Guarantor liability under a special nationalisation statute continues unless the law expressly discharges the guarantee.

A special enactment nationalising sick textile undertakings did not extinguish the liability of guarantors under deeds of guarantee. The Court held that the statute's overriding effect concerned the liabilities and recovery of the nationalised undertaking, but it contained no express provision discharging guarantors. A guarantor's obligation continued under the terms of the guarantee even if recovery from the principal borrower was affected. The suit against the guarantors was therefore maintainable, and the preliminary objection was rejected.

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Issues: Whether the suit for recovery against the guarantors was not maintainable in view of the provisions of the Sick Textile Undertakings (Nationalisation) Act, 1974.

Analysis: The Act was held to deal with the liabilities of the nationalised undertaking and to give the statute an overriding effect, but it did not contain any provision extinguishing the liability of guarantors under deeds of guarantee. The liability of the guarantor was held to arise from the terms of the guarantee and to continue notwithstanding inability to recover from the principal borrower. The principle governing the continuing obligation of a guarantor was treated as applicable, and the nationalisation statute was understood as affecting only the mode of recovery, not the substantive liability of the guarantor.

Conclusion: The suit was maintainable against the guarantors and the preliminary objection was answered in favour of the appellant.

Final Conclusion: The decree of the courts below on maintainability was set aside and the matter was remitted for adjudication on merits.

Ratio Decidendi: Unless the governing statute expressly discharges the guarantor, the creditor may proceed against the guarantor on the terms of the guarantee even where recovery from the principal borrower is affected by a special enactment.

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