Indian Overseas Bank vs Kandimalla Narsaiah and Others

B.S.A. Swamy, J.—This Revision petition is filed against the order of the Subordinate Judge, Naigonda in C.F.R. No. 1724/96, dated 22-11-1996 wherein the Sub-Judge held that the against defendants 2 and 3, the guarantors for the loan availed by the 1st defendant, is time barred as they did not sign revival letters.

While ordering notice on admission, I called for a report of the Sub-Judge to explain the circumstances under which he has taken the above view and the legal provision with reference to the limitation. Accordingly, he submitted his report in Dis. No. 3322/97 dated 28-2-1997. In the meantime, the notices sent were served on the parties but they did not choose to appear before this Court, when the matter is taken up for hearing. Hence I am constrained to dispose of the revision petition on merits.

It is not in dispute that the 1st defendant availed term loan facility from the plaintiff Bank on 27-1-1988 and defendants 2 and 3 stood as guarantors for prompt payment of the amount by depositing their title deeds creating an equitable mortgage on the properties which is commonly followed by the financial organisations having statutory power. It is seen from the order of the Court that while the defendant No. 1 executed a revival letter on 16-11-1990, 18-2-1993 and finally on 8-9-1994 for the amount stood undischarged and the defendants 2 and 3 have not executed revival letters. The suit was filed on 1-8-1996 it cannot be disputed that the period of limitation for mortgage suit is 12 years under Article 62 of the Limitation Act while the period of limitation for the loan advanced under pronote is 3 years under Article 36 of the Limitation Act. If the suit is based on mortgage it is not in dispute that the suit filed is within the period of limitation allowed under the Act.

In the above circumstances, the only question that arises for consideration of this Court would be whether the loan was given by the petitioner-bank on the basis of a pronote or on the basis of an equitable mortgage created by the sureties by pledging their documents of title. The original deed under which defendants 2 and 3 deposited their title deeds seems to have been filed along with the suit. Mr. Suryanarayana, the learned counsel for the petitioner strenuously contended that these documents were pledged to the bank by creating an equitable mortgage under the letter of confirmation executed by the sureties. As the letter is not before me, I feel it appropriate to remit the matter back for fresh consideration whether the suit is filed on the basis of a pronote or on the basis of an equitable mortgage. If the suit is is filed on the basis of an equitable mortgage the question of executing revival letters either by the loanee or guarantors does not arise. But the bank seems to be obtaining revival letters from the loanee to show that the loan account maintained by the bank is the true reflection of the loan so that the loanee may not dispute the figures at a later date. Merely because the loanee executed a revival letter and the guarantors have not executed such letters inspite of the fact that the suit is based on, an equitable mortgage does not bar the claim of the plaintiff as long as the suit is based on equitable mortgage. Hence the Sub-Judge gravely erred in dismissal of the suit against the defendants 2 and 3 without applying his mind to the facts of the case.

At the end of the proceedings, the learned counsel produced the original revival letters executed by the defendants 2 and 3. I have gone through the letters. Had these letters been produced in the Court below, even assuming that the view taken by the Sub Judge is right, the suit would not have been dismissed against D-2 and D-3, as the suit is well within the limitation as per his own understanding.

In the light of the view taken by me, the order of the Court below dated 22-11-1996 in C.F.R. No. 1724/96 is set aside and the matter is remitted back to the trial Court and the Sub Judge is directed to register the suit against defendants 2 and 3 also and issue summons for their appearance. It is open to the Sub Judge to frame an issue whether, the suit is barred by limitation against defendants 2 and 3 after pleadings are completed in this case and proceed to dispose of the suit in accordance with law.

The C.R.P. is accordingly allowed. No costs.