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TMI Blog1992 (3) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... nor given their consent? 3. Whether the period of limitation would start running only upon the demand being made to the principal debtor as well as guarantors thereby extending the statutory provisions of limitation of 3 years. (This ground is not raised in the memo of appeal. Being, agitated during the course of argument it was opposed by the other side). 2. The facts giving rise to file the suit, in brief, are as under :- The appellant/plaintiff alleges that it is a body Corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, having its Head Office at Bombay. The Divisional Office of the plaintiff is situated at Kamptee Road, Nagpur. The suit transaction took place at the Station Road Branch of the plaintiff at Nagpur. On 6th October, 1971, the plaintiff sanctioned and advanced the loan of Rs. 23,950/- to the defendant No. 1 Awarkhan Chhotekhan for purchase of Ambassador Car to run as a Taxi on the guarantee of the defendant Nos. 2 and 3 i.e. Ali Mohamed s/o Mohamed Hussain and Hazi Wazir s/o Dadumiya (who died during the pendency of the proceedings before the trial Judge). The original defendant Nos. 1, 2 and 3 had agreed to pay in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23,950/-, as also that the defendant Nos. 2 and 3 were his guarantors for the repayment of his loan. However, he denied to have agreed to pay the rate of interest as alleged. Similarly, he admitted the fresh loan of Rs. 1,400/- and also the execution of Promissory Note dtd. 6th October 1974 for Rs. 22,000/-. However, he denied to have agreed to pay the higher rate of interest as alleged. The defendant No. 2/respondent No. 1 submitted his written statement vide Exh. 40 and denied all the plaint allegations. He contended that his signatures were obtained on the printed guarantee bond without explaining the contents thereof and, therefore, the terms did not bind him. He further contended that the plaintiff did not consult him when the fresh loan of Rs. 1,400/- was given to the principal borrower on 15th July 1972, as also while executing the fresh promissory note for Rs. 22,000/- on 6th October, 1974. He specifically contended that the suit of the plaintiff against him is barred by limitation, he not being the party to the transaction dtd. 15-7-1992 and 6-10-1974. Similarly, it is contended that the contents of the letter of guarantee dtd. 6-10-1971 are not binding and operative as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may by written intimation given to the Bank request notices addressed to be dispatched. Term No. 7: I/We hereby consent to your making any variance that you may think fit in the terms of your contract with the principal to your determining, enlarging or varying any credit to them to your making any composition with them or promising to give them time or-not to sue them and your parties with any security you may hold for the guarantee debt. I/We also agree that I/We shall not be discharged from my/our liability by your realising the principals or by any act or omission of yours the legal consequence of which may be to discharge the principals or by any act of yours which would but for this present provision be inconsistent with my/our rights as sureties or by your omission to do any act which, but for this present provision your duty to me/us would have required you to do. Though as between the principals and myself as sureties only, we agree that as between yourselves and me I/we am/our principal DEBTOR jointly with them and accordingly, I/We shall not be entitled to any of the rights conferred on sureties by sections 133. 134, 139 and 141 of the Contract Act. It is no doubt that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of limitation does not operate to discharge the surety. An acknowledgement does not also impair the remedy of the surety against the debtor under section 139 of the Contract Act. 7. The learned counsel for the appellant/plaintiff relied on the case of Kanchanlal Chandulal Patikh vs. Bank of India, reported in I (1991) BC 119 (DB) Bombay High Court. Their Lordships held that: Under the guarantees the undersigned jointly and severally hereby guarantee that due payment two days after demand in writing, of all advances. liability would be made. The period of limitation would, therefore, start running only upon a demand being made. The suit is filed within 3 years of the demand being made and is, therefore, in time. It is further held that : We see no novation, expressed or implied. The liability of the 3rd and 4th defendants under the guarantees executed by them remained and was not in any way affected by the renewals of the guarantees taken from the 5th defendant. In this case the first loan was advanced to the first defendant on April 26, 1968. The defendant Nos. 2, 3 and 4 executed the deed of guarantee in favour of the bank. The 5th defendant the State of Maharashtra also ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on September 26, 1975. On December 2. 1981 the suit was decreed. The learned Judge rejected the submission made on behalf of the defendants that the suit was barred by limitation and that it was not maintainable. He held that there was no novation which absolved the second, third and fourth defendants of their liability under the deeds of guarantee. Considering the facts before Their Lordships it has been rightly held by Their Lordships that there was no change either of the amount or in terms and conditions in the subsequent acknowledgements of the earlier contract, expressly or impliedly because from time to time the defdts. had executed the deed of guarantee in respect of the advance. 8. Shri Manwarbhai, the learned counsel for the respondent No. 2 resisted the claim of the appellant and submitted that it has been rightly held by the learned trial Court that the suit in respect of the respondents Nos. 2 and 3 is barred by limitation. Similarly, it is submitted that the appellant Bank wants to take the protection against the guarantors by depriving them of all the advantages of the statutory provisions of sections. 133, 134. 135, 139 and 141 of Indian Contract Act, 1872. It is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstitute a new contract for it, or to rescind or alter it, the original contract need not be performed. Shri Ashokkumar Wani (P.W. 2) the sub-accountant in the plaintiff's Station Road Branch at Nagpur in the cross-examination stated that; The original agreement dtd. 6-10-1971 was continued till the change of documents in 1974. In view of this admission, it cannot be said that it is merely a minor enlarging the scope of the contract or varying the terms of the contract. The document Exh. 57 dtd. 6-10-1974 a Promissory Note also does not speak that this is an acknowledgement in respect of the earlier two loans advanced. On behalf of the plaintiff the extract of accounts in respect of the account of the principal borrower is placed on the record. There is no entry dtd. 6-10-1974 to the effect that a Promissory Note was executed, the earlier accounts were renewed and the principal borrower has executed the Promissory Note vide Exh. 57 for Rs. 22,000/-. There is also no entry that on 6-10-1974 the principal borrower was indebted to Rs. 22,000/-. 10. The provisions of section 18 of the Limitation Act, 1963 are regarding the acknowledgment in writing. The import of the section is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even though they will not be the parties to the acknowledgement. In the case of Federal Bank of India Ltd. vs. Som Dev Grover and others reported in AIR 1956 P H 21, it is held that: Unless it appears otherwise in the terms of the surety's contract, an acknowledgement or payment by a debtor does not extend limitation against the surety. Similar question has been discussed in the case of Hazara Singh Gujjar Singh vs. Bakhshish Singh Muta Singh and another, AIR 1962 P H 495. The learned Judge has considered the scope of section 19 of the Limitation Act. Section 19 is in these terms:- 19(1). Where, before the expiration the period prescribed for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed or by some person through whom he derives title or liability a fresh period of limitation shall be computed from the time when the acknowledgement was so signed. (2) Where the writing containing an acknowledgement is undated, oral evidence may be given of the time when it was signed; but, subject to the provisions of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. Shri Manwarbhai, the learned counsel for the respondent attracted my attention to the sections 133, 134. 135, 139 and 141 of the Indian Contract Act, 1872. Section 133 of the Indian Contract Act, reads as under:- Discharge of surety by variance in terms of contract - Any variance, made without the surety's consent, in the terms of the contract between the principal (debtor) and the creditor, discharges the surety as to transactions subsequent to the variance. Section 134 of the Indian Contract Act, reads as under:- Discharge of surety by release or discharge of principal debtor - The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or Commission of the creditor, the legal consequence of which is the discharge of the principal debtor. Section 135 of the Indian Contract Act, reads as under:- Discharge of surety when creditor compounds with, gives time to or agrees not to sue, principal debtor. A contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor, discharges the surety, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... still remains as to whether a surety can waive his rights under section 133 or 135 of the Contract Act and give consent in advance to the future acts in contravention of the provisions of those sections. The language of those sections indicates that a consent in advance could not be given. The language of section 133 debars a creditor from making a variance in the terms of the contract without the consent of the surety. That means that if there is a variance, the surety must consent to the same simultaneously and not in advance. The words without the surety's consent clearly indicate that the consent should be given along with or at the time of the variance and there could not be any such consent when no variance had been made or even though the same was not in contemplation. Similarly, words unless the surety assents to such contract occurring in section 135 also indicate that the consent should exist at the time of the acts mentioned in the said provision. The word ''assent suggests present tense which is indicative of the fact that the assent should be simultaneous with the composition, etc., mentioned in section 135. In fact the statutory rights of a surety or guara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations of principal debtor and surety and held that:- The general principles underlying the law of suretyship (and in particular the principle that the rights of surety are not to be interfered with without his consent) may be applied and ought to be applied, even though the provisions of the Contract Act do not govern the case. In the case before Their Lordships security bonds were executed by sureties during the pendency of a suit against their principal debtor. A decree having been passed against the principal debtor, the decree-holder took out execution proceedings. The principal debtor i.e. the judgment-debtor, went up in appeal against the decree and execution against him was stayed on offering of fresh securities for the decretal amount. Question was whether the old sureties were discharged by reason of the acceptance of the new surety in appeal. Held that the case was one in which the Court itself was responsible for substituting fresh sureties, and although it was not for the old sureties to allege and prove that they were materially prejudiced, yet in fact they were so prejudiced and hence the first sureties were discharged . 16. Considering the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of such property or right has been executed in writing and signed by the party against whom such property or right is claimed. Article 21 of the schedule of the Limitation Act, 1963 is in respect of the transaction where money lent under an agreement that shall be payable on demand and the period of limitation is 3 years and the time begins to run when the loan is made. Article 35 deals with the bill of exchange or promissory note payable on demand and not accompanied by any writing restraining or postponing the right to sue. The period of limitation is again 3 years and the period begins to run from the date of the bill or note. It is, thus, clear from the above provisions that the prescribed limit to institute the suit, to prefer appeal and make application is 3 years and time begins from the date of the execution of the deed. Even if the word has been used in Articles 21 and 35 that the amount shall be payable on demand, the time will not run from the date of demand because statutes provide that time begins means cause of action begins from the date of the execution of the agreement, deed or note. It means, creditor has to make demand within the prescribed period of 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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