1983 PLP 244 (CLC)

7. The learned counsel for defendant No. 2, has not challenged the facts deposed to by the plaintiffs' witness or execution of any of the documents which have been produced and duly .exhibited. He however, submitted that the claim against the defendant No. 1, which according to him arises out of Pro missory Note dated 13th July, 1968 (Exh. 5/1), had already become barred by time under Article 73 of the Limitation Act when the present suit was filed on 14-10-1976 and thus the defendant No. 2 according to the learned counsel shall be deemed to have been discharged from the bond executed by him as a guaran tor. The learned counsel for the defendant No. 2 in support of his contention relied upon the case of Saligram v. Lachmandas (A I R 1928 All. 46) wherein it was observed that if the remedy of the creditor against the principal became barred by time the surety would be deemed to have been discharged. 8. (i) I have carefully considered the above arguments advanced by the learned counsel for the defendant No.

2. So far as the defendant No. 1 is concerned his liability on the facts of the case continued and was renewed by the promissory note executed on 29-12-1973 (Exh. 5/3) whereby he expressly promised in writing to make payment on demand to the plaintiffs a sum of Rs. 23,691.80 which was the amount then due on the aforementioned over draft account. The suit against the defendant No. 1 is, therefore, within time. (ii) We now proceed to consider if the claim against defendant No. 2 is within time. The document upon which the learned counsel for the plaintiffs relied is the letter of guarantee dated 13th July, 1968 executed by both the defendants whereby they jointly and severally guaranteed due payment to the plaintiffs :- " . . Within two days after demand of all moneys which shall at any time be due to you from the principal, in any shape or form, together with interest, charges, cost etc. provided that the total amount recoverable from me/us jointly and severally under this guarantee shall not at any time exceed the principal sum of Rs. 50,000 (Rupees Fifty thousand only) exclusive of interest and charges." The learned counsel for the plaintiffs pointed out that under clauses 1 and 2 of the aforementioned Letter of Guarantee it has been agreed by both the defendants that their liability shall be chat of principal debtors and the bank may at its option hold any one or both of them primarily responsible for the said liabilities. It was further covenanted vide clause 2 that :- "This guarantee shall be a continuing security binding on me/us and my/our personal representative until receipt by you of written notice of discontinuance thereof and notwithstanding such discontinuance or any release of granting of time or other indulgence by you to any one or more of us, this guarantee shall remain a continuing security as regards the other or others . . ." The learned counsel also referred to clause 4 which provided as follows :- "The guarantee shall not be discharged or prejudiced by any partial payment or by settlement of accounts or the existence of a credit balance of the principal at any time or by discharge of the principal by opera tion of law or for any other reason." Perusal of the evidence particularly the documents produced, shows that admittedly the amount claimed in suit is due on the overdraft account, the payment of which has been guaranteed by both the defendants jointly and severally by executing the letter of guarantee on 13th July, 1968 (Exh. 5/2). The contention of the learned counsel for the defendant No. 2 that the letter of guarantee executed by the defendant No. 2 was restricted to payment due under the promissory note dated 13th July, 1968 however does not find any support from the said document or any other evidence on record. On the other hand a reading of the relevant terms of the letter of guarantee (Exh. 5/2) already noted above shows that the defendant No. 2 expressly bound himself to repay all moneys due to the plaintiffs in consideration of the latter "making or continuing advances or otherwise giving, or continuing credit or accommo dation" to the defendant No. 1 to the extent of Rs. 50,

000. There is no reference in the said letter of guarantee limiting the liability of the defen dant No. 2 to the promissory note dated 13th July, 1968 alone as contended by the learned counsel for the defendant No. 2.

9. I also find that the plea raised to the effect that the suit having become barred by time against the defendant No. 1, the guarantor namely defendant No. 2 also stood discharged cannot be accepted firstly for the reason that as discussed above factually it is not correct that the suit is barred against the defendant No. 1 and secondly under the terms of letter of guarantee (Exh. 5/2) the cause of action to enforce the liability against the defendant No. 2 could not be deemed to have arisen until the demand was made by the plaintiffs upon the guarantor/defendant No. 2 and payment was not made within the stipulated period of two days. The argument as above advanced by learned counsel, is also negatived by the terms of clause 4 of the letter of guarantee (Exh. 5/2) itself which provide that the "guarantee shall not be discharged or prejudiced at any time by dis charge or principal by operation of law or for any other reason."

10. The conclusion reached as above finds support from the case of Bradford Old Bank Limited v. Sutcliffe (1918) 2 K B 833, wherein the liability of surety who executed deed of guarantee, relevant portion whereof is reproduced herein below, came up for consideration :- "In consideration of your opening of continuing a banking account with Sutcliffs ..we do hereby jointly and severally guarantee to you and make ourselves jointly and severally liable to, pay to you on demand all sum and sums of money now due or, owing, or which shall become due or owing from Sutcliff to you on their banking account. The conditions of this our guarantee being as follows ; (1),That the amount ultimately recoverable under this guarantee shall not exceed 6,100 with interest thereon at the rate of 5 per cent her annum, from the time of default of payment by Sutcliff or from the time of your demanding payment thereof from us or any one or more of us whichever event shall first happen." Pickford L.J. interpreting the above term in the deed of guarantee, observed : - "If, therefore, it were necessary for the plaintiffs to prove a demand, the cause of action did not accrue till after the demand." It was further held by the learned Judge that :- "It was argued on behalf of the defendant that the words "on demand" should be neglected because the money was due and therefore a demand was unnecessary and added nothing to the liability. This proposition is true in the case of what has been called a direct liability for example, for money lent. There the liability exists as soon as the loan is made, and a promise to pay on demand adds nothing to it, as in the case of a promissory note for the amount payable on demand, and the words "on demand" may be neglected. It has however, been held long age in cases more particularly mentioned by the other members of the Court that this doctrine does not apply to what has been called a collateral promise or collateral debt, and I think a pro mise by a surety to pay the original debt is such a collateral promise, or creates such a collateral debt." The learned Judge after citing with approval the case of Brown's Estate (1893) 2 Ch. 300 further proceeded to hold :- "The only question therefore is whether, on the construction of the guarantee, the parties meant the words "on demand" to mean what they say. I cannot doubt that they say. I cannot doubt that they did. Interest is to run from demand. Clause 6 makes a demand a condition precedent to the guarantor's power to pay off the amount due, and clause suggests that a demand would be necessary to inform the guarantor or of the deficiency left on the realization of the debentures." Reference here may also be usefully made to the following observations of Bankes L. J. which appears at page 843 of the above-referred reports :- "1f demand before action is an essential part of any cause of action by the bank against the guarantors, when the statute could not com mence to run until the necessary demand was made ......................... If therefore, a demand for payment before action brought was necessary, the action is not barred by the statute .............................. In my opinion the documents both from its nature and from its language indicates that the guarantors stipulated for a demand being made upon them before the bank could enforce the guarantee against them."

11. The proposition of law as expounded in the judgments referred to above would be sufficient to indicate that the arguments advanced that the claim against the defendant No. 2 on the letter of guarantee executed on 13-7-1968 (Exh. 5/2) has become barred by time when the suit was brought on 14-10-1976, cannot be sustained. The reliance placed by the learned Counsel for defendant No. 2 on the case of Saligram (A I R 1928 All. 46) is misconceived as it was overruled by the Full Bench of the same Court in the case of Aziz Ahmed v. Sher Ali (A I R 1956 All. 8) where after referring to sections 134 and 137 of the Contract Act, the learned Court observed :- "With great respect to the learned Judges who decided these cases, we are of opinion that the Court erred in the meaning it has given to both sections 134 and 137 of the Act. We think it now to be well estab lished that the effect of the expiry of the period of limitation (except in t the case of suits to establish a right to immovable property) is to bar the remedy without extinguishing the right, and in our opinion the consequence is that the omission to sue a debtor within the period of limitation will not result in the debtor's discharge. Section 25(3) of the Act makes it clear that a barred debt is a good foundation for a written promise to pay signed by the persons to be charged therewith, or by his agent ; and section 60 speaks of a barred debt as a lawful debt actually due and payable to the creditor. As pointed out in 33 Mad. 308 at page 311 unless a law of limitation operates as well as a law of extinctive prescription, omission to sue cannot discharge the debtor." The principle enunicated in the case of Carter v. White ((1885) 25 Ch. D 660) by Lindlay, J. may also be noted below :- "Is it the law that a creditor who neglects to sue his debtor till the statute has run will thereby discharge his surety? There is no decision to that effect. On the contrary, the true principle is that mere omission to sue does not discharge the surety, because the surety can himself set the law in operation against the debtor."

12. I am in respectful agreement with the observations made in the above-cited cases and accordingly find that the defendant No. 2 as the guarantor could not have been sued unless a demand for repayment. was made and had defaulted for two days after the said demand in payment of the money due from the defendant No. 1 as stipulated by terms of letter of guarantee (Exh. 5/2) dated 13-7-1968. There is sufficient evidence on record in the form of notice dated 25-10-1975 (Exh. 5/5) addressed to the defendant No. 1 and another letter (Exh. 516) of the same date addressed to the defendant No. 2, as the guarantor, to take repayment of the amount due from the defendant No.

1. The final notice of demand was given on 20-3-1976 (Exh. 5/4) to the defendant No. 2 calling upon him to make the payment of the then outstanding amount of Rs. 30,177.80 to the plaintiff bank within 15 days from the receipt thereof. In the last notice the plaintiffs warned the defendant No. 2 that in case he failed to comply, legal proceedings would be taken against him for the recovery of the said debt at his cost and risk. The above documentary evidence coupled with the oral evidence given by the plaintiffs witness Mr. Mohammad Ali (Exh. 5) have remained unchallenged and unrebutted.

13. The Defendant No. 2 who had filed his written statement chose to remain absent. He did not step in the witness-box or give evidence on his own behalf. His non-appearance as a witness, therefore, would be the strongest possible circumstance to discredit the truth of his case. If any authority is needed reference may be made to the case of Khairun Nisa v. Mohammad Ishaq (P L D 1972 S C 25) in which case while citing and approving the above principle, the Honourable Supreme Court also observed that written statements cannot be exhibited without the person who filed the same being examined in the Court.

14. The upshot of the above discussion is that the defendant No. 1 is liable to pay the amount claimed in suit and that in view of the promissory note dated 13-7-1968 Exh. 5/1 read with letter of guarantee Exh. 5/2 coupled with promise made in writing vide promissory note (Exh. 5/3) executed on 29-12-1973 whereby the said defendant promised to pay on demand to the plaintiff Rs. 23,691.80 which was the amount then outstanding on the over draft account, the suit filed against him on 14-10-1976 would, therefore; be within time under Article 73 of the Limitation Act. As regards the defendant No. 2, the guarantor who promised to pay within two days after demand all moneys due from the defendant No. 1, the making of the demand was a condition precedent, and that such a demand was necessary to inform the guarantor (defendant No. 2) of the amount out standing against the principal debtor, and to give rise to accrual of cause o action against him. In the circumstances the suit filed against him on 14-10-1976 after service of notices dated 25-10-1975 and 20-3-1976 would not be barred by time.

15. Accordingly the suit is decreed against defendants Nos. 1 and 2 jointly and severally for Rs. 30,277.80 with costs. On the amount decreed as above the defendant No. 1 shall pay interest @ 13 % per annum with monthly rests as claimed in suit while the defendant No. 2 shall be liable to pay the interest @ 9 % per annum with monthly rests from date of suit till payment. S. Q. Suit decreed.