2002 (6) TMI 603 - HC - Indian Laws

Appellate court overturns judgment, decree in favor of plaintiff.

Indian Bank Versus The State of Tamil Nadu and Ors.

Indian Bank Versus The State of Tamil Nadu and Ors. - TMI Issues Involved:1. Liability of the first defendant.2. Maintainability of the suit against guarantors alone.3. Limitation period for the suit against guarantors.4. Prematurity of the suit.5. Proper service of notices under Section 80 CPC.6. Necessity of the Government of India as a party.7. Non-joinder of the Government of India.8. Relief entitlement for the plaintiff.Detailed Analysis:1. Liability of the First Defendant:The learned Single Judge concluded that the first defendant was not liable for the suit amount. The court noted that the suit was filed against defendants 2 and 3 based on the Deeds of Guarantee they executed. There was no justification provided in the plaint or during the proceedings to establish that the first defendant was a necessary party. The appellate court agreed with this finding.2. Maintainability of the Suit Against Guarantors Alone:The court addressed whether a suit against guarantors alone was maintainable without the principal debtor being a party. The learned Single Judge decided in favor of the plaintiff, referencing the decision in *Gopilal J. Nichani v. M/s. Track Industries and Components Ltd.*, which clarified that the liability of the guarantor is co-extensive with that of the principal debtor. The appellate court concurred with this interpretation.3. Limitation Period for the Suit Against Guarantors:The critical issue was whether the suit was barred by limitation. The learned Single Judge held that the suit was barred by limitation, applying Articles 19, 7, and 25 of the Limitation Act, which prescribe a three-year period. However, the appellate court disagreed, citing the Supreme Court's decision in *Margaret Lalita v. Indo Commercial Bank Ltd.*, which held that in the case of a continuing guarantee, limitation runs from the date of breach. The appellate court found that the guarantees were continuing guarantees, and since the accounts were live and the suit was filed within three years of invoking the guarantees, the suit was within time under Article 55 of the Limitation Act.4. Prematurity of the Suit:The defendants argued that the suit was premature as the plaintiff had already pursued claims before the Commissioner of Payments and had pending appeals. The learned Single Judge held that the suit was not premature, noting that the appeals and writ petitions had been dismissed during the pendency of the suit. The appellate court agreed with this finding.5. Proper Service of Notices Under Section 80 CPC:The learned Single Judge found that the statutory notices under Section 80 CPC were properly served on the defendants. The appellate court upheld this finding, noting that the plaintiff bank had sent the necessary notices before filing the suit.6. Necessity of the Government of India as a Party:The defendants contended that the Central Government was a necessary party since it was liable for any shortfall in compensation under the Nationalisation Act. The learned Single Judge rejected this argument, stating that the suit was based on the guarantee agreements, not under the Nationalisation Act. The appellate court agreed, noting that defendants 2 and 3 had created liability against themselves through the guarantees.7. Non-Joinder of the Government of India:Related to the previous issue, the defendants argued that the suit was bad for non-joinder of the Government of India. The learned Single Judge found that the Central Government was not a necessary party, and the appellate court upheld this conclusion for the same reasons.8. Relief Entitlement for the Plaintiff:The appellate court concluded that the suit was valid and within the limitation period. It set aside the judgment and decree of the learned Single Judge and decreed the suit against defendants 2 and 3 as prayed for by the plaintiff, including costs.Conclusion:The appeal was allowed, and the judgment and decree passed by the learned Single Judge were set aside. The suit was decreed against defendants 2 and 3, with costs awarded to the plaintiff.