SC asks K'taka HC to examine afresh Kondaiah's plea against financial liability

The Supreme Court on Friday asked the Karnataka High Court to examine afresh a plea made by former Congress MP and present MLC K C Kondaiah, challenging fastening of liability of Rs 18 crore, besides interest, on him.

The amount is held to be due on Kondaiah for he stood as surety for being one of the directors of M/s Bellary Steels & Alloys Ltd (BSAL) Company, which entered into non-convertible debenture (NCD) loan agreement in 1996 and equipment lease agreement in 1998 with Karnataka State Finance Corporation (KSFC).

A three-judge bench presided over by Chief Justice Dipak Misra sent the matter back to the high court for re-examination as senior advocate Yatindra Singh, along with advocates Chandramauli and Sanjay M Nuli contended that the plea by Kondaiah was dismissed on the technical ground of 259-day delay in filing the petition.

Kondaiah has challenged the high court's judgment of Dharwad bench passed on June 6, 2013.

The high court failed to appreciate that the petitioner was not the party to the equipment lease agreement at all much less the director of the BSAL Company when the equipment lease agreement was executed between the BSAL Company through its Managing Director being the ‘lessee’ and the Karnataka State Finance Corporation being the ‘lessor’, the counsel said.

They also submitted that the liability with regard to NCD loan was taken over by his successor after his resignation. The KSFC was represented by senior advocate Kiran Suri.
The trial court has held Kondaiah “jointly and severally liable” to pay in respect of both NCD loan as well as equipment leasing on a proceeding initiated by the KSFC.

 “The KSFC proceeded against the surety without first proceeding against the borrower company to realize the amount of loan. However, the KSFC had taken over all the assets of the BSAL company to the extent of 700 acres and also equipment of Rs 730 lakhs leased to the BSAL Company under the Equipment Lease Agreement,” the petitioner claimed.

Kondaiah had executed the deed of guarantee on behalf of BSAL Company but, his personal guarantee was released by IDBI in 1998 after he had resigned from the directorship of BSAL Company, his petition stated.