Supreme Court Reinstates Decree, Holds Guarantors Jointly Liable

The Supreme Court reinstated the decree against the principal debtor, confirming his liability. The Court found the guarantors' undertakings unsatisfactory and noted their separate suit to declare guarantees void. The Court held the guarantors jointly liable based on the guarantee terms, as any action by the principal debtor bound them. Consequently, the Court allowed appeals against the guarantors, setting aside the High Court's decision and reinstating the Single Judge's order, directing the guarantors to pay appeal costs.

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Issues:
Enforcement of decree against principal debtor, confirmation of decree against guarantors, validity of letters of guarantee, separate proceedings initiated by guarantors.

Analysis:
The Supreme Court granted special leave and reinstated a decree against the principal debtor, confirming his liability under Order 12 Rule 6 CPC. However, the issue of confirming the decree against the guarantors was deferred initially. The guarantors were directed to provide undertakings not to dispose of their properties. The undertakings submitted were found unsatisfactory as they did not clearly declare all their properties. Additionally, the guarantors had filed a separate suit seeking to declare the guarantees null and void, indicating an attempt to avoid the enforcement of the guarantees in the present proceedings.

Considering the actions of the guarantors, the Court decided to settle the question of confirming the decree against them. The Court noted that the terms of the letters of guarantee clearly held the guarantors liable if the principal debtor failed to fulfill the contract. The letters of guarantee specified that any action admitted by the principal debtor would be binding on the guarantors. Therefore, with the decree against the principal debtor confirmed, the guarantors were held jointly and severally liable to satisfy the decree. Consequently, the Court allowed the appeals against the guarantors, setting aside the High Court's decision and reinstating the Single Judge's order. The guarantors were directed to pay the appeal costs amounting to Rs. 10,000.

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