1992 (2) TMI 384 - HC - Indian Laws

Summary

Issues Involved:
1. Applicability of Article 37 of the Limitation Act.
2. Whether the suits are within the limitation period.

Detailed Analysis:

1. Applicability of Article 37 of the Limitation Act:
The primary issue revolves around determining which Article of the Limitation Act is applicable to the case. The contention is whether Article 37, which pertains to suits based on promissory notes or bonds payable by installments with a default clause, applies. The court noted that the loan was sanctioned based on the promissory note (Ex.A-3) and hypothecation bond (Ex.A-4), which contained a default clause. Clause 13 of Ex.A-4 specified that if the borrower defaults on any installment, the entire loan amount becomes due immediately. The court concluded that Article 37 applies to the facts of the case, as the terms and conditions of the loan, including the default clause, were contained in multiple documents (Exs.A-1, A-3, and A-4). The description of the suit in Column 1 of Article 37 fits the scenario where the loan transaction is documented in more than one document.

2. Whether the suits are within the limitation period:
The court examined whether the suits were filed within the limitation period as prescribed by the applicable Article. According to Article 37, the limitation period is three years from the date of default unless the creditor waives the benefit of the default clause. The first installment fell due on 30-6-1976, and subsequent installments were due annually. The court found that none of the installments were paid, and the bank issued a demand notice on 5-5-1979, recalling the entire loan amount. The limitation period began from the date of the first default (30-6-1976) unless the bank waived the default. The court held that waiver is a mixed question of fact and law and must be specifically pleaded and proved by the creditor. In this case, the bank neither pleaded nor proved waiver. Therefore, the limitation period started from the date of the first default, and the suits filed beyond three years from that date were barred by limitation.

Conclusion:
The court concluded that Article 37 of the Limitation Act applies to the case, and the suits were not filed within the prescribed limitation period. Consequently, the judgments and decrees of the lower courts were set aside, and the second appeals were allowed, except for Second Appeal No. 791 of 1987, which was dismissed. The parties were directed to bear their own costs.