1984 Supreme(Cal) 340

High Court Of Calcutta
ASHA MUKUL PAL
EASTERN BANK LTD. - Appellant
Versus
PARTS SERVICES OF INDIA LTD. - Respondent
Suit 3463  Of  1969
Decided On : 09/21/1984

A continuing guarantee in accordance with S. 141 of the Contract Act, would only mean a guarantee which extends to a series of transactions. Therefore, continuing guarantee speaks of continuing transactions, not the period of such transactions. Therefore it is quite possible in my view as it appears from the facts of the present case that here in the present case guarantee was confined to a series of transactions which were restricted or limited to one year.

Headnote:

GUARANTEE - CONSTRUCTION - EXTENT OF LIABILITY - CONTINUING GUARANTEE - PERIOD OF GUARANTEE - RENEWAL OF GUARANTEE - DISCHARGE OF GUARANTORS - LIMITATION ACT, 1963 - APPLICABILITY.

Fact of the Case:

The plaintiff bank filed a suit against the defendant company and its guarantors for recovery of a sum of Rs. 7,51,718.96 with interest. The plaintiff's case was that the defendant company had a current account with overdraft facilities with the condition that such loans would carry interest at the rate of 10% per annum. The plaintiff also claimed that as security for the advances made by the bank in the said overdraft account the defendant company deposited and placed with the plaintiff diverse goods and merchandise which the plaintiff held and possessed subject to the terms and conditions contained in the letter of pledge dt. 18th Dec., 1967. The plaintiff further claimed that the defendants 2,3,4 and the original defendant 5, executed a letter of guarantee on or about 26th Aug.,1964 in consideration of the loans granted or to be granted by the Bank to the defendant company. The said question has been pleaded in Para (3) of the plaint and in Para (h) of the plaint : the guarantee was said to be continuing guarantee. The defendant company and the guarantors contested the suit. The defendant company's defence was that the letter of guarantee signed by the defendant 4 dt. 26th of Aug., 1964 was to be in force or to be operative for a period of one year only commencing from 12th Mar., 1964 as was specifically mentioned in the Bank's letter dt. 19th Mar., 1964 to the first defendant on the basis of which the said guarantee dt. 26th Aug., 1964 was given and as the loans mentioned in the said letter dt. 19th Mar.,1964 were specifically sanctioned for one year only from the said date that is to say from 12th Mar., 1964 all dues became repayable within one year from 12th Mar., 1964 and consequently the guarantee was enforceable within a period of three years from 12th Mar.,1965 and as the suit was filed on 3rd Oct., 1969 the claim is barred by the laws of limitation. Moreover all the claims on the basis of which claim is sought to be made out in the plaint are beyond the date of termination of guarantee - as such the Bank has no case against the defendant 4 and the original defendant 5. The guarantors also raised similar defences.

Finding of the Court:

1. The guarantee executed on 26th Aug., 1964 was a continuing guarantee but it covered and continued only those transactions which took place by and between the plaintiff bank and the defendant No. 1 from 12th of March, 1964 to 11th of March, 1966; in other words it continued only for one year. 2. The defendants 4 and 5 were discharged to the extent from the said guarantee by reason of the subsequent transactions of the plaintiff with the defendant 1 and/or the plaintiff's dealing with the securities. 3. The claim against the original defendant 5 and defendant 4 was barred by limitation. 4. A sum of Rs. 7,81,718.96 was due from the original defendant 5 and defendant 4 as alleged inter alia in Para 13 of the plaint.

Issues: 1. To what extent, if any are the transactions referred to in the plaint covered by the guarantee dt. 26th Aug., 1964? 2. Were the defendant 4 and the original defendant 5 discharged to any extent from the said guarantee by reason of the subsequent transactions of the plaintiff with the defendant 1 and/or the plaintiff's dealing with the securities? 3. To what extent, if any, is the claim against the original defendant 5 and defendant 4 barred by limitation? 4. Was a sum of Rs. 7,81,718. 96 or any part of it due from the original defendant 5 and defendant 4 as alleged inter alia in Para 13 of the plaint? 5. To what reliefs, if any, is the plaintiff entitled as against these substituted defendants and also against the defendant 4.

Ratio Decidendi: 1. The guarantee was a continuing guarantee for a fixed period. 2. The guarantee covered the series of transactions only for one year with the terms and conditions stated therein. 3. The renewal of the guarantee meant termination of one and after termination of the same revival of the agreement with terms which might be altered might bp new or even be the same but the renewal could not be in any event the continuation of the first one specially in the case of contract because one of the implied connotation of the word renewal is revival and revival suggests termination and creating of a new one.

Final Decision: The suit was dismissed against the defendant No. 4 and the substituted heirs of defendant 5. A decree for a sum of Rs. 7,51,718.96 was passed against the defendant No. 1.