Dilip Kumar Seth,J. - (1.)The moot question that arises in these two applications being G. A. No. 99 of 2001 and G. A. No. 100 of 2001 is as to whether the decree obtained against the defendant-applicant can be enforced or proceeded with or could be treated to be a valid decree, against the defendant-judgment-debtor by the plaintiff, in view of the fact that the claim that was sought to be enforced arises out of a guarantee given by the defendant against recovery of an advance made to a company against which proceedings under Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the SICA) was initiated and referred to the Board for Industrial and Financial Reconstruction (hereinafter referred to as the BIFR). In order to appreciate the question first we may refer to the facts of the case in short, before we note the respective arguments advanced by learned counsel for the respective parties. The plaintiff-decree holder on February 9, 1996, allegedly advanced Rs. 75 lakhs as loan to one VHEL Industries Ltd. (hereinafter referred to as VHEL) by way of an intercorporate deposit. One J. K. Rajgarhia (hereinafter referred to as JKR) executed a deed of guarantee as guarantor for repayment of the said loan by VHEL. On August 13, 1998, the plaintiff filed a suit at Vadodara for recovering the alleged amount from VHEL and JKR. On September 11, 1998, terms of settlement, between the plaintiff and the two defendants in the Vadodara suit, were agreed. A further security for repayment of the loan was executed through a deed of guarantee by O.P. Rajgarhia (hereinafter referred to as OPR). On the same date three cheques, covering the entire amount, issued by OPR were handed over to the plaintiff, on the alleged understanding that in the event VHEL or JKR fails to pay, the plaintiff would be entitled to encash the cheques. On presentation by reason of non-payment by VHEL and JKR the cheques were dishonoured. Thereafter on September 30, 1998, a consent decree was obtained in the Vadodara suit, wherein the defendant agreed to pay the entire amount in instalments. On October 15, 1999, VHEL was referred to the BIFR under the SICA. On March 13, 2000, the plaintiff filed a suit (C. S. No. 83 of 2000) against OPR being a guarantor for recovery of the loan availed of by VHEL and guaranteed by JKR. The said suit was decreed on June 9, 2000. Admittedly at that time the enquiry under the SICA against VHEL was pending before the BIFR. On September 26, 2000, certain orders were passed in the execution application being G. A. No. 3752 of 2000. On November 8, 2000, further order was passed in the said execution. After having obtained change in favour of the present advocate-on-record on December 12, 2000, it came to the notice of the advocate-on-record that while obtaining the decree the court was not informed of the proceedings against VHEL pending before the BIFR. In the circumstances no suit could be proceeded with against a guarantee covering the loan advanced to VHEL and the decree passed therefor being a nullity, the same could not be proceeded with. Therefore, these two applications have been filed by the judgment debtor. G. A. No. 99 of 2001 was filed seeking recalling and/or setting aside of the decree dated June 9, 2000, passed in C. S. No. 83 of 2000 and also for dismissal of the said C. S. No. 83 of 2000, G. A. No. 100 of 2001 was filed for stay of proceedings of G. A. No. 3752 of 2000 being the execution of the decree passed in C. S. No. 83 of 2000, and for dismissal of the said execution proceedings and recalling of the orders dated September 26, 2000, November 8, 2000, and December 13, 2000, respectively, passed in the said execution proceedings, as well as for stay of operation of the respective orders. Thus, how the present matters have come up before this court.
(2.)Mr. S.N. Mukherjee, learned counsel appearing on behalf of OPR being the defendant-judgment-debtor herein contends that C. S. No. 83 of 2000, in effect, is an attempt to enforce a guarantee in respect of loan advanced to VHEL since referred to the BIFR. According to him in view of sections 16, 17 and 22 of the SICA such a suit does not lie and cannot be proceeded with and as such the decree passed therein is a nullity and cannot be enforced. Therefore, not only the decree but also all the orders passed therein, be recalled. According to Mr. Mukherjee Section 22, Sub-section (1), specifically bars a suit, for recovery of money or for enforcement of any security against the industrial company or of any guarantee in respect of any loans, or advance granted to the industrial company, shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the appellate authority, where an enquiry under Section 16 is pending or a revival/scheme under Section 17 is being framed or is under implementation or an appeal under Section 25 relating thereto is pending. In support of this contention he has referred to the decision in the case of Patheja Brothers Forcings and Stamping v. Industrial Credit and Investment Corporation of India Ltd., Gramophone Company of India Ltd. v. Mahaboob Productions Pvt. Ltd. [1993] 1 CLJ 335, Testeels Ltd. v. Radhaben Ranchhodlal Charitable Trust, and Asian Bearings and Tools Corporation v. Coastal Chemicals Ltd. [1996] 86 Comp Cas 590 (AP). According to him by reason of Section 22, Sub-section (1) of the SICA there was inherent lack of jurisdiction on the part of this court in proceeding with the suit and decreeing the same during the pendency of the reference before the BIFR. He further contends that the plaintiffs objection that the decree was passed in the presence of the learned advocate of OPR, therefore the applications are not maintainable and barred by the principle of res judicata, cannot be sustained in view of the fact that the decree was a nullity and was obtained without informing the court about the pendency of the reference cutting at the root of the jurisdiction of this court. In support of his contention he had relied upon the decision in the case of Surji (Mt.) v. Manki Ram. He further contends that the principle that the executing court cannot go behind the decree has certain exceptions. The nullity of a decree for want of jurisdiction is one such exception since the decree ceases to be executable. In support of his contention he relies on the decision in the case of Purusottam Padhee v. Mst. Panchali Bewa. Relying of the decision in the case of Official Trustee, West Bengal v. Sachindra Nath Chatterjee, and Urban Improvement Trust, Jodhpur v. Gokul Narain he contends that when a decree is a nullity the same can be assailed at any stage including at the stage of execution or in collateral proceedings since it hits at the very root of the jurisdiction and authority of the court. In order to contend that the court had no jurisdiction in view of Section 22(1) of the SICA he points out that the suit was founded on the deed of guarantee dated September 22, 1988. This guarantee was in respect of a loan or advance given to VHEL. The deed of guarantee recited that OPR stood guarantee for payment of the amount advanced to VHEL in the event VHEL or JKR fails to pay. OPR had given a guarantee for repayment of the loan advanced by the plaintiff to VHEL and that both OPR and JKR became co-sureties. It cannot be contended that OPR was a surety for JKR in view of the provisions contained in Sections 146 and 147 of the Indian Contract Act. From the pleading it is apparent that the entire claim of the plaintiff is based on a guarantee in respect of a loan or advance made by the plaintiff to the industrial company. The guarantee given by OPR being without consideration, cannot be enforced.
(3.)Mr. Pratap Chatterjee appearing on behalf of the plaintiff decree holder on the other hand contends that this application is not maintainable in view of the fact that the decree in the suit was passed after due service of writ of summons for final judgment and in the presence of the advocate for the defendant. As such the decree having not been passed ex parte the said application cannot be maintained. The questions now raised can be raised only in an appeal and not otherwise. This question of maintainability ought to have been taken before the decree was passed. Since it was not taken therefore, the same is barred by the principles of constructive res judicata or principle analogous thereto. The defendant cannot go into the merits of the case nor can it raise any argument as to the effectiveness or the extent of the guarantee. In the facts and circumstances of the case Order 9, Rule 13, of the Civil Procedure Code, has no manner of application. The guarantee in effect consists of two guarantees contained in one document. In one part OPR guaranteed payment receivable by the plaintiff in the event of default by (1)VHEL or (2) by JKR. Thus, there are two distinct defaults. One by VHEL and the other by JKR. The suit is confined only with regard to default by JKR. Therefore, it is not an enforcement of a guarantee either against VHEL or against any loan or advance made to VHEL. Section 22, Sub-section (1) is attracted to a suit for enforcement of guarantee in respect of any loan or advance granted to a sick industrial company. Whereas in the present case the suit is against OPR when it seeks to enforce the guarantee with regard to the guarantee of JKR who is an individual and not the industrial company. Section 22, Sub-section (1) contemplates a guarantee given for default by a company. It does not cover a guarantor of a guarantor. In case the contention of Mr. Mukherjee is accepted in that event it would be distortion of statutory provision as was held in the case of Prem Narayan Barchhiha v. Hakimuddin Saifi. Relying on the decision in the case of Deputy CTO v. Corromandal Pharmaceuticals he contends that the provisions of the SICA cannot be permitted to be misutilised as has been sought to be done in the present case for defeating the claim of the plaintiff by a private individual guaranteeing payment by another private individual. Relying on the decision in the case of State Bank of India v. Indexport Registered he contended that the object of the SICA is to protect the assets of the sick company not those of any private individual. Therefore, the mischief of Section 22, Sub-section (1) cannot be attracted when the plaintiff seeks to enforce the liability of OPR in the event of default of JKR both private individuals and not the sick industrial company. This proposition can be supported by the principle that the plaintiff can sue the guarantor only without suing the principal debtor. Alternatively he contends that the guarantee given by OPR was a counter guarantee for payment by JKR which has nothing to do with the principal debtor. In order to counter the contention of Mr. Mukherjee that the guarantee, being without consideration as such, cannot be enforced, Mr. Chatterjee contended that the said question cannot be gone into in view of the decision in the case of Gulam Hussain Khan v. M. Faiaz Ali Khan, ILR 15 Lucknow 656 and Jogindra Nath Roy v. Chandra Nath Poddar, ILR 31 Cal 242 (DB).