Skip to main content

Suing directors for loan recovery

The Supreme Court last week ruled that though a mortgage of assets of a company which failed to return a loan may have come to an end with their sale, the contract of indemnity with regard to the loan would continue. They are independent contracts. The directors who stood guarantee will still be liable to return the full loan.

Therefore, the financial institution which proceeded against the borrower firm can sue it and the guarantors for recovery of the balance of the loan if the sale proceeds are not sufficient to satisfy the claims of the secured creditors. The court reconciled two of its earlier judgments which were apparently contradictory in the new judgment, Deepak Bhandari vs Himachal Pradesh Industrial Development Corporation. In this case, the corporation issued recall notice to the firm in 1990 and sold the assets in 1994. But the amount recovered was not sufficient to meet the claims of the corporation and another secured creditor.

Therefore, the directors of the firm were sued in the high court in 1994 for the balance of the dues. They opposed it arguing that the suit was beyond the time limit as the recall notice was in 1990 and the suit was filed four years later. It should have been within three years according to the law of limitation. The high court rejected the contention. One director appealed, but the Supreme Court upheld the high court view and asserted that the period of limitation starts from the date when the assets were sold (1994) and not when the recall notice was given (1990).

Article referred: http://www.business-standard.com/article/opinion/suing-directors-for-loan-recovery-114020200781_1.html

Comments

Post a Comment

Most viewed this month

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more

Court approached in the early stages of arbitration will prevail in all other subsequent proceedings

In National Highway Authority of India v. Hindustan Steelworks Construction Limited, the Hon'ble Delhi High Court opined that once the parties have approached a certain court for relief under Act at earlier stages of disputes then it is same court that, parties must return to for all other subsequent proceedings. Language of Section 42 of Act is categorical and brooks no exception. In fact, the language used has the effect of jurisdiction of all courts since it states that once an application has been made in Part I of the Act then ―that Court alone shall have jurisdiction over arbitral proceedings and all subsequent applications arising out of that agreement and arbitral proceedings shall be made in that Court and in no other Court. Court holds that NHAI in present case cannot take advantage of Section 14 of the Limitation Act, 1963 for explaining inordinate delay in filing present petition under Section 34 of this Act in this Court.
Post a Comment
Read more

No Rebate For Stamp Duty Paid In Another State - Bombay HC

A three judge bench of the Hon'ble Bombay High Court (Bombay HC) in a recent judgment in the matter of Chief Controlling Revenue Authority, Maharashtra State, Pune and Superintendent of Stamp (Headquarters), Mumbai v Reliance Industries Limited, Mumbai and Reliance Petroleum Limited, Gujarat1 has held that orders in case of a scheme of arrangement under Section 391 to 394 of the Companies Act, 1956 (Act) involving different High Courts in multiple states, are separate instruments in themselves. Accordingly, stamp duty would be payable on all the orders (and consequently, all the states) without the benefit of remission, rebate or set-off.
Post a Comment
Read more