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of <h1>Enforcement of Guarantees Upheld: Respondents Ordered to Pay Outstanding Amount with Interest Under Financial Corporation Act.</h1> <h3>SICOM Limited Versus Mahipatrai J. Shah and Ors.</h3> The HC upheld the enforcement of guarantees under section 31(1)(aa) of the State Financial Corporation Act, directing the respondents to pay the ... - Issues:Enforcement of guarantees under section 31(1)(aa) of the State Financial Corporation Act; Jurisdiction of the court; Discharge of guarantors under section 139 of the Indian Contract Act; Liability of guarantors independent of principal debtor; Validity of waiver of rights under Indian Contract Act; Consideration for execution of guarantee; Limitation period for invoking guarantee; Rate of interest charged by financial institution; Payment of court fees on the claimed amount; Dispute regarding the quantum of claim.Analysis:Enforcement of Guarantees:The petitions were filed under section 31(1)(aa) of the State Financial Corporation Act against guarantors for the enforcement of their liabilities arising from guarantees provided for a loan disbursed to a company. The guarantors failed to make repayment as per the terms of the loan agreement, leading to the invocation of guarantees by the petitioner.Jurisdiction of the Court:The court determined its jurisdiction based on the location of the industrial concern's office and business activities. Since the office and substantial business of the company were within the court's jurisdiction, it had the authority to entertain the claim, supported by clauses in the deed of guarantee specifying Bombay as the exclusive jurisdiction.Discharge of Guarantors:The argument that the guarantors were discharged under section 139 of the Indian Contract Act due to the alleged undervalued sale of assets was rejected, as the company had accepted the sale and did not challenge the petitioner's actions under section 29.Liability of Guarantors:The court affirmed that the liabilities of principal debtors and guarantors are independent, allowing for the enforcement of guarantees against guarantors without initiating proceedings against the principal debtor.Validity of Waiver and Consideration:Contentions regarding the validity of waiver clauses in the guarantee and lack of consideration for executing the guarantees subsequent to financial assistance were dismissed, emphasizing that the guarantees were given in consideration of the loan amount lent and advanced.Limitation Period and Rate of Interest:The court rejected claims of limitation and excessive interest rate, citing precedents and agreements between the parties to uphold the invocation of the guarantee within the limitation period and the agreed-upon interest rate.Payment of Court Fees and Quantum of Claim:Arguments related to court fees and the quantum of the claim were also addressed, with the court ruling in favor of the petitioner and directing the guarantors to make payment of the outstanding amount along with interest, while rejecting contentions lacking supporting evidence.Conclusion:In conclusion, the court allowed the petition, directing the respondents to make payment of the outstanding amount with interest. No costs were awarded in the judgment.
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