JUDGMENT:

TARUN CHATTERJEE, J.

1. Leave granted.

2. This appeal arises out of the final judgment and decree dated 11th of May, 2006 passed by the High Court of Delhi at New Delhi in RFA No.71 of 1985 whereby the High Court had set aside the judgment and decree dated 12th of November, 1984 passed by the Additional District and Sessions Judge dismissing the suit filed against the appellant who was a guarantor in respect of loans advanced by the Punjab National Bank [ in short the Bank] respondent no.1 to M/s Rangaa Trades and Exports Pvt. Ltd. respondent no.2 in this appeal. By the impugned judgment, the High Court affirmed the decision of the Additional District and Sessions Judge and held that the suit filed by the Bank be decreed against the original defendant Nos.1 to 4 for a sum of Rs.42,874/- including interest at the rate of 19.5 per cent per annum with quarterly rests from the date of filing of the suit till realization. At this stage, we may note that the said decree against the defendant nos.1 to 4 has now become final as no appeal was preferred by the said defendant nos. 1 to 4 against the said decree. Feeling aggrieved by the aforesaid judgment of the High Court, this special leave petition has been filed by the guarantor appellant in respect of which leave has already been granted.

3. The only question that was raised on behalf of the appellant was that in view of the statutory provision under section 130 of the Indian Contract Act, 1872 (in short "the Act"), whether the High Court was justified in holding that the appellant who was a guarantor of the loan advanced to the defendant nos. 1 to 4 was liable to pay the decretal amount on the ground that the appellant had revoked the guarantee before such loan was actually paid to the defendant Nos. 1 to 4 and long before the suit was filed by the bank against the defendants for recovery of such loan.

4. In order to decide the question raised by the learned counsel for the appellant, we may look into the agreement of guarantee entered into by the bank with the appellant as guarantor, which reads as under:

"The guarantors hereby guarantee jointly and severally to pay the bank on demand all principal, interest, costs, charges and expenses due and which may at any time become due to the Bank from the borrower, on the accounts opened in respect of the said limits (hereinafter called the said accounts) down to the date of payment and also all loss or damages, costs, charges and expenses and in the case of legal costs, costs as between attorney and client occasioned to the Bank by reason of omission, failure or default temporary or otherwise in such payment by the Borrower or by the Guarantors or any of them including costs (as aforesaid) of enforcement or attempted enforcement of payment by suit or otherwise or by a sale or realization or attempted sale or realization of any security for the said indebtedness or otherwise howsoever or any costs (which costs to be as aforesaid) charges or expenses which the Bank may incur by being joined in any proceeding to which the Bank may be made or may make itself party either with or without others in connection with any such securities or any proceeds thereof. The Guarantors hereby declare that this guarantee shall be a continuing guarantee and shall not be considered as cancelled or in any way affected by the fact that at any time the said accounts may show no liability against the Borrower or may even show a credit in his favour but shall continue to be guarantee and remain in operation in respect of all subsequent transactions." (Emphasis supplied) Keeping the agreement of guarantee, as noted hereinabove, in mind, let us now look into the facts of the present case. It is an admitted position that the guarantee issued by the appellant to the Bank was subsequently cancelled by his letter dated 31st of July, 1980 written to the Manager of the Bank and in that view of the matter, the appellant sought to substantiate his case that sinc