CENTRAL BANK OF INDIA versus VIRUDHUNAGAR STEEL ROLLING MILLS LTD. & ORS.

Citation: [2015] 12 S.C.R. 64 · Decided: 29-12-2015 · Supreme Court of India · Bench: VIKRAMAJIT SEN · Disposal: Dismissed

Judgment (excerpt)

A 
B 
[2015] 12 S.C.R. 64 
CENTRAL BANK OF INDIA 
V. 
VIRUDHUNAGAR STEEL ROLLING MILLS LTD. & ORS. 
(Civil Appeal No. 3654 OF 2006) 
DECEMBER 29, 2015 
[VIKRAMAJIT SEN AND SHIVA KIRTI SINGH, JJ.] 
Bank/Banking: Credit facilities taken by respondent 
c company from appellant-bank - On 30. 8. 197 4, respondent 
nos.2 to 4, the Directors of the respondent company gave 
personal guarantee - Held: Liabilities incurred by the 
respondent company prior to the execution of personal 
guarantees by respondent nos.2 to 4 were not recoverable 
D from the latter. 
Dismissing the appeal, the Court 
HELD: The Guarantee Deeds executed by 
Respondent Nos.2 to 4 on 30.8.1974 rendered them 
E personally liable for any transactions or advances made 
l>Y the appellant Bank to the Respondent Company after 
30.8.197 4. The Bank account lay dormant after this date, 
all dealings having been transacted much prior thereto. 
F Such being the position, it is not open to the Appellant 
E3ank to pursue Respondent Nos.2 to 4 for recovery of 
debts incurred· by the Respondent Company in favour 
of the Appellant Bank. The decision is founded on the 
evidence that has been recorded in this suit. [Para 7] [69-
G 0-F] 
H 
Sita Ram Gupta v. Punjab National Bank (2008) 
s sec 111: 2008 (4) SCR 636 -
held 
inapplicable. 
64 
CENTRAL BANK OF INDIA v. VIRUDHUNAGAR STEEL 
65 
ROLLING MILLS LTD. 
J. J. Harigopal Agarwal v. State Bank of India AIR 
A 
1976 MAD 211; D. K. Mohammed Ehiya Sahib 
v. R.M.PV Val/iappa ChettiarAIR 1976 MAD 536; 
Montosh Kumar Chatterjee v. Central Calcutta 
Bank Ltd. (1952-53) 57 CWN 852; B. G. Vasantha 
v. Corporation Bank, Mangalore (2005) 10 SCC 
B 
215; M.S. Anirudhan v. Thomco's Bank Ltd. AIR 
1963 SC 746: 1963 Suppl. SCR 63 - referred 
to. 
Case Law Reference 
C 
AIR 1976 MAD 211 
AIR 1976 MAD 536 
(1952-53) 57 CWN 852 
2008 (4) SCR 636 
(2005) 1 o sec 215 
1963 Suppl. SCR 63 
referred to. 
referred to. 
referred to. 
held inapplicable. 
referred to. 
referred to. 
Para 2 
Para2 
Para 5 
Para 6 
Para 6 
Para 6 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 
3654 of2006 
D 
E 
From the Judgment and Order dated 02.01.2003 of the 
Division Bench of the High Court of Madras in Appeal Suit No. 
251 of 1987 
Jyoti Dastidar, Dinesh Mathur, Rameshwar Prasad Goyal 
for the Appellant. 
F 
T. Archana, K. K. Mani, P.. B. Suresh, Vipin Nair, Prithu 
Garg, Mis. Temple Law Firm for the Respondents. 
The Judgment of the Court was delivered by 
VIKRAMAJIT SEN, J. 1. This Appeal assails the 
concurrent findings of the Trial Court as well as the High Court 
absolving the Respondents, other than Respondent No.1 which 
G 
is the company which received various credit facilities from H 
66 
SUPREME COURT REPORTS 
[2015] 12 S.C.R. 
; 
A 
the Appellant Bank, of a total amount of ~12 lacs against 
security of moveable as well as raw materials. These facilities 
were subsequently secured in favour of the Appellant Bank by 
. means of continuing guarantee by the Directors of the 
I 
Respondent Company, who are Respondent Nos. 2 to 4 herein, 
B in terms of Promissory Notes, Letters of Guarantee, L~tters of 
Hypothecation and Letters of Continuity all dated 30.8.1974. 
On 30.6.1977 and again on 31.12.1977, by means of separate 
letters from the Respondent Company to the Appellant Bank, 
the entire balance due, stood confirmed. Eventually, the 
C Appellant filed a suit on 2.5.1980 for recovery of 3,94,805.42 
with future interest at the rate of 14 per cent per annum. In the 
interregnum another creditor of the Respondent Company, 
namely Respondent No. 5, had already initiated recovery 
D proceedings in the Court in the course of which the properties 
of Respondent Company came to be auctioned and were 
purchased by Respondent No. 6 on 26.10.1979. 
2. As many as ten issues were framed by the Trial Court 
which went on to decree the suit against the Respondent 
E Company, but dismissed it as against Respondent Nos. 2 to 
4. The conclusions of the Trial Court so far as they are germane 
to decision in this Appeal were that the liabilities incurred by 
the Respondent Company prior to the execution of the personal 
F guarantees by Defendant Nos. 2 to 4 were not recoverable 
from the latter. 
The Trial Court placed reliance on two 
judgments of the Madras High Court, namely J .J. Harigopal 
Agarwal v. State Bank of lndi-a AIR 1976 MAD 211 and D. K. 
Mohammed Ehiya Sahib v. R.M.P.V. Valliappa Chettiar AIR 
G 1976 MAD 536. In the latter case it was held that if t

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