B.P. Gupta vs State Bank of India and Others

A.L. Bahri, J.—Vide this judgment four company appeals (C. A. Nos. 8 to 13 of 1986) are being disposed of as they have arisen out of the common judgment and decree dated November 1, 1985*, of the company judge in two company petitions (C. P. Nos. 69 and 75 of 1982). While allowing the aforesaid petitions, the company judge passed a decree in favour of the plaintiff, State Bank of India, against the borrower-company (now in liquidation) and others, guarantors. The present appeals have been filed by the different guarantors.

The borrower-company is defendant No. 1, Depro Foods Ltd. It entered into an agreement with the State Bank of India, New Delhi branch, which was to stand as guarantor for payment of the money to a foreign company from whom Dcpro Foods Ltd. was to import machinery. The price of the machinery was payable in instalments and the company was to make payment to the State Bank of India in instalments. This agreement was entered into on June 26, 1970, and this contract is known as "deferred payment guarantee". Defendants Nos. 2 to 6 stood guarantee and property of defendant No. 8 was equitably mortgaged. When two instalments became due, the bank recovered the amount of the same by debiting the amount in the account of the company. Thereafter some more instalments fell due and the company was unable to pay the amount. In the meantime, the company got a cash credit limit to the extent of Rs. 6,00,000 on February 26, 1972, in the State Bank of India branch at Bahalgarh. This limit was increased to Rs. 6,50,000 on March 14, 1973. For the liability of this account only defendants Nos. 2 and 3 were guarantors. This account would be known as the second account. The bank debited this account in respect of four instalments of the amount of deferred payment guarantee. Another account was opened on March 16, 1974, with a cash credit limit of Rs. 1,00,000. In this account only defendant No. 2 was the guarantor. The fifth account with a cash credit limit of Rs. 7,50,000 was opened on March 21, 1975, and the guarantors were defendants Nos. 2, 4, 5 and 6. Subsequently, the cash credit limit was increased to Rs. 15,00,000 on December 13, 1976, known as the sixth account for which defendants Nos. 2, 4, 6 and 7 stood guarantee. It was in this account that the previous accounts Nos. 2, 4 and 5 were amalgamated. Subsequently, the limit was raised to Rs. 45,00,000 on January 8, 1977, and for this account the guarantors were only defendants Nos. 2 and 4. This is to be known as the seventh account. The plaintiff-bank filed a suit for the recovery of Rs. 70,26,642.23 which was pending in the High Court of Delhi. The winding-up proceedings of the borrower company, Depro Foods Ltd., were commenced in this High Court and subsequently, under orders of the company judge, the suit pending in the Delhi High Court was transferred to this High Court and it was registered as C. P. No. 69 of 1982. During the pendency of the aforesaid petition/suit, since more instalments under the "deferred payment guarantee" became due, the plaintiff-bank filed another suit which was registered as C. P. No. 75 of 1982, in this court for the recovery of Rs.2,08,616.29. These two petitions/suits were tried together and disposed of by one judgment. C. A. Nos. 10 and 8 have been filed by defendant No. 8-B. P. Gupta in the aforesaid C. P. Nos. 69 and 75 of 1982, respectively, whereas other guarantors have filed appeals Nos. 11 and 9 in the aforesaid cases, respectively.

A preliminary objection has been raised on behalf of the bank stating that the company appeals aforesaid are not maintainable and instead Letters Patent Appeals should have been filed on payment of ad valorem court-fee on the amounts involved in the appeals. It has been argued by Shri R. K. Chhibber. advocate, that the civil suit pending in the High Court at Delhi stood transferred to this court as such and though it was wrongly registered as C. P. No. 69, the same was disposed of by a judge of this court and not as company judge. The other civil suit was tried by the High Court which resulted in a decree under the provisions of the Code of Civil Procedure, the company appeal was not maintainable and appeal under Letters Patent would be maintainable and that too on payment of ad valorem court-fee and not fixed court-fee under the Companies Act. This contention has no merit.

Section 446 of the Companies Act reads as under :

"446(1). When a winding up order has been made or the official liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the court and subject to such terms as the court may impose.

(2) The court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of :

(a) any suit or proceeding by or against the company,

(b) any claim made by or against the company (including claims by or against any of its branches in India),

(c) any application made u/s 391 by or in respect of the company,

(d) any question of priorities or any other question whatsoever, whether of law or fact,

which may relate to or arise in course of the winding up of the company ;

whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960.

(3) Any suit or proceeding by or against the company which is pending in any court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that court.

(4) Nothing in Sub-section (1) or Sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court."

In view of Sub-section (1) of Section 446 as referred to above, after the order of winding up of the company has been made by this court, trial of the suit pending against the company in the High Court of Delhi was not to proceed except by leave of this court. Sub-section (2) of Section 446 referred to above empowers this court where proceedings for winding up of the company were pending to entertain and dispose of suits against the company. Sub-section (3) of Section 446 contemplates transfer of suits pending in other courts against the company which is being wound up in this court. The only exception given to the aforesaid provision is contained in Sub-section (4) of Section 446 that no such proceedings are to be transferred where such proceedings are pending in appeal before the Supreme Court or a High Court. In the present case, only the suit was pending in the High Court of Delhi when the order of winding up of the company was passed by this court. On the application of the liquidator, the order of transfer of that suit to this court was passed by this court and hence on transfer the said suit was registered as C. P. No. 69 of 1982. Section 483 of the Companies Act reads as under :

"483. Appeals from any order made, or decision given, in the matter of the winding up of a company by the court shall lie to the same court to which in the same manner in which, and subject to the same conditions under which, appeals lie from any order or decision of the court in cases within its ordinary jurisdiction."

Since in the present case in the matter of winding up of the company the suit pending in the Delhi High Court was transferred for disposal, any order passed in that suit would be appealable u/s 483 of the Companies Act as reproduced above as it relates to matter of winding up of a company.

The present appeal is, therefore, held to be maintainable u/s 483 of the Companies Act. The other suit was filed in the High Court itself as winding up proceedings were pending against the company in this court. The suit was tried in view of Section 446 of the Companies Act and the decision made therein is appealable in view of Section 483 of the Act aforesaid.

In C. P. No. 69 of 1982, the liability of Shri B. P. Gupta, defendant No. 8, was fixed at Rs. 2,27,466.05 out of the total amount of instalments Nos. 3 to 7 of the "deferred payment guarantee". Credit was given for Rs. 62,000 which was recovered by the bank in order to arrive at the aforesaid figure. Likewise the liability of the guarantors of the "deferred payment guarantee" was also fixed. The details are not necessary at this stage, some of the arguments addressed related to defendant No. 8 and other guarantors of the "deferred payment guarantee" who had not stood guarantee in the subsequent agreements of cash credit limit accounts. The reasons being recorded in respect of defendant No. 8 could also be attracted to the decision of other such guarantors.

Exhibit P-1 is the agreement dated June 23, 1970, vide which the company, Depro Foods Ltd., had agreed to pay the amount of the machinery to be imported to the bank. Exhibit P-2 is the guarantee furnished to the bank on deposit of Rs. 6,18,390.00 Exhibit P-3 is the guarantee furnished by other defendants, namely, H. P. Mittal and others. B. P. Gupta, defendant No. 8, had hypothecated his property by equitable mortgage and that is how he is made liable for the amount aforesaid. The plaintiff-bank relied upon the statement of account furnished to indicate that the amount of the third, fourth, fifth and sixth instalments were debited to the cash credit account of the company as the company did not pay the amount on the dates the instalments fell due. The liability of defendant No. 8 is thus still subsisting with respect to non-payment of the amount of the instalments.

It has been argued on behalf of the appellant-defendant No. 8 that by debiting the amount of the four instalments due under the "deferred payment guarantee" in the cash credit account of the company, the liability of defendant No. 8 stood extinguished as by debiting the aforesaid amounts it should be treated that the amounts were paid to the bank. This argument has also been pressed into service by learned counsel for the other guarantors of the "deferred payment guarantee" who did not stand guarantee for the liability of the company in the subsequent accounts mentioned above.

A banker has a lien over moneys belonging to the customer in different accounts and in different branches of the bank. It is open to the bank to appropriate money due in one account from money of the customer lying in other account. Likewise the bank has also a right to amalgamate different accounts of the customer and recover the amount due to the bank, by filing a suit. The principle of banker''s lien in that respect is well-recognised in different judicial pronouncements. Some of them may be noticed. Halesowen Presswork and Assemblies Ltd. v. Westminster Bank Ltd. [1970] 1 All ER 33 (QB). In this case, the right of adjustment of accounts and amalgamation was recognised ; in Punjab National Banh Ltd, v. Satya Pal Virmani [1956] 26 Comp Cas 135 bankers'' lien on-all the securities in favour of the bank was recognised, in N. Mohamed Hussain Sahib Vs. The Chartered Bank, Madras and Another, . The right of the bank to adjust the amount of cheque collected in the account in which money was due to the bank was recognised. It was also observed that the bank had the right to combine different accounts of the customer. While referring to the aforesaid rights of the bank, it is to be noticed that such a right is to be governed by the terms and conditions of the contract entered into between the bank and the customers in individual cases. In other words, such a general right is subject to the terms and conditions to the contrary mentioned in the contract.

Defendant No. 8, Shri B. P. Gupta, with respect to the "deferred payment guarantee" had mortgaged his property. His liability as correctly held by the learned single judge is to the extent of the value of the property mortgaged with respect to the amount due to the bank from the borrower-company in respect of payment of the amounts to the foreign-company for which the plaintiff-bank had stood as a guarantor. Defendant No. 8, Shri B.P. Gupta, is not concerned with other accounts of the defendant-company opened and operated with any branch or branches of the plaintiff-bank. Even if the liability of the company extends to the amount due under the "cash credit account" which is up to the limit of Rs. 45,00,000 (account No. 7), defendant No. 8 cannot be burdened with any such liability. The important question for consideration as far as defendant No. 8 is concerned is as to whether the amount of the four instalments Nos. 3 to 6 which were adjusted by the bank by debiting the same in the cash credit account of the company, can be recovered from him. The answer is in the negative. As in the case of the first two instalments the bank debited the account of the company which was in the new branch of the bank. The amount of the four instalments subsequently falling due stood adjusted by appropriating the same from the cash credit account which was opened in the branch of the plaintiff''s bank at the Bahalgarh opened in 1972 with a limit of Rs. 6,00,000 (account No. 2). If the cash credit limit had not been granted, and the company had no credit balance in the account at the Bahalgarh branch of the bank, there would have been no occasion for appropriating the amount from such account. By making debit entries it meant that the amount had been withdrawn from the bank from that account and paid in the account of the New Delhi branch for adjustment in the "deferred payment guarantee" account.

The contention of Shri R. K. Chhibber, advocate, is that the bank is an entity itself and its branches also have independent entity. This contention has been urged with respect to the moneys due to the plaintiff-bank from the borrowing company although the borrowing company may have accounts in different branches of the bank at different stations. In the present case, the "deferred payment guarantee" agreement related to the plaintiff''s bank at the New Delhi branch wherein the borrowing company also had another running account. Subsequently, at the Bahalgarh branch of the plaintiff-bank other accounts were opened from time to time prescribing and extending the cash credit limit as stated above. Accepting the argument of Shri R. K. Chhibber, advocate for the bank, that the amount of the company lying in different branches and different accounts could be appropriated by the plaintifi-bank in respect of the amounts due from the borrowing-company, it has been held above that the four instalments of the amount of the "deferred payment guarantee" were rightly appropriated by the bank against the account of the borrowing company which was opened in the Bahalgarh branch. The further contention of Shri Chhibber is that factually the borrowing company did not make payment of the instalments either to the New Delhi branch of the bank where the "deferred payment guarantee" agreement was entered into or to the Bahalgarh branch of the bank. In order to keep the accounts straight, entries of debit were made in the cash credit account of the borrowing company in the Bahalgarh branch which was debited to that extent by the New Delhi branch. For all intents and purposes the amount remained due to the bank under the "deferred payment guarantee" agreement. The argument appears to be fanciful and attractive but the same is not tenable in law, as far as defendant No. 8 and other guarantors are concerned, who did not stand guarantee in the subsequent cash credit limit accounts. Qua them the appropriation made from the cash credit limit account of the company amounted to payment in the "deferred payment guarantee" account of the New Delhi branch, Up to the limit sanctioned in the cash credit accounts at Bahalgarh, the borrower-company could also withdraw the amount and then deposit the same in the New Delhi branch in the "deferred payment guarantee account".

In C. P. No. 69 of 1982, the bank also claimed the amount of the seventh instalment of "deferred payment guarantee." In para 24 of the plaint, a reference was made to this amount as due to the bank from the defendants, although in the prayer clause the amount of this instalment was perhaps accidentally omitted. In spite of that the plaintiff-bank would be entitled to a decree in respect of the amount of the seventh instalment, which admittedly was not paid to the bank by the borrower-company, in view of Order 7, Rule 7 of the CPC and the decision of the Supreme Court in L. Janakirama Iyer and Others Vs. P.M. Nilakanta Iyer and Others, . In this case, it was held that in construing the plaint the court must have regard to all the relevant allegations made in the plaint and must look at the substance of the matter and not its form. In Mehar Chand v. Milkhi Ram AIR 1932 Lah 401 [FB], it was held that it is the duty of the court to mould the relief to be granted on the facts pleaded and proved. The Allahabad High Court in Maqsood Ali Vs. Zahid Ali Sabzposh, , where the plaintiff had claimed a one-tenth share of the income of waqf property was allowed a decree to the extent of a one-fourth share without amendment of the plaint as the plaintiff was found entitled to the same. The single judge was perfectly right in decreeing the amount of the seventh instalment in favour of the bank as well as against defendant No. 8, Shri B. P. Gupta, appellant and other guarantors.

The amount of the seventh instalment under the "deferred payment guarantee" was not debited in the cash credit account of the borrower-company. Such an entry was made in the protested bills account. The argument of learned counsel for the appellant that the guarantors were not liable to pay any amount due under the protested bills account or that by making a debit entry in the protested bills account of the seventh instalment, the liability of the guarantors is extinguished cannot be accepted. For clarification, it may be stated that the protested bills account is not an account where the customer under any contract keeps any money to his credit. When the bank finds that any account of any customer has become stale, the inoperative entries are taken to another register known as the protested bills account and the bank stops making further entries of interest due from time to time in the original account. It is only when the amount has to be claimed by filing a suit that calculations are made of the interest due which are added to the amount due under the contract. The contention of learned counsel for the appellant that the borrower-company or the guarantors, the appellant had no knowledge of the protested bills account or has no concern therewith is of no consequence. The suit of the plaintiff is based on non-payment of instalments of the amount due under the "deferred payment guarantee" and as such is maintainable. The bank was not supposed to keep any separate account of the "deferred payment guarantee" and even if any such account was prepared and not produced in the court, it is of no consequence. The dates on which the instalments fell due are mentioned in the agreements. Admittedly, the amount of the instalments was not paid on the due dates. The rest is a matter of calculation of interest as per agreement aforesaid to which the plaintiff-bank would be entitled in case of passing of the decree. On the facts it was not disputed that the amount of the seventh instalment was not paid by the borrower-company and that the same was also not appropriated from any account of the company. To this extent defendant No. 8 or other guarantors cannot escape liability for payment.

Shri R. K. Chhibber, advocate, has argued that the bank could have an additional guarantee even for the payment of the amount due under the "deferred payment guarantee" account. Reference has been made to the guarantees furnished by the guarantors of the aforesaid account which do not prohibit having additional guarantees by the bank. The question for consideration is as to whether in fact the guarantees submitted in the cash credit limit accounts from time to time were in respect of the amount due on the "deferred payment guarantee" account or not ? On perusal of those agreements of guarantees, it appears that there was no reference made to the amount due under the "deferred payment guarantee" account. Since the borrower-company was to establish the factory apart from the fact that machinery was imported from abroad and money was to be paid by the bank in instalments, the company also needed more funds for running the factory that it obtained the cash credit limit which was enhanced from time to time. The only fact to connect the "deferred payment guarantee" account with the cash credit accounts at the Bahalgarh branch was that at one stage the amount of four instalments was appropriated by the bank. Ultimately, it may be noticed that the amount due under the cash credit limit formed part of the consideration of the pronotes furnished by the borrower-company for getting enhancement in the cash credit limits. The consent of all the guarantors of the "deferred payment guarantee" account was not taken. This is so stated because at subsequent stages all the guarantors did not stand guarantee for the amount due under different cash credit accounts. The contention of Shri Chhibber, advocate, is that by getting more guarantors while opening the cash credit limit accounts as aforesaid the bank secured the amount due from the borrowing-company by having additional security. This contention is devoid of merit. In the subsequent guarantees furnished with respect to the new cash credit limit accounts referred to above, no mention was made regarding the amounts due from the borrowing-company earlier, that is on account of the "deferred payment guarantee." As a matter of fact subsequent guarantees related to different new cash credit accounts opened . which correlated with the limits allowed under such accounts.

The contention of learned counsel for the appellant-guarantors is that by entering into subsequent contracts of cash credit limits the guarantee furnished by the guarantors in respect of the "deferred payment guarantee" agreement stood extinguished as it amounted to variation of the contract without consent of such guarantors. In support of this contention reference has been made to the judicial pronouncements on the subject. The basic decision is of the Privy Council in AIR 1935 21 (Privy Council) . It was observed as under (headnote) :

"The surety, like any other contracling party, cannot be held bound to something for which he has not contracted. If the original parties have expressly agreed to vary the terms of the original contract no further question arises. The original contract has gone, and unless the surety has assented to the new terms there is nothing to which he can be bound, for the final obligation of the principal debtor will be something different from the obligation which the surety guaranteed. Presumably he is discharged forthwith on the contract being altered without his consent, for the parties have made it impossible for the guaranteed performance to take place."

The aforesaid decision was subsequently relied upon by the different High Courts in India. Those cases may briefly be noticed as under :

Nuserwanji Cursedji Bhesania and Co. Vs. Mahamayi Ammal and Others, . A similar view was taken by the Division Bench of the Lahore High Court in Pirthi Singh v. Ram Charan Aggarwal AIR 1944 Lah 428, and this decision was further relied upon in Ishar Singh Vs. Ram Saran Dass and Others, and in Union of India (UOI), Ministry of Food and Agriculture (Dept. of Food), New Delhi Vs. Pearl Hosiery Mills and Others, . The Bombay High Court in Jagivandas Jethalal v. King Hamilton and Co. AIR 1931 Bom 337, held as under (headnote):

"The rights of a surety are not to be interfered with without his consent. The effect of material alteration in the contract between the creditor and the principal debtor without reference to the surety is to discharge the surety. Giving time to the principal debtor does prejudice the rights of the surety by preventing him from paying off the creditor and then enforcing the creditor''s original rights against the principal debtors."

On the same lines the other decisions of the Bombay High Court are Keshavlal Harilal Setalvad Vs. Pratapsing Moholalbhai Sheth, , and Parvatibai Harivallabhdas Vani Vs. Vinayak Balvant Jangam, .

The Madras High Court also took a similar view in T.N. and Q. Bank Ltd. Vs. Official Assignee, and The Indian Bank, Madras Vs. S. Krishnaswamy and others, . The contention of learned counsel for the appellant cannot be accepted as there was no variation in the original agreement of guarantee furnished by the appellant with respect to the "deferred payment guarantee." What the bank did in respect of the amount of four instalments Nos. 3 to 6 when they became due was merely to debit the aforesaid amount in the cash credit account of the borrower-company in the Bahalgarh branch and in this manner the amount was appropriated as already stated above. At that stage no question arose regarding variation in the guarantee agreement of the "deferred payment guarantee." As already stated above, the new guarantee furnished for the cash credit limit account of the borrower-company at Bahalgarh did not make any reference to the "deferred payment guarantee."

The bank in the plaint referred to the interest payable in case of default of payment of the instalments of the amount under the "deferred payment guarantee" at 2 1/2%. However, the agreements entered into disclose that the interest was payable at the minimum bank rate at the rate of 10%. It seems the rate of 2 1/2% was incorrectly mentioned which was payable by the bank to the foreign-company if there was any default in payment of the instalments. As far as payment of late deposit of the amount of instalments by the borrower-company is concerned, the interest payable was the bank-rate minimum of 10%. On the same ground, as discussed above, the bank would be entitled to interest at the bank rate. In this context reference may also be made to Section 21(2)(e) of the Banking Regulation Act, which reads as under :

"21. (2) Without prejudice to the generality of the power vested in the Reserve Bank under Sub-section (1), the Reserve Bank may give directions to banking companies, either generally, or to any banking company or group of banking companies in particular, as to--

(e) the rate of interest and other terms and conditions on which advances or other financial accommodation may be made or guarantees may be given."

The plaintiff-bank is entitled to interest under the aforesaid provisions of the Act. On the ground that the interest claimed is excessive, the claim of the bank cannot be refuted. In Konakalla Venkata Satyanarayana (Died) and Others Vs. State Bank of India and Others, , it was held that there cannot be any presumption under the Usurious Loans Act that the bank was charging excessive interest, if the agreement allowed interest with monthly rests, The Madras High Court in Indian Bank, Tiruvannamalai Vs. V.A. Balasubramania Gurukal, , held that the Usurious Loans Act and the Banking Regulation Act are two separate enactments to operate differently. The charging of interest by the bank under the Banking Regulation Act is not controlled by the other Act. It was held that the provisions of the Banking Regulation Act alone regulate the rate of interest on advances by the nationalised banks.

Thus, in the present case, the plaintiff-bank could legitimately claim interest at the bank rate as agreed upon subject to the minimum provided in the agreements.

The other guarantors have also filed appeal against the decrees passed against them in C. P. No. 69 of 1982. That appeal is by defendants Nos. 2 to 6, These defendants stood guarantors in the "deferred payment guarantee" accounts. They are also entitled to the benefit of adjustment of the amount of four instalments in the cash credit account as far as "deferred payment guarantee" account is concerned. Those of them who stood guarantee in the cash credit account also would, of course, be liable to the extent of such guarantees furnished in such accounts. As already stated above, defendants Nos. 2 and 4 were guarantors in the seventh cash credit account with Rs. 45,00,000 limit. These defendants would otherwise be liable for the amount due in the cash credit account which also includes the amount of four instalments of the "deferred payment guarantee" account. Their liability is the same as that of defendant No. 1. Defendant No. 3 was only a guarantor In the cash credit limit account to the extent of Rs. 6,50,000 which was account No. 2. Though this account was subsequently merged when the sixth account was opened, his liability would be to the extent of Rs. 6,50,000 total in the cash credit Iimit account, apart from his liability under the original guarantee submitted to the "deferred payment guarantee" account with respect to the seventh instalment which was not paid. Defendant No. 5 stood guarantee to the cash credit limit account which was up to the limit of Rs. 7,50,000 (account No. 5). His liability was rightly fixed by the single judge. Defendants Nos. 6 and 7 stood guarantors in the cash credit limit account of Rs. 15,00.000 (account No. 6). Their liability would be to that extent in the cash credit limit account whereas the liability of defendant No. 6 in the "deferred payment guarantee" account would also be there in respect of the amount due with respect to the amount of the seventh instalment.

On behalf of the appellants, it was argued that as and when the cash credit limit was increased and new documents were executed including fresh pronotes and endorsements made thereon in favour of the bank, the previous agreements and guarantees furnished became part of history and cannot be enforced. This contention cannot be accepted as far as the cash credit limit accounts are concerned. Similar documents were executed in respect of the guarantees furnished. Those guarantees provided for the bank to have additional securities and guarantees which would not affect such guarantees furnished. In such a case it would be deemed that the previous guarantors had given consent in writing to the bank to have additional guarantees and their liability was not to be affected. The learned single judge was perfectly right in coming to such a conclusion on the facts of the present case.

The machinery of defendant No. 1, Depro Foods Ltd., was sold during the pendency of the suit. The amount of the sale proceeds was to the tune of more than Rs. 3,90,790. It has been argued on behalf of defendant No. 8 as well as other defendants-guarantors that this amount is to be adjusted against their liability. In principle, this stand is not disputed on behalf of the bank. Since the present appeals are against the preliminary decree and a final decree is yet to be passed, this amount can be adjusted at the time of passing of the final decree.

Two appeals have been filed by defendant No. 8 and the guarantors in C. P. No. 75, which related to the amount of the remaining instalments of the "deferred payment guarantee" agreement by the aforesaid appellants respectively. Since this amount was not paid by defendant No, 1 or the guarantors at any time, the bank is entitled to the same against the company as well as the guarantors and defendant No. 8 subject to what has been stated above regarding adjustment of the sale proceeds of the machinery of the company, a final decree would be passed in this case as well.

It has been argued on behalf of the appellants that the appellants cannot be made liable for the amount of the third account which was a clean term loan to the extent of Rs. 5,00,000 and for which the appellants never stood guarantee. Likewise arguments have been addressed in respect of account No. 4 cash credit limit to the extent of Rs. 1,00,000 in which only defendant No. 2 had stood as guarantor. There is no merit in these contentions. As already discussed above, the bank has a right of appropriation of amount of one account from the other. The bank could amalgamate such accounts and get it further secured by having additional guarantees. It was so done in the present case.

For the reasons recorded above, the appeals filed by defendant No. 8 in both the suits are allowed. The judgments and decrees of the single judge are modified. In C. P. No. 69 of 1982, the suit shall stand dismissed qua defendant No. 8, B. P. Gupta. Defendant No. 8 was liable to pay the amount of the seventh instalment, i.e., Rs. 55,233.03. A sum of Rs. 62,000 deposited by the borrower-company was to be adjusted and in this manner a sum of Rs. 6,766.97 was still in excess. The amount of four instalments, as already held above, cannot be recovered from him in the "deferred payment guarantee" account. This excess amount as found above can well be adjusted in the other suit along with the sale proceeds of the machinery. Thus, in this suit (C. P. No. 69 of 1982) the decree passed against him stands set aside.

Civil Appeal No. 11 of 1986, has been filed by defendants Nos. 2 to 6 in C. P. No. 69 of 1982, The appeal of defendant No. 2 stands dismissed as he is liable for the amount found due from defendant No. 1 to the extent he stood guarantee for the seventh account to the extent of Rs. 45,00,000.

The appeal of defendant No. 3 would stand partly allowed. He is to be given benefit of appropriation of amounts of four instalments in the cash credit account. Thus, in "deferred payment guarantee" account his liability is to the extent of the amount of the seven instalments of Rs. 55,233.03 and the amount of the guarantee furnished in the second account, i.e., Rs. 6,50,000 total being Rs. 7,05,233.03. Out of this amount, he is to get credit for the sum of Rs. 62,000 deposited by the borrower-company leaving a benefit of Rs. 6,43,233.03, To that extent the judgment and decree of the single judge is modified. It may be stated that at the time of passing of the final decree adjustment of the amount of sale proceeds of the machinery would be taken into effect.

The appeal of defendant No. 6 is to be partly allowed. In final account No. 6, his liability has been fixed at Rs. 44,04,504.63. In the "deferred payment guarantee" account he is liable to pay the seventh instalment also an amount of Rs. 55,233.03, the total being Rs. 44,59,737.66. To that extent, a decree against him is passed for this amount. To that extent the judgment and decree of the single judge is modified.

The appeal (C. A. No. 11) of the other defendants stands dismissed.

Civil Appeal No. 8 of 1986 has been filed in C. P. No. 75 of 1982. The amount found due by the single judge has been rightly fixed. However, at the time of passing of the final decree the court will adjust a sum of Rs. 6,7(56.97, which has been found in excess while deciding Civil Appeal No. 10 of 1986, filed by defendant No. 8, B. P. Gupta, appellant. He will also be given adjustment for the amount of sale proceeds of the machinery. To that extent the judgment and decree of the single judge stands modified.

Civil Appeal No. 9 of 1986, in C. P. No. 75 of 1982, is dismissed with the observation that the amount of the sale proceeds of the machinery would be adjusted at the time of passing of the final decree.

The parties in all these appeals are left to bear their own costs.