INDIAN BANK MADRAS Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) Plaintiff is the appellant in this appeal.

(2.) The suit in C. S. No. 346/83 was filed for recovery of an amount of Rs.6,73,817.21 together with interest at the contract rates on the respective principal amounts viz., Rs.1,28,242.62 in respect of Medium Term Loan and a sum of Rs.1,40,841.98 in respect of UDA/DP. M/s. Om Parasakthi Mills Limited, Coimbatore has availed the facilities of term loans and as on 10-9-1969 a sum of Rs.5,73,223.11 was due to the plaintiff. On 15-9-1969, the said Mill was taken over under the provisions of Industries (Development and Regulations) Act, 1951 and was subsequently nationalised under the provisions of the Sick Textiles Undertaking (Nationalisation) Act, 1974. At the time of nationalisation, defendants 2 and 3 requested the plaintiff to grant further loan facilities and they have executed the necessary guarantees in favour of the plaintiff. Later, the plaintiff has preferred a claim before the Commissioner of Payments under the Nationalisation Act claiming the amounts due under the various facilities. By award dated 12-1-1979, the Assistant Commissioner of Payments had recognised and passed orders for payment of Rs.8,66,531.42 under UDA/DP guarantee and rejected the claim of the plaintiff for Medium Term Loan of Rs.1,28,242.62. The plaintiff has preferred CMA No. 75 of 1979 on the file of the District Judge, Coimbatore. The plaintiff bank issued advocate notice dated 6-12-1979 calling upon the defendants 2 and 3 to pay a sum of Rs. 5,72,200.50 together with interest. The said amount was inclusive of a sum of Rs.1,28,242.62 together with interest being the amount which was rejected by the Assistant Commissioner of payments under Medium Term Loan on the ground that it was pre-take over liability and the sum of Rs.1,40,841.98 together with further interest being the amount which was rejected by the Assistant Commissioner of Payments under UDA/DP. The said notice was given without prejudice to the claim in CMA No. 75 of 1979. Defendants 2 and 3 have received the notice but neither sent any reply nor complied with the demand. The defendants were liable to pay a sum of Rs.1,28,242.62 and a sum of Rs.99,662.46 towards interest at 14% p.a. from 25-4-1977 till the date of plaint totalling Rs.2,27,905.08 in respect of Medium Term Loan and Rs.1,40,841.98 towards balance under UDA/DP and a sum of Rs.3,05,070.15 towards interest at 16.5% per annum from 25-4-1977 till date of plaint totalling to Rs.4,45,912.13 and thus the total amount of Rs.6,73,817.21 was due and payable by the defendants as per the deeds of guarantee dated 8-12-1969 and 22-12-1969 and 4-1-1973. The plaintiff has invoked the guarantees on 6-12-1979. the present suit is filed within three years of the said invocation of the guarantee. The present suit is only for recovery of the portion of the claim disallowed by the Assistant Commissioner of payments and the interest thereof. Hence the suit.

(3.) Defendants 2 and 3 contested the suit on the ground that without proceeding against the principal debtor, the suit was filed against the guarantors and as such it was not maintainable. Under the principles of law, the liability of the surety/guarantor is co-extensive with that of the principal debtor and one cannot have any separate existence without the other. Even the National Textiles Corporation that has taken over the Mills has not been added as a party. According to the defendants, the suit is premature and unsustainable in law. The defendants have admitted that they have executed guarantees in favour of the plaintiff for Rs.5,73,223.11 on 22-12-1969 and also another guarantee for Rs.23.00 lakhs on 4-1-1973. The Ordinance of Nationalisation of Sick Textile Undertakings was passed on 21-9-1974 and the Nationalisation Act became law on 21-12-1974. The claims of the plaintiff were all included in Category I (Part A) of Schedule 2 to the Sick Textile Undertakings (Nationalisation) Act 1974. The liabilities included in the said category are to be paid first out of the compensation specified in respect of each Mill in Schedule I of the Act and if the compensation provided is not adequate to cover the full amount, the liability has to be assumed by the Central Government as per S. 27 of the Nationalisation Act. The Central Government is not impleaded as a party and hence the suit was bad for non joinder of necessary party. The Central Government has issued a memo No. 53/3/1/75 CF dt. 19-12-1975 specifically directed that the unresolved disputes between the Government Department and a Public Sector Enterprise and between one Public Enterprise and another would ordinarily fall in two categories namely (i) those relating to statutory matters (ii) those relating to commercial or other agreements, but, the plaintiff has filed the suit in disregard of the above terms as such it is not entitled to claim any amount. The plaintiff has already resorted to the provisions of Sick Textiles Undertaking (Nationalisation) Act, 1974 and preferred an appeal and other legal action for the recovery of the amount separately. While so, the present suit was pre-matured. The guarantees were made on 22-12-1969 and 4-1-1973 as such the suit filed is barred by limitation. All the claims were prior to 1973 and the suit is filed after 9 years. Even the guarantee cannot be invoked after the main claim is barred by limitation. The main claim was said to be due as on 10-9-1969 which expired on 9-9-1972. Even assuming that the guarantee was given on 4-1-1973, it was valid upto 3-1-1975. The time taken by the plaintiff to agitate the claim before the Commissioner for Compensation under the Nationalisation Act cannot save limitation. In any event the claim having not been maintained within three years from 12-1-1979, the date of award, it cannot be stated that the suit is in time. The plaintiff has been negligent and allowed the claim visited with the law of limitation and therefore, even in equity, it was not entitled to any claim. Having chosen to claim the entire money out of the compensation payable in respect of the take over it is not open to the plaintiff to claim a rejected portion from the 3rd defendant. His remedy is only to file appeal under the provisions of the Nationalisation Act and not a suit. On this ground also the suit is liable to be rejected.