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TMI Blog2007 (6) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... from plaintiff-bank for his business and that was made at the instance of the request of first defendant on 19-5-1986. Second defendant guaranteed the repayment of the above said loan. Therefore, both joined together and executed a pronote on 19-5-1986 for a sum of Rs. 25,000/- in favour of appellant/plaintiff-bank and that was marked as Ex. A-2. There was also a hypothecation deed under Ex. A-3 executed by both as security for the said loan. Thus, first defendant was the principal-debtor and second defendant was only a guarantor. 3. A sum of Rs. 1,000/- was repaid by first defendant on 3-2-1987 and there was an acknowledgment by first defendant, the principal-debtor. Construing as a starting period of limitation, the plaint was filed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by limitation. 5. In that case law, reliance was made upon Indian Bank, Madras v. Krishnaswamy AIR 1990 Mad 115 , where the loan was given by the bank to the mill and the plaintiff in that suit stood as surety. The mill was subsequently taken over by the Government and there was a fresh agreement between the Government and the mill, which was not made known to the surety and, therefore, it was held that the surety was discharged from that liability. 6. But in the case of Mercantile Credit Corporation Ltd., there was no fresh agreement entered into and the acknowledgment of principal-debtor should be treated as that of the surety as such a finding was given in Wandoor Jupeter Chits (P)Ltd. v. K.P. Mathew AIR 1980 Ker 190 , wherein the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and that when Section 2(j) of the Contract Act lays down that: A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable, the unenforceability should arise from substantive law, and not from procedural regulations. The debt remains a debt even when the creditor by reason of a rule of procedure cannot himself bring an action upon it. In Bombay Dyeing and Mfg. Co. v. State of Bombay (1958) ILLJ 778 SC , the Supreme Court held: Now, it is the settled law of this country that the statute of limitation only bars the remedy but does not extinguish the debt, Section 28 of the Limitation Act (of 1908, which corresponds to Section 27 of the present Act) provides that when the period limited to a person fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditor's rights by payment or performance as soon as the debtor becomes liable. 9. Therefore, the following was observed in AIR 1980 Ker 190 : To sum up, the making of an acknowledgment by the principal-debtor does not involve any variance of the contract within the meaning of Section 133 of the Contract Act. It also does not involve the making of another contract under Sections 134 and 135 whereby the creditor discharges the debtor or makes a composition with him. In fact the effect of an acknowledgment is just the contrary. Nor is Section 137 attracted because it has been held that mere forbearance to sue even for a time beyond the period of limitation does not operate to discharge the surety. An acknowledgment does not also im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is a continuing guarantee determinable only after three months' notice there is no case that it has been so determined and Clause (c) states that the guarantee shall be applicable to the ultimate general balance. Therefore, it was made clear that in respect of any debt incurred by the principal during the currency of the guarantee, the surety is liable so long as the debt is recoverable from principal. It does not matter that the principal has kept the debt alive by acknowledgment under Section 19 of the Limitation Act or by payment under Section 20, for by these acts, there is no renewal of the debt, and no new debt created which is not covered by the guarantee. The debt remains the same, namely, the debt guaranteed; only the bar o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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