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Issues Involved:
1. Bar of Limitation for the claim against the surety. 2. Interpretation of the contract of guarantee. 3. Applicability of Section 20 of the Limitation Act. 4. Applicability of Articles 65 and 115 of the Limitation Act. Issue 1: Bar of Limitation for the claim against the surety The primary issue in this case was whether the claim against the surety was barred by the Statute of Limitations. The suit was filed on November 12, 1914, while the promissory note was executed on April 25, 1911. The defendant No. 2 claimed that the suit was barred by limitation. The court had to determine whether the payment of interest by the principal debtor on November 13, 1911, affected the limitation period for the surety. Issue 2: Interpretation of the contract of guarantee The contract of guarantee was interpreted under Section 126 of the Contract Act of 1872. The promissory note was payable on demand, creating an immediate debt. The surety's endorsement, "Re-payment guaranteed by me," was treated as a contract of guarantee. The court concluded that the surety's liability arose immediately upon the principal debtor's default, which occurred as soon as the promissory note was executed. Issue 3: Applicability of Section 20 of the Limitation Act Section 20 of the Limitation Act was scrutinized to determine if the payment of interest by the principal debtor could extend the limitation period for the surety. The court found that although the payment was made with the surety's knowledge and consent, there was no evidence that it was made on behalf of the surety. Therefore, the payment did not extend the limitation period for the surety. Issue 4: Applicability of Articles 65 and 115 of the Limitation Act The court examined whether Article 65 or Article 115 of the Limitation Act applied to the case. Both articles prescribe a three-year limitation period. Under Article 65, the period runs from the specified contingency, i.e., the default of the principal debtor. Under Article 115, it runs from the breach of the contract of guarantee. The court concluded that the limitation period began on the date of the promissory note, April 25, 1911, making the suit filed on November 12, 1914, barred by limitation. Detailed Analysis: Bar of Limitation for the claim against the surety: The court determined that the claim against the surety was barred by the Statute of Limitations. The promissory note was executed on April 25, 1911, and the suit was filed on November 12, 1914. The court held that the limitation period began on the date of the promissory note, and the payment of interest by the principal debtor did not extend this period for the surety. Interpretation of the contract of guarantee: The court interpreted the contract of guarantee under Section 126 of the Contract Act of 1872. The promissory note was payable on demand, creating an immediate debt. The surety's endorsement, "Re-payment guaranteed by me," was treated as a contract of guarantee. The court concluded that the surety's liability arose immediately upon the principal debtor's default, which occurred as soon as the promissory note was executed. Applicability of Section 20 of the Limitation Act: The court scrutinized Section 20 of the Limitation Act to determine if the payment of interest by the principal debtor could extend the limitation period for the surety. The court found that although the payment was made with the surety's knowledge and consent, there was no evidence that it was made on behalf of the surety. Therefore, the payment did not extend the limitation period for the surety. Applicability of Articles 65 and 115 of the Limitation Act: The court examined whether Article 65 or Article 115 of the Limitation Act applied to the case. Both articles prescribe a three-year limitation period. Under Article 65, the period runs from the specified contingency, i.e., the default of the principal debtor. Under Article 115, it runs from the breach of the contract of guarantee. The court concluded that the limitation period began on the date of the promissory note, April 25, 1911, making the suit filed on November 12, 1914, barred by limitation. Conclusion: The appeal was allowed, and the judgment was entered for the second defendant with costs in both the High Court and the Court of first instance. The court held that the claim against the surety was barred by limitation, as the limitation period began on the date of the promissory note, and the payment of interest by the principal debtor did not extend this period for the surety.
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