Decided on March 13,2006



K.Gnanaprakasam, - (1.) THE 7th defendant in TA-368/2001, on the file of the DRT-2 at Chennai, is the appellant herein. THE appellant contended that he had revoked his guarantee and the suit was also not filed in time and therefore the claim against him was barred and his contentions were not accepted and the TA was decreed as prayed for. Aggrieved by the same, the 7th defendant has preferred this appeal. I have heard the learned Advocates for the appellant and the respondent Bank.
(2.) Though the appellant has raised several grounds in the Memorandum of Appeal, he had restricted his argument on two grounds: 1. That the guarantee given by the appellant was revoked and therefore he is not liable; and 2. The suit was barred by time. The learned Advocate for the appellant had taken me through the letter dated 3.7.1989 Exbh. B2, sent by the appellant to the respondent and the receipt of the same is not in dispute. That in the said letter the appellant had stated, "In 1984, even before my induction into the company, when the aforesaid loan had been sanctioned by you to the said company, I was not a guarantor. Subsequently when the ad hoc limit was sanctioned, my signature was taken in view of fact that I was designated as a Director, though in fact, my function was that of a mere consultant. I have since resigned my Directorship on 7.1.1988, I am not liable for the commitment of the company with you. The Management is in the hands of the new Board of Directors who control the affairs of the company". The appellant made it very clear that he had resigned from the Directorship on and from 7.1.1988. Of course, there is a delay in informing the same, as it was informed only by the letter dated 3.7.1989. The said resignation from the Directorship was again affirmed and confirmed by another letter dated 26.12.1991, Exbh. B4, wherein he had stated that the company had also released him from his personal guarantee in respect of the company's liability to the respondent Bank. From these two letters it is made out that the appellant had resigned from the Directorship and the same was duly informed to the respondent Bank. It may be taken that the resignation of the appellant would take place either from 3.7.1989 or from 26.12.1991. The learned Advocate for the appellant has drawn my attention to Clause 13 of the agreement of guarantee Exb. A-23 which states, "The guarantee hereby given shall be a continuing security and shall not be determined unless 3 calendar months' written notice is given by the guarantors and in the event of the guarantors' death or their coming under a disability, the liability of the guarantors estate shall continue unless three calendar months' notice of their instruction to determine the guarantee in writing is given to the Bank by the legal representation of the guarantors". The first part of this Clause is applicable to the appellant, as he has informed about his resignation at least from 26.12.1991. As per Clause 13, three calendar months' written notice is required and if three months is reckoned from 26.12.1991, the resignation of the appellant would lake place from the month of March, 1992, and the suit should have been filed on or before March, 1995 but whereas the suit was filed only on 12.6.1995 ex facie the suit is barred by time and, therefore, the appellant is not liable. It is further urged that as the appellant had revoked his guarantee he was no more liable to the respondent Bank. It is therefore submitted on both the grounds that the suit laid by the respondent is not sustainable and liable to be dismissed.
(3.) ON the contrary, the learned Advocate for the respondent Bank would contend that though the appellant had resigned from the Directorship and the same was informed to the respondent Bank, it was not accepted by the respondent Bank and therefore the liability of the appellant continues. In order to sustain his submission, the respondent relied upon Clause 3 of the agreement guarantee which states, "The guarantors hereby declare that this guarantee shall be continuing guarantee and shall not be considered as cancelled or in any way affected by the fact that on any time the said accounts may show no liability against the Borrower or may even show a credit in his favour but shall continue to be a guarantee and remain in operation in respect of all subsequent transactions". It is, therefore, submitted that the guarantee given by the appellant is a continuing guarantee and he continues to be liable till the debt due to the respondent Bank is discharged. It is further contended that as long as the liability of the principal borrowers continue, the liability of guarantor also continues and, therefore, the appellant is liable to pay the claim made in the T.A.;

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