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2023 Supreme(Online)(KER) 20319
HIGH COURT OF KERALA
Sathish Ninan, J
C.K.JAYALAKSHMI – Appellant
Versus
VIJAYA BANK – Respondent
AS 325 2002
SRI.T.P.VARGHESE SRI.M.F.MOHAMMOD SIYAD SRI.PHILIP T.VARGHESE SRI.THOMAS T.VARGHESE SRI.K.SHRIHARI RAO
A continuing guarantee binds the guarantor to liabilities arising from future loans within the agreed limits, despite closure of previous facilities.
Headnote:
Guarantee - Loan Agreement - N/A - The court interpreted the guarantee as a continuing obligation of the guarantor, finding that the additional loan taken by the primary borrower fell within the liability scope agreed upon in the original guarantee agreement.
Fact of the Case:
The plaintiff bank filed a suit for recovery of money against the first defendant loan account, with the third defendant as the guarantor. The third defendant contested her liability, arguing her guarantee pertained only to an overdraft facility, which had already closed.
Finding of the Court:
The trial court held that the third defendant's guarantee was a continuing one and was applicable to the subsequent loan despite her claims to the contrary, siding with the bank's position that the original agreement covered future liabilities.
Issues: The primary issue was whether the third defendant remained liable for the new loan availed by the first defendant after the initial overdraft facility had been closed.
Ratio Decidendi: The court found the guarantee agreement explicitly covered future debts, confirming that such agreements constitute continuing guarantees that endure beyond the closure of initially secured facilities.
Final Decision: The appeal was dismissed, affirming the trial court's judgment against the third defendant.
J U D G M E N T
The suit for money filed by the Bank on a loan account, was decreed by the trial court. The third defendant-guarantor is in appeal.
2. On 27.06.1995, the first defendant availed a temporary overdraft of ` 5 lakhs from the plaintiff- Bank. The third defendant stood as guarantor for the facility. She also created equitable mortgage of immovable property to secure the liability. Subsequently, on 16.08.1995, the first defendant availed a secured loan of ` 2,25,000/- and closed the overdraft facility. According to the plaintiff, the guarantee of the third defendant continued and in addition, the second defendant who is the husband of the third defendant also stood as a guarantor. Since repayment was defaulted, the suit was filed.
3. The third defendant denied the plaintiff's contention that she was a guarantor to the loan availed by the first defendant on 16.08.1995. According to her, she stood as a guarantor and created equitable mortgage only to secure the overdraft facility availed on 27.06.1995. After closure of the said facility on 16.08.1995, no fresh documents were executed by her guaranteeing the subsequent loan of ` 2,25,000/- availed by the first defendant on 16.08.1995. Thus, she sought for dismissal of the suit.
4. The second defendant, who is the husband of the third defendant, contended on the same lines.
5. The trial court held that the guarantee given by the second defendant at the time of availing the overdraft facility was a continuing guarantee and that she was liable under the facility granted on 16.08.1995. It is aggrieved thereby that the third defendant is in appeal.
6. Heard learned counsel on either side.
7. The point for determination is, whether the finding of the trial court that the liability of the third defendant continued under the facility availed by the first defendant on 16.08.1995, justified on the materials.
8. Ext.A3 is the guarantee agreement given by the third defendant at the time of availing the overdraft facility by the first defendant. Clause-1 in Ext.A3 specifically provides for grant of further credit to the first defendant, subject to the cap of ` 5 lakhs. The third defendant as guarantor has agreed to hold herself liable for the overdraft facility or any other facility which may be granted to the first defendant thereafter subject to the limit as above. Hence the trial court was right in holding that the guarantee given by the third defendant was a continuing guarantee and that she continues to be liable for the loan granted to the first defendant on 16.08.1995.
9. Learned counsel for the appellant would contend that after closure of the overdraft availed by the first defendant, the third defendant had demanded return of title deeds but the same was not returned by the Bank. The fact that third defendant demanded return of title deeds indicates that she did not intend to guarantee the subsequent loan availed on 16.08.1995, it is argued. He also points out that the third defendant-appellant has produced additional documents before this Court today under Order XLI Rule 27 of the Code of Civil Procedure along with IA No.1/2023 producing therewith copy of a letter dated 20.04.1996, postal receipt and postal acknowledgment card. As per the said letter, the third defendant demanded return of the title deeds. Therefore, it is evident that the appellant did not intend to guarantee the loan granted on 16.08.1995, it is contended.
10. The contention of the appellant based on the additional documents sought to be produced is not liable to be accepted. In the written statement filed by the third defendant, there is no contention that such a letter, as is now claimed, was sent by the third defendant to the plaintiff. The documents are sought to be produced after the lapse of 25 years. Not only that the grounds under Order XLI Rule 27 of the Code of Civil Procedure are not made out, but as noticed, the evidence is sought to be adduced without any plea. Even if the documents are accepted in ev
