NATIONAL AND GRINDLAYS BANK LTD VS. TIKAM CHAND DAGA

( 1 ) THE plaintiff has brought this action for recovery of sum of Rs. 1,80,414/- against the defendants as guarantors. The facts out of which this action arises shortly as follows:

( 2 ) A company known as the Central Jute Co. Ltd. having its registered office at Narayanganj in East Pakistan (to be called hereafter as the Company) maintained an overdraft account with the plaintiff then carrying on business of banking in the name and style of National Bank of India Ltd. , Narayanganj Branch. Subsequently, the name of the plaintiff bank was first changed to National Overseas and Grindlays Bank Ltd. , with effect from 1st January, 1958 and later on the name was again changed to National and Grindlays Bank Ltd. , with effect from 1st January, 1959.

( 3 ) BY the Deed of Hypothecation dated 8th November, 1954, the Company hypothecated in favour of the plaintiff the stocks of jute described in the Hypothecation Deed to secure a loan to be granted by the plaintiff up to a limit of Rupees 10 lakhs (Pakistan Rupees ). On the same date i. e. , 8, November, 1954, the defendants Nos. 1, 2 and 3 executed in Calcutta a Deed of Guarantee in favour of the plaintiff in its Calcutta Branch by which the defendants jointly and severally agreed repayment of monies due in the said overdraft account of the Company in Narayanganj Branch with the agreed interest at 1% over State Bank of Pakistan rate of interest with a minimum of 4 % per annum. It was further agreed that the amount of the principal together with interest was to be paid by the defendant when called upon to do so; and lastly the amount of the liability was to be calculated in Indian Rupees at the rate of exchange declared by the State Bank of Pakistan.

( 4 ) ON 21 October, 1955, the defendant no. 2 executed in Calcutta a Letter of Lien in favour of the plaintiff and deposited by way of pledge 20100 shares of Swatantra Bharat Paper Mills Ltd. , for the purpose of creating security in respect of the overdraft on certain terms mentioned in the Letter of Lien. It is said that as the said amount outstanding in the overdraft account was not paid on demand, the plaintiff in or about September, 1957, sold the shares and realised Rs. 18,894/- as the sale proceeds thereof in the Union of India and the Reserve Bank of India having objected to the said sum being remitted to Narayanganj, the same could not be credited to the said overdraft account in Narayanganj. By letter dated 31st March 1958 and two separate letters both dated 28th July, 1959 the plaintiff called upon the defendant No. 1 to pay Rs. 1,82,335-0-9 and the defendant Nos. 2 and 3 to pay Rs. 1,94,887-0-9 with interest as money due on 31 March, 1958 and 28 July, 1959 respectively. On 31dec, 1959 the overdraft account was increased to Rs. 1,99,308/- by addition of interest for the period between 28th July and 31 December, 1959 and became payable to the plaintiff by the by the defendants by reason of the liability undertaken by them by and under the said Letter of Guarantee and by the Letter of Lien. After giving credit for Rs. 18,898/- the plaintiff claims Rs. 1,80,414-0-9 in Indian Currency as due and owing to the plaintiff by the defendants on 31st December, 1959. The defendants having failed to pay the said sum the plaintiff has brought this action against the defendants as guarantors under the Deed of Guarantee dated 8 November, 1954 for recovery of the amount claimed.

( 5 ) THE defendants have filed their respective written statements separately. Their main defence is that the claim of the plaintiff is barred by Law of Limitation. The other defences are as follows: (a) That at all material times they are citizen of India. (b) That the Deed of Guarantee dated 8th November, 1954 was executed to guarantee payment of loan on the overdraft account of Central Jute Co. Ltd. , to be granted by the plaintiff at its Narayanganj Branch with effect from the date subsequent to the date of t

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