff the present respondent No. 1, that is State Bank of Saurashtra was entitled to recover a sum of Rs. 60,40,648-70 ps. with 6% running interest during the pendency of suit and cost of the suit from defendants subject to the limitations specified in the judgment and they have also challenged the finding that no decree was solicited against National Textile Corporation, the original-defendant No. 1-A in the suit. Since, both the Appeals relate to and arose out of the same judgment and decree passed by the learned Civil Judge (S.D.), Bhavnagar in Special Civil Suit No. 45 of 1968, the same are being disposed of by this common judgment.

(2.) The brief facts, giving rise to these two First Appeals, are that the original-plaintiff - the respondent No. 1 herein, has instituted a Special Civil Suit No. 45 of 1968 in the Court of Civil Judge (S.D.) at Bhavnagar to recover a sum of Rs. 60,40,648-70 ps. being the principal amount and interest due from Mahalaxmi Mills Ltd., the defendant No. 1, being the principal-debtor as on 24-10-1968. This amount was claimed against the original-defendant Nos. 2 to 7 - the appellant Nos. 1 to 6 in First Appeal No. 930 of 1978 as guarantors by virtue of Deed of Guarantee and Pronote dated 28-10-1965 executed by the original-defendant Nos. 2, 3, 6 and 7 being Exhs. 183 and 184 and Letter of Guarantee and Pronote dated 29-9-1968 executed by the original-defendant Nos. 4 and 5 being Exhs. 192 and 193. The original-plaintiff has restricted its claim against the original-defendant Nos. 8 to 11 to the extent of Rs. 25 lakhs with interest by virtue of Letter of Guarantee and Pronote and documents depositing Title Deeds of Thana properties by way of equitable mortgage dated 10-3-1967, the Exhs. being 195, 196, 197 and 198. After the institution of the suit, a notification was issued under Sec. 18A of the Industries (Development and Regulation) Act, 1951 appointing the Gujarat State Textile Corporation (G.S.T.C.) as Authorised Controller and the same G.S.T.C. took possession of the undertaking of the original-defendant No. 1-Mills Company and of certain movables which were pledged and hypothecated and which were in possession of the original-plaintiff-Bank. In the year 1972, the Gujarat Government and G.S.T.C. executed Letter of Guarantees dated 28th May, 1972 being Exh. 202, in respect of the past dues of the original-defendant No. 1-Company and as a result thereof, the Gujarat Government as well as the G.S.T.C. were impleaded as defendant Nos. 12 and 13 in the said suit and claim against them was restricted to the amount guaranteed by them, namely Rs. 38,00,640-30 ps. From 1-4-1974, the appointed day under the Sick Textile Undertaking (Nationalisation) Act, the textile undertaking of the original-defendant No. 1-Mills Company was nationalised and vested in the Central Government for compensation of Rs. 83,61,000 and all the properties of the original-defendant No. 1-Company accordingly vested in the National Textile Corporation (N.T.C.), free from any encumbrance. As a result thereof, the N.T.C. was impleaded as defendant No. 1-A in the said suit.

(3.) As far as the original-defendant No. 1 is concerned, it has filed written statement at Exh. 83. However, no evidence was led during the course of the trial. The newly added party, namely N.T.C., the original-defendant No. 1-A in the suit has not filed any appearance and suit was proceeded ex-parte against the said defendant. As far as the original-defendant Nos. 2 to 5 are concerned, they have filed their written statement at Exh. 84 inter alia contending therein that the Court had no jurisdiction to entertain the suit and that they were wrongly impleaded as defendants in the said suit, and thus, the plaintiffs are not entitled to recover any amount from them. The original-defendant Nos. 3 and 4 have filed their additional statements at Exh. 168 inter alia contending therein that because of the Sick Textile Undertaking (Nationalisation) Act, 1974, the claim of the plaintiff-Bank against the defendants-guarantors was extinguished and that the undertaking of Mahalaxmi Mills stood transferred and vested absolutely in Central Government, free from any encumbrance and, that therefore, because of Secs. 3 and 4 of the said Act, the Guarantee Deed itself was extinguished, and hence, the liability of the defendants-guarantors stood discharged in law. The original-defendant Nos. 8 to 11 have filed their written statement at Exh. 85 inter alia contending that the Court had no jurisdiction to try the suit and that the suit was bad because of non-joinder of parties and misjoinder of cause of action and that the suit was barred by limitation and that the original-defendant Nos. 8 to 11 did not agree for continuing various facilities given to the original-defendant No. 1 by the plaintiff-Bank in March, 1969 and that it was not agreed that the said guarantee of M/s. Industrial Engineering Company of Rs. 25 lakhs should be secured by creation of equitable mortgage of the properties of the firm in Thana district and that the plaintiff- Bank had already recovered a sum of Rs. 40 lakhs which the Bank should give credit to them. The original-defendant Nos. 12 and 13 have filed their written statement at Exh. 159 inter alia contending that the suit was not maintainable against them and that the same was also barred by limitation as far as they are concerned and that the Gujarat Government was not liable on the basis of the alleged Guarantee Deed and that there was a material change in the terms of the Guarantee Deed as a result of taking over of the textile undertakings and the possession of the defendant No. 1-Mills Company by the Central Government. The original-defendant Nos. 12 and 13 were to be relieved and discharged from all the liabilities and the debts regarding the said Mills Company, and that the Commissioner for Payments appointed by the Government of India was the proper authority to settle and finalise the dues of the plaintiff- Bank, and hence, no decree could have been passed against them. The original- defendant Nos. 6 and 7 have not filed any written statement though appearances have been filed on their behalf.