,,
The petitioner before this Court, a Company incorporated under the Companies Act, 1956, is having a Current Account No. 01420020338000 and the",,
same has been marked as 'General Lien' by the IDBI Bank. The contention of the petitioner is that the petitioner Company had given a Corporate,,
Guarantee in favour of M/s. Suman Agritech Ltd., and M/s. Suman Agritech Ltd., defaulted in making payment to the Bank. It has been further stated",,
that as per the terms and conditions of the Corporate Guarantee it was valid till M/s. Suman Agritech Ltd., starts its commercial production. The",,
contention of the petitioner is that the commercial production started on 23/3/2012 and on account of the commercial production which started in the,,
year 2012, the Corporate Guarantee came to an end. The petitioner's grievance is that inspite of the aforesaid the Bank Account of the petitioner has",,
been marked 'Lien' and the respondent Bank is not releasing the amount which is available in the account of the petitioner.,,
Mr. S. C. Bagadia, learned senior counsel has argued before this Court that on 15/11/2010 the petitioner Company gave a Corporate Guarantee for",,
financial assistance availed by M/s. Suman Agritech Ltd., in terms of the sanction letter dated 13/7/2010 and as per the letter of sanction as well as",,
Corporate Guarantee, it was valid till commencement of commercial production. The petitioner has further stated that subsequently the Bank modified",,
the sanction letter on 13/7/2010 and the petitioner Company passed a resolution on 15/11/2010 to sign the Corporate Guarantee in terms of the,,
sanction letter dated 13/7/2010. A resolution to that effect was passed by the petitioner Company on 15/11/2010. It has been further stated that,,
subsequently a facility agreement dated 15/11/2010 was executed between M/s. Suman Agritech Ltd., and IDBI Bank and again as per clause 3.1(A)",,
(iv) the guarantee was valid upto the time of commencement of commercial production. It has been further stated that on 19/1/2012 the respondent,,
Bank renewed the financial assistance sanctioned on 13/7/2010 and modified on 9/11/2010, however, the terms and conditions of the corporate",,
guarantee were not changed. The petitioner has also filed a certificate dated 23/3/2012 in support of the averments that the commercial production has,,
commenced in respect of M/s. Suman Agritech Ltd., After 2012 ie., after the commencement of the commercial production the Bank on 3/4/2013",,
renewed the financial assistance sanction dated 13/7/2010 and no resolution was passed by the petitioner Company pursuant to the renewal dated,,
3/4/2013 and no corporate guarantee was signed by the petitioner Company.,,
On 5/6/2013 the petitioner Company submitted its representation to the respondent Bank requesting the Bank that the Company cannot provide,,
corporate guarantee beyond a certain limit and as the production started in respect of the Unit in question, the account cannot be kept in lien. It has",,
been further stated that the Bank kept silent over the matter and on 17-2-2015 / 17-2-2016 a letter was issued to the petitioner reflecting that M/s.,,
Suman Agritech Ltd., has defaulted in making the payment and the petitioner was directed to regularise the default in terms of the corporate",,
guarantee.,,
It has been contended that on 10/4/2015 the respondent Bank further renewed financial assistance given to M/s. Suman Agritech Ltd., and no",,
corporate guarantee was signed by the petitioner in pursuance to the renewal letter dated 10/4/2015. The petitioner again informed the Bank vide,,
letter dated 17/2/2015 that the Corporate Guarantee has come to an end on account of the commencement of commercial production and inspite of,,
the aforesaid, the petitioner Company was directed by the Bank to make the payment in respect of the default committed by M/s. Suman Agritech",,
Ltd., The petitioner Company kept on reminding the Bank that the Corporate Guarantee has come to an end. It has been further stated that a cheque",,
was issued by the petitioner Company on 1/10/2016 for a sum of Rs.10.25 lacs in favour of other company, however, the cheque was dishonoured and",,
the petitioner after making enquiry with the Bank, came to know that the petitioner's account has been marked as lien against the dues of M/s. Suman",,
Agritech Ltd., Thereafter, all the transactions of the petitioner Company have not been honoured by the Bank on account of the lien mark of the",,
current account of the petitioner Company and for the first time on 2/2/2017, the respondent Bank has informed the petitioner Company that the",,
corporate guarantee is still in force because M/s. Suman Agritech Ltd., is holding 5.98% shares in the petitioner's Company. The petitioner's grievance",,
is that inspite of there being a categoric clause in the guarantee deed, no objection certificate is not being issued and, therefore, in those circumstances,",,
the petitioner has prayed for the following reliefs :,,
(i) By issue of an appropriate writ, direction or order, directing the respondent Bank to remove the 'lien' marked on the current account bearing",,
number 01420020338000 of the petitioner Company;,,
(ii) By issue of an appropriate writ, direction or order, directing the respondent Bank to release the margin money lying in the form of Fixed Deposit",,
No. 0382105400008617 and 0382105400008907 of the petitioner Company;,,
(iii) By issue of an appropriate writ, direction or order, directing the respondent Bank to issue No Dues Certificate the petitioner Company;",,
A detailed and exhaustive reply has been filed on behalf of the respondent Bank and it has been stated that vide sanction letter dated 13/7/2010, the",,
IDBI bank has granted M/s. Suman Agritech Ltd., credit facility to the tune of Rs.70 crores, out of which 30 crores was by way of term loan for",,
establishing Soya Solvent Extraction Plant and also accepted the offer of the petitioner to accept the corporate guarantee which will remain in force,,
upto the date of commencement of commercial production in the said plant and the said letter was accepted by the principal debtor who subsequently,,
entered into facility agreement with the respondent and other consortium Bank. The Bank has further stated that the principal debtor and the Bank,,
executed a deed of guarantee on 15/11/2010 and a corporate guarantee was furnished in favour of the respondent which was to remain in force till the,,
commencement of the commercial production in the principal debtor's account. It has been further stated that the petitioner acted as per its,,
undertaking.,,
It has been further stated that Such modification vide Renewal Sanction Letter dated 19.01.2012 has been done by the Bank in accordance with,,
Clause 5(a) of the Guarantee,,
Agreement executed by the present petitioner in favor the respondent Bank. It is submitted that petitioner has concealed this material fact that the,,
modification of Sanction Letter is done in presence of all the three parties i.e The Lender, The Borrower and The Guarantor in terms of the Clause",,
5(a) of the Guarantee Agreement which provides for modification of sanction letter, the only competent authorities are the Lender and Borrower.",,
It has been further stated that the contention of the petitioner that the petitioner is not liable to pay any amount as a consequence of novation of,,
contract for the reason that the Bank has modified /renewed the credit limits is illegal and not sustainable in the eyes of law. The deed of Guarantee,,
permits the enhancement of credit limits without notice to the guarantors. The petitioners have agreed to the bank’s making any variance that the,,
Bank as it may think fit in the terms of the Bank’s contract with the Borrower, to the Bank’s determining, enlarging or varying any credit to",,
the Borrower to the Bank’s making any composition with the Borrower or promising to give the Borrower time or not to sue him and to the,,
Bank’s parting with any security the Bank may hold for the guaranteed debt.,,
It is contended on behalf of the respondent Bank that the Corporate Guarantee executed by the Petitioner in favor of IDBI Bank is Continuing,,
Guarantee in terms of section 129 of the Indian Contract Act. Section 129 of the Indian Contract Act reads as under :,,
129. 'Continuing guarantee' A guarantee which extends to a series of transactions is called a 'continuing guarantee.""",,
It is further argued that the said Corporate Guarantee does not permit the revocation of the Guarantee. There was a specific clause in the deed of,,
continuing guarantee that the “guarantee shall be a continuing one and shall remain in full force and effect till such time the borrower repays in full,,
the Loan together with interest, liquidated damages, costs, charges and all other monies that may from time to time become due and payable and",,
remain unpaid to the lender under the Loan Agreementâ€. Therefore, in terms of the contract entered upon by the guarantor with the Bank, it was",,
clear that even if the loan account shows no liability, the guarantor will continue to be bound by the terms of the guarantee in the case of continuing",,
guarantee.,,
It has been further contended that Section 130 of the Contract Act deals with the Revocation of continuing guarantee. Section 130 reads as under :,,
“130.Revocation of continuing guarantee: A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to",,
the creditor.""",,
It has been further argued that no such letter/notice were ever issued by the petitioner to the bank in terms of section 130 of the Indian Contract Act,",,
Thus, even if a letter was written to the Bank by the Petitioner on 05.06.2013 vide Annexure P-11 stating that “As per law, Anik Industries Ltd.",,
cannot give Corporate Guarantee beyond a certain limit, therefore, we hereby humbly request you not to stipulate the corporate guarantee clause of",,
Anik Industries Ltd. towards the regular facilities sanctioned to Suman Agritech Ltd.â€, it was contrary to the clause in the agreement of guarantee,",,
as stated above. Therefore, it was not open to the petitioner to revoke the guarantee as the petitioner had agreed to treat the guarantee as a continuing",,
one and was bound by the terms and conditions of the said guarantee. Although the said letter was issued by the petitioner in the context of clause No.,,
5(xi) which states that the corporate guarantee remain in force up to the time of commercial production, however, the said clause was modified and",,
accepted by the petitioner vide Renewal Sanction Letter dated 19.01.2012 to the effect that the Corporate Guarantee of M/s Anik Industries Ltd shall,,
continue to remain valid and applicable beyond the envisaged COD.,,
It has been further contended that M/s Suman Agritech (Borrower) failed and neglected to pay IDBI Bank (Petitioner), the installments of principal",,
amount of the Financial Assistance, interest & other monies upon which, Respondent Bank issued the Recall Notice dated 20.02.2017 (Annexure R-1)",,
to the Borrower as well as the Corporate Guarantor (Petitioner) but no appropriate steps were taken by the borrower to repay the loan amount. Being,,
aggrieved by the aforesaid, the respondent Bank again issued the Notice to the Personal Guarantor vide letter dated 10.03.2017, but all remained in",,
vain.,,
It has been further argued that consequent upon the default committed by the Borrower Company, the account in respect of the Financial Assistance",,
has been classified by the petitioner Bank as Non Performing Assets in accordance with the direction / extant guidelines issued by the Reserve Bank,,
of India from time to time, and thereafter, a statutory notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and",,
Enforcement of Security Interest Act, 2002 was served to the Borrower as well as to the Corporate Guarantor (Petitioner) on 29.09.2017.",,
Respondent Bank has further contended that thereafter respondent along with the consortium member i.e. Allahabad Bank obtained the Joint,,
Symbolic possession along with Allahabad Bank on 05.01.2018 in accordance with section 13(4) of SARFAESI Act 2002. It is further submitted that,,
Allahabad Bank (Consortium Member) has also filed an Application under Section 14 of SARFAESI Act 2002 before the Learned District Magistrate,,
at Bhojpur, which is pending.",,
The respondent Bank has further contended that the respondent Bank has filed an Original Application before the DRT at Jabalpur and the same has,,
been registered as OA No. 497/2017, which is pending for consideration. The Borrower Suman Agritech Ltd. (Defaulter) has also approached DRT",,
by filing Application registered as SA No. 68/2018. Similarly, Allahabad Bank has also lodged suit before the DRT at Jabalpur for its financial",,
assistance sanctioned to Suman Agritech Ltd registered as OA No 348/2018 which is also pending. It has also been brought to the notice of this Court,,
that the proceeding under SARFAESI Act 2002 are also pending against M/s Suman Agritech Limited before DRT and it has been pointed out that as,,
per the provision of Section 128 of the Indian Contract Act, the liability of the petitioner company is co-extensive with that of the principal debtor.",,
Section 128 of the Contract Act is reads as under :,,
“128. Surety’s liability â€" The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the",,
contract.â€,,
Reliance has been placed upon a judgment delivered by the Hon'ble Supreme Court in the case of Industrial Investment Bank of India Ltd. Vs.,,
Biswanath Jhunjhunwala reported in (2009) 9 SCC 478. Hon'ble the Supreme Court in the aforesaid case has observed that the legal position as,,
crystallised by a series of cases of the Supreme Court is clear that the liability of the guarantor and principal debtors is coextensive and not in,,
alternative, therefore, petitioner cannot escape from the liability merely by saying that the Corporate Guarantee was for a particular time limit. It has",,
been argued that the present petition filed by the petitioner is not maintainable as petitioner has remedy to file appropriate Application / Appeal against,,
the action taken by the Respondent Bank under Section 17 of SARFAESI Act 2002.,,
Heard learned counsel for the parties at length and perused the record. The present petition is being disposed of with the consent of the parties at the,,
motion hearing stage itself.,,
The petitioner before this Court is a Company registered under the Companies Act, 1956 and the petition has been filed by filing a Resolution to file",,
this petition. The respondent is a Bank and is State within the meaning of Article 12 of the Constitution of India, thus, amenable to the writ jurisdiction",,
of this Court.,,
The undisputed facts of the case reveals that the petitioner Company is having a current account bearing No. 01420020338000 and the said Bank,,
Account has been marked as General Lien by the respondent Bank on account of the fact that the petitioner Company has given a corporate,,
guarantee in favour of M/s. Suman Agritech Ltd., which is again a Company incorporated under the Companies Act, 1956. M/s. Suman Agritech Ltd.,",,
has defaulted in making the payment in respect of the loan advanced by the respondent Bank. Undisputed facts further reveal that a corporate,,
guarantee in respect of financial assistance availed by M/s. Suman Agritech Ltd., was given for a limited duration ie., upto the time of commencement",,
of commercial production of newly set up project of M/s. Suman Agritech Ltd., The loan was sanctioned to M/s. Suman Agritech Ltd.,vide sanction",,
letter dated 13/7/2010. Relevant clause of Appendix I (Terms and conditions of the financial assistance) of sanction letter which is in respect of,,
corporate guarantee furnished by the petitioner, reads as under :",,
Xi,Security,"Primary 1st charge by way of Equitable Mortgage / Hypothecation of entire fixed assets of
the company, both present and future. Collateral: 2nd charge by way of hepothecation of
entire current assets (both present and future) of the company. Guarantor/s: An irrevocable
and unconditional guarantee Personal Guarantee of Mr. Suresh Shahra. No guarantee
commission shall be payable by the company to the guarantor. Corporate Guarantee: An
irrevocable and unconditional Corporate Guarantee of Anik Industries Limited which shal
remain in force upto the time of commencement of commercial production. No guarantee
commission shall be payable by company to the corporate guarantor.
cannot travel beyond the terms and conditions of the guarantee agreement.,,
The respondents have placed reliance upon the judgment delivered in the case of Industrial Investment Bank of India Vs. Biswanath Jhunjhunwala,,
reported in (2009) 9 SCC 478. In the aforesaid case, the apex Court has held that the liability of the guarantor and the principal debtors is co-extensive",,
and not in alternative.,,
This Court has carefully gone through the aforesaid judgment. There cannot be any iota of doubt in respect of the law laid down by the apex Court.,,
However, the fact remains that in the present case the guarantee was a conditional guarantee and it has come to an end the moment M/s. Suman",,
Agritech Ltd., (borrower) has started commercial production and, therefore, the judgment relied upon by the learned counsel for the respondent is of",,
no help to the respondent Bank. The respondents have also placed reliance upon the judgment delivered in the case of Kerala State Electricity Board,,
Vs. Kurien Kalathil and others reported in (2000) 6 SCC 293 on the ground of availability of alternative remedy. This Court is of the considered,,
opinion that alternative remedy is not an exclusive bar and in the present case, the petitioner cannot be thrown out on the basis of availability of",,
alternative remedy as the Bank is proceeding against the petitioner and has marked lien on the account of the petitioner even though the guarantee,,
provided by the petitioner has come to an end on account of commencement of commercial production. This Court does not find any reason to deny,,
relief to the petitioner on the ground of availability of alternative remedy. The apex Court in the case of Harbanslal Sahnia Vs. Indian Oil Corporation,,
Ltd., reported in (2003) 2 SCC 107 has held as under :",,
7. So far as the view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore,,
the writ petition filed by the appellants was liable to be dismissed, suffice it to observe that the rule of exclusion of writ jurisdiction by availability of an",,
alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case in spite of availability of the alternative remedy, the High",,
Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks enforcement of any of the Fundamental,,
Rights; (ii) where there is failure of principles of natural justice or, (iii) where the orders or proceedings are wholly without jurisdiction or the vires of",,
an Act and is challenged [See Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Ors., (1998) 8 SCC 1.1 The present case attracts",,
applicability of first two contingencies. Moreover, as noted, the petitioners' dealership, which is their bread and butter came to be terminated for an",,
irrelevant and non-existent cause. In such circumstances, we feel that the appellants should have been allowed relief by the High Court itself instead",,
of driving them to the need of initiating arbitration proceedings.,,
In the light of the aforesaid judgment, alternative remedy cannot be a bar and, therefore, this Court is of the considered opinion that as the commercial",,
production started on 23/3/2012, the action of the Bank to treat the account of the petitioner Company as 'General Lien' is void, illegal and opposed to",,
law.,,
This Court is of the considered opinion that as the commercial production started on 23/3/2012, the petitioner was justified in raising a claim that his",,
guarantee is no longer in existence and, therefore, the action of the Bank in marking the petitioner Company's account as 'General Lien' which is not in",,
consonance with the sanction letter dated 13/7/2010 and the deed of guarantee dated 15/11/2010, deserves to be set aside. The respondents are",,
directed to release the Bank Account of the petitioner which has been marked as 'General Lien' within a period of two weeks from the date of receipt,,
of certified copy of this order.,,
With the aforesaid, the present petition stands disposed of.",,
Certified copy, as per Rules.",,
