Guarantor liability and territorial jurisdiction upheld where guarantee, limitation and contractual interest objections failed.

Jurisdiction under section 31(1)(aa) of the State Financial Corporations Act was sustained where the petition alleged that the company's registered office, sanction and disbursement of facilities, repayment obligations, and execution of guarantees all arose in Bombay, and the guarantee deed also conferred exclusive Bombay jurisdiction; the territorial objection was rejected. The guarantors' discharge defence failed because sale of the secured assets did not by itself extinguish their liability, enforcement against them did not require first proceeding against the principal debtor, and the waiver clauses in the guarantee remained effective; the guarantee stayed enforceable. Limitation ran from invocation of the guarantee, so the claim filed soon after invocation was within time. The agreed contractual interest, court-fee objection, and quantum challenge were also rejected.

---

---

Issues: (i) Whether the Court had jurisdiction under section 31(1)(aa) of the State Financial Corporations Act to entertain the petition. (ii) Whether the guarantors stood discharged because the secured assets were sold, the principal debtor was not proceeded against, or the guarantee contained waiver clauses relating to sections 133, 134, 135, 139 and 141 of the Indian Contract Act, 1872. (iii) Whether the claim against the guarantors was barred by limitation. (iv) Whether the agreed rate of interest and the quantum of claim could be rejected.

Issue (i): Whether the Court had jurisdiction under section 31(1)(aa) of the State Financial Corporations Act to entertain the petition.

Analysis: The petition pleaded that the company had its registered office and carried on business within Bombay, the facilities were sanctioned and disbursed there, repayment was due there, and the guarantees were executed there. No affidavit in reply controverted those averments. The deed of guarantee also conferred exclusive jurisdiction on the courts at Bombay. On those materials, the jurisdictional objection was not accepted.

Conclusion: The objection to territorial jurisdiction was rejected.

Issue (ii): Whether the guarantors stood discharged because the secured assets were sold, the principal debtor was not proceeded against, or the guarantee contained waiver clauses relating to sections 133, 134, 135, 139 and 141 of the Indian Contract Act, 1872.

Analysis: The sale of the mortgaged assets under section 29 of the State Financial Corporations Act was not challenged by the company, and the mere assertion of under-valuation was unsupported. The liability of the guarantors was treated as independent of the principal debtor, and enforcement against the guarantors did not depend on first proceeding against the principal debtor. The guarantee was given in consideration of the loan advanced, and no separate consideration for each covenant was required. The contention based on discharge and invalid waiver therefore failed.

Conclusion: The guarantors were not discharged and the guarantee remained enforceable.

Issue (iii): Whether the claim against the guarantors was barred by limitation.

Analysis: The period of limitation against the guarantors was held to commence from invocation of the guarantee. Since the guarantee was invoked on 23.4.2002 and the petition was filed on 16.9.2002, the claim was within time.

Conclusion: The plea of limitation was rejected.

Issue (iv): Whether the agreed rate of interest and the quantum of claim could be rejected.

Analysis: The agreed contractual interest was accepted as binding, and the guarantors were liable on the same footing as the principal debtor. The objection to court fee was rejected in view of binding precedent under the same statutory scheme. On quantum, no material was produced to dislodge the figures placed by the petitioner.

Conclusion: The objections to interest, court fee and quantum were rejected.

Final Conclusion: The petition was held maintainable and the guarantors were made liable for the quantified amount with further interest.

---