Secured bank debt not stayed where notification excluded bank liabilities and guarantors remained liable.

A notification under section 7(1)(b) of the Sugar Undertakings (Taking Over of Management) Act, 1978 suspends only liabilities expressly covered by it. Because the notification in force excluded secured liabilities owed to banks and financial institutions, the bank's mortgage debt was not stayed. The guarantors' liability also remained unaffected, as a section 7 notification does not suspend proceedings against sureties whose liability is co-extensive with that of the principal debtor under section 128 of the Indian Contract Act, 1872. The suit for recovery under Order 34 Rule 4 of the Code of Civil Procedure, 1908 could therefore proceed against both the undertaking and the guarantors.

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Issues: Whether the suit for recovery of a secured bank debt against the sugar undertaking and its guarantors was liable to be stayed under section 7 of the Sugar Undertakings (Taking Over of Management) Act, 1978.

Analysis: The statutory scheme permitted suspension of only those contracts, assurances of property, agreements, obligations and liabilities that were specifically covered by a notification issued under section 7(1)(b). The notification in force expressly excluded secured liabilities to banks and financial institutions. The mortgage debt in favour of the bank therefore fell outside the suspension. The liability of the guarantors also remained unaffected, because a notification under section 7 did not suspend proceedings against sureties, whose liability under section 128 of the Indian Contract Act, 1872 is co-extensive with that of the principal debtor. The suit under Order 34, Rule 4 of the Code of Civil Procedure, 1908 could accordingly proceed.

Conclusion: The stay ordered by the High Court was unwarranted, and the suit was not liable to be stayed either against the principal debtor or against the guarantors.

Ratio Decidendi: A notification under section 7(1)(b) of the Sugar Undertakings (Taking Over of Management) Act, 1978 suspends only the liabilities specifically covered by it, and where secured bank liabilities are expressly excluded, neither the recovery suit nor the proceedings against guarantors are stayed.

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