M R LAKSHMI NARAYANAN DECD Vs. SYNDICATE BANK

JUDGEMENT

(1.) FOR the The fourth defendant is the appellant. The case of the plaintiff is as follows : The first defendant applied for an overdraft facility for rs. 30, 000 as working capital. The plaintiff granted it on June 5, 1973, against the pledge of the first defendant's electronic equipment, refrigerators and electrical goods and on the personal guarantee for the repayment given by defendants Nos. 2 to 4. The first defendant was irregular in repayment of the amount. So, the plaintiff brought the properties to sale. The first defendant filed O. S. No. 8517 of 1977 and obtained an order of interim injunction, but, it was vacated later. As on October 31, 1977, a sum of Rs. 31, 341. 10 is due by the first defendant to the plaintiff. So, the plaintiff exercised its right and sold the damaged goods for Rs. 20, 710. 30 and the defective goods for Rs. 2, 568. After giving credit to this amount, the first defendant is due and liable as on March 5, 1979, in a sum of Rs. 10, 333. 80. The first defendant did not pay in spite of demands. Defendants Nos. 2 to 4 are guarantors for the repayment of the amount and they are jointly and severally liable with the first defendant to pay the suit amount.

(2.) THE third defendant filed written statement contending that he ceased to be a director of the first defendant-company and so, the guarantee given by him was terminated and so, he is discharged from the guarantee. Defendants Nos. 1 and 2 remained ex parte. THE fourth defendant filed written statement contending as follows : This defendant did not give any personal guarantee for repayment of the amount by the first defendant and he has resigned his post as director of the first defendant-company long back to the knowledge of the plaintiff and he gave guarantee only in the capacity of a director of that company and since he ceased to be a director, the guarantee given by him stands automatically cancelled and an acknowledgment of liability on behalf of the first defendant will not be binding upon him. THE trial court decreed the suit as prayed for and it was confirmed by the first appellate court. Aggrieved against that concurrent finding, the fourth defendant has challenged that finding in this second appeal. THE substantial questions of law framed at the time of admission of the second appeal are : (i) should a guarantor be given notice of the sale of the pledged articles before the actual sale " (ii) is the appellant discharged from guarantee in view of the sale of the pledged articles carried only by the respondent without notice " and (iii) was there a proper and valid sale of the pledged articles "

(3.) WITH regard to the point of limitation, the first defendant has acknowledged its liability to pay the amount due as on March 15, 1976, as seen from exhibit A-4. The suit was filed on March 6, 1979, and so, it is not barred by limitation. But, counsel for the defendant contended that there is acknowledgment of liability only to the tune of Rs. 23, 044 and only to that amount, it saves limitation and so, the entire suit claim cannot be decreed. The first appellate court found that a perusal of the entries in the account books, exhibit A-12, discloses that the first defendant had repaid a sum of Rs. 1, 275 on August 17, 1976, and so the suit having been filed on march 6, 1979, is well within three years from August 17, 1976, and it is clearly within the time not only against the first defendant but also against the guarantors, defendants Nos. 2 to 4 as the entire amount constitutes a continuing transaction and on such facts, the letter of acknowledgment, exhibit a-4, dated March 15, 1976, executed by the first defendant assumes nil significance as the plaintiff has no necessity to rely thereon to sustain its claim against all the defendants. The first appellate court observed that the ratio laid down in the case of Margaret Lalita Samuel v. Indo Commercial Bank ltd. , applies to the present case. It has been held in the above decision that : "the guarantee is seen to be a continuing guarantee and the undertaking 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 settled and there is no refusal on the part of the guarantor to carry out 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. "