Personal guarantor liability in revenue recovery upheld, with limited protection on the sequence of sale of properties

Revenue recovery proceedings against directors who had acted as personal guarantors for a defaulted company loan were upheld because the initiating institution was notified under the Revenue Recovery Act. The challenge to recovery was rejected on that basis. The Court, however, granted limited protection by directing that the petitioners' movable properties should not be proceeded against first, and could be sold only if the proceeds from other available properties were insufficient to meet the dues. The ruling confirms that a personal guarantor cannot avoid recovery action merely because the liability arose from the company's default, though the sequence of recovery may be regulated.

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Issues: Whether revenue recovery proceedings initiated against the petitioners, who were directors and personal guarantors for the company's dues, were liable to be interfered with, and whether the petitioners' movable properties could be excluded from recovery.

Analysis: The petitioners had guaranteed the loan liability of the company, which had committed default. The first respondent was an institution notified under Section 71 of the Revenue Recovery Act, and on that basis the initiation of revenue recovery proceedings against the petitioners was held to be unobjectionable. At the same time, since the company and the Managing Directors had mortgaged movable properties, the Court protected the petitioners to the limited extent of directing that their movable properties should not be proceeded against in the first instance, and could be sold only if the proceeds of the other available properties were insufficient to satisfy the dues.

Conclusion: The challenge to the revenue recovery proceedings was rejected, but the petitioners obtained limited protection in respect of their movable properties.

Final Conclusion: The recovery proceedings were upheld against the petitioners, with a narrow restriction on the mode and sequence of recovery.

Ratio Decidendi: A personal guarantor to a defaulted loan cannot avoid revenue recovery proceedings initiated by a notified institution, though the Court may regulate the order in which properties are proceeded against.

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