The Kerala High Court has asked the State Government to clarify whether the borrowings made by the 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 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 its matured fixed deposit invested in the company came up for hearing.

In its affidavit, the Government pointed out that no valid legally enforceable guarantee had been executed by the State Government in favour of KTDFC as per the provisions of the Government Guarantee Act. KTDFC cannot, therefore, insist or invoke a 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.

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. Even though the Government is supporting public sector undertakings including KSRTC in different ways, the Government is not legally bound to give financial support to it to meet its day-to-day affairs. Therefore, it would be feasible if the Transport Department could take the initiative to settle the matter between two the corporations viz KSRTC and KTDFC by way of payment from the internal accruals of KSRTC or mortgaging its property.

The Government also said that the liability of the guarantor will be applicable in a later stage after resolving the disputes between KTDFC and KSRTC. Therefore at this stage, the question of guarantee does not arise. The KSRTC and KTDFC have sufficient valuable immovable properties throughout the State, especially in Thiruvananthapuram, Kozhikode and Kochi valued at about ₹1,000 crore. Therefore, if KSRTC or the Transport Department takes the initiative to sell or mortgage the property of KSRTC to outside persons or government agencies, the liability due to 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 KTDFC and KSRTC. Besides, the depositors have not exhausted his legal remedies against the principal debtor.