TaxTMI 
TaxTMI 
1931 (4) TMI 18
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....rdraft at the Imperial Bank. On the 7th March, 1925, the company executed a deed of simple mortgage of its premises and plant in favour of the Secretary of State for India in Council and the Secretary of State therein agreed to guarantee the cash credit overdraft with the Patna branch of the Imperial Bank to the extent of Rs. 75,000 reducible annually by Rs. 5,000. This deed has not been produced before us, but it is agreed that the terms are as above stated-No money was actually advanced, however, at that time. On the 20th January, 1928, a promissory note payable on demand was executed by the company in favour of the Government for Rs. 60,000 with interest. This promissory note was endorsed by the Local Government to the Imperial Bank. On ....
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....borrower; and by section 15 it is enacted:- "The provisons of sections 9 to 13 (both inclusive) in respect of loans shall, subject to any rules that may be made under this Act, apply so far as may be to guarantee of cash credit overdrafts and fixed advances with banks." In my opinion, this section merely put the Government into the position that it should be able to recover the amount paid by it under a guarantee in the same way as it might recover the amount of a loan, but it did not have the effect of giving the Government power to recover the amount of guaranteed overdraft from the principal debtor unless the Government had been obliged to fulfil the terms of its guarantee. The fact that the Government endorsed to the bank the promisso....
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.... therefore, the Government applied in the winding up proceedings for the leave of the Court to proceed with the execution, and on the 25th September, 1929, Mr. Justice Wort made an order, the effect of which was, to allow those proceedings to continue. The Bank of Bihar and the company were made parties to the application before the learned Judge, and from the order made by him, the Bank of Bihar new appeals to this Bench. Now, as between the Government and the company the judgment obtained in the certificate proceeding is binding and the company cannot dispute their liability to the Government for the original debt has now become merged in the judgment. But Mr. Pas contends that his client, the Bank of Bihar, is in no way bound by the jud....