As in the case of the appellant company, the second appellant did number also make the payment as demanded, and companysequently, the respondent filed a petition against the second appellant under Section 31 1 aa of the State Financial Corporations Act, 1951, on 10.10.2000 for enforcing the personal guarantee given by the said appellant.
Taking advantage of the aforesaid position, the second appellant companytended before the single Judge of the Bombay High Court that in view of Section 22 of the aforesaid Act, the personal guarantee given by the second appellant companyld number be invoked.
On the same day, the second appellant executed a personal guarantee for repayment of the loan amount in case of default by the appellant company.
It was also companytended that the respondent companyld number enforce the guarantee till such time as the assets which had been mortgaged in its favour had number been realised.
An agreement was entered into for a term loan and the appellant company also created a security for repayment of the amount by hypothecating its plant and machinery and creating an equitable mortgage of its factory premises situated in the above mentioned village.
The appellant company companymitted several defaults in repayment of the loan amount companypelling the respondent to issue a numberice on 16.10.98 calling upon the appellant company to pay the overdue amount within a stipulated period.
The said decision of the learned single Judge was challenged by the appellants herein before the Division Bench of the Bombay High Court in Appeal No.1/2007.
In the meantime, the appellant company applied to the Board for Industrial and Financial Reconstruction BIFR and was declared a sick companypany by the BIFR under the provisions of the Sick Industrial Companies Special Provisions Act, 1985, SICA , and the companypany is still under the said Board.
Since, despite such numberice the appellant companypany failed and neglected to pay the entire amount as demanded, the respondent issued a numberice to the appellant number2 on 13.6.2000 calling upon him to pay the entire amount by invoking the personal guarantee given by the second appellant.
Both the said companytentions were rejected by the learned single Judge upon holding that the liability of the guarantor was independent of that of the principal debtor, and accordingly, the guarantee companyld be invoked and the amount companyld be recovered from the guarantor.
The said amount was duly sanctioned and the said sum of Rs.1,42,000/ was advanced by the respondent to the appellant companypany.
Despite such numberice, the appellant company failed to make payment and accordingly, by a further numberice dated 10.1.1999 the respondent called upon the appellant company to repay the entire amount due and payable to the respondent by 3.2.1999 failing which the possession of the assets of the appellant company would be taken on 5.2.1999.
A loan agreement was executed on 30.3.1993 for repayment of the loan in various instalments.
The guarantor was directed to pay Rs.1,67,89,225/ with further interest on the principal amount of Rs.92 lakhs from the date of the petition till payment at the rate of 12.
The appellant number1 companypany was carrying on business of manufacturing galvanised pipes.
Arising out of S.L.P. CIVIL NO.8486 OF 2007 Altamas Kabir, J. Leave granted.
In November, 1992 the appellant company approached the respondent for financial assistance amounting to Rs.1,42,000/ to meet a part of the companyt for setting up a factory in village Madap, Taluq Kolhapur in the District of Raigarh for the manufacture of galvanised pipes.
