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IN THE HIGH COURT OF BOMBAY
(NAGPUR BENCH)
Wahane B.U., J.
Central Bank of India .... Appellant.
Versus
Ali Mohammad another.... Respondents.
F.A. No. 180 of 1983, decided on 4-3-1992.
Advocates appeared :
Nagle, for appellant.
Sajjad Hussain, for respondent No. 1.
Manwarbhai, for respondent No. 2.
See Limitation Act, 1963, Section 18.
Sections 133, 134, 135, 139 and 141-Variation in terms of contract where creditor compounds with or gives time to satisfy Joan and promises not to sun principal debtor-Creditor said act inconsistent with right of surety, without suretys consent-Effect-Surety under an earlier stand discharged in absence of his assent to fresh contract.
Sections 133 and 135- Terms of contract between principal debtor and creditor Bank-Variation in-Effect on rights of surety.
Held, statutory rights of surety under Sections 133 or 135 could not be affected by consent given in advance to variance in terms of contract suretys assent to variation, must be at time of the act and assent has to be simultaneous with novation. Hence surety is to be discharged.
Section 18-Contract Act, Section 62-Provision in Section 18 of Limitation Act regarding acknowledgement in writting-Import of section-Acknowledgement does not entitle the creditor to claim interest at higher rate than which was prevailing upto date of acknowledgement-Definitely it would amount to novation of fresh contract between creditor and debtor.
The provisions of Section 18 of the Limitation Act, 1963 are regarding the acknowledgement in writing. The import of the Section 18 is that before the expiration of the prescribed period for a suit in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, therefore, the period of limitation shall be computed from the time of the acknowledgement. Even a receipt in lieu of old doubt may amount to an acknowledgement. Acknowledgement means the definite admission of liability. It is not necessary that there should be promise to pay. Simple admission of debt sufficient. There must be conscious acknowledgement that the party concerned i. liable to pay under the document on which reliance is placed. Acknowledgement must be an acknowledgement of the existing loan. Mere acknowledgement of the execution of the Promissory Note without anything more does not amount to an admission of subsisting liability so as to give fresh period of limitation for suit on pronote.
Articles 21 and 35-Proision in instrument that amount shall be payable on demand-Even in such cases to which Article 21 or 35 applicable cause of action begins to run from date of execution of deed, agreement or note.
Article 21 of Schedule of Limitation Act, 1963 is in respect of transaction where money is lent under an agreement that it shall be payable on demand and period of limitation is 3 years and the time begins to run when the loan is made. Article 35 deals with bill of Exchange or promissory note payable on demand and not accompanied by any writing restraining or postponing the right to sue. The limitation period is again 3 years and the period begins to run from date of bill or note. It is thus clear from above provisions that the prescribed limit to institute suit to prefer appeal and make application is 3 years and time begins from date of execution of deed. Even if the word has been used in Articles 21 and 35 that the amount shall be payable on demand, the time will not run from date of demand because statutes provide that time begins means cause of action begins from date of execution of agreement, deed or note. It means creditor has to make demand within prescribed period of 3 years.
1. Whether the terms 1 and 7 of the Guarantee Bond override the provisions of sections 133, 134, 139 and 141 of the Contract Act?
2. Whether, an acknowledgement or execution of the promissory note Exhibit 57 by the principal debtor will save the limitation against the sureties-defendant Nos. 2 and 3, though they are neither the parties to the execution nor given their consent?
3. Whether the period of limitation would start running only upon the demand being made to the principal debtor as well as guarantors thereby extending the statutory provisions of limitation of 3 years.
(This ground is not raised in the memo of appeal. Being, agitated during the course of argument it was opposed by the other side).
2. The facts giving rise to file the suit, in brief, are as under:---
The appellant/plaintiff alleges that it is a body Corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, having its Head Office at Bombay. The Divisional Office of the plaintiff is situated at Kamptee Road, Nagpur. The suit transaction took place at the Station Road Branch of the plaintiff at Nagpur.
On 6th October, 1971, the plaintiff sanctioned and advanced the loan of Rs. 23,950/- to the defendant No. 1 Awarkhan Chhotekhan for purchase of Ambassador Car to run as a Taxi on the guarantee of the defendant Nos. 2 and 3 i.e. Ali Mohamed s/o Mohamed Hussain and Hazi Wazir s/o Dadumiya (who died during the pendency of the proceedings before the trial Judge). The original defendant Nos. 1, 2 and 3 had agreed to pay interest at the rate of 6 per cent per annum over the rate of interest of the Reserve Bank of India, subject to a minimum of 12 per cent annum with quarterly rests. For this loan, the defendant No. 1 i.e. the principal debtor, executed an agreement of hypothecation whereby the hypothecated the Ambassador Car No. MHG 203. The original defendant No. 1 i.e. the principal debtor/borrower agreed to satisfy the loan amount by monthly instalment of Rs. 500/-. The defendants Nos. 2 and 3 executed the guarantee bond for recovery of the loan. They had also agreed under this agreement that they will not be entitled to any of the rights conferred on them as sureties by sections 133, 134, 139 and 141 of the Indian Contract Act. They as a guarantor had agreed that the guarantee shall remain in force until written notice is given by them.
On 15th July, 1972, on the request of the defendant No. 1 the principal borrower, the appellant/plaintiff advanced the loan of Rs. 1,400/- to him for purchase of a Meter for the Taxi. At that time also the defendant No. 1 agreed to pay interest on this amount at the rate of Rs. 6 per cent per annum over the bank rate with a minimum of 12 per cent per annum with quarterly rests. The defendant No. 1 had agreed to repay this amount with the original loan. The defendant No. 1 neither repaid the amount of the loan not observed the repayment schedule.
On 6th October, 1974, the defendant No. 1 renewed the loan documents and executed a promissory note for Rs. 22,000/-. According to the plaintiff, this amount was inclusive of the dues under the promissory note dated 15th July, 1972. This time, the defendant No. 1 agreed to repay the amount of loan with interest at the rate of 8 per cent per annum over the rate of interest of the Reserve Bank of India, subject to a minimum of 15 per cent per annum with quarterly rests. The defendant No. 1 also executed a fresh agreement of hypothecation of Taxi.
On 21s
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