Decided on April 08,2004



A.Subbulakshmy, - (1.) THE appeal is directed against the Order dated 8.11.2002 passed by the PO, DRT. Bangalore, with regard to the dismissal of the OA claim as against D2 and D3 by the appellant Bank. D1 is the main borrower and D2 and D3 are the guarantors. According to the Counsel for the appellant Bank. D2 and D3 executed the Continuing guarantee and as per the Continuing guarantee they are liable for the Suit claim and their guarantee continues till the main borrower pays that amount and the Continuing guarantee shall come to end only after issue of notice by the appellant Bank as per the conditions provided in the Continuing guarantee and after issue of notice the appeal was filed in time and the Continuing guarantee was in force and as per the Continuing guarantee, D2 and D3 are liable for the Suit claim and the dismissal of the OA as against D2 and D3 is not sustainable.
(2.) Counsel appearing for the 2nd respondent submitted that the debt is not live and so decree cannot be passed as against D2 and D3 and the Order passed by the PO. DRT, dismissing the claim as against D2 and D3 is perfectly justified. The PO, DRT, has found that the acknowledgement by the borrower cannot operate adverse to the interest of the guarantor in the absence of any authorisation by the guarantor in favour of the principal borrower to bind the guarantor as well by the acknowledgement and he could not find any such authorisation in Exs. A7, A12 and A17 by guarantors in favour of D1 to give on their behalf as well an acknowledgement of debt and thus the claim of the Bank as against D2 and D3 is clearly barred by limitation. The PO has further found that D2 and D3 are totally absolved from liability for the simple reason that Dl alone had acknowledged the debt or liability as per Exs. A19 to A21, A23 to A25, A27 to A32, A34 to A36 and A41 to A43. Counsel for the2nd respondent relies upon the Statement of Account in Exs. A49 to A51 and he drew my attention to the Statement of Account and pointed out that these accounts ceased to become live with effect from 30.3.1990, 18.9.1996 and 30.12.1981 as could be seen from Exs. A49 to A51. He pointed out as per the Statement of Account there is no transaction and the last payment was made on 6.1.1993 and afterwards no payment, since D1 had acknowledged the liability D1 alone is liable and so far D2 and D3 are concerned the debt itself is not live. It cannot be stated that the debit is not live. So long as the principal borrower's liability extends, the guarantors liability also extends but it depends upon the terms and conditions of the guarantee document executed by the guarantors. The principal debtor's liability is there by virtue of the acknowledgement of liability made by the 1st defendant as evidenced by the Exhibits mentioned supra. Since the liability of the principal debtor is there the liability of the guarantors also is there since the guarantors have executed the Continuing guarantee and the guarantee continues till the payment of the amount by the principal debtor and the guarantors are not absolved of their liability as per the Continuing guarantee executed by them. The liability of the guarantors is co-extensive with that of the principal debtor. Since there is acknowledgement of liability by the debt is live and for that Dl the main borrower is liable and the guarantors D2 and D3 are also equally liable for the Suit claim by virtue of the Continuing guarantee executed by them. The Continuing guarantee executed by D2 and D3 reveals that the guarantee shall be a Continuing guarantee irrespective of any sum or sums which may be paid into the account of the principal at any time during the continuance of the guarantee and shall remain in force until cancelled under written authority and the amount then due shall be subject to this guarantee and be secured thereby. So the terms and conditions of the Continuing guarantee is crystal clear that the Continuing guarantee shall remain in force until cancelled under written authority. So, there was a continuing guarantee in force and D2 and D3 continue to be liable for the Suit claim under the Continuing guarantee.
(3.) THE Bank issued notice on 24.10.1994 and the Suit was filed on 31.7.1995 within time. So it cannot be stated that the Suit is barred by limitation. THE Hon'ble Supreme Court in AIR 1979 SC 102 (Mrs. Margaret Lalita Samuel v. Indo Commercial Bank Ltd.) has held that-- "In the case of a continuing guarantee and 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 obligation, the period of limitation for a suit to enforce the bond could not be said to have commenced running. Limitation would only run from the date of breach under Article 115.";

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