Appeal No. 293 of 2015. Case: The Hongkong and Shanghai Banking Corpn. Ltd. Vs Geeta S. Advani and Ors.. Delhi DRAT DRAT (Delhi Debt Recovery Appellate Tribunals)

Case NumberAppeal No. 293 of 2015
CounselFor Appellant: Sumit Bansal, Shilpa Thakur and Gaurav Khanna, Advocates and For Respondents: Ravi Aggarwal, Shyam Moorjani and Sanjeev Kumar, Advocates
JudgesRanjit Singh, J. (Chairperson)
IssueIndian Contract Act, 1872 - Sections 129, 130, 131, 132, 133, 62
Judgement DateMarch 10, 2016
CourtDelhi DRAT DRAT (Delhi Debt Recovery Appellate Tribunals)


Ranjit Singh, J. (Chairperson)

  1. Appellant Bank had filed an O.A. for recovery of a sum of Rs. 5,38,58,458.95. Initially, respondents who were defendants 1 to 5 in the O.A. were declared ex-parte and an ex parte final judgment was passed on 10.5.2012. Later, respondent No. 1, Mrs. Geeta S. Advani, appeared before the Tribunal and prayed for setting aside of the ex-parte judgment passed against her, by filing M.A. No. 96/2013. This M.A. was allowed and the O.A. was restored as against respondent No. 1. The case set up by the Bank is that respondent through its Directors, including respondent No. 1, had approached the Bank for credit facilities in or around July 2004. The respondents availed Export Facility for Purchase/Negotiation of Documents Against Payment/Acceptance for Rs. 41 crore and Pre-shipment Loan Against Export (LAE) available in FCY for Rs. 4,88,80,000/-. Mrs. Geeta S. Advani and other Directors had executed irrevocable personal guarantees to the extent of Rs. 82,00,00,000/- and Rs. 10,75,00,000/- to cover and secure the payment of outstanding. The borrower company had availed credit facilities from other Banks as well. When an outstanding amount of Rs. 5,07,37,772/- was due to the appellant Bank, the Bank issued recall notice on 25.1.2008. A legal notice was also issued on 5.3.2008 calling upon the borrower to pay the amount with interest @ 17.5% p.a. w.e.f. 25.1.2008 and accordingly a claim of Rs. 5,38,58,458.95 was made.

  2. Since all other respondents were proceeded ex-parte, the O.A. was contested by Mrs. Geeta Advani only. In her written statement, respondent No. 1 pleaded that the O.A. was not signed and verified by authorized person and thus was liable to be dismissed. As per the respondent, O.A. was filed with respect to a particular facility purportedly granted/sanctioned vide Facility Advice Letter dated 10.7.2007 as was averred in paragraph 3 of the O.A. As per the Facility Advice Letter dated 10.7.2007, the following facilities were sanctioned:

    It is urged that in the said letter dated 10.7.2007 as security for all limits the personal guarantees of Mr. T.O. Joseph (respondent No. 3), Mrs. Sophy Joseph (respondent No. 4), Ms. Elizabeth Thomas (respondent No. 5) and one Mr. T.O. Thomas only were taken. Respondent No. 1 would accordingly urge that there was no requirement of personal guarantee of the said respondent as per the Facility Advice Letter dated 10.7.2007. The respondent No. 1 would further urge that admittedly the Bank had not filed any letter of personal guarantee signed by her with respect to the facilities granted vide Facility Advice Letter dated 10.7.2007. Respondent No. 1 accordingly had claimed that she was not liable for any amount as claimed in the O.A. and that the O.A. was wrongly filed against her. Respondent would point out that the Bank had admitted and acknowledged that respondent No. 1 was not guarantor to the alleged facility.

  3. Elaborating further, it is pointed out that the Bank had granted credit facility (Packing Credit) to the borrower to the tune of Rs. 10.75 crore and had required furnishing of personal guarantees of Chairman/Directors, i.e., respondent No. 1 and other respondents. As per respondent No. 1, she did not furnish any legal, valid and subsisting personal guarantee. It is urged that on 16.10.2006 the Bank had reduced the current facilities w.e.f. 1.2.2007 while cautioning the borrower company that new facility amount will be available on specific terms and conditions outlined in the said letter. These facilities granted were as under:

    As per the terms/requirement, the Bank had obtained the personal guarantees of respondents 3, 4 and 5 only. As per the respondent No. 1, the aforesaid facilities were absolutely new credit facilities granted to the borrower company and were not in continuation of the old credit facilities, i.e. Packing Credit, granted in 2004. The respondent would also urge that even if it was assumed for the sake of argument that the personal guarantee of the said respondent was valid and subsisting for the Packing Credit Facility of Rs. 10.75 crore, the same stood discharged due to novation of the main contract. The respondent No. 1 would urge that except for the signature of the respondent on a printed form, there was no consent, concurrence, knowledge, notice or approval of the respondent to the alleged fresh, new and totally changed credit facilities granted in the year 2006-07. As per respondent No. 1, the Bank had suppressed material facts from the Tribunal inasmuch as there was no mention of sanction letters dated 16.10.2006 and 26.9.2005 in the O.A. There was no mention of grant of documentary credit (D.C.) limit of Rs. 1.50 crore and deferred payment credit of Rs. 1.50 crore. There was neither any mention of grant of fresh credit facilities vide letters dated 26.9.2005 and 16.10.2006 and 10.7.2007 in the O.A. It was the case of non-filing of individual statement of account relating to Packing Credit Limit and other limits. It was also alleged that the Bank did not file copy of the legal notice dated 5.3.2008 mentioned in para 9 of the O.A.

  4. In this background, the Tribunal formulated points which required determination. Two of the points which are relevant were as under:

    Whether AW-1/6 agreement dated 23.1.2007 and AW-1/1 agreement dated 10.7.2007 were in variance to the contract of guarantee executed by respondent No. 1 on 21.7.2004 discharging the contract of guarantee of the said respondent?

    Whether the demand of personal guarantee from respondents 3, 4 and 5 and execution of the personal guarantee by respondents 3, 4 and 5, AW-1/7, AW-1/8 and AW-1/9 on 23.10.2006 was an express conduct on the part of the Bank in discharging the guarantee of respondent No. 1 executed on 21.7.2004?

    The Tribunal below has considered these two issues...

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