1. This appeal is preferred by an unsuccessful plaintiff against the Judgment and decree passed by the VIII Additional City Civil Judge, Bangalore City, in O.S. No. 1765/1980.
2. The facts relevant for the disposal of this appeal briefly stated are as under.
The plaintiff filed a suit against defendants 1 and 2 praying for a decree for a sum of Rs. 17,348.15p, together with costs and current interest at the contractual rate. Defendant No. 1 (since deceased) was the son of defendant No. 2. Defendant No. I was a brick manufacturer and he approached the plaintiffBank for financial assistance and accordingly over-draft facility to the tune of Rs. 12,000/- was sanctioned by the plaintiff Bank in favour of defendant No. 1 on 23-3-1974. On the same day defendant No. 1 also executed a promissory note in favour of the plaintiff. Defendant No. 2 was the guarantor for the said loan and she also executed an agreement of guarantee to the effect as evidenced by Ex.P. 3. It was agreed between the parties that defendant No. 1 should pay interest at 10% with monthly rests, together with interest at 3% above the Reserve Bank of India rate of interest. The defendant also acknowledged the said debt and promised to pay the said sum by his letter dated 24-7-1974 and 18-7-1975. However, the amount taken towards over-draft facility was not paid by defendant No. 1. Under the circumstances, the plaintiff Bank issued notice to both the defendants. However, the same did not meet with any response. Under the circumstances, the plaintiff filed the suit in question praying for the reliefs referred to herinabove.
3. Defendant No. 1 resisted the suit of the plaintiff by his written statement. He is shown to have denied almost all the allegations made in the plaint, including the allegation that he had borrowed the amount, by executing a suit pronote. He also denied the allegation that defendant No. 2 stood as surety for the said loan. He took the contention that the documents relied upon by the plaintiff i.e. the agreement and pronote are not genuine. He denied that he agreed to pay interest as claimed by the plaintiff. He also took the contention that the suit was barred by time. In sum he prayed for the disposal of the suit.
4. Defendant No. 2 did not file separate written statement. However she adopted the O.S. of deft. No. 1.
5. The lower Court on the basis of the pleadings raised the following issues :-
'1. Whether the plaintiff proves that it gave an over-draft facility to defendant No. 1 under the self employment scheme on 23-3-1974 and that defendant drew cheques in the course of business and remained in arrears of Rs. 17,288.15p. as on 14-6-1977 as alleged in para 3 of the plaint?
2. Whether the plaintiff proves that the second defendant stood guarantee for the suit claim as alleged?
3. Whether the plaintiff is entitled to claim the interest at the rate charged and the cost of notice of Rs. 60/- as claimed?
4. Whether the plaintiff proves that deceased B. M. Mahadev Babu executed the suit pronote and the agreement?
5. Whether the defendants prove that the suit claim or any portion of the same is time barred?
6. What is due to the plaintiff if any?
7. What decree or order?
It appears that during the pendency of the suit defendant No. 1 died and memo was filed On 17-3-1990, to the effect that defendant No. 1 died unmarried leaving defendant No. 2 as a sole heir.
6. The lower Court examined one witness on behalf of the plaintiff. Ex. P-1 to Ex, P-16 were marked for the plaintiff. None was examined on behalf of defendants and no documents were marked for them.
7. The lower Court on consideration of the evidence on record and for the reasons reflected in the Judgment answered all the issues in favour of the plaintiff except issue No. 5. Under issue No. 5 the lower Court took the view that the plaintiff's suit as against defendant No. 2 was barred by time. It also took the view that there was no evidence to show that defendant No. 2 has inherited any property from defendant No. 1 to mulct defendant No. 2 with the liability as the legal representative of defendant No. 1. In this view of the matter the lower Court dismissed the suit of the plaintiff by its judgment under appeal.
8. I have heard Sri Ram Mohan Reddy, learned Counsel for appellant. The respondent has remained absent.
9. The point for consideration in this appeal is as under:--
(1) Whether the lower Court has erred inholding that the suit of the plaintiff is barred by time under issue No. 5?
(2) Whether the lower Court was right in holding that defendant No. 2 did not inherit any property as the legal representative of deceased defendant No. 1?
(3) What order?
Points 1 and 2 appear to be intimately connected with each other. In the result, they are taken up together for discussion.
10. As pointed out earlier the lower Court has given findings in favour of the plaintiff on all issues except on issue No. 5. It has taken the view that the plaintiff has advanced a sum of Rs. 12,000/- in favour of the defendant by way of an over-draft facility. However, as pointed out earlier under issue No. 5 it has taken the view that though the suit of the plaintiff was saved from the clutches of limitation by virtue of acknowledgment of debt u/S. 18 of the Limitation Act the said benefit would not accrue to the plaintiff as against defendant No. 2 that is, to say, the instant respondent. This aspect is dealt with by the learned Civil Judge in paras 13 to 17 of his judgment. It would be indeed convenient to cull out the portion of the judgment of the learned Judge with a view to have clear idea as regards the reasons leading to the conclusions reached by him. The lower Court among other things has in the course of its judgment observed as under:--
'16. In the instant case, the agreement executed by defendant No. 2 is produced at Ex. P-3. Under this document she has undertaken to indemnify all the claims made against her son defendant No. 1 and agreed to pay the interest at the rate of 10% p.a. from the date of demand made to her. She has also stated that her liability would be only for a sum of Rs. 12,000/-. She has further stated that though she is the surety for the principal debtor she agreed that she is also a joint debtor so far as the plaintiff bank is concerned. There is no specific recital as such in this document that she agreed to pay even the time barred debts of her son defendant No. 1. She stood surety for the loan advanced by the plaintiff to her son and she has stated thatshe is a joint debtor so far as the plaintiff bank is concerned.
17. Under S. 20 of the Limitation Act, it is clear that the payment or an acknowledgment in respect of the debt made by one of the joint contractors of the debt would not bind the other joint contractor. The expression 'joint contractor' used in S. 20 also applies to the surety. Even under Ex. P-3 defendant No, 2 has stated that she is a joint debtor so far as the plaintiff bank is concerned along with her son defendant No. 1. That being so, under this Section joint contractor is not bound by the payment made by another. Hence, the payment or acknowledgment made by the debtor does not keep the transaction alive against the surety if it is not done with her consent. It is no doubt true that u/S. 128 of the Contract Act, the liability of the surety is co-extensive with that of the principal debtor. But this section must be read together with the Limitation Act and it should not be read so as to nullify the provisions of the Limitation Act. In the instant case, as narrated above, there is no specific agreement as such made by defendant No. 2 in her document Ex. P-3 undertaking to pay the debt of her son even if it is barred by time. Besides there is no specific averment made by the plaintiff against defendant No. 2 to enforce the terms of the agreement as embodied in Ex.P-3. Not even a notice issued to her prior to the suit. Ex.P-7 does not disclose that a similar notice was also sent to defendant No. 2. P.W. 1 did not say that the bank has sent a similar notice to defendant No. 2. Besides there is no specific pleading to the effect that the plaintiff bank is entitled to recover the suit amount against defendant No. 2 also in view of Ex.P-3. Therefore, I am of the opinion that the suit claim made against defendant No. 2 is clearly barred by time as the acknowledgment of the debt made by her son defendant No. 1 is not being done with her consent. There is no evidence led by the plaintiff that defendant No. 2 has also given her consent for this acknowledgment of the debt made by her son defendant No. 1. Therefore, such acknowledgment made by defendant No. 1 during his lifetime will not at all bind the surety and the plaintiff hank cannot file such a suit against the suretybeyond the period of 3 years as per Art. 59 of the Limitation Act.'
Sri Ram Mohan Reddy, learned Counsel for the appellant, contended that the lower Court has erred in holding the conclusion that the acknowledgment given by defendant No. I (since deceased) would not enure to the benefit of the plaintiff to enforce him claim against defendant No. 2. Dilating on this aspect the learned Counsel contended that the guarantee letter executed by the 2nd defendant would go to show that she had bound herself to the conditions reflected in the said letter. Among other things, the attention of this Court is drawn to the portion of the said 'letter' to contend that the consent of the guarantor is reflected, with reference to the acknowledgment of debt by defendant No. 1 in the way and manner as he did. In this connection, the learned Counsel invited the attention of this Court to the decision in R. Lilavati v. Bank of Baroda reported in : AIR1987Kant2 .
11. Sri Ram Mohan Reddy, learned Counsel appearing for the appellant also contended that even otherwise having regard to the provisions reflected in Art. 55 of the Limitation Act, 1963 (Act No. 36 of 1963) corresponding to Art. 115 of the Indian Limitation Act, 1908 (Act No. 9 of 1908) the period of limitation against defendant No. 2 did not commence at all till there was breach of conditions on the part of guarantor. The breach of the condition could be said to have occurred only when the amount was not paid by defendants 1 and 2. According to Sri Reddy, learned Counsel, the breach of the condition that was guaranteed can be said to have occurred only when defendant No. 2 repudiated her liability in her written statement by adopting the written statement of defendant No. 1. In this connection, learned Counsel, invited the attention of this Court to the decision of the Supreme Court in Margaret Lalita Samueal v. Indo Commercial Bank Ltd. reported in : [1979]1SCR914 .
12. Summing up all these submissions, on these lines, the learned counsel contended that the suit of the plaintiff deserves to be decreed.
13. I have given my considerations to the submissions made by Sri Ram Mohan Reddy, learned Counsel for the appellant.
14. It is seen that the lower Court under issue No. 1 has given a finding that the plaintiff has proved that it gave over-draft facility to defendant No. 1 under self employment scheme on 23-3-1974 and that defendants drew cheques in the course of the business and have remained in arrears of Rs. 17,298.15p as on 14-6-1977, as alleged in para No. 3 of the plaint. It is also seen that the lower Court has recorded its finding on issue No. 2 that the second defendant stood as a guarantor for the suit claim. The lower Court has also held under issue No. 4 that the plaintiff has established that deceased Maha dev Babu (defendant No. 1) executed a promissory note and the agreement. In so far as these aspects are concerned it is seen that the lower Court has relied on the evidence of the plaintiff as also on the documentary evidence referred to in para No. 9 of its judgment. The trial Court has also taken into consideration the fact that the defendants have not stepped into the witness box. With reference to the guarantee letter alleged to have been executed by defendant No. 2 the lower Court has relied mainly on Ex. P-3. The lower Court has taken into consideration that defendant No. 2 who has executed the said guarantee letter has not chosen to examine herself before the Court. Under the circumstances, the lower Court has in the course of its judgment at para No. 10, therein reached the conclusion that the guarantee letter is proved. On a careful consideration of the evidence on record and the discussion made by the learned Judge with reference to these aspects I do not find any infirmity with reference to these findings on these aspects.
15. However, the only point, as pointed out earlier which requires consideration of this Court is as to whether the plaintiff's suit is barred by time. The reasons which led the lower Court to reach a conclusion that the suit of the plaintiff is barred by time are already alluded to earlier and it is not necessary to risk a repetition here again. It will have to be seen as to whether the finding of the lower Court inthat behalf is correct, in the context of the submissions made by the learned counsel for the appellant and which submissions are already alluded to earlier.
16. It is seen that, as pointed out earlier, defendant No. 1 since deceased has acknowledged the debt due to the plaintiff in writing as reflected in Ex. P-5, to Ex. P-16. The last acknowledgment is dated 30th July, 1975, and the same is marked as Ex. P. 10. It would also be convenient to refer to other Exhibits particularly Ex. P. 6. In Ex. P-6 under the caption 'details of securities' it is mentioned as under :
'I do hereby confirm the correctness of the securities mentioned above and acknowledge that the sum of Rs. 13,518.46p. is due by me as stated above.'
Then, again in other documents referred earlier also in Ex.P-10 it is stated as under:--
'I have for acknowledgement the above legal notice and noted the contents, in this connection, I wish to bring the following to your kind consideration.'.
That the claim made by you on behalf of your client is not challenged by me and I was subjected to heavy loss for
(i) 75% sustained loss while burning in kiln.
(ii) I hail from a very poor Section of family and I do not possess any resource able properties.
I am unemployed for the present and finding it very hard to make the ends meet, in these hard days.
I have no proposal not to discharge the loan, but I require some time say about three months from now by which time I shall try to discharge the outstanding amount referred to in your notice with the accrued interest thereon, which please intimate your client.'
Having regard to what is stated herein above, it is clear that defendant No. 1 acknowledged the debt even as late as on 30th July, 1975. It is seen that over-draft facility was given to defendant No. 1 on 23-3-1974. Further, it is also seen that defendant No. 1 withdrew theentire amount of Rs. 12,000/- by drawing cheques on the plaintiff Bank for the period from 23-3-1974 to 11-12-1974. It is therefore, clear that the different acknowledgments referred to earlier were made by the defendants within 3 years next after the over-draft facility was given to defendant No. 1 and from the date of the execution of the promissory note which is at Ex.P. 2 dated 23rd March, 1974. In this connection it is indeed necessary to refer to the provisions of S. 18 of the Limitation Act. Section 18 of the Limitation Act reads as under :--
Effect of acknowledgement in writing.
'18.(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.
(2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed but subject to the provisions of the Indian Evidence Act, 1972, oral evidence of its contents shall not be received.'
A perusal of S. 18 of the Limitation Act be reflected herein above unmistakably would go to show that the acknowledgment of the debt should be made in writing. Secondly it should be made by the party against whom the liability is claimed or by persons through whom he derives title or liability. Lastly the acknowledgment should be made before the expiration of the prescribed period for a suit. If these conditions are satisfied then period of limitation begins to run only from the time when the acknowledgment was so signed. In this case it is seen that all these ingredients are satisfied. In fact, the lower Court does not appear to have had any doubt with reference to the question as to when the limitation had begun to run as against defendant No. 1 (since deceased). However, as pointed out earlier thelower Court has taken the view that the limitation would not be saved as against defendant No. 2. In the instant case, even if the acknowledgment dated 18th July, 1975, covered Ex. P. 6 alone is taken into consideration it is clear that the limitation in the instant case at any rate as against defendant No. 1 would commence only from that date, that is to say from 18th July, 1975. The suit is filed on 16-6-1977. The suit for money is governed by Art. 35, of the Schedule to the Limitation Act. The period prescribed is three years. In the instant case the promissory note was executed on 23-3-1974. It is therefore clear that the suit ought to have been filed in the normal course on or before 15-6-1977, since acknowledgment of liability has intervened in between, the limitation would commence from the date of acknowledgment and in that context it is clear that the suit against defendant No. 1 was well within the time. In that context the only question to be considered is as to whether the postponement of the commencement of limitation as against defendant No. 1 would hold good in the case of defendant No. 2 also. In this connection, Sri Ram Mohan Reddy, invited the attention of this Court to the guarantee letter, particularly to that portion of the guarantee letter which reads as under :--
'We hereby consent to your making any variance that you may think fit in the terms of your contract with the principal debtor to your determining, enlarging or varying any credit to him, to your making any composition with or promising to give him time or not to sue him and to your parting with any security you may hold for the guaranteed debt. We also agree that we shall not be discharged from our liability by your releasing the principal debtor or by any act or omission of yours the legal consequence of which may be to discharge the principal debtor or by any act of yours which would, but for this present provision, be inconsistent with our rights as sureties or by your omission to do any act which, but for this present provision, your duty to us would have required you to do. Though as between the principal debtor and ourselves we are sureties only, we agree that as between yourselves andus/we are principal debtors jointly with him, and accordingly we shall not be entitled to any of the rights conferred on sureties by Ss. 133, 134, 139 and 141 of the Contract Act.'
Sri Reddy, placed reliance on the aforesaid portion of the guarantee letter and submitted that if the same is construed properly it would amount to consent on the part of the guarantor even to the acknowledgment of debt. Pressing into service in this context the decision in R. Lilavati's case : AIR1987Kant2 referred to earlier. Sri Ram Mohan Reddy, learned Counsel, submitted to the Court that the benefit of acknowledgment which enures to the appellant as against defendant No. 1 is extended to defendant No. 2 also. In Lilavathi's case this Court had taken the view that in the case dealt with by it the surety bond executed by the surety specifically provided that for all purposes of the claim in question the principal was empowered to give consent on behalf of the surety, and any consent so given by the principal would be deemed to have been given by the surety and would bind the surety in all respects, as if the consent had been expressly given by the surety in writing. The relevant clause in the guarantee letter in the instant case is already culled out herein above. If the facts in Lilavati's case are read as a whole, the same would go to show that ratio of the said case is attracted to the facts of the instant case also. It is necessary to notice here that a Division Bench of this Court has affirmed the said decision in Raju Setty v. Bank of Baroda ILR 1991 Kar 3303 particularly at para No. 11 therein. In the said case it is also pointed out that the rights available to the surety under Chapter VIII of the Contract Act can be waived by the surety and such waiving of the right by the surety is neither intended to defeat nor does it defeat any provisions of law. Having regard to the totality of the Clause reflected in the portion of the guarantee letter culled out herein above, I am of the view that the ratio laid down in Lilavati's case by the learned single Judge is attracted to the facts of the instant case also. Even otherwise, it is necessary to notice here that the suit in the instant case is both against defendant No. I and defendantNo. 2. As pointed out earlier defendant No. 2 that is to say the instant respondent was a guarantor. In that view of the matter the suit in substance in so far as it relates to defendant No. 2 would amount to a suit to enforce the guarantee bond executed by her. Looked at from that point of view it is clear that a suit of such a nature as against defendant No. 2 would be governed by Art. 55 of the Limitation Act, 1963, corresponding to Art. 115 of the Indian Limitation Act, 1908. In this connection, the decision in Margaret Lalita Samueal v. Indo Commercial Bank Ltd., reported in : [1979]1SCR914 can indeed be looked into with advantage. In the said case the Supreme Court as held that in the case of a continuing guarantee and an undertaking by the defendant to pay any amount that may be due by a company to a Bank on the general balance of its account or any other account, 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 for a suit to enforce the bond could not be said to have commenced running. In the instant case it is necessary to notice here that among other things in the guarantee bond the following clause which is un-numbered reads as under :--
'My/Our liability under these presents shall remain in full force until three calendar months after I/We shall have given or sent to you notice in writing of my/ our intention to discontinue and determine these presents and shall have paid to you all money up to the limit of my/our liability due at the expiration of such notice and in the event or my/all or any of us dying or being under any legal disability the liability .....
Further however, it is nobody's case that a guarantee letter in question was at any time put an end to by defendant No. 2 in the way and manner stipulated in the guarantee letter. Under the circumstances it is clear that the ratio laid down by the Supreme Court in Margaret v. Commercial Bank Ltd. : [1979]1SCR914 , would apply to the facts of this case on all force. Looked at from this point of view also it is absolutely clear that the suitagainst defendant No. 2 cannot be said to be barred by time at all. For the reasons stated herein above, I am of the view that, the lower Court has erred in reaching the conclusion that the plaintiff's suit is barred by time as against defendant No. 2.
17. The only point which falls for consideration of this Court is as to whether the lower Court has erred in its finding as to the liability of defendant No. 2 in her capacity as legal representative. It is seen that the trial Court has taken a view that there is no evidence to show that defendant No. 2 has come into possession of any of the assets of defendant No. 1. I am of the view that the proper course in that context for the lower Court would have been to hold that defendant No, 2 is liable to the extent of assets inherited by her from defendant No. 1. However, having regard to the fact that I have reached a conclusion that the suit as against defendant No. 2 is not barred by time, this aspect would not really assume significance. For the reasons stated herein above the different points raised for decision are answered as above.
18. Under the circumstances, the finding given by the lower Court under issue No. 5 that the suit claim is barred by time is liable to be set at naught.
19. It is thus seen that different issues raised in the case in the suit will have to be answered in affirmative. As pointed out earlier the trial Court has held under issue No. 1 that the amount that is due from defendant No. 1 as on the date of the suit is Rs. 17,288.15p. It is further seen under issue No. 3 that the trial Court has held in para No. 11 of its judgment that the defendants are bound to pay interest as agreed by them in the document. It is therefore clear that the plaintiff is entitled to a decree as against the instant respondent who was defendant No. 2 before the lower Court in the sum of Rs. 17,288.15p with interest. It will have to be seen as to what is the correct rate of interest that can be awarded to the plaintiff. In so far as the rate of interest is concerned I am of the view that having regard to the fact that the transaction in question as disclosed from theevidence on record is commercial and having regard to the fact that there is an agreement also as reflected in Ex. P-2, the ends of justice demand that discretion should be exercised with reference to the rate of interest, in the context of the agreement and having regard to the powers conferred upon this Court under the provisions to S. 34 of the Civil Procedure Code.
20. Further it is seen that the lower Court has held that the plaintiff is also entitled to an amount of Rs. 60/- towards notice charges. It is therefore, obvious that the same will have to be included as the amount payable by the defendants to the plaintiff.
21. In the result, the appeal is allowed. The judgment and decree passed by the VIII Additional City Civil Judge in O.S. No. 1765/ 1980 are hereby set aside. The suit of the plaintiff is decreed in the sum of Rs. 17,348-15p together with interest at the rate of 10% on the sum of Rs. 12,000/- from the date of the suit till realisation.
22. The plaintiff shall also recover the costs of proceedings of both the Courts.
23. Appeal allowed.