Judgment

R. M. SAHAI, J. (Concurring with majority) :- Even though I respectfully agree with brother Venkatachala, J., that the order of the Madras High Court allowing the appeal of the insurance guarantor and dismissing the suit of the appellant corporation for recovery of the money is not liable to be maintained yet considering the importance of the legal issue involved in this appeal arising in day-to-day commercial dealings and absence of any authoritative pronouncement of this Court specially when the High Court has traversed wide field it appears appropriate to add a few words of my own.

2. Shortly the issue of law that arises for consideration in these appeals directed against judgment of Madras High Court is, if the suit filed after six months by the appellant, a public sector corporation, against Insurance Company was barred by time in view of the following recital in the Fidelity Insurance Guarantee.

"however, that the corporation shall have no rights under this bond after the expiry of (period) six months from the date of the termination of the contract."

What does it mean? Does it restrict the right of the appellant precluding it from filing suit for recovery of money from the insurance company within six months from the date of termination of the contract or it is the outer limit for exercising the right of making the demand? What is the impact of Section 28 of the Contract Act on such clause? Since no factual dispute survives, and even if there was any it has been ironed out by the two courts below, the skeleton facts and meanings as are necessary shall be referred as and where necessary for appreciating the legal issue. The appellant, as principal, appointed millers for procuring, hulling and supplying rice on certain conditions. To ensure its compliance the insurance company on behalf of the millers, executed Fidelity Insurance Guarantee in favour of the appellant guaranteeing honest accounting and refund of money received by the millers for supplying rice to the appellant. The appellant was given right under the Guarantee to indemnify for any loss, directly, from the company. The exact words were,

"We the Anand Insurance Company Limited do hereby undertake to indemnify and keep indemnified the corporation to the extent of Rs. 1,50,000/-(Rupees One Lakh and Fifty Thousand only) against any loss, claim suit proceeding and expenses caused to or Suffered by the corporation by reason of any breach by the said miller of any term or condition of the said agreement and authorise the corporation to recover the same directly from us."

Since there was breach of agreement the appellant filed suits for recovery of money against the millers and the company. The findings on agreement between the appellant and the miller and the company, the terms of agreement, its breach, shortfall in supply of rice, amount due etc. are all agreed to by both the courts below and were in fact more or less conceded. For instance on the relevant issues about the quantum of short delivery, and the amount due to the appellant the trial Court in Appeal No. 1799 which is treated as leading found that it was admitted that the firm defendant entered into agreement with the appellant to procure paddy, transport the same deliver to other millers as directed by the appellant for hulling converting it into rice and for supply. It further found that there was no dispute about the quantity of supply of paddy and the balance which ought to have been supplied. It, therefore, held that as regards insurance company the default occurred within the stipulated period of agreement. It observed that in reply notice sent by the company demanding the amount it was never claimed that the company was liable only if there was misappropriation or that the claim was barred by time. It was found that even in the Written Statement the plea of limitation was not raised. The trial Court held that even though it was mentioned in the guarantee agreement that the appellant would loose