IMPORTANT POINT
A guarantor can, in no circumstances be fastened with liabilities which had been incurred in the past.

JUDGMENT :

Vikramajit Sen, J.

This Appeal assails the concurrent findings of the Trial Court as well as the High Court absolving the Respondents, other than Respondent No.1 which is the company which received various credit facilities from the Appellant Bank, of a total amount of Rs. 12 lacs against security of moveable as well as raw materials. These facilities were subsequently secured in favour of the Appellant Bank by means of continuing guarantee by the Directors of the Respondent Company, who are Respondent Nos. 2 to 4 herein, in terms of Promissory Notes, Letters of Guarantee, Letters of Hypothecation and Letters of Continuity all dated 30.8.1974. On 30.6.1977 and again on 31.12.1977, by means of separate letters from the Respondent Company to the Appellant Bank, the entire balance due, stood confirmed. Eventually, the Appellant filed a suit on 2.5.1980 for recovery of Rs. 3,94,805.42 with future interest at the rate of 14 per cent per annum. In the interregnum another creditor of the Respondent Company, namely Respondent No. 5, had already initiated recovery proceedings in the Court in the course of which the properties of Respondent Company came to be auctioned and were purchased by Respondent No. 6 on 26.10.1979.

2. As many as ten issues were framed by the Trial Court which went on to decree the suit against the Respondent Company, but dismissed it as against Respondent Nos. 2 to 4. The conclusions of the Trial Court so far as they are germane to decision in this Appeal were that the liabilities incurred by the Respondent Company prior to the execution of the personal guarantees by Defendant Nos. 2 to 4 were not recoverable from the latter. The Trial Court placed reliance on two judgments of the Madras High Court, namely J.J. Harigopal Agarwal v. State Bank of India AIR 1976 MAD 211 and D. K. Mohammed Ehiya Sahib v. R.M.P.V. Valliappa Chettiar AIR 1976 MAD 536. In the latter case it was held that if there is any variation in the original contract the legal consequence would be that the surety stood absolved.

3. The impugned Judgment notes that the main submission on behalf of the Appellant Bank was that all the documents executed by the Respondent Company, including those dated 30.8.1974 and the acknowledgement of liability dated 30.6.1977 and 31.12.1977 had to be taken together in fastening the liability of the Directors of the Company with regard to their personal guarantees. It also noted that in none of the documents relied upon by the Respondent Company had Respondent Nos. 2 to 4 acknowledged or undertaken their personal liability and/or stood guarantee for repayment of any specific and liquidated amounts already advanced by the Appellant Bank to the Respondent Company prior to 30.8.1974. The High Court also returned the finding that there was no cogent evidence to establish that the claims raised in the suit pertained to advance or credits made subsequent to 30.8.1974, the date on which Respondent Nos. 2 to 4 had executed the documents relied upon by the Appellant Bank.

4. The learned Counsel appearing for the Appellant Bank had raised arguments, firstly to the question of limitation, secondly to the discharge of surety by variance and thirdly on priority claims in respect of Rollers. Since the question which engaged the attention of the High Court in the impugned Judgment revolved around the fastening of the liability on the Respondent Nos.2 to 4 in respect of transactions prior to the date of the execution of those documents, i.e. 30.8.1974, we shall restrict our attention only to this point. It will be a relevant reiteration that the entire claim of the Appellant Bank had been decreed against the Respondent Company.

5. So far as the factual matrix is concerned, the Respondent Company was a constituent of the Appellant Bank for a considerably long period and had availed of various facilities including cash credit, etc. It is not in dispute that of the limit of Rs. 12 lacs sanctioned by the Appellant Bank in favour