P. V. GOPINATHAN v. Nedungadi Bank Ltd and Others

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE THOMAS P.JOSEPH FRIDAY, THE 13TH DAY OF JULY 2012/22ND ASHADHA 1934 RSA.No. 890 of 2012 () ---------------------AS.112/2006 of SUB COURT, OTTAPPALAM OS.3/2000 of MUNSIFF-MAGISTRATE COURT,PATTAMBI APPELLANT(S)/APPELLANT/3RD DEFENDANT: ---------------------------------------------- P.V.GOPINATHAN, AGED 57 YEARS S/O.LATE RAMAN NAIR, PANIKKAVEETTIL HOUSE PARADUR AMSOM AND DESOM, OTTAPALAM TALUK PALAKKAD DISTRICT, PARUDUR POST. BY ADVS.SMT.T.D.RAJALAKSHMI SRI.R.SREEHARI RESPONDENT(S)/RESPONDENTS/PLAINTIFF, IST DEFENDANT AND SUPPL. DEFENDANTS 4 TO 7: -------------------------------------------------------------------------------- 1. THE NEDUNGADI BANK LTD PALLIPPURAM, AMALGAMATED WITH PUNJAB NATIONAL BANK, PATTAMBI, REPRESENTED BY ITS MANAGER, PATTAMBI POST, PIN-679 303. 2. RAJAN S/O.PANDIYARACHIRAKKAL NARAYANI AMMA PARUDUR AMSOM AND DESOM, OTTAPALAM TALUK PARUDUR POST, PIN.679 312. 3. CHANDRAMATHI W/O.LATE SIVASANKARAN NAIR 4. SANTHOSH S/O.LATE SIVASANKARAN NAIR 5. SURESH S/O.LATE SIVASANKARAN NAIR 6. SARITHA D/O.LATE SIVASANKARAN NAIR. 3 TO 6 ARE RESIDING AT MADATH KOTHALANGATTU, PARADUR AMSOM, DESOM, OTTAPALAM TALUK AND PARADUR POST, PIN-679 312. THIS REGULAR SECOND APPEAL HAVING COME UP FOR ADMISSION ON 13-07-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **THOMAS P. JOSEPH, J.** ## **-------------------------------------R.S.A. No.890 of 2012 -------------------------------------Dated this the 13[th] day of July, 2012.** ## **JUDGMENT** The effect and extent of a continuing guarantee so far as the law of limitation is concerned, is the question raised for a decision in this Second Appeal. It arises at the instance of the 3[rd] defendant in O.S.No.3 of 2000 of the Munsiff-Magistrate's Court, Pattambi and the confirmation of that judgment and decree by the learned Sub Judge, Ottapalam in A.S.No.112 of 2006. 2. 1[st] respondent filed the suit for recovery of money. It alleged that the 2[nd] respondent/1[st] defendant availed a loan of `25,000/- from it undertaking to repay the said amount with interest at the rate of 12.5% per annum or the interest which prevailed during the period of the debt. The 2[nd] respondent also executed a demand promissory note in favour of the 1[st] respondent. The appellant and deceased 2[nd] defendant (whose legal representatives are respondents 3 to 6) executed a continuing guarantee (Ext.A3) in favour of the 1[st] respondent on 18.01.1994 undertaking to pay the amount notwithstanding the discharge of the principal by operation of law, etc. The 1[st] respondent claimed that on 25.12.1995 the 2[nd] respondent/1[st] defendant executed a revival letter (Ext.A5) keeping his liability alive and hence also, the appellant, 2[nd] respondent and deceased 2[nd] defendant are liable to pay the amount. 3. The second respondent/1[st] defendant remained exparte. Appellant 2 RSA No.890/2012 and respondents 3 to 6 contended that the 2[nd] respondent has not executed any revival letter and that the suit has become wholly time barred not only against the 2[nd] respondent but also against the deceased 2[nd] respondent and the appellant. They contended that the revival letter allegedly executed by the 2[nd] respondent is a concocted document. 4. Trial court based on the evidence of CW1, the expert and Ext.C1, his report and on a perusal of the admitted signature of the 2[nd] respondent with the disputed signature in Ext.A5 came to the conclusion that due execution of Ext.A5 is not proved and hence liability of the 2[nd] respondent/1[st] defendant has become barred by limitation by the time the 1[st] respondent instituted the suit. However, based on Ext.A3, continuing guarantee appellant and the legal representatives of the deceased 2[nd] defendant were held liable to pay the amount. 5. Appellant challenged that judgment and decree before the learned Sub Judge but only to be confirmed. Hence the Second Appeal. 6. Learned counsel has contended that the finding entered by the courts below as to the liability of the appellant and the deceased 2[nd] defendant is not correct. It is contended by the learned counsel that the decision in **Mrs.** **Margaret Lalita samuel v. Indo Commercial Bank Ltd. (AIR 1979 SC 102)** relied on by the courts below has been distinguished by the Supreme Court in **Syndicate Bank v. Channaveerappa Beleri (AIR 2006 SC 1874)** . According to the learned counsel, in the absence of a demand, 1[st] respondent could not make the appellant and the deceased 2[nd] defendant liable even on the strength of 3 RSA No.890/2012 Ext.A3, continuing guarantee. No such demand is proved in this case though it is stated in the plaint. 7. I have been given a copy of the plaint and Ext.A3 for perusal. In the plaint it is stated that the 2[nd] respondent/1[st] defendant had executed a revival letter in favour of the 1[st] respondent on 25.11.1996 acknowledging liability. It is further stated in paragraph 3 of the plaint that the 1[st] respondent had demanded the appellant, 2[nd] respondent and the deceased 2[nd] defendant several times by notice and directly to pay the amount and interest due to the 1[st] respondent. But, it was not so done. 8. So far as the demand pleaded by the 1[st] respondent in paragraph 3 of the plaint is concerned, the date of demand if any is not available from the plaint. Nor has the 1[st] respondent produced any document to show that any such demand was made. Appellant is not admitting that there was any such demand. If the appellant has a case that a demand was made even based on the continuing guarantee (Ext.A3), but, the suit is filed beyond the period of three years from the date of that demand and hence the claim against the appellant is barred by limitation, certainly it was for the appellant to produce the demand notice if any. That has not been attempted by the appellant. 9. True that the trial court found that Ext.A5, revival letter is not proved to be executed by the 2[nd] respondent and that finding of the trial court is not challenged by the 1[st] respondent. Thus the claim as against the 2[nd] respondent has become time barred. 10. Then the next question is whether for the said reason liability of the 4 RSA No.890/2012 guarantors is discharged? The courts below referred to the decisions in **Mrs. Margaret Lalita samuel v. Indo Commercial Bank Ltd.** (supra), **Union Bank of India, Ernakulam v. T.J.Stephen and others (AIR 1990 Kerala 180)** and **B.G.Vasantha v. Corporation Bank, Mangalore & another ((2005) 10 SCC 215)** to hold that notwithstanding that personal liability of the 2[nd] respondent/1[st] defendant, the principal debtor stood discharged by the law of limitation, the guarantors continued to be liable on the strength of Ext.A3, continuing guarantee in so far as the account remained alive in the sense that it was not settled. 11. Learned counsel has invited my attention to Ext.A3, continuing guarantee and the decision in **Syndicate Bank v. Channaveerappa Beleri** (supra). It is contended that in the absence of a demand, question of liability of the guarantors even under the continuing guarantee does not arise. 12. I am afraid, no such interpretation could be given to the decision in **Syndicate Bank v. Channaveerappa Beleri** (supra). There, what is held in paragraph 11 is that even in the case of continuing guarantee, the period of limitation will begin to run when a demand is made and the guarantor commits breach by not complying with the demand. 13. In this case, I stated that though it is averred in paragraph 3 of the plaint that a demand was made to the guarantors as well, that is denied by the appellant and there is no evidence to show that any such demand was made and if so when such demand was made and hence the appellant cannot contend that the suit is filed beyond the date of demand and hence is barred by limitation. 5 RSA No.890/2012 14. Otherwise, liability of the guarantor on the strength of continuing guarantee is settled by the decisions in **Mrs. Margaret Lalita samuel v. Indo Commercial Bank Ltd.** , **Union Bank of India, Ernakulam v. T.J.Stephen and others** and **B.G.Vasantha v. Corporation Bank, Mangalore & another** (supra). In the first of the above decisions, it is held that the continuing guarantee so long as the account is a live account in the sense that it is not settled and there is no refusal on the part of the guarantor to carry out the obligation, the period of limitation would not commence to run. A Division Bench of this Court in **Union Bank of India, Ernakulam v. T.J.Stephen (AIR 1990 Kerala 180)** considered the same question and after reference to the decisions including **Mrs. Margaret Lalita samuel v. Indo Commercial Bank Ltd.** (supra) held that the agreement executed by the guarantor is a separate and collateral contract distinguished from the contract of debt between the principal debtor and creditor and that in such situation Article 55 of the Limitation Act would apply to the contract of guarantee. It was held that so far as the debt remains alive in the sense that it is not settled notwithstanding that liability of the principal debtor is extinguished by the law of limitation, the guarantors will continue to be liable unless there is a refusal on their part to pay amount in which case the period of limitation will run from the date of the refusal. 15. That the remedy against the 2[nd] respondent stood extinguished by the law of limitation does not mean that there is an extinguishment of the debt. The debt remains so far as it is not discharged by operation of law or otherwise. In this case the debt remains in force in that it was not discharged by operation 6 RSA No.890/2012 of law or otherwise settled by the parties. Therefore, on the strength of Ext.A3, continuing guarantee, liability of the guarantors continued notwithstanding that the personal remedy against the 2[nd] respondent stood discharged. 16. So far as the contention of the learned counsel that there is no demand against the guarantors is concerned, I must notice that in Ext.A3 there is no stipulation that to make the guarantors liable there must be a demand. 17. Learned counsel has invited my attention to the decision in **Ajab** ## **Enterprises v. Jayant Vegoiles and Chemicals Pvt. Ltd. (AIR 1991 Bombay** **35)** to contend that there could be no waiver against the period of limitation prescribed under the Act. An observation in that regard is made in paragraph 7 of the judgment. 18. The very purpose of getting a continuing guarantee executed is to get over the period of limitation so far as the debt remained alive in the sense that it is not settled or discharged otherwise. In the circumstances contending that there could be no waiver against the period of limitation (as stated in Ext.A3), appellant cannot successfully claim that the suit as against him is time barred. 19. The last argument the learned counsel has advanced is that in the plaint there is no reference to the subsisting liability of the appellant based on the continuing guarantee and the averments in the plaint goes as if the guarantors are also liable consequent to the revival of liability by the 2[nd] respondent/1[st] defendant, principal debtor. 20. Assuming so, the relevant documents are produced along with the 7 RSA No.890/2012 plaint and that forms part of the pleadings. What remained is only an interpretation of the provisions on the strength of settled position of law as to the liability of the guarantors. 21. Having regard to the circumstances above stated, I am not inclined to think that any substantial question of law is involved in this matter in that a question of law not so far settled arises for a decision. That the liability of the guarantors under a continuing guarantee notwithstanding that the personal remedy against the principal debtor has become time barred due to the law of limitation continues is already settled by a canteena of decisions including the decisions I have referred above. As such it involves no substantial question of law. Second Appeal is dismissed. All pending interlocutory applications will stand dismissed. **THOMAS P.JOSEPH, Judge.** **cks**