Back
ARUN KUMAR, R.V.RAVEENDRAN
Syndicate Bank – Appellant
Versus
Channaveerappa Beleri – Respondent
The ratio of the case primarily revolves around the interpretation of the term "on demand" in guarantee agreements and the commencement of limitation periods for suits against guarantors. The Court held that when a guarantee explicitly states that the guarantor's liability is to be satisfied "on demand," the limitation period begins only from the date when a valid demand is made by the creditor and the guarantor refuses or fails to comply with that demand. It emphasized that the liability of a guarantor depends on the terms of the guarantee, particularly distinguishing between guarantees that are payable immediately or forthwith and those that require a demand. Furthermore, the Court clarified that cessation of account operation or dormancy does not automatically amount to a demand or refusal, and the limitation period does not start from such events. Instead, it begins from the date of a proper demand and refusal, making the timing of the demand crucial in determining the enforceability of the guarantor’s liability within the prescribed limitation period.
JUDGMENT
Raveendran, J. — 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 & 3 being restricted to Rs. 15,75,960 and liability of Respondents 6 & 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.
2.1) The Bank had extended credit facilities by way of overdraft, goods loan, 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 agreei
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
