SYNDICATE BANK Vs. CHANNAVEERAPPA BELERI

JUDGEMENT

(1.) THIS appeal by special leave, is by the plaintiff-Bank against the judgment dated 6-3-1997 of the High Court of Karnataka dismissing R.F.A. No. 107 of 1993 filed by it against the judgment and decree dated 29-10-1992 of the Civil Judge, Gadag in O.S. No. 29 of 1990, dismissing its suit on the ground of limitation.

(2.) THE appellant-Bank filed Original Suit No. 29 of 1990 against Respondents 1 to 7 herein for recovery of Rs. 19,77,478/60 (the liability of Respondents 2 and 3 being restricted to Rs. 15,75,960 and liability of Respondents 6 and 7 being restricted to 17,56,070.60) together with interest @ 18.5% per annum compounded quarterly from the date of suit till the date of realization. THE plaint averments in brief are as under. (1) THE Bank had extended credit facilities by way of overdraft, goods loans, and demand loan against Supply Bills to a company known as Gadag Forge Fits (India) Pvt. Ltd., ('company' for short). Respondent 1 was its Managing Director and Respondents 2 to 7 were its Directors. THE credit facilities were renewed and enhanced from time to time. Respondents 1 to 7 executed the following guarantee bonds in favour of the Bank, personally agreeing and undertaking to pay and satisfy the Bank on demand all sums which may be due on account of the credit facilities granted to the company subject to the limits mentioned therein: i) Guarantee Bond dated 17-9-1983/20-8-1983/29-8-1983 executed by Respondents 1, 2 and 3, the limit of liability being Rs. 10.50 lakhs (a single deed executed by Respondents 1, 2 and 3 on different dates). ii) Guarantee bond dated 4-4-1984 executed by respondents 4 and 5, the limit of liability being Rs. 10.50 lakhs. iii) Guarantee bond dated 10-9-1985 executed by Respondents 1, 4, 5, 6 and 7, the limit of liability being Rs. 11.70 lakhs. Thus the limit of total liability undertaken exclusive of interest was Rs. 22.20 lakhs in the case of Respondents 1, 4 and 5, Rs. 10.50 lakhs in the case of Respondents 2 and 3 and Rs. 11.70 lakhs in the case of Respondents 6 and 7. THEir liability was joint and several with the company. (2) On account of the company allegedly incurring losses and stopping its activities, operations in the accounts of the company with the Bank stopped in the middle of 1986. In view of the failure on the part of the company (principal debtor) in paying the amounts due, the Bank sent a letter dated 12-10-1987 to the company and its 7 Directors (Respondents 1 to 7) informing that the following amounts were outstanding in the accounts of the company as on 30-9-1987 and calling upon the company as principal debtor and respondents 1 to 7 as guarantors to pay the said amounts aggregating to Rs. 13,48,264.79 with interest @ 18.5% per annum from <FRM>JUDGEMENT_2134_AIR(SCW)_2006Html1.htm</FRM> (3) THE company and its Directors (Respondents 1 to 7) sent a reply dated 31-10-1987 through counsel stating that the company was passing through a financial crisis and the Bank had failed to assist the company by making further advances by way of working capital. THEy further alleged that in view of the failure to advance further funds, the company sustained heavy loss and the company was reserving liberty to file a suit for damages for an amount which would be more than the amount claimed by the Bank. THEy also alleged that the bank ought to have given a moratorium on interest to rehabilitate the company. THEy also stated that without prejudice to their rights and contentions, they were willing to discuss the matter with the Bank, to arrive at an amicable solution. A formal notice through counsel was sent by the Bank on 17-12-1987 demanding payment which elicited a reply dated 30-12-1987 denying the demand. (4) THE Bank initiated proceedings for winding-up against the company on account of its liability to pay its dues, on 11-10-1988 and the High Court ordered winding-up of the company on 17-3-1989. THErefore, the suit was filed by the Bank on 16-3-1990 only against the Guarantors (Respondents 1 to 7) for recovery of Rs. 19,77,478.60 (that is, the amount demanded in the notice dated 12-10-1987 with interest up to date of suit). THE Bank restricted the claim to Rs. 10.50 lakhs with interest at 18.5% P.A. from 17-12-87 to the date of suit against Respondents 2 and 3 and to Rs. 11.70 lakhs with interest at 18.5% P.A. from 17-12-1987 to date of suit against respondents 6 and 7. THE Bank contended that the respondents were jointly and severally liable to pay the amounts due by the company, as aforesaid. It was alleged that the cause of action for the suit against the guarantors (respondents 1 to 7) arose on 17-12-1987 when the demand was made and on 30-12-1987 when they denied the liability by notice. THE statements of account showing the particulars of amount due as on 31-12-1989 were annexed to the plaint.

(3.) TO appreciate the rival contentions, it is necessary to refer to the relevant statutory provisions, the terms of the guarantee and the decision of this Court relied on by both parties. (1) Section 126, 128, 129 and 130 of Contract Act, 1872 are extracted below: