TMI Blog1997 (7) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... porate deposit of Rs. 1.00 crore on 16-5-1995 to the respondent with repayment promise within 90 days. On 10-8-1995 there was a request by the respondent for extension of the deposit by 60 days. The respondent had repaid by that time, Rs. 80.00 lakhs, but since thereafter they did not clear the balance in spite of several demands, the application for winding up was filed. The application was contested at the admission stage by the respondent taking the stand that since they had paid Rs. 80.00 lakhs, the appellant was to release the securities held by it proportionately but that it had refused to do so. Such conduct of the appellant made the respondent incapable of raising money on the held up securities as a consequence of which the amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. It is conceded by Mr. S. Ravi that in the loan transaction there was no stipulation of proportionate release of the pledged certificates when amounts are repaid. A loan contracted and paid is subject to the terms and conditions settled between the parties as part of the contract. If the contract does not stipulate steps to be taken as are contended by the respondent, a right of proportionate release of the shares on payments being made must be found in the general principles of law governing contracts or as an accepted commercial practice. No such interpretation of law has been brought to our notice and indeed no such general commercial practice has also been pleaded. On the other hand, the correspondence between the parties would rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of his guarantee; and this upon the ground, at first confined to equity, but afterwards extended to law, that it is inequitable in the creditor, who is at liberty to increase the balance or not, to increase it at the expense of the surety." Considering the question of balancing the equities of a surety and a creditor vis-a-vis the principal debtor, it was observed that the equity between the creditor and the surety is for the creditor not to do anything to deprive the surety of his right. The application of the principle to indemnify the surety was decided in Duncan, Fox v. North South Wales Bank (3) L.R., 6 App. Cas. 1 at p. 13. That case itself yielded the reading 'that the creditor's right to hold his security until ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-8-1995 the respondent made a request to the appellant for extension of the time for payment by 60 days. A fax message was sent by the appellant regarding non-receipt of Rs. 20.00 lakhs. On 28-8-1995 the respondent sent a communication replying to the fax message, that the decision of the appellant not to give the intercorporate deposit would be a big disaster for the respondent-company, that the amount to be repaid was in the Bank but that due to the survey conducted by the Income-tax Department the Banks were under prohibitory orders for one week. It was urged that immediately on lifting up of the orders they would send the amount to the appellant. Meanwhile, an appeal was made by the respondent to revolve the previous amount repaid so t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d through different correspondences for release of the security which, we have already found, was an untenable position. On 15-12-1995 the appellant presented the cheques of the respondent for an amount of Rs. 2,78,925 which had been issued by the respondent on 19-11-1995, for encashment. But the cheques were dishonoured which fact the appellant communicated to the respondent on 27-12-1995. On 8-1 -1996 a registered call notice was issued by the appellant under section 434 of the Compa- nies Act and section 138 of the Negotiable Instruments Act. The reply of the respondent on 4-3-1996 was an acknowledgement of the debt but sticking to their stand for release of the securities proportionately. The appellant sent the pledged shares for transf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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