Suit against the Guarantor Is Not a Suit for Recovery of Debt but For ‘Enforcement of the Guarantee’

1.         An extract of Section 19(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“DRT Act”) is reproduced below for ready reference.

“19. Application to the Tribunal.—(1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction…………” (emphasis supplied swiss replica watches)

 

   INTERPRETATION — SECTION 19 (1)

It is submitted that that a civil action for the recovery of money under section 19(1) of DRT Act, and a civil action for the enforcement of any guarantee in respect of any loan, are two entirely different actions as explained below.

 

2.         Here,   it would be advantageous to refer Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, which states as follows.

 

“22. SUSPENSION OF LEGAL PROCEEDINGS, CONTRACTS, ETC. (1) Where in respect of an industrial company, an inquiry under section 16 is pending, or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding-up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and *[no suit for the recovery of money or for the 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.” (emphasis supplied)

 

*Note: It is pertinent to note here that the words in bracket were inserted by Act 12 of 1994, S. 12 (w.e.f. 01-02-1994). Therefore, it is evident that suits for the recovery of money, and suits for the enforcement of any guarantee in respect of any loan, are two entirely different civil actions, otherwise, there was no need to add redundant words by the Parliament in section 22(1) w.e.f. 01-02-1994.

 

3.         The aforesaid analysis is further strengthened by observations of Hon’ble Bombay High Court in Centurion Bank Ltd. vs Indian Lead Ltd. And Anr. {(2000) 100 Comp Cas 537 Bom; (1999-3) 101 Bom LR 556; Decided on 20 August, 1999} as follows.

 

"19. It has been pointed out that defendant No. 2 is a guarantor against whom the suit is only for recovery of money. The suit against the guarantor is not a suit for recovery of debt but for enforcement of the guarantee." (emphasis supplied)

 

Thus, Hon’ble Bombay High Court held that the civil action against the guarantor is not for recovery of debt but for enforcement of the guarantee. As per Black’s Law Dictionary, Ninth Edition, at page 608, “enforcement” means the act or process of compelling compliance with a law, mandate, command, decree or agreement.

DRT Has No Jurisdiction

























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