The Kerala High Court on Wednesday asked the State government to clarify whether the borrowings made by the Kerala Transport Development Finance Corporation Ltd. (KTDFC) are guaranteed by the government.
Justice Devan Ramachandran granted the government a week’s time to file a clarificatory affidavit as the court felt that the affidavit filed by the State did not explicitly state whether the borrowings made by the KTDFC were guaranteed by the government. The court observed that the government appeared to be taking the stand that the government did not guarantee the borrowing of the KTDFC.
The court passed the order when the petitions filed by a Kolkata-based company and others seeking a directive to the KTDFC to return their matured fixed deposits in the company came up for hearing.
Contingent guarantee
In its affidavit, the government pointed out that no valid legally enforceable guarantee had been executed by the State government in favour of the KTDFC as per the provisions of the Government Guarantee Act. The KTDFC cannot, therefore, insist or invoke guarantee against the government. Even assuming that the government orders and other documents involved in the case were treated as guarantees, it should be treated as a ‘contingent guarantee’ in which the guarantor would not be liable unless a specified event occurred.
Financial constraints
The affidavit also said that the State was now passing through “a phase of financial constraints.” Any monetary benefit has to be allowed within the financial resources available with the government. Though the government is supporting public sector undertakings, including the Kerala State Road Transport Corporation (KSRTC) in different ways, government is not legally bound to give financial support to meet their day-to-day affairs. Therefore, it would be feasible if the Transport department could take initiative to settle the matter between the two corporations, viz the KSRTC and the KTDFC, by way of payment from the internal accruals of the KSRTC or mortgaging its property.
The government also said that the liability of the guarantor will be applicable at a later stage after resolving the disputes between the KTDFC and the KSRTC. Therefore at this stage the question of guarantee does not arise. The the KSRTC and the KTDFC are having sufficient valuable immovable properties throughout the State, especially in Thiruvananthapuram, Kozhikode and Kochi valued about ₹1,000 crore. Therefore, if the KSRTC or the Transport department takes initiative to sell or mortgage the property of the KSRTC to outside persons or government agencies, the liability due to the KTDFC can easily be discharged.
The government pointed out that the dispute with regard to the non- payment of the money could be resolved amicably between the KTDFC and the KSRTC. Besides, the depositors have not exhausted their legal remedies against the principal debtor.
