Margaret Lalita Samuel v. Indo Commercial Bank Ltd.

914 MARGARET LALITA SAMUEL _v._ INDO COMMERCIAL BANK LTD. ### B _September_ 25, 1978 [Y. V. CIIANDRACHUD, C.J., R. S. SARKARIA AND 0. CHINNAPPA REDDY, JJ.] _Constitution of_ _India-Arts._ _136-141-Substantial_ _justice-If_ _erroneous_ _order_ _of_ _re1nand_ _results_ _in_ _substantial_ _justice_ _whether_ _this_ _Court_ _should_ _interfere-_ _Litnitatfon Act_ _1908-Schedule-Articles_ 57, _115-Coniinuing_ _guara11tec-_ _When does litnitation_ _run-Liability_ _of_ _Bank_ _guaranlet!-lf_ _claim given up_ _without specifying any particulars whether_ _it_ _can be taken into considerarion_ C _again.H rite_ _unproved debts._ D E F G H The respondent plaintiff is the lndo Commercial Bank Ltd. now taken over and represented by the Punjab National Bank. In 1943 C. B. Samuel, the husband of the appellant-defendant with other persons floated a company known as the Modern Hindustan Food Products Ltd. Co. at Poona. The company openetl;.-with the plaintiff Bank a current account which was later converted into an over.draft Account with the maximum limit of Rs. 10/- Iakhs. C. B. Sanluel, the Managing Director of the company executed a Promissory Note for Rs. 10 lakhs and he and his wife, the defendant executed a guarantee bond by which they jointly and severally guaranteed to the Bank, the repayment of all moneys which shall at any time be due to the Bank from the Company, on the general balance of their account with the Bank or on any account whatever.· The guarantee was to be a continuing guarantee to the extent of _Rs._ 10 lakhs at any one time. The Company ceased business on 30th June, 1946 and there~ after the Company entered into an arrangement with the Bank by which the Bank was authorised to receive all amount due from the Director General of Food Supplies, or from any other person or Department and appropriate the sums collected towards the money due to the Bank from the Company. An irrevocable poVl·er of attorney oothorising the Bank to do so was executed by the Managing Director. All Bills and documents were accordingly handed over to the plaintiff bank for realisation of the amount due to the Company. C. B. Samuel died on 27th April, 1951. The defendant by her letter dated 2nd February, 1952, acknowledged her personal guarantee to repay to the plaintiff the sum of Rs. 2,71,531 which was stated to be balance due to the plaintiff from the Company as on 31st December, 1951. To that, a sum of _Rs._ 21,886/- was to be added by way of interest. The Bank recovered a sum of Rs. 57,964 and thus the balance due was Rs. 2,35,453/-. The Bank filed the present suit In November, 1954 to enforce the guarantee bond against the defendant and to recover a sum of Rs. 1,50.000. It was stated in the plaint that a sum of Rs. 85,453 was given up and the suit was filed to recover the sum of Rs. 1,50,000/- only. The defence of the defendant was that the suit was barred by limitation, that the letter dt. 2nd February, 1952 was obtained from her by fraud and that she was, in any case, not liable to pay amounts disputed by her in para 15 of her written statement. She also pleaded that the plaintiff had deliberately withheld production of the accounts between 194346 du~ which period most of the transactions took place and that if these accounts were produced, she would be in a position to challenge other items as well. ######, MARGARET _v._ INDO COMM. BANK _(Chinnappa Reddy,_ _!.)_ 915 Soon after filing the written statement, the defendant filed an application in the trial court to direct the plaintiff to produce among other documents, the accounts from 1943 onwards. The Trials Judge by his Order rtt. 10th March, 1955 directed the plaintiff to produce the documents within two weeks from that date. The plaintiff did not produce the documents. Subsequently, however, an extract of the accounts from 1943 to 1946 was produced. On the date of the hearing of the suit, the defendant filed an application Ext. _85,_ seeking a direction from the Court, that the plaintiff be allowed to produce any documentary evidence which they might possess in support of the items mentioned in the schedules even till the time the evidence is finished and the defendant be allowed to deny, under the circun1stances mentioned, the items mentioned in schedule 'B'. Alongwith the application, the deft:ndant filed two schedules; Schedule 'A' showing the items specifically denied by the defendant in her written statement and Schedule 'B' showing the items which were denied by her after the accounts from 1943 to 1946 were produced in Court by the plaintiff. The application was opposed by the plaintiff. The trial court dismissed the application on the ground that it was belated. The trial court observed that if the defendant wanted to dispute any item from the accounts, she should have got the accounts produced even before she filed the written statement. The court, observed that the defendant had no doubt filed the earlier application but when the plaintiff failed to produce the accounts within two weeks, she did not take further action in the matter. The trial court found that letter dated 2nd Feb. 1952 was not proved to have been obtained by fraud. The court found that the defendant who was a highly educated lady had subscribed her signature to Ext. _55_ fulJy knowing its contents. The trial court however, held that the suit was barred by limitation. The trial court also held that there was no proper proof of the several debit items and that they were suspicious. The plaintiff filed an appeal to the High Court of Bombay. The High Court held that the suit was not barred by limitation but that on the material placed before the Court, it was impossible to pags a decree in fa-vour of the plaintifI, for any amount alleged to be due by the defendant. The High Court also observed that the trial Judge was wrong in dismissing the application. The High Court. however, thought that in order to do justice between the parties, it was necessary to give the plaintiff-bank an opportunity to prove the various items which were challenged by the defendant in her written statement and in her application Ext. 85, and further to give the defendant an opportunity to lead evidence in support of her contention that the entries were in respect of accounts which she was _noJ_ liable to pay. The High Court remanded the suit to the trial court for fresh disposal in the light of the observations made by it after raising additional issues if necessary. On remand, the trial court raised two additional issues. The trial court held that the plaintiff proved two items in dispute as given in the written statement and Exhibit _85._ The trial court negatived the defendant's case that the debit entries were in respect of the amounts which she was not liable to pay. The trial court based these conclusions primarily on the letter dt. 30th June, 1950 passed by the Company in favour of the Bank acknowledging the balance due. at the foot of the overdraft account as on 30th June, 1950 was Rs. 4,90,523. The trial Judge held that the letter of acknowledgment was A B c D E F G H f.-,, A B c 916 SUPREME COURT REPORTS [1979] I s.c.R. binding on the defendant. The suit was decreed for a sum of Rs. 1,50,000/-. In an appeal filed by the defendant, the High Court considered the evidence relating to each item and found that the debit !terns a-mounting to Rs. 68,761/\vere not proved to be binding on the defendant. The High Court. however. held that since this amount was less than Rs. 85,453 /- \\1-hich had been given up by the plaintiff, the High Court affirmed the decree passed by the trial court. The IIigh Court gave a finding relating to three letters signed by the defendant herself a& Director of the Company in the year 1945. In au appea.l by special appeal, the appellant con'ended ; ( 1) that there was no justification for the order of remand passed in the first instance by the Bombay High Court. On the finding arrived at by the Bombay High Court. that the plaintiff had failed to prove any of the debit items, the original decree of the trial court dismissing the suit should have been affirmed. \Vhen the application Ext. 85 was filed by the defendant, the . plaintiff opposed it. The appellate Court, therefore, was not justified in giving a ·further opportunity to the plaintiff to prove the debit items. D (2) the suit was time-barred. Each of the debit item constituted a dis tinct loan and gave rise to a separate cause of action, every one of which was barred by limitation. E F G H The respondent contended that : (i) the initial order of 'rernand made by the High Court was justified in the special circum~tances of the case. Even if the order of remand could not be fully justified, this is not a fit case for interference under Art. 136 having regard to the justice of the matter as disclosed by the subsequent findings of the trial court and the appellate Court. (ii) the suit was really one to enforce the guarantee bond, that the guarantee v1as a continuing guarantee and, therefore, the suit could not be said to be barred by limitation. Partly allowing the app~al the Cour~ HELD : The contention of the appellant that each item of overdraft was independent loan and that Art. 57 of the Schedule to the Limitation Act 1908 applied, is erroneous. [9220-H, 924B] _Basante Kun1ar Mitra_ v. _Chota Nagpur Banking Association_ Ltd. A.LR. 1948 Pat. 18; _Braiendra Kishore_ _Roy_ _Chowdhury_ v. _Hindustan Co-operative_ _Insurance Society Ltd.,_ ILR 44 Cal. 979; _National and Grindlays Bank Ltd._ v. _Tikanz Chand Daga and Anr.,_ A.I.R. 1964 Cal. 358; _flnu1_ _Shankar Prasad_ v. _Bank_ _of_ _Bihar Ltd._ & _Anr .._ Al.R. 1942 Pat. 201 distinguished. It is unnecessary for the purpose of the present case to go into the question of the nature of an overdraft account. The present suit is in .substance and truth one to enforce the guarantee bond executed by the defendant. The guarantee bo~d itself provides that the guarantee shall be a,,,"Ontinuing guarantee ,, :; ; MARGARET _v._ INDO COMM. BANK _(Chinnappa Reddy, J.)_ 917 and the defendant undertoolr. to pay any amount that may be due by the **A** company at the foot of the general balance of its account or any other account whatever. In the case of such continuing guarantee, so ~ong as the **account** **is** **a live account** **in** **the sense** **that** **it** **m not settled** **and** **there is** **no** refusal on the part of the guarantor to carry out the obligation, the period of limitation does not commence running. Limitation would only run from the date of breach under Art. _llS_ of the Schedule to the Limitation Act, 1908. [923A-B, 924A-BJ **B** _**Wright and Anr.**_ **v.** _**New Zealand Farmers**_ _**Cooperative**_ _**Association**_ _**of**_ _Canterbury Ltd.,_ 1939 A.C. 439; approved. _Parr's Banking Co. Ltd._ v. _Yates_ [1898] 2 K.B. 460 found to be over-ruled. **It does not, however, mean that** **the** **Supreme Court will every** **•.ime** **exer·** **cise its discretionary powers under** **Art.** **136** **of** **the,** **Constitution** **merely** because it finds that the High Court bad wrongly passed an order <>f remand **at an earlier stage** **of** **the case.** **If** **the Supreme Court** **is** **satisfied** **that** **as** **a** result of the order of the remand substantial "justice has been done to the **parties** **in** **the consequential proceedings, the Court can decline to exercise** **its** **power to interfere under Art. 136.** **Art.** **136, is not meant** **to** **correct every** **illegality brought to** **the** **notice** **of** **the Supreme Court nor to undo, merely on** **account** **of** **such illegality,** **an** **adjudication which** **has** **done substantial justice** to the parties. On the other hand, Art. 142 of the Constitution expressly con**fers** **powers** **upon the Supreme Court** **in** **the** **eXercise** **of** **its** **jurisdiction** **to** **pass** **such decrees** **to** **make such order** **as** **is necessary for doing complete justice** **in** **any case or** matt~r **pending before** **it** **On** **account** **of** **the** **speci:.'t-1** **cncumstances** of the case, the High Court remanded the case in the interests of justice. Whether er not, the order of remand is capable of being justified under the provisions of the Code of Civil Procedure, the interest of justice had been done between the parties as a result of subsequent proceedings. In the special ~99SCI/78 '· _Gradford Old Bank Ltd._ v. _Sutcliffe,_ [1918] 2 K.B. 833; referred to In the present case, the overdraft account which was guaranteed by the defendant by the execution of the guarantee bond continued to be a live **account even after the company** **ceased_ its** **business. A power** **of** **attorney** **was** accepted by the company in favour of the Bank for realisation. Certain amounts were received. The defendant herself executed letter dt. 2nd Feb. 19S2 acknowledging her liability in respect of the guarantee. Thus, far from **repudiating the liability and breaking the contract** **of** **continuing- guarantee,** the defendant accepted her obligation under the gnarantee bond in respect of **the overdraft account which continued** **to** **be live at least upto 29th** **September.-** 1952. The suit was filed on 8th November, 1954 and was, therefore, clearly within time under Article 115 Of the schedule of Limitation Act, 1908. [926A-F] c **D** _;(_ , _)_ **The** **correctness** **of** **an** **order** **of** **demand** **passed** **by** **the** **High** **Court** **which** **could not then** **be** **questioned** **by** **filing an appeal** **in** **the Supreme Court against** **that** **order because such** **an** **appeal** _**was**_ **not competent** **could** **nevertheless** **be** **E** **challenged later** **in** **the appeal before the** **Supi-eme** **Court arising out** **of** **the** final judgment in the action. [927 A-BJ _Saty<dhyan Ghoslial and Ors._ v. _Smt. Beoraiin Debi and Anr._ [1960] 3 S.C.R. 590; _Lonankutty_ v. _Thomman and Anr._ [19761 Suppl. SCR 74; _Jasraj_ _lnder Singh_ v. _Hemrai Multan Chand_ [1977] 2 SCR 973; relied on. **F** **G** **H** **A** **B** c **D** E F G **H** 918 SUPREME COURT REPORTS [1979] l s.c.R. **circumstances** **of** **this** **case,** **the** **Supreme Court** **Will** **not** **interfere** **with** **the** **decree** **of** **the** **lower** **court** **merely** **because** **the** **earlier** **order** **of** **remand** **passed** by the High Court may not be capable of being justified. [9278-D, 928A, CJ CNIL APPELLATE JURISDICTION : Civil Appeal No. 2133 of 1968. Appeal by Special Leave from the Judgment and Order dated 25-9-1967 of the Bombay High Court in First Appeal No. 247 of 1960. _B. D. Bal, Mrs._ _Jayashree_ _Wad_ and S. _B. Wad_ for the Appellant. _V._ C. _Mahajan,_ _S._ _K._ _Mehta,_ _K._ _R._ _Nagaraja_ and _P._ _N._ _Puri_ for the Respondent. The Judgment of the Court was delivered by CHINNAPPA REDDY, J.-The defendant in the action is the appellant in this appeal by special leave. The respondent-plaintiff is the Indo Commercial Bank Ltd., Madras, now taken over and represented by the Punjab National Bank. We will hereafter refer to the pl'aintiff as the Bank. In 1943 Kawasji Karanjia and Jal Karanjia and C. B. Samuel, hus\Joand of the defendant, floated a company known as the Modern Hindustan Food Products Ltd. at Poona. Jal Karanjia, C. B. Samuel and the defendant were Directors of the Company. The Company opened a current account with the plaintiff bank in 1943 which was later converted into an overdraft account with the maximum limit of Rs. 25,000/-. By a subsequent arrangement dated 19th June, 1944, the limit of the overdraft account was raised to Rs. 10 lacs. C. B. Samuel, as Managing Director of the Company, executed a promissory note for Rs. 10 lacs and he and his wife Margaret Samuel (defendant) executed a guarantee Bond (Exhibit 57) by which they jointly and severally guaranteed to the bank the repayment of all money which shall at any time be due to the Bank from the Company on the general balance of their account with the bank, or on any account whatever. The guarantee was to be a continuing guarantee to the extent of Rs. 10 lacs at any one time. We will have occa- . sion to refer to the ternrs of the bond in detail later. The overdraft facility was utilised by the Compuny and amounts were drawn from the Bank at various times. The Company ceased business on 30th June 1946, and thereafter th.e Company entered into an arrangement with the plaintiff bank by which the plaintiff bank was authorised to receive all amounts due from the Director General of Food Supplies, Government of India, or from any other person or Department and appropriate the sums collected towards the money due to the bank from the Company. An irrevocable power of attorney autherising the bftnk to do so was executed by C. B. Samuel as Managing Director , MARGARET _v._ INDO COMM. BANK _(Chiniuippa_ _Reddy,!.)_ 919 of the Company. All Bills und documents were accordingly handed over to the plaintiff bank for realisation of the amount due to the Company. C. B. Samuel died on 27th April 1951. By her letter Exhibit _55_ dated 2nd February 1952, the defendant acknowledged her personal guarantee to repay to the plaintiff the sum of Rs. 2, 71,531-8-6 which was stated to be the boalance due to the plaintifl from the Company as on 31st December, 1951. Adding a sum of Rs. 21,886-6 Ans-0 ps. by way of interest from 1st January 1952 till 30th September, 1953, and deducting a sum of Rs. 57,964-14-6 said to be the amount recovered between those dates, the balance due on 8th November, 1954, was stated to be Rs. 2,35,453-1-0. On 8th November, 1954 the present suit was filled by the Bunk to enforce the guarantee bond against the defendant Margaret Samuel and to recover a sum of Rs. 1,50,000/- from her. It was stated in the plaint that a sum of Rs. 85,453-1-0 was remitted and the suit was laid to recover the sum of Rs. 1,50,000/- only. Alongwith the plaint an extract of the account subsequent to 1946 was filed. The defence of Margaret Samuel, to the extent that is relevant for the purposes of the present appeal, was that the suit was barred by limitation, that the letter dated 2nd February, 1952 was obtained from her by fraud and that she was, in any case, not liable to pay amounts d"tsputed by her in paragraph 15 of her written statement. She also pleaded that the plaintiff had deliberately withheld production of the accounts between 1943 to 1946 during which period most of the trans'aCtions took place and that if those acconnts were produced she would be in a position to challenge other items as well. Soon aiter filing the written statement the defendant filed an application in the Trial Conrt to direct the plaintiff to produce, among other documents, the accounts from 1943 onwards. The Trial Judge by his order dated 10th March 1955 directed the plaintiff to produce the documents within 2 weeks from the date. The plaintiff did not produce the documents within the time allowed. Subsequently, however, an extract of the accounts from 1943 to 1946 was produced on 1st September 1955, the date of hearing of the suit. Ori. 10th October, 1955, the defendant filed Exhibit 85, an application seeking a direction from the Court "that the plaintiff be allowed to produce any documentary evidence which they might possess in support of the items mentioned in the schedules even till the time the evidence is finished and the defendant be allowed to deny, under the circumstances mentioned all the items mentioned in Schedule 'B', with her A B c D E F G H **A** **B** **c** **D** 920 **SUPREM!!** COUllT REPORTS (1979) 1 $.C.R. explanation for the items". Alongwith the application the defendant filed two schedules, Schedule 'A' showing the items specifically denied by the defendant in her written statement and schedule 'B' showing the items. which were denied by her after the accounts from 194 3 to 1946 were produced in Court by the plaintiff. The application was opposed by the plaintiff. The Trial Court dismissed the application on the ground that it was belated. The Trial Court observed that if the defendant wanted to dispute any item from the accounts she should have got the accounts produced even before she filed the written statement. No doubt she had filed an application soon afterwards to direct the plaintiff to produce the aecounts and other documents within two weeks, but when the plaintiff failed to produce the accounts within two weeks, she did not take any further action in the matter. Having failed to take steps to compel the plaintiff to produce the accounts earlier, the Court said, she could not seek to dispute the items after the plaintiffs had closed the evidence of their side. Thereafter the Trial of the suit was concluded. t At the trial the plaintiff relied primarily upon Exhibit 55 the letter of acknowledgment dated 2nd February, 1952. This letter of acknowle.dgment, as already mentioned by us was alleged by the defendant to have been obtained from her by fraud. The learned Civil **E** Judge found that the letter was not proved to have been obtained by fraud. He held that the defendant, who was a highly educated lady, had subscribed her sigoature to Exhibit 55 fully knowing its contents. He, however, held that the suit was barred by limitation. The learned Civil Judge also held that there was no proper proof of the several debit items and that they were suspicious. The suit was, therefore, **F** dismissed. ' The plaintiff filed an oappeal to the High Court of Bombay. The High Court held that the suit was not barred by limitation. The High Court observed that on the material placed before the Court, it **G** was impossible to pass a decree in favour of the plaintiff-bank for any amount alleged to be due by the defendoant. The High Court also observed that the Trial Judge was wrong in dismissing the application (Exhibit 85). The High Court, however, thought that in order to do justice between the parties it was necessary to give the plaintiffbank an opportunity to prove the various items which were challenged **H** - by the defendant in her written statement and in her application (Exhi bit 8 _3)_ and further to give the defendant an opportunity to fead evidence in support of her contention that the entries were in respect MARGARET _v:_ INDO COMM. BANK _(Chinniippa Reddy,_ **J.)** **921** of amounts which she was not liable to pay. Tbe High Court remand- **A** ed the suit to the Trial Court for fresh disposal in the light of the observations made by it, after raising additional issues if necessary. After remand the Trial Judge amended original issue No. 9 and added issue No. 9-A. He allowed the parties to lead evidence. The two issues which were tried by him were issues 9 and 9-A which were **B** as follows, : "9. Does plaintiff prove the items in dispute as given in the written statement and in Ex. 85 ? 9-A. Does defendant prove that the debit entries are in respect of amounts which she is not liable to pay ?" **C** On an elaborate consideration of the evidence, the Trial Judge answered issue No. 9 in the affirmative and issue No. 9-A in the negative basing his conclusion,primarily on Exhibit 99 a letter dated 30th June 1950, passed by the Company in favour of the bank acknowled~ng that the balance due at the foot of the over-draft account as on 30th **D** June, 1950 was Rs. 4,90,523-5-7. The Trial Judge held that the letter of acknowledgement was binding on the defendant. The suit was decreed for a sum of Rs. 1,50,000/- with further interest and costs. The defendant preferred an appeal to the High Court of Bombay. **E** The High Court considered the evidence relating to each item of debit in great detail oand found that debit items amounting to Rs. 68,761-7-0 were not proved to be binding on the defendant. As this amount with interest was less than the amount of Rs. 85,453-1-0 which had been given up by the plaintiff in the plaint, the High Court affirmed the decree passed by the Trial Court. The finding of the High Court **F** in regard to the various debit items were greatly influenced by a group -Of three letters Exhibit 104, dated 30th June, 1945, Exhibit 105 dated 27th November, 1945 and Exhibit 106 dated 6th December, 1945 -signed by the defendant herself as Director of the Company. On the basis of these three letters the High Court took the view that, substantially, all the entries of debit made prior to 1st December, 1945 **G** must be held to have been proved. In this appeal by special leave Shri B. **D.** Bal, learned Counsel for the defendant-appellant argued that there was no justification far the ocder of rema!ld passed in the first instance by the Bombay High Court. He submitted that on the finding arrived at by the Bombay **H** High Court that the plaintiff had failed to prove any of the debit items, the original decree of the Trial Court dismissing the suit should have 1' ##### # 922 **SUPREME** COURT REPORTS [1979] **1** s.c.R. . **A** been affirmed. He said that when the defendant filed Exhibit 85, proposing that the plaintiff should be given an opportunity to adduce evidence to prove the debit items, the plaintiff opposed the application. The Appellate Court was, therefore, unjustified in giving a further opportunity to the plaintiff to prove the debit items. Shri Bal further urged that the suit was barred by limitation. His conten**B** tion was that each of the debit items constituted a distinct loan and gave rise to a separate cause of action, everyone of which was barred by limitation. In regard to Exhibits 104, 105 and 106 Shri Bal urged that the defendant had merely signed the letters which were put up for her signature, without personally verifying the correctness of the **c** unlikely that the defendant statements made in the letters. would His have personally argument was verified that it the accounts was most **D** **E** **F** G **H** statements made in the letters. His argument was that it was most unlikely that the defendant would have personally verified the accounts and satisfied herself about the correctness of the several debit items, before signing the letters put up before her. Shri Bal also argued that in any case a sum of Rs. 50,000/- which was in deposit with the Government and which the Bank was entitled to receive under the tripartite arrangement made between the Company, the Bank and the Government should have been deducted from the amount of decree. He also urged that two items of debit which related to the transfer of funds to the personal account of C.B. Samuel should also be excluded. Shri Vikram Mahajan, learned Counsel for the plaintiff argued that the initial order of remand made by the Bombay High Court was justified in the special circumstances of the case. He further argued that even if the order of remand could not be fully jnstified, it was not a fit case for interference under Article 136 of the Constitutioo, having regard to the justice of the matter as disclosed by the subsequent findings of the Trial Court and the Appellate Court. On the question of limitation he submitted that the suit was really one to enforce the guarantee bond, that the guarantee was a continuing guarantee and therefore, the suit could not be said to be barred by limitation. He urged that the defendant was an educated person well versed in business affairs and the High Court was right in attaching importance to the three letters Exhibit 104, 105 and 106. We may first consider the question of limitation. As oalready mentioned by ns, the submission of Shri Bal was that every item of an overdraft account was an independent loan, limitation for the re.covery of which was determined by Article 57 of the schedule to the Limitation Act, 1908. Limitation, according to the learned Counsel, started to run from the date of each loon. He relied on _BaJante_ _Kumar_ _Mitra_ v. _Chota Nagpur Banking Association_ _Ltd,.(')_ _Braj1mdra_ _t_ (I) A. I. R. 1948 Patna 18. _)_ .. ## -- MARGARET _v._ INDO COMM. BANK _(Chinnappa Reddy,_ J.) 923 _Kishore_ _Ray Chowdhury_ v. _Hindustan Cooperative Insurance Society_ Ltd.(') _National and Grindlays Bank Ltd._ v. _Tikam Chand_ _Daga_ **cl** _**Anr.,(**_ _**[2]**_ _**)**_ and _Uma_ _Shankar_ _Prasad_ v. _Bank_ _of Bihar Ltd._ _&_ _Anr.(_ _[8]_ _)._ In our view it is unnecessary for the purposes of the present case to go into the question of the nature -of an overdraft account. The present suit is in substance and truth one to enforce the guarantee bond executed by the defendent. In order to ascertain the nature of the liability of the defendant it is necessary to refer to the precise terms of the guarantee bond rather than embark into an enqmry as to the nature of an overdraft account. Exhibit 57 is the guarantee bond executed by the defendant and her husband on 23rd October, 1944. It is addressed to the Indo-Commercial Bank Ltd., Madras, and is in the following terms : **"Dear** **Sirs,** In consideration of your having agreed to allow overdraft accommodation upto Rs. 10,00,000/- (Rupees Teu Lakhs only) to the Modern Hindustan Food Products Ltd., Poona, we, C. **B.** Samuel and M. L. Samuel, the undersigned do hereby jointly and severally guarantee to you, the Inde>-Commercial Bank Limited the repayment of all money, which shall at any time be due to you from the said Modern Hindustan Food Products Ltd., on the general balance of their accow1ts with you or on any account whatever (such balances to include all interest, charges, commission and other expenses which you may charge as bankers) and oalso the due payment at maturity of any promissory note or other negotiable instn1ment on the security or in respect of which any credit or advance shall be made. And we hereby declare that this guarantee shall be a continuing guarantee to the extent at any one time for Rs. 10,00,000/- (Rupees Ten Lakhs only) and shall not be considered wholly or partially satisfied by the payment at any one tinle or at different times of any sums of money due on such general balance of acconnt but shall extend and cover aud be a security for every and all further sums at any time due to you tllereon. And we further declare that you may grant to the Modern Hindustan Food Products Ltd., any indulgence witllout discharging our liability." **1)** I.L. R.44cal. 979. (2) A. **T.** R. 1964 Cal. 358. (3) A. I. R. 1942 Patna 201. **A** **B** **c** **D** **E** **F** **G** **H** A B c D E F G H 924 SUPREME COURT REPORTS [1979) 1 s.c.R. The guarantee is seen to be a continuing guarantee and the underl!aking by the defendant is to pay any amount that may be due by the company at the foot of the general balance of its account or any other account whatever. In the case of such a continuing guarantee, so long as the account is a live account in the sense that it is not se'tled and there is no refusal on the part of the guarantor 'O carrv f'Ut the obligation, we do not see how the period of limitation could be said to have commenced running. Limitation would only run from the date of breach, under Article 115 of the schedule to the Limitation Act, 1908. When the BomlYay High Court considered the matter in the first instance and held that the suit was not barred by l'mitation, J. C. Shah, J ., speaking for the Court said : "On the plain words of the letters of guarantee it is clear that the defendant undertcJk to pay any amount wh"ch may be due by the Company at the font of the general balance of its account or any other account whatever ..... . We are not concerned in this case with the period of limitation for the amount repayable by the Company to the bank. We are concerned with the period of limitati"n 'or enforcing the liability of the defendant unde~ the surety bond ........ We hold that the suit to enforce the Jiabilitv is governed by Art. 115 and the cause of action arises when the contract of continuing guarantee is broken, and in the present case we are of the view that so long as the account remained a live account, and there was no refusal on the ., ·rt of defendant to carry out her obligation, the period of limitation did not commence to run." We agree with the view expressed by Shah, J, The intention and effect of a continuing guarantee such as the one with which we are concerned in this case was considered by the Judicial O>mmittee of the Privy Council in _Wright and Anr._ v. _New Zealand Farmers Co .._ _operative Association_ _of_ _Canterbury Lid.(')_ The second clause of the guarantee bond in that case was in the following terms : "This guarantee shali be a continuing guarantee and shall apply to the balance that is now or may at any time hereafter be owing to you by the William Nosworthy and Robert Nosworthy on their current account with you for goods supplied and advances made by you as aforesaid and interest and other charges as aforesaid." A contention was raised in that case that the liability of the guarantor was barred in respect of each advance made to the Nosworthys on - (I) 1939] A. C. 439. _Y_ ' .. #### - - • A B c D· E F G H MARGARET _v._ _INDO COMM. BANK _(Chinnappa.Reddy.J.)_ 925 the expiration of six yean; from the dale" of advance. . The Judidal Committee of the Privy ·Council expressed the · . opinion · that the matter had to be determilled by the true construction of the guarantee. Proceedirig to _:do_ so, the Judicial Committee obser\'ed (at p. 449) : . "It. is no doubt a guarantee that the Association will be repaid by the Nosworthys advanced made and to be made to them by the· Association together with interest and charges; ·but it specifies in col. 2 how that guarantee will operate-namely. that it will apply to (i.e. the guarantor guarantees. repayment of) the balance which at any time thereafter is owing by the Nosworthys to the Association. It is difficult to see how · efkct can be given to this provis;on except by holding that the repaymcnCof every debit balance is guaranteed as it is constituted from time to time, during the·· continuance ·of the guarantee, by the excess of the total' debits over the total credits. If that be true co'nstruction of this document, as their Lordships think it is, the number of years which have expired since any individual debit was incurred is immaterial. The question of limitation could only arise in regard to the time which had elapsed .since the balance guaranteed and sued for had been constituted"~ Later it was again observed (at p, 450) : '"!bat document, in their opinion, clearly guarantees the repayinent of each debit balance as constituted from time to time, during the continuance of th;, guarantee, by the surplus of the total debits over the total credits, and accordingly at the date of the counterclaim the Associa-. tion's claim against the plai'ntiff for payment of the· unpaid balance due from the Nosworthys, with interest, was not statute-barred." This was precisely the view which J. C. Shah,· J., expressed in the . passage already extracted· by us, with which ·we expressed our agreement. We may add here that in _Wrights_ case the Privy Council appeared not to approve of the decision in _Parr's_ _BMking_ _Company_ _I..td._ v. _Yates('),-_ where it' had been ob&orved that the statutory limitation would run from tM date of each advance. As noticed in _Pagefs_ _Law_ _of_ _Banking_ (8th Edition) at _PP:_ 82-83, the !! (1898] 2 K. B. 460 . A B c D E 926 SUPREME COURT REPORTS [1979] l s.c.R. authority of _Parr's_ case has been overruled so far as the guarantor is concerned by the judgment of the Court of Appeal in _Bradford_ _Old_ _Bank Ltd._ v. _SutcUffe(')._ Now, the overdraft account which was guaranteed by the defendant by the execution of the guarantee bond dated 23rd October, 1944, continued to be a 'Jive' account even after the Company ceased its business on 30th June, 1946. A power of Attorney was executed by the Company in favour of the plaintiff bank and amounts due to the Bank were realised and credited in the overdraft account. A sum of Rs. 2, 19, 784-4-0 was received from the Director General of Food Supplies on 27th June, 1950. On 6th September, 1950, another sum of Rs. 1,15,229-15-0 was received from the Director General of Food Supplies and credited to the account of the Company. Again on 27th January, 1951, 14th March, 1951 and 29th September, 1952, several amounts received by way of refund of Income-tax were credited to the Company in its account. The amount credited on 29th September, 1952 was Rs. 24.022:0-10. The overdraft account was thus a live account at least till 29th September, 1952. The Compa'ny executed various promissory notes and letters of acknowledgement. The defendant hernelf m; guarantor executed, on 2nd February, 1952, Exhibit 55, acknowledging her liability in respect of the guarant•"e given by her. Paragraph (a) of the letter is as follows : "In respect of the personal guarantee which myself and my husba'nd have given to the bank, the amount dne to the bank as on 31st December, 1951 is Rs. 2,71,531-8-6." Thus far from repudiating her liability and breaking the contract of continuing guarantee, the defendant accepted her obligation under ~ F the guarantee bond in respect of the overdraft account which co'nti nued to be live at least upto 29th September, 1952. The suit which __)---_ was filed on 8th November, 1954, was therefore, clearly within time under Article 115 of the schedule to the Limitation Act, 1908. G H We may mention here that it was the contention of Shri Bal tl1at the letter dated 2nd February, 1952, was obtained from the defrrdant by fraud. Both the Trial Court and the High Court h''"' found that there was no fraud and that the letter was written by the defendant voluntarily and with full knowledge of its contents. We accept the finding of th~ Trial Court and the High _Caurt_ that the letter was not obtained by any fraud practiced upo'n the defendant. The next question is about the legality and the consequences of the illegality, if any, of the original order of remand. It cannot be (J) (1918] 2 K. B. 833. ' ~~.~~ ~~'~~ MARGARET _v._ INDO COMM. BANK _(Chbmappa Reddy,_ !.) S.27 disputed, and indeed it was not disputed before us, b.y Shri Mabajan, that the correctness of a·n order of remand passed b.y the High Court which could not theu be questioned b.y filing an appeal in the Supreme Court against that order because such an appeal was not competent could nonetheless be challenged later in the appeal before the Supreme Court arising out of the final judgment pronounced in the action vide _Satyadhyan Ghoshal_ _&_ _Ors._ v. _Smt. Beorajin_ _Debi_ ./ _&_ _Anr.('); Lonankutty_ v. _Thomman_ _&_ _Anr.('); Jasraj_ _lnder Singh_ v. _Hem Raj Multan Chand(')._ It does not, however, mean that the Supreme Court will, every time, exercise its discretionary power under Article 136 of the Constitution merely because it finds that the High Court had wrongly passed an order of remand at an earlier stage of the case. If the Supreme Court is satisfied that as a result of the order of remand substantial justice has been done to the parties in the consequential proceedings, the Supreme Court may decline to exercise its discretionary power to interfere. The jurisdiction under Article 136 is not meant to correct every illegality brought to the notice of the Supreme Court, nor to undo, merely on account of such illegality, an - adjudication which has done substantial justice to the parties. On the other hand, Article 142 of the Constitution expressly confers powers upon tho Supreme Court, i'n the exercise of its jurisdiction, to pass such decree or make such order as is necessary for doing complete justice in any case or matter pending before it. In the case before c us, the Bombay High Court no doubt found that on the material . E placed before it there was no option exc•,pt to non-suit the plaintiff. The High Court, however, appears to have felt that the plaintiffbank which had rested its case i'n the Trial Court almost entirely on the acknowledgement dated 2nd February, 1952, was, perhaps mrsled into doing so because of the order passed by th•o Trial Judge on the application Exhibit 85, filed by the defendant. In the F order dated 11th October, 1955, passed on the application Exhibit 85, th•o Trial Judge had observed that the defendant should have taken proper steps earlier if she wanted to dispute the debit items . a'nd that having failed to take proper steps she had to pay the penalty for her !aches. That order might have made the plaintiff G believe that it was unnecessary to adduce any more evidence. Though the High Court did not expressly state that the plaintiff was misled by the order of th~ Trial Judge, it is clear from a' perusal of the remand order of the High Court that the High Court felt that the order made on the application Exhibit 85, was responsible for the F G (I) [1960] 3 S. C. R. 590. {2) [1976] Supp. S. C. R. 74. (3) [1977] 2 S. C.R. 973. 1 A B c D E F G H 928 SUPREME COURT REPORTS [1979] l s.c.R. failure of both the plaintiff and defendant to adduce appropriate evidence in regard to the s~veral debit items. It was i'n those circumstances that the High Court, in the inter>ests of justice, remanded the suit to the Trilli Court in order to enable both parties to adduce necessary evidence regarding the items of debit. Whether or not the order of remand is capable of being justified under the provisions of the Code of Civil Procedure, we are of the view that the i'nterests of justice have not suffered but on the other hand substantial justice has been done between the parties as a result of the subsequent proceedings. The Trial Court and the High Court have in their judgments fully and exhaustively discussed the liability of the defendant in regard to each of the debit items. In the s]Y'..,cial circumstances of this case we do not think that we will be justified in i'nterfering with the decrees of the Lower Courts merely because the earlier order of remand passed by the High Court may not be capable of being justified. As mentioned by us earlier the High Court placed great reliance on the three letters dated 30th June, 1945, 27th November, 1945 and 6th December, 1945, and it was because of those !ette's the High Court upheld all the items of debit made prior to 1st December, 1945. We think that the High Court was right in doing so. The first of the letters Exhibit 104, is a letter addres&ed by the Bank _to_ the Company informing the latter that the balance due at the foot of the account as on 30th Jnne, 1945, was Rs. 6,81,24i-9-5. The, Jetter contains an endorsement by the defendant as a Director of the Company confirming the correctness of the statement. The second Jetter dated 27th November, 1945 (Exhibit 105) is a Jetter addressed by the Company to the Bank. It is signed by the defendant on behalf of the Company. By this Jetter the Company complained about the dishonour of two cheques for RE. 20,000/- each despite the fact that the Company had not e,.ceeded the overdraft limit. In ihe Jetter it was pointed out that while the overdraft balance was Rs. 10,14,380-7-6, a bill for Rs. 89,789/- had been sent by the Company to the Bank on 22nd November, 1945. The letter while taking the plaintiff to task for dishonouring the cheque requested the bank to send a statement of acconnt as on 30th November, 1945. This Jetter is of great importance since it shows that the Company was aware of the correct balance of the overdraft account without reference to the bank. It is apparent from the Jetter that th" Company had kept an account of the debits and that any statement of account sent by the Bank ~s being verified by the Company with reference to the MARGARET _v._ INDO COMM. BANK _(Chinnappa Reddy,_ _!.)_ 9.29 Company's books. It may .be noticed here that by another letter dated 19th December, 1945, the bank informed the Company that the balance due upto 30th November, 1945, was Rs. 10,60,913-8-11 and this was confirn!ed on behalf of the Company by C. B. Samuel himself. The third letter is Exhibit 106 dated 6th Decemb>.r, 1945. This letter refers to the Bank's statement of account for the month of November, 1945, and draws the bank's attention to the fact that the balance of Rs. 9,29,339-15-1 as on 12th November, 1945, had been shown as carried over as Rs. 9,29,540-5-4, on 14th November, 1945. There was a difference of Rs. 200-6-3. This letter was also signed by the defendant on behalf of the Company. The letter indi" cates that any statement sent by the bank; to the Company was being careMly examined by the Company. In regard to these letters the case of the defundant was that she had merely signed the letters which were put up to her by the office and that she had no i>ersonal knowledge of the statements made in the letters. We agree with the Trial Court a"nd the High Court that this case of the defendant cannot be accepted. A review of her deposition and the several transactions into which she has entered before and after her husband's death clearly indicate that she is an educated lady, an intelligent woman and 'a man of the world' if a woman may be so d""cribed. We do not have the slightest doubt that the defendant could not have signed those letters without satisfying herself about the correctness of their contents. Having regard to the circumstance that the defendant herself had signed the three letters Exhibit 104, 105 a'nd 106 and having regard to the further circumstance that two of these letters contained positive indications that the statements of account submitted by the Bank had been verified with reference to the Company's book'S, the High Court took the view that debit items upto 1st December, 1945. could be safely held to have been proved by the bank. We see no reason to take a view different from that taken by the High Court. Shri Bal urged that under the tripartite arrangement between the bank, the Company and the Govt, the Bank was entitled to receive the amount of security lying in deposit with the Government and therefore, the item of debit of Rs. 50,000/- made on 17th July, 1944, in the loan account of the Company should be deducted from the total of the debit item~. We are unable to agree with the submission of Shri Bal. In the first place no dispute concerning this item was raised either in the written statement of the Company or in Exhibit 85. In the 2nd place this is also one of the items of debit made prior to 1st December, 1945 and it must have been duly verified A B c D E F G H **A** **B** **c** **D** **E** **F** **G** 9311 SUPREME COURT REPORTS [ 1979] 1 s.c.R. before the letters Exhibit 104, 105 and 106 were written. Shri Bal also objec~~d to two items of debit dated 30th September, 1944 and 30th June 1945, representing amounts transferred from the . Company's account to the personal account of C.B. Samuel. Both these debits were made prior to 1st December, 1945, and, therefore, we do not think we will be justified in excluding them. As a result of the foregoing discussion we agree with the High Court that the plaintiff bank failed to prove items of debit totalling Rs. 68,761-7-0. Allowing interest from the various dates of debit, the total amount which has to be deducted from the claim of the pla!ntiff bank is Rs. 80,894-8-4. The question now is whether this has to be deducted from the sum of Rs. 2,35,453-1-0 which the plaintiff mentioned in paragraph 8 of the plaint as the amount due to the bank out of which the plaintiff was giving up the sum of Rs. 85,453-1-0 or from the sum of Rs. 1,50,000/- for the recovery of which alone this suit was filed. The High Court thought that since the plaintiff had given up the sum of Rs. 85,453-1-0 as the plaintiff was doub*11 about the .recovery of the amount from the defendant, the Court would be justified in deducting the sum of Rs. 80,894-8-4, from the sum of Rs. 2,35,453-1-0 instead of from the sum of Rs. 1,50,000/. We do not think there is any justification for the course adopted by the High C<)urt. The plaintiff did not choose to mention in the plaint the particular items of debit which he was giving up. There is, therefore, no reason why the amount given up by the plaintiff should be treated as attributable to the items of debit which have now been found to be not proved. W '' are, therefore, of the view that the total of the unproved debit item; together with interest i.e. the sum of Rs. 80,894-8-4 should be deducted from the sum of Rs. 1,50.000/- for which amount only the plaintiff filed the suit. The plaintiff is, therefore, entitled to a decree for Rs. 69,105-7-8 with interest at 4% from the date of suit till realisation. The appeal is allowed to the extent indicated. Having regard to the circumstances of the case, the parties will bear their own costs throughout **P.H.P.** _Appeal allowed_ _in_ _part._