RADHAKRISHNA RAO, J.

( 1 ) A Scheme to provide self-employment opportunities to weavers has been evolved by the Government of Andhra Pradesh to advance monies to the artisans of various co-operative societies for the purchase and installation of powerlooms. Pursuant thereto in G. O. Ms. N6. 626 dated 2-6-1972 the Government stood guarantee to the extent of Rs. 1 crore to the A. P. State Co-operative Bank for providing cash credit facilities to the societies for the purchase and installation of powerlooms. Thereafter, by G. O. Ms. No. 182 dated 28-3-1973 (Ex. B-3) the government of Andhra Pradesh, on the suggestion of the Director of Handlooms and Textiles, agreed to transfer the guarantee given to the A. P. State Co-operative bank in favour of three nationalised banks viz. , State Bank of hyderabad, Syndicate Bank and Canara Bank to the extent of Rs. 40 Lakhs, rs. 20 Lakhs and Rs. 20 lakhs respectively for a period of five years for providing block capital facilities to Weavers Co-operative Societies for the purchase and installation of powerlooms, and the balance of Rs. 20 lakhs out of Rs. 1 crore was ordered to be kept in reserve. Thereafter, defendant No. 1 Company was asked to manufacture and supply powerlooms to various co-operative societies. Under the good faith of realising the sale proceeds, defendant No. 1 started supplying the powerlooms to the societies. As the plaintiff-Bank insisted upon giving guarantee that was sought to be given, the Government executed a guarantee deed dated 19-7-1974 (Ex. A-2) in favour of the plaintiff-Bank for the repayment of the principal and payment of interest on each of the promissory notes or bills of exchange executed by the co-operative societies. It was also agreed therein that the Government shall be liable to pay to the Bank the amounts due in default of payment by the co-operative societies. Subsequently, supplemental agreement dated 21-5-1975 (Ex. A-3) has been executed by the government covering also the bills drawn by the sellers on the societies and accepted by the societies made payable to the Bank. As the period of promissory notes executed by the co-operative societies concerned, had come to an end by the expiry of three years and as the amounts due were not paid, the plaintiff- bank obtained revival letters from them. After issuing notices to the concerned, the plaintiff-Bank filed different suits claiming the amounts due on the basis of guarantee deeds (Exs. A-2 and A-3) executed by the Government.

( 2 ) THE contention of defendant No. l is that it has supplied powerlooms on the basis of the scheme evolved by the Government, that the guarantee period covered by Ex. A-1 must be deemed to have expired by virtue of execution of exs. A-2 and A-3 by the Government and that its liability ceases as soon as the government guaranteed repayment of the amounts due. The contention of defendant No. 2 is that the plaintiff-Bank having agreed to advance to the societies with capital of Rs. 5,000/- for each powerloom, failed to provide the same and ultimately the society incurred heavy loss, that defendant No. 2 was not aware of the arrangement between the plaintiff and defendant No. 1, that defendant No. 3 Government agreed to guarantee repayment and that, therefore, they are not liable to pay the amount. The case of the Government, which is impleaded as defendant No. 3,is that Ex. A-2 guarantee deed was valid only for a period of five years from the date of execution i. e. , 19-7-1974 and during that period of five years alone, the Government is liable for any default in payment of amounts due and since the promissory notes executed by the co-operative societies are the transactions anterior to 1974, the Government is not liable to pay the amount.

( 3 ) THE learned counsel for the plaintiff - Bank submits that not only Ex. A-2, but Ex. A-3 also has to be taken into account, that both Exs. A-2 and A-3 have to be read together, that the Government extended continuing bank guarantee a

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