The time limit imposed in a contract for enforcing rights will not be void under S.28 of the Indian Contract Act, if the rights accrued cease to exist by the expiry of the limited period provided for in the contract.

1. The plaintiff is the appellant. The facts are stark and simple. The 3rd defendant, the proprietor of a business concern at Dindigul, entered into a contract with the plaintiff-company on 17-1-1970 for the purchase of 39 motors. On 16-1-1970 the 2nd defendant, Manager of the 1st defendant-Bank at Nattam, executed a bank guarantee (Ext. Al) to the plaintiff. As per Ext. Al, the 2nd defendant agreed on behalf of the 1st defendant-Bank that if the plaintiff supplied motors and other electrical appliances to the 3rd defendant on credit, the Bank will be responsible to the plaintiff upto Rs. 15,000/- of the amounts, if any, found due from the 3rd defendant. Ext. Al was a continuing guarantee for a period of one year. As per the contract, on 17-1-1970 the plaintiff supplied to the 3rd defendant 39 motors. The bill amount of 22 motors was duly paid. But the bill for the remaining 17 motors was not paid. The plaintiff made a demand to the 2nd defendant and an amount of Rs. 3000/- was paid on 18-1-1971. On 30-3-1971 the plaintiff issued a lawyer notice to the 2nd defendant. But the 2nd defendant repudiated the liability Thereupon, the plaintiff filed the suit on 4-10-1971 for realisation of the balance due. The 3rd defendant remained ex parte and defendants 1 and 2 contested the suit. The main contention in the written statement filed was that no claim could be made against the 2nd defendant under the bank guarantee after 16-7-1971 as the plaintiff lost his rights under the guarantee as he did not institute a suit within a period of 6 months from the date of the expiry of the period of guarantee. A contention that the 2nd defendant was not competent to execute the bank guarantee on behalf of the 1st defendant-Bank was also taken in the written statement. The trial court found that since the suit was filed after one year and 6 months from the date of Ext. Al bank guarantee, the plaintiff lost all rights under Ext. Al and hence could not enforce the claim against defendants 1 and 2. The trial court however found the 3rd defendant liable for the plaint claim and gave a decree against the 3rd defendant and his assets. It is the above judgment and decree of the trial court that is challenged by the plaintiff in this appeal.

2. Clause.6 of Ext. Al bank guarantee dated 16-1-1970 reads:

"This guarantee will remain in force for a period of ONE YEAR from the date here of and unless a suit or action to enforce claim under the guarantee is filed against us within six months from the date of expiry of all your rights under the said guarantee shall be forfeited and shall be relieved and discharged from all liability thereunder."

The short point that arises for consideration is whether the condition in Clause.6 that a suit or action to enforce claims under Ext. Al is to be filed within 6 months from the date of expiry of the guarantee is hit by S.28 of the Indian Contract Act, 1872.

3. S.28 of the Indian Contract Act, 1872 reads:

"28. Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent.

S. 28 makes two kinds of agreements void. What we are concerned in this case is the second of the two kinds, namely, an agreement which limits the time within which a party thereto may enforce his rights under or in respect of a contract by the usual legal proceedings in the ordinary tribunals. It is the limiting of the time within which the rights are to be enforced that is made void. So, it goes without saying that rights to be enforced under the contract should continue to exist even beyond the shorter period agreed for enforcing those rights, to make such an agreement void under the section. If, for example, beyond the shorter period agreed upon the rights under the contract cannot be kept alive, no limiting of the time to enforc