A guarantor's liability is contingent on timely demands; a creditor loses enforcement rights if the underlying debt becomes time-barred against the principal debtor prior to demand on the guarantor.

CAV JUDGMENT

(PER: THE HON’BLE MR JUSTICE T.M.NADAF )

This Regular First Appeal filed by the plaintiff under Section – 96 of Code of Civil Procedure calling in question the judgment and decree dated 16.07.2007 in O.S. No. 20/2005, passed by the Civil Judge (Senior Division) and JMFC, Chikkaballapur, whereby, the suit for recovery filed by the plaintiff was dismissed.

2. The parties shall be referred to as per their ranking before the Court below, for easy reference.

3. A brief outline of the facts leading to the filing of the present appeal are as follows:

At the earlier point of time, the plaintiff filed a suit seeking against the Defendants for the Recovery of Rs.09,80,816/- with interest at the rate of 15.5% p.a. However, during the pendency of the suit, the plaintiff also enforced the security of mortgage created on 25.01.1999 in respect of suit schedule property.

4. The plaintiff is a Scheduled Bank. On 25.01.1999, defendant No.1 has barrowed a sum of Rs.9,00,000/- from the plaintiff-bank for the purpose of business agreeing to repay the same with the interest at the rate of 15.5% p.a., defendant Nos.2,3 and B.Jayasimha husband of defendant No.1 stood as sureties for the same and they have also executed concerned documents in favour of the plaintiff bank.

5. Defendants have mortgaged the suit schedule properties in favour of plaintiff bank by depositing the title deeds. Defendants are in due of Rs.9,80,816-67 in favour of plaintiff bank, despite several demands and issuing of notices to the defendant by the plaintiff-bank defendants have not cleared the debt. Hence, a suit for recovery was filed.

6. After filing of the suit, in pursuance of the service of summons defendant No.2 appeared through his counsel and defendant No.1 and 3 have remained as Ex- parte. Defendant No.4 is the husband of the Defendant No.1. It was stated further in cause-title that Defendant No.4 - B.Jaysimha was represented by his only legal heir the 1^st defendant, which means plaintiff-bank has filed the suit against Smt.B.Krishnaveni, the defendant No.1.

7. It is further contended that the Counsel for the second defendant filed the written statement, and contended that the suit is not maintainable in law, facts and circumstances of the case. He further contended that the suit of the plaintiff is barred by limitation He has denied that he stood as surety for the loan borrowed by defendant No.1 and he further contended that he had not mortgaged the suit schedule property in favour of the plaintiff-bank by equitable mortgage by deposit of title deeds and he had not signed any documents for the alleged transactions. He contended that he was not aware of the alleged transaction and therefore he was not liable to pay any amounts to the plaintiff-bank. He further stated that he has not acknowledged the liability to the plaintiff- bank therefore he prayed for dismissal of the suit.

8. The trial court subsequent to completion of the pleadings, framed the following issues and additional issues, which reads as follows:

ISSUES

1. Whether the plaintiffs bank proves that defendant No.1 availed loan of Rs.9,00,000/- (Nine lakh) from the plaintiff-bank agreeing to repay the same with the interest at the rate of 15.5%p.a.compounded quarterly?

2. Whether the plaintiff-bank further proves that defendant No.2 to 4 have stood