K.V. Ganapati Subramania Iyer vs Essan and Co. Ltd.

Kunhamed Kutti, J.—The plaintiff in the Court below is the appellant. He filed the suit out of which this appeal arises for recovery of a sum

of Rs. 60772 being the balance of principal and interest due on a promissory note dated 2nd December, 1950 for Rs. 67601 repayable with

interest at 6 per cent per annum executed by one S. N. N. Sankaralinga Iyer for and on behalf of the first defendant Messrs. Amir Hind

Manufacturers Ltd. of which Essen and Co. Ltd., the second defendant was the managing agents. On the same date as the promissory note

Sankaralinga Aiyar who was also the managing director of D. 2 for and on behalf of the said company passed a letter to the plaintiff guaranteeing

repayment by the first defendant of all the sums of money under the promissory note. On 14th March, 1952, a sum of Rs. 3951 was paid towards

interest and the same was endorsed on the promissory note under the signature of Sankaralinga Aiyar. As no further payment was made, the

plaintiff sent a letter to the first defendant giving six months notice to discharge the loan. There was no response. On 12th November, 1951, the

plaintiff is said to have caused a lawyer''s notice to be sent to the two defendants followed by another notice dated 10th September, 1953,

demanding payment. Only two payments of Rs. 10,000 each were made on 22nd October, 1954 and 7th December, 1954. The plaintiff,

therefore filed the suit to recover the balance amount due as aforesaid. The second defendant was impleaded as guarantor of the first defendant''s

liability alleging that the guarantee executed by them was a continuing one irrespective of the change of constitution of the first defendant company;

and reliance was placed on the endorsement made by Sankaralinga Aiyar on 14th March, 1952, to save limitation against both the defendants.

The first defendant allowed the suit to proceed ex parte. The second defendant, through its director one K. S. Narayanan, filed a written

statement pleading inter alia that the aforesaid endorsement was not valid in law and would not save limitation, that the letter of guarantee did not

create any liability and that even so by the plaintiff by his conduct had lost his right to proceed against the surety.

The learned Subordinate Judge decreed the suit against the first defendant and dismissed it with costs as against the second defendant.

The short point for determination is whether the dismissal of the suit as against the second defendant is unsustainable.

The learned Subordinate Judge look the view that the endorsement by Mr. Sankaralinga Aiyar marked as Ex. A-1 (a) being only as agent of the

first defendant according to the evidence could save limitation only against that defendant but not as against the second defendant. According to the

learned Judge, an acknowledgment of liability will save limitation only against a principal debtor and not as against the surety; and he repelled the

contention urged on behalf of the plaintiff that the cause of action against the second defendant arose only on the expiration of six months of the

date of promissory note stating that even if it were so the suit having been filed more than three years after the said date, namely, 2nd June, 1951,

is barred by limitation.

Pending this appeal the plaintiff filed C.M.P. No. 5668 of 1958 for amendment of the plaint by adding to paragraph 9 of the plaint:

That the cause of action against the second defendant arose on 18th September 1952, 12th November, 1952 and 10th September, 1953, on

which dates notices were issued to the second defendant calling on them to pay the plaintiff the money remaining due to him on the suit promissory

note; the suit is in time as against the second defendant having been filed within 3 years from even the earlier of the said two dates and further is

saved against any time bar by reason of two cheques issued for Rs. 10,000 each referred to in paragraph 5-b and signed by 8. N. N. Sankaralinga

Aiyar and also by the reply letter dated 19th October, 1953. written by K. S. Narayanan under the authority of his father S. N. N. Sankaralinga

Aiyar to the plaintiff''s Advocate acknowledging the liability in respect of the suit claim.

We allowed this amendment as the same was not opposed.

No request was made for filing an additional written statement. It appears to us however that the liability of the second defendant company has

to be determined with reference to the guarantee letter, Ex. A. 2, which is as follows:

Dear Sir,

In consideration of your advancing a sum of Rs. 67601 to Messrs. Amer Hind Manufacturers Ltd, under a promissory note dated 2-12-1950,

executed by consolidating the amounts advanced by you to them, we, Essen and Co. the managing agents of Messrs. Amer Hind Manufacturers

Ltd., do hereby guarantee to you the repayment by the aforesaid Messrs. Amer Hind Manufacturers Ltd., (Principal debtor) of all sums of money

due under the aforesaid promissory note within six calender months of the service of notice in writing on us of any default on the part of Messrs.

Amer Hind Manufacturers Ltd, (the principal debtor). The guarantee given by this letter will be a continuing guarantee and no change in the

constitution of Messrs. Amer Hind Manufacturers Ltd. the principal debtor, shall impair the liability of the guarantor hereunder.

For Essen and Co., Ltd.

(Sd.) S. N. N. Sankaralinga Aiyar.

It is clear from the above letter that the liability of the second defendant is a continuing one, co-existent with the liability of the first defendant, the

only condition for enforcing the same against the former, if at all, being a notice in writing of the default on the part of the latter. The undertaking is

that on intimation of such default in writing the second defendant would within six calendar months of such intimation see to the payment of all sums

of money due under the promissory note. Notice of demand was served on the first defendant as per the original of Ex. A. 3, dated 19th

September, 1952. There was no compliance and the first intimation of default on the part of the first defendant was sent to the second defendant

on 12th November 1952. The specific averment in para 6 of the plaint that notices demanding payment were sent to both the defendants on the

aforesaid date has not been controverted in the written statement of the second defendant. In the ordinary course, the second defendant should

have received this notice in a day or two; and having regard to the terms of the guarantee letter, the second defendant was bound to repay the

amount within six calendar months of the receipt thereof.

There was yet another notice as per Ex. A. 5 and this was received by Sankaralinga Aiyar himself on 11th September, 1953, so that the cause

of action as against the second defendant should be deemed to have arisen only from the date of service of either the first or the second notice. In

either case the suit against the second defendant would be in time provided the debt was alive and enforceable, as against the principal debtor, the

first defendant.

No doubt, Sankaralinga Aiyarsigned the endorsement Ex. A-1 (a) without disclosing his capacity either as managing agent of the first

defendant or as managing director of the second defendant. But the fact is not denied that, at the time, he held both the capacities. The unremitted

evidence of P. W. 1 is that he signed the endorsement in his capacity as managing agent of the first defendant and this evidence has been accepted

and acted upon by the learned Subordinate Judge. The position, therefore, is this: On the date of suit, the debt was alive as against the first

defendant. The second defendant was liable for the same in view of the continuing or co-existing liability undertaken by the said defendant. Its

liability could be deemed to have arisen only on intimation of default given by the plaintiff as per notice dated 12th November, 1952. The claim

against the second defendant, was, therefore, not barred by time and so we are satisfied that the dismissal of the suit as against the second

defendant is unsustainable and has to be set aside. This appeal is, therefore, allowed, the decree of the learned Subordinate Judge dismissing the

suit against the second defendant is set aside and the suit is decreed as against the said defendant as well with costs here and in the Court below.