ORDER

1.This appeal is filed against the judgment dated 25-9-1998.

2. Briefly stated, the facts are as follows: The respondent Bank had advanced a term loan of Rs 60,000 to the 2nd respondent. On the same day it also advanced two cash credit facilities of Rs 10,000 each to the 2nd respondent. The appellant executed deeds of continuing guarantee guaranteeing to repay the amount advanced to the 2nd respondent along with interest thereon. Subsequently, the cash credit limits were extended to Rs 20,000 and Rs 25,000.

3. The respondent Bank filed suit for recovery of the amount. The trial court dismissed the suit on the ground that the plaint had not been signed by an authorised person. It also held that the appellant herein had only agreed to repay the principal amount and not the interest. As against this, the respondent Bank went in appeal. The High Court by the impugned judgment set aside the judgment of the trial court and decreed the suit. While decreeing the suit it has awarded interest @ 15.5% p.a. in respect of the abovementioned facilities.

4. We are in agreement with the view of the High Court that the suit was not barred by limitation. The guarantee being a continuing guarantee, so long as the principal debt remained due and payable, the guarantor also remainedliable.

5. We are also in agreement with the High Court that the guarantee is not, only for repayment of the principal amount but also for interest thereon. However, we find that so far as the principal debtor is concerned, the liability to pay interest is @ 13.5% p.a. in respect of the term loan facility and 14% p.a. in respect of cash credit facility. Even though the guarantee documents mention interest @ 15.5% p.a., in our view, the liability of the guarantor cannot exceed that of the principal debtor. The guarantor is only guaranteeing debt due by the principal debtor. The High Court thus erred in granting decree against the guarantor and the principal debtor for interest @ 15.5% p.a. To this extent the High Court judgment needs to be modified. We direct that the principal amount payable will be with interest @ 13.5% p.a. in respect of the term loan facility and 14% p.a. in respect of cash credit facility.

6. Save as above, the appeal stands dismissed with no order as to costs.