Decided on January 13,2003



Pratibha Upasani, (J.) Chairperson - (1.)THESE two Misc. Appeals are filed by the appellants/original defendants being aggrieved by the order dated 23.12.2002 passed by the learned Presiding Officer of Debts Recovery Tribunal-II, Mumbai on Exh. Nos. 50 and 52 in Original Application No. 11/2002. By the impugned order, the learned Presiding Officer rejected the application made by the appellants for dismissal of the Original Application and directed the defendants to file written statement on or before 14.1.2003. Being aggrieved, the present Misc. Appeals are filed.
(2.)I have heard Mr. Shah for the appellants and Mr. Kaisar Merchant for the respondents. I have also gone through the proceedings, including the impugned order and in my opinion; the impugned order is correctly passed by the learned Presiding Officer.
The appellants were arraigned as defendants in the Original Application in their status as guarantors to the loan transaction between the applicant Bank and M/s. Lloyds Finance Ltd. respondent No. 2. The loan was admittedly sanctioned in the year 1997 and the borrower had executed acknowledgement in the year 1999. Admittedly, the guarantor was not a party to the acknowledgement. On this ground, contention was taken by the guarantors that, they be discharged from the liability. Application was made by the defendants for dismissal of the original application against guarantor on the ground that original application was barred by the limitation.

Applicant Bank opposed the said application by filing reply, contending that there were terms in the guarantee agreement whereby the guarantors had permitted and authorised the Bank to vary the terms of contract.

The learned Presiding Officer, after hearing arguments of both the sides and after considering the position of law on the point, had expressed his view that, question of limitation could be decided de hors rest of the issues. According to him, the question of limitation could be taken up by way of defence only in the written statement and not by way of taking out separate application. He also observed that, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 provided summary procedure whereby the entire matter was to be decided within a period of six months and having this objective in mind and also considering other grounds no such plea could be entertained by way of independent application.

As far as merits of the matter are concerned, the learned Presiding Officer observed that, the said application even lacks merits inasmuch as recitals in the guarantee bound, permitted the borrower to vary terms of contract and the limitations as against the guarantor begins only after recall of the loan. The learned Presiding Officer further concluded that the application made by the applicants not only lacked merit but also, appeared to have been made for protraction of the trial. Observing this, he dismissed the application and directed the defendant to file written statement.

Having heard both the Advocates at length and after going through the material placed before me, in my opinion, the learned Presiding Officer has passed the impugned order correctly. Indeed, the appellants ought to have filed written statement to put forth their defence and should not have made any separate application for that purpose.

If one goes through the guarantee deed, it will be revealed that, the guarantee was a continuing guarantee under which, even LRs. were bound. It is also an admitted position that no notice of revocation was given by the appellants. As far as point of limitation is concerned, it is a settled position of law that in case of a continuing guarantee an undertaking by the defendant to pay any amount that may be due by a company to a Bank on the general balance of its account or any other account, so long as the account is a live account in the sense that, it is not settled and there is no refusal on the part of the guarantor to carry out the obligations, the period of limitation for a suit to enforce the bond could not be said to have commenced running. Limitation would only run for the date of breach under Article 115 of the Limitation Act, 1908.

Thus, considering from any angle these Misc. Appeals have substance. Hence, following order is passed.


Misc. Appeal Nos. 15/2003 and 16/2003 are dismissed.

Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.