The Gujarat High Court as well as the DRT fell in serious error by not only failing to appreciate the correct factual matrix in the Hutchens case, but also the ratio laid down based on the factual matrix. In Hutchens, the dramatis personae were: (a) Kenbrite Corporation, the principal debtor; (b) Hutchens, a director of Kenbrite and a personal guarantor, who, in addition to the guarantee, also had mortgaged the property in favour of the creditor General Credits; (c) General Credits, the creditor and first charge holder and in whose favour the guarantee was originally executed; (d) Helvetic, subsequent creditor of Kenbrite which held the second charge on the assets of Kenbrite; (e) M/s Deauville Investments, assignee of the debts by M/s Helvetic.
After the principal debtor became insolvent, General Credits proceeded to appoint a receiver and so did Helvetic for the second charge. General Credits assigned all its rights as a creditor to Helvetic. Helvetic, thereafter, had assigned its rights in favour of Deauville and also transferred the mortgage of the immovable property. However, the facts noticed for consideration by the Supreme Court were that there was no transfer of first mortgage debt nor an express transfer of Hutchens indebtedness by Helvetic to Deauville.
The issue raised in this regard is summed up by the Supreme Court of Australia as follows:
“If that be so, the questions arise about whether the transfer of real property mortgage by Helvetic to Deauville, could, of itself, suffice to effect a transfer of Hutchens indebtedness as a guarantor, which was, as has been seen, the only actual liability it secured and whether, if it could not, Deauville is entitled as mortgagee to enforce the security of the real property mortgage given to secure the payment of a debt to a company other than itself.”
It was in this context that the Supreme Court noticed the difficulty that arises when the benefit of the guarantee and real property offered to secure it alone was transferred to Deauville while Kenbrite remained liable as a principal debtor.
Source: Barandbench
