The liability of a guarantor under a continuing guarantee is limited to the amount specified in the guarantee and the guarantor is not liable for the whole debt.

1. This appeal is by defendant No. 2 in the suit. He was the guarantor for the cash-credit facility extended by the plaintiff-bank/respondent No. 1 to the principal debtor-respondent No. 2. The plaintiff-bank brought the suit for recovery of Rs. 1,04,601.06 which was decreed against the defendants, including the principal-debtor and the guarantors/defendants. There are three defendants in this case. The 1st defendant is the principal-debtor, whereas defendants 2 and 3 are the guarantors.

2. The gist of the case of the plaintiff-bank is that defendant No. 1 (Subodh Kumar), the principal-debtor, ran a grocery shop. He approached the plaintiff for financial assistance by way of working capital and the plaintiff agreed to grant cash-credit facility to him to a limit of Rs. 25,000.00 only re-payable with interest @ 2.85 % over Reserve Bank of India, subject to a minimum of 11.85% per annum, for which he executed a demand promissory note dated 10-10-1980 (exhibit 1), a deed of hypothecation of tangible movable property and defendants 2 and 3 executed a continuing guarantee dated 10-10-1980 taking all the responsibility that they would also be liable to pay the amount to the plaintiff-bank. It is the further case of the plaintiff that on the request made by defendant No. 1, the plaintiff on 4-11-1980 allowed him to over-draw the account to the extent of Rs. 25,000.00 more and defendant No. 1 executed another promissory note with respect thereof (exhibit 1/a). But defendant No. 1 failed to operate the account regularly, though he had availed the cash-credit facility. By the letters of acknowledgment of indebtness dated 3-7-1982 and 25-6-1984 (exhibits 5 and 5/a) respectively, the defendants acknowledged the liability for payment of the entire dues in the cash-credit facility account of the principal-defendant. In spite of demands and vakalat notice, the defendants failed to regularise the accounts or to clear the dues. Hence, the plaintiff-bank brought the suit for recovery of due sum in the account against the defendants. The stand of the plaintiff bank was that defendants are jointly and severally liable to pay the same.

3. Defendants 1 and 2 resisted the suit by filing separate written statements. Defendant No. 1 admitted in the written statement that he had approached the plaintiff-bank on 10-10-1980 for cash-credit facility for Rs. 25,000.00 which was granted to him and that on 4-11-1980 on his request, the plaintiff allowed him to over-draw the account to the extent of Rs. 25,000.00 more, but he has denied to have executed the promissory notes (exhibits 1 and 1/a) or to have agreed to pay the alleged interest at compound rate. His stand was that his signatures were obtained by the plaintiff-bank on blank forms, which might have been converted into the promissory notes. He also denied to have executed the letters of acknowledgment of the debt (exhibits 5 and 5/a). He contended that the suit as framed is not maintainable; that the claim was barred by limitation, estoppel and waiver and that the plaintiff was entitled to no relief.Defendant No. 2 admitted in his written statement that he executed the letter of guarantee dated 10-10-1980 (exhibit 4) for the cash-credit facility of Rs. 25,000.00 only extended by the plaintiff-bank to defendant No 1. According to him, defendant No. 1 never agreed to pay interest at the compound rate and the letter of guarantee (exhibit 4) had lost its force on 9-10-1983 and it was never for the enhanced limit of the cash-credit facility extended by the plaintiff to defendant No. 1 with effect from 4-11-1980 and when such agreement was made by the plaintiff-bank with defendant No. 1 without his consent, he was discharged from the liability of surety for the debt. Further, his stand was that the letters of acknowledgment of liability (exhibits 5 and 5/a) do not bind him and that the claim as against him is barred by limitation. This was the main case put up by him at the trial.Defendant No. 3 di