November 2009
Recovery — Directors of Pvt. Ltd company who were not co-borrowers nor guarantors not liable — Recovery of Debts due to Banks and Financial Institutions Act 1993.
By Dr. K. Shivaram, Ajay R. Singh, Advocates
Reading Time 2 mins
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Recovery — Directors of Pvt. Ltd company who were not
co-borrowers nor guarantors not liable — Recovery of Debts due to Banks and
Financial Institutions Act 1993.
[Vijay Dashika Char v. Bank of Maharashtra, AIR 2009
(NOC) 2260 (Bom.)]
The plaintiff bank filed a suit for a monetary claim
against the defendants. The original defendant was a private ltd company who
had taken financial assistance from the plaintiff bank of Rs.2.50 lacs. In
security the defendant company had executed a demand promissory note.
The bank had contended that the managing director and
director had executed bond and were guarantors, however no such bond was ever
produced by the bank before the Court.
The Court observed that merely because the directors had
put their signatures on the credit note, would not render the promise made a
personal promise on part of directors. It was admitted position that the cash
credit facility was given only to the company. There was no personal cash
credit facility granted to any of the directors. Thus it was clear that there
was no personal facility granted in favour of any individual director. Thus,
the bank has no case against the directors, but was only for recovery from the
company. The plaintiff’s suit as against the directors’ was therefore
dismissed.
