CANARA BANK Vs. A CHIDAMBARAM

JUDGEMENT

(1.) THE Bank filed original application (TA) before the DRT for recovery of the amount. THE TA was disposed of by the Presiding Officer, DRT-II, Chennai, and the TA was allowed and decree was passed as against defendants 1 to 5 and D-6 was discharged from the loan liabilities. Aggrieved against the order passed by the Presiding Officer, DRT-II, discharging D-6, the Bank has preferred this appeal.

(2.) Counsel for the appellant Bank submitted that the respondent D-6 executed continuing guarantee under Ex. A9 and as it is a continuing guarantee. D-6 is liable till he revoked that guarantee and any revocation letter sent by D-6 will operate only with regard to the future transactions after the revocation notice and for the prior transactions this continuing guarantee will hold good and D-6 will be liable for the suit claim until it was revoked and only for the future transactions D-6 may not be held liable. Counsel for the respondent D-6 submitted that it is not a continuing guarantee and as D-6 has sent revocation letter revoking the continuing guarantee, he is discharged from this liability immediately when he sent that revocation letter and the order passed by the Presiding Officer, DRT-II, discharging D-6 is perfectly justified. Section 129 of the Contract Act deals with continuing guarantee which states that a guarantee which extends to a series of transactions is called a 'continuing guarantee'. A continuing guarantee is one which extends to a series of transactions and is not exhausted by or confined to a single credit or transaction. A continuing guarantee is usually given as security for an overdraft facility, since the overdraft fluctuates in amount and will often continue for an indefinite period. Guarantees for bank overdrafts usually state in terms that they are to be by way of continuing security, and that they are not to be satisfied, discharged or affected by any intermediate payment or settlement of account.

(3.) THE clause pertaining to this is mentioned in the guarantee letter executed by the guarantor D-6 which reads as follows: