VIMLA PRADHAN Vs. UNITED COMMERCIAL BANK

JUDGEMENT

(1.) THIS first appeal filed under section 96 of the Code of Civil Procedure, is directed against the Judgment and decree dated 15th April, 1985 passed by Shri K. K. Saxena, IInd Additional Judge to the Court of District Judge, Bilaspur in Civil Suit No. 11-B of 1978, holding the appellants responsible, jointly and severally with Respondents Nos. 2, 3 and 4, to the sum of Rs. 14,084. 56 p. together with interest at the rate of 11 per cent per annum.

(2.) FACTS of this case are more or less settled. It is no longer in dispute that Respondent No. 2 Sharad Kumar Thawait borrowed a sum of Rs. 30,300/- from the respondent Bank for purchasing a Matador pick-up van which was granted to him. The original defendant Bhaskar Prasad whom the appellant now represents, had guaranteed the aforesaid loan by executing document of guarantee dt. 5-3-1974 (Ex. P-3 ). From this document it appears that the guarantee was continuing guarantee and was to terminate only with the liability of the borrower Respondent No. 2. It, however, appears, that the said amount could not be paid by the borrower necessitating action by the respondent Bank. On 12-11-1976, the account between Respondents Nos. 1 and 2 was settled and a fresh contract regarding hypothecation of goods was signed (Ex. P-18 ). By this agreement the pick-up van M. P. L. 7016 was hypothecated by the respondent Bank to secure the amout of Rs. 21,000/ -. This agreement was different than the earlier agreement (Ex. P-3) inasmuch as by the earlier agreement the amount secured was Rs. 30,300/- whereas in this agreement the amount secured was only 21000/ -. The rate of interest agreed in Ex. P-3 was only 11 per cent per annum charged on the daily balance whereas this rate was increased to 13 per cent in the agreement (Ex. P-18 ). Perhaps because of these important changes in the terms of agreement, the respondent Bank also required the respondent-borrower to provide fresh guarantee of the aforesaid loan. The respondent No. 3, S. K. Verma, therefore, guaranteed the aforesaid loan by executing a letter of guarantee (Ex. P-17 ). It appears that the respondent Bank was not satisfied by the aforesaid guarantee in the context of continuing default of payments and therefore, required the respondent borrower to give another guarantee which was furnished by Respondent No. 4 on 9-8-1977. vide Ex. P-19. It however, appears that in spite of aforesaid arrangement the amount could not be repaid and the respondent Bank had to file the suit for realizing the balance of Rs. 26,784. 56 p. From the proceedings of the trial Court, it appears that hypothecated vehicle was sold in public auction and a sum of Rs. 12,700 recovered. Because of this recovery, the suit was amended to obtain a decree of Rs. 14,084. 56 p. only. The appellants denied their liability as guarantor and submitted that since the borrower has signed fresh agreement and obtained fresh guarantee which has been accepted by the respondent Bank, they are no longer liable to pay the amount. The learned Judge, on consideration of oral and documentary evidence on record, held that the subsequent agreement was only an acknowledgment of the previous debt and therefore, liability of the appellant was not terminated. That is how the decree making the appellants jointly and severally liable, has been passed.

(3.) IMPORTANT question arising for consideration in such a factual situation is whether the liability of the earlier guarantor late Shri Bhaskar Prasad ceased to exist because of subsequent arrangement by agreements Ex. . P-17, P-18 and Ex. P-19? Any decision on this question would depend upon the finding whether this new arrangement amounted to 'acknowledgment' of past liability within the meaning of section 18 of the Limitation Act, 1963. Though this question was neither raised before nor decided by the trial Court, it has been seriously pressed for consideration of this Court as a pure question of law arising out of facts already on record. The question is relevant in relation to the liability of the appellants alone as they are not parties to subsequent arrangement. If this arrangement amounts to 'acknowledgment' within the meaning of section 18 of the Limitation Act, it would not amount to a fresh cause of action but would give fresh limitation for suit. If, however, this arrangement amounts to a new arrangement giving a fresh cause of action, suit on original cause of action, would be barred by limitation. Federal Bank of India v. Som Dev Grover and Ors. , AIR 1956 Pun. 21 and Suwalal Vemichand v. Fazle Hussain Rajabali Bohra and Ors. , AIR 1939 Nag. 31. holding that acknowledgment of liability by the borrower would not extend the period of liability against the guarantor and that this principle applies with equal force to cases of continuing guarantee also. Federal Bank of India's case was followed by the same High Court in Hazara Singh v. Bakshish Singh, AIR 1962 Pun. 495. Both these cases were dissented from in Wandoor Jupitor Chits (P.) Ltd. v. K. P. Mathew, AIR 1980 Ker. 190. This Court is not aware of any case where Suwalal"s case has either been followed or dissented. Learned counsel for the respondent Bank, However, stated that some unreported judgments of this court lay down that acknowledgment of liability by the debtor was sufficient to extend the period of limitation against the guarantor in view of the particular term in the agreement. No such decision has been placed for consideration of this Court. In the opinion of this Court, this question does not arise for consideration at this stage, though it may arise if it is held that agreements Exs. P-17, P-18 and P-19 amount to 'acknowledgment' of the liability within the meaning of section 18 of the Limitation Act. For the time being this Court has to ascertain if agreements Exs. P-17, P-18 and P-19 merely contain 'acknowledgment' of liability arising from agreements Exs. P-3 and P-4 or constitute fresh contract creating fresh cause of action covered under section 25 (3) of the Contract Act? Having given its anxious consideration to the submissions of the appellants this Court is unable to hold that agreements Exs. P-17, P-18 and P-19 amount to 'acknowledgment' of the liability arising from agreements Exs. P-3 and P-4. The distinction between an acknowledgment of liability and a contract creating a new cause of action has been explained by the Supreme Court in Shapoor Freedom Mazda v. Durga Prasad, AIR 1961 SG 1236. in the following words: