Habibullah Mohamed Yousuff v Indian Bank

CourtCourt of Three Judges (Singapore)
JudgeKarthigesu JA
Judgment Date10 July 1999
Neutral Citation[1999] SGCA 49
Citation[1999] SGCA 49
Defendant CounselTan Teng Muan and Wong Khai Keng (Mallal & Namazie)
Subject MatterTriable issue,Contract,Whether defendant has raised reasonable grounds for setting up a defence,Collateral contracts,Guarantee,Whether principal debtor clause can be converted into contract of indemnity,Civil Procedure,Whether defendant can rely on undisclosed 'unusual features' surrounding plaintiff's case as part of his reasonable ground,Summary judgment
Published date29 November 2003
Date10 July 1999
Docket NumberCivil Appeal No 252 of 1998
Plaintiff CounselHarpreet Singh Nehal and Siraj Omar (Drew & Napier)


(delivering the grounds of judgment of the court): This was an appeal against the dismissal of the appellant`s appeal against the assistant registrar`s decision granting summary judgment to the respondents. The summary judgment arose out of the respondents` action by way of Suit No 2355 of 1996 (`the Suit`) against Sadeco Sarl Pte Ltd (`Sadeco`) and their guarantors for the recovery of about US$10.97m. The appellant was the second defendant in the Suit.

2. The facts

The appellant is Habibullah Mohamed Yousuff. According to his affidavit filed on 14 March 1998, he graduated from International Islamic University, Malaysia, sometime in the middle of 1991. He was at that time an Indian national. Sometime in late 1991 or early 1992, Pakirisami Vijayagavan (`Pakirisami`) approached the appellant to join Sadeco as a director. Sadeco had been incorporated on 18 February 1991 with a paid up capital of S$1m. Sadeco`s principal activity was general wholesale trade. At the time that the appellant was approached, Pakirisami was an employee of Mountamount (S`pore) Pte Ltd (`Mountamount`), who were the de facto parent company of Sadeco. Pakirisami is also the nephew of the seventh defendant in the Suit, Muthukrishna Varatha Raja (`MVR`). The appellant became a director of Sadeco on 19 March 1992.

3.After becoming a director of Sadeco, sometime in 1993, the appellant was given 500,000 shares in Sadeco to hold as nominee for Varatha Rajaloo Usha (`Usha`), the sixth defendant in the Suit, and MVR. According to the appellant, he was not involved with the day to day management of Sadeco, which was done by MVR even though he was not a director of the company. The appellant claims that he did not visit Sadeco`s office as he was working at his father`s shop at Albert Complex. Whenever his signature was required, the relevant documents would be despatched to him.

4.By a letter dated 8 June 1993, the appellant applied on Sadeco`s behalf to the respondents, Indian Bank, for changes to the existing credit facilities that Sadeco had with the respondents. The facilities were for the sum of S$16.5m.

5.Over a year later, the respondents informed Sadeco by way of a letter dated 18 July 1994 (`letter of offer`) that they had renewed Sadeco`s credit facility. The nature of the facility was a single line of credit subject to a maximum of US$10m (`credit facility`). The credit facility, inter alia, allowed for discounting of foreign bills of exchange with interest at 2.5% pa above the respondents` prime lending rate at monthly rests. According to the letter of offer, the limits of the credit facility were scheduled for review on 4 June 1995. As security for the facility, the respondents required joint and several guarantees for US$10m from four individuals, including the appellant, and a pledge of deposits for S$223,160.68 plus interest accrued thereon.

6.On 14 October 1994, the appellant and Kumarappan s/o Maruthamuthu (`Kumarappan`), one of the directors of Sadeco and the third defendant in the Suit, went to the respondents` office and signed a joint and several guarantee (`the guarantee`) as security for the credit facility extended by the letter of offer. The signing of the guarantee was handled by M Nachiappan (`Nachiappan`), an assistant manager (credit) of the respondents. Nachiappan did not ask for any documents relating to the appellant`s credit worthiness.

7.According to the appellant, Nachiappan said that the guarantee was merely `cosmetic`, as the top management of the respondents in India had agreed to certain arrangements with Usha, MVR and Mountamount. According to the appellant, Nachiappan also assured the appellant that the guarantee would never be enforced against him under any circumstances as they knew that he was not worth anything. This allegation of the appellant is disputed by Nachiappan. In his joint affidavit with M Umayal filed on 28 May 1998, Nachiappan said that if he had said what the appellant claimed he did, he would be `stark starring mad`. According to Nachiappan, he did not do anything of that sort, and that as part of his practice, he would have explained to the appellant the nature of the guarantee.

8.Two months after the guarantee was signed, by way of a letter dated 12 December 1994, the respondents wrote to Sadeco enclosing copies of the assets and liabilities forms to be completed by the appellant and Kumarappan. According to the respondents, their failure to ask the appellant to furnish a declaration of assets and liabilities when he signed the guarantee was due to an oversight, which they attempted to rectify by way of the letter dated 12 December 1994. Further reminders for the same were sent by the respondents by way of letters dated 21 December 1994, 28 January 1995, and 9 June 1995. To date, the assets and liabilities forms have not been completed.

9.The appellant resigned from Sadeco on 26 September 1995. On 6 May 1996, he went to the respondents` office and asked for a print out of the company`s outstanding and a copy of the guarantee. By way of a letter dated 3 June 1996, the appellant`s solicitors Ms Drew & Napier informed the respondents that the appellant was no longer a director and shareholder and requested his release from the guarantee. The respondents replied by way of a letter dated 5 June 1996, noting that Sadeco had liabilities of US$2,236,130.48 for foreign bills purchased and US$7,759,378.52 for overdue foreign bills purchased, and that those liabilities were secured, amongst others, by the guarantee of the appellant and that they would not be able to release him from his guarantee until the liabilities were adjusted.

10.About five months later, the appellant instructed another set of solicitors. By way of a letter dated 5 November 1996, Ms Karuppan Chettiar and Husain wrote to the respondents informing them that:

We are instructed that the principal debtors have caused the creation of a collateral security in India through your Muthialpet branch, Madras which security would be sufficient to cover all existing liabilities of the above company.


As our client is anxious to get into new business venture, he wants to be released from his guarantee herein as early as possible ...

11.The respondents replied through their solicitors Ms Mallal & Namazie by way of a letter dated 18 November 1996 stating that the respondents would be unable to release any of the guarantors who stood guarantee for the facilities granted until the outstanding amount was fully repaid or fully secured by security acceptable to the respondents.

12.Throughout 1995 to 1996, 112 foreign bills drawn by Sadeco to the value of US$9,995,509 were purchased by the respondents pursuant to the credit facility. All of these bills were dishonoured upon presentation. By 31 October 1996, the sum and interest due from Sadeco was US$10,974,929.96 (`the sum`).

13.On 6 December 1996, the respondents commenced action by way of the Suit against Sadeco and its guarantors for the recovery of the sum. Judgment in default of appearance was obtained against Sadeco on 14 December 1996. Sadeco was subsequently wound up on 9 May 1997 after two unsuccessful attempts by Sadeco to petition for judicial management.

14.On 6 March 1998, the respondents applied for summary judgment against the appellant. On 17 April 1998, the appellant applied for discovery against the respondents by way of SIC 2911/98 (`discovery application`). The discovery application was dismissed by the assistant registrar on 12 June 1998. The appellant appealed to the High Court against the dismissal of the discovery application. On 18 July 1998, the respondents obtained summary judgment against the appellant for the sum. On 28 July 1998, the appeal in relation to the discovery application came before Kan Ting Chiu J, who adjourned the appeal pending the outcome of the appellant`s appeal against summary judgment.

15.On 21 September 1998, the respondents filed an affidavit which exhibited copies of the 112 foreign bills and set out details of the paid and unpaid bills of Sadeco. On 25 September 1998, the appellant`s appeal to the High Court against the granting of summary judgment was heard.

16. Decision of the learned judge

The learned judge dismissed the appellant`s appeal. The learned judge was of the view that the facts did not disclose triable issues. Neither had the appellant made out a case under the principle in Miles v Bull [1969] 1 QB 258 that there should be `some other reason` for trial.

17.The appellant had relied on numerous newspaper reports and internet articles to contend that loans were extended by the respondents to companies belonging to MVR because of the personal relationship between MVR and the chairman of the respondents` head office, Gopalakrishnan, and not for commercial reasons. The appellant also relied on a first information report filed in India and noted that investigations were being carried out in India against MVR and Gopalakrishnan. In respect of this, the learned judge held that:

33 ...My view is, until the charges (if any) preferred against the seventh defendant and Gopalakrishnan are proved in a court of law, it is not for the second defendant to judge and convict them based on newspapers and other reports. Even if the close personal relationship between the two persons is true, it does not detract from the fact that the company and the plaintiffs had a history of legitimate business transactions in discounting bills.


35 Consequently, the second defendant`s allegations regarding pending criminal charges or investigations against Gopalakrishnan, even if true, were irrelevant and did not afford a defence to him on his obligations as the company`s guarantor ... To suggest that the bad loans incurred by the plaintiffs on the company`s account were more sinister than the exercise of poor commercial judgment (on hindsight) on the part of the plaintiffs, requires a greater degree of proof than mere...

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