AI Structured Summary
Not yet generated for this judgment
Judgment
K. Raviraja Pandian, J.—The above Original Side Appeal is filed by the appellant/plaintiff - Tamil Nadu Industrial Investment Corporation
Limited against the judgment and decree dated 18.6.1990 made in C.S.No.352 of 1981 non-suiting the appellant for the relief of a decree jointly
and severally against the defendants/respondents herein for a sum of Rs.44,20,195-54ps together with interest at 10% per annum from
16.11.1980 till the date of realisation and for costs.
The case of the appellant/plaintiff is that in the course of business, the appellant granted financial assistance in the form of three loans to a
Company called M/s.Micro Tools Limited, one on 26.4.1968 for a sum of Rs.10,00,000/-, on 31.10.1969 for a sum of Rs.5,00,000/- and on
27.11.1972 for a sum of Rs.7,50,000/- and the loans are secured by the Company under mortgage deed executed on 13.9.1968 for a sum of
Rs.10 lakhs and another mortgage deed on 25.10.1969 for the second loan amount of Rs.5 lakhs and for the third loan amount of Rs.7.5 lakhs
secured by a joint equitable mortgage in favour of the plaintiff and two other All India Finance Institutions. The defendants/ respondents No.1 and
2 have executed deeds of guarantee on 13.9.1968 and 25.10.1969 guaranteeing the repayment of the principal, interest or any other monies for
the time being due to the plaintiff for the first two loans of Rs.10 lakhs and Rs.5 lakhs. The guarantees executed by the defendants 1 and 2 are
continuing guarantees and the liability of the guarantors arises as and when the plaintiff makes a demand on the guarantors consequent upon the
default committed by the Company in payment of such principal, interest or any other monies for the time being due to the plaintiff under the first
two loans. In the event of default by the Company, respondents 1 and 2, who are guarantors, are liable to pay the amount.
Incidentally, one of the creditors M/s. Industrial Finance Corporation of India filed O.P.No.200 of 1977 for appointment of a Joint Advocate
Receivers to dispose of the assets of the company. Further, a Company Petition No.32/77 was taken out by a creditor of the Company and this
Court by an order dated 3.11.1977 directed the Company to be wound up and consequently the Official Liquidator was directed to take charge
of the assets of the Company. Hence, the plaintiff has filed the suit for recovery of the total outstanding sum of Rs.44,20,195-54ps from the
defendants 1 and 2.
The first defendant died after filing of the suit and defendants No.3 to 7 were impleaded as legal representatives. The second defendant resisted
the suit on various grounds, primarily, on the question of limitation.
On the basis of the pleadings, the learned Judge of this Court framed as many as six issues, which are as follows:
Whether the suit is barred by limitation?
Whether the 2nd defendant has been discharged from any liability under the deeds of guarantees?
Whether the suit guarantees are enforceable as against the assets of the 1st defendant?
Whether the suit is premature? (This issue was not taken into consideration since it was conceded that the issue did not arise at all.)
Whether the suit guarantee deed are not enforceable?
To what reliefs the parties are entitled?
The learned Judge after taking into consideration of the material produced and arguments advanced, decided all the issues against the appellant
and dismissed the suit. The correctness of the said judgment is now put in issue in the above appeal.
The learned counsel Mrs. Rita Chandrasekaran appearing on behalf of M/s.Aiyar & Dolia for the appellant has submitted that the finding arrived
at by the learned Judge that the suit is barred by limitation is not correct. It is her contention that the guarantee executed by the second defendant is
a continuing guarantee. As per the terms of the agreement, the amount that may be due to the appellant on the general balance of its account or any
other account, so long as the account is a live account in the sense that it is not settled that the guarantee can be invoked at any time, the period of
limitation for a suit to enforce the bond could not be said to have commenced running unless and until it is settled.
No other issue has been raised or any argument has been made in respect of other issues in spite of the fact that all other issues, particularly,
whether the agreement is enforceable, against the defendant"" has been decided by the learned Judge of this Court against the appellant. In order
to sustain her contention that so long as the account is a live, the period of limitation could not be said to have commenced running, she relied on
the judgment of the Apex Court in Mrs. Margaret Lalita Samuel Vs. The Indo Commercial Bank Ltd., . She also relied on a Division Bench
judgment of this Court dated 11.6.2001 in O.S.A.No.285 of 2000 (T.MUTHUKUMARAN VS. THE TAMIL NADU INDUSTRIAL
INVESTMENT CORPORATION LTD. REP.BY ITS BRANCH MANAGER).
The learned counsel appearing for the second respondent argued for sustaining the judgment of the learned Judge.
The point to be decided is whether the finding arrived at by the learned Judge as ""the suit is barred by limitation"" is correct?
The guarantee deeds dated 13.9.1968 AND 25.10.1969 have been marked as Ex.P.1 and P.2. It is manifestly clear from the pleadings in the
plaint that the suit is based on guarantee deeds. Though mortgage deeds have been executed on 13.9.1968 for Rs.10 lakhs and on 25.10.1969 for
Rs.5 lakhs, no mortgage suit has been filed. Copy of the notice issued by the counsel for the appellant/plaintiff dated 29.10.1980 has been marked
as Ex.P.16. Exs.P.17 and P.18 are the acknowledgements by defendants No.1 and 2. The suit was filed on 20.11.1980. On the basis of Ex.P.16,
it has been contended that the suit is well within the time. It is the further contention, as stated above, of the learned counsel for the appellant that in
respect of continuing guarantee, so long as the account is a live, the period of limitation could not be said to have commenced running.
It is now well settled that whether or not the transaction is a continuing guarantee is to be determined by the terms of the instrument. It is mainly
a question of construction. The document should be interpreted as a whole and is not to be confined merely to the operative part. If there is any
ambiguity, it is permissible to press into consideration the nature and character of business, the relative position of parties and surrounding
circumstances. Though in the terms of the agreements which are under dispute, it is stated it is a continuing guarantee, but the fact remains, the
guarantee has been executed to secure the due payment of Rs.10 lakhs and Rs.5 lakhs, which have been advanced by the appellant on 26.4.1968
and 31.10.1969 respectively.
In the facts and circumstances of the case, we need not embark upon the question as to whether the guarantee, which forms the basis for the
action of the appellant is a continuing guarantee or not, because of the clinching document Ex.D.3, which is a notice issued by the counsel for the
appellant/plaintiff. In that notice, mentioning about the guarantee deeds executed by the defendants in respect of the loans advanced to M/s. Micro
Tools Limited and further pointing out that the Company has committed default in payment of principal and interest, the guarantors/ respondents
have been called upon to pay the same, which were then outstanding and it has been stated that in the event of failure to pay the same within fifteen
days, action will be taken against guarantors jointly and severally. There is absolutely no dispute with regard to the fact that the said notice has
been issued and there was no compliance by the defendants. In the above said factual matrix of the case, we are at a loss to understand how the
decision of the Supreme Court relied on heavily by the learned counsel for the appellant would advance the case of the appellant. In Mrs.
Margaret Lalita Samuel Vs. The Indo Commercial Bank Ltd., , it has been categorically held thus:
In the case of a continuing guarantee and an undertaking by the defendant to pay any amount that may be due by a Company to a Bank on the
general balance of its account or any other account so long as the account is a live account, in the sense that it is not settled and there is no refusal
on the part of the guarantor to carry out the obligation, the period of limitation for a suit to enforce the bond could not be said to have commenced
running.
(Italics by us)
The ratio laid down in the above Judgment by the Supreme Court is virtually in favour of the respondents. In this case, by Ex.D.3, the
respondent was called upon by the appellant to pay the amount outstanding within fifteen days from there, which has been issued on 7.3.1977. As
stated already, even after the fifteen days time granted in the said notice, there was no compliance of the said notice and the non-compliance is a
clear refusal on the part of the guarantors to carry out the obligation and the period of limitation started running from 7.3.1977 or at least on the
expiry of the fifteenth day. It is clearly admitted by P.W.1 - one Muthukrishnan, Assistant Manager of the Appellant Corporation in his evidence
that Ex.D.3 was issued by the counsel for the appellant. When such being the factual position, the reliance on the above decision of the Supreme
Court is not available to the appellant.
The same is the position in respect of the Division Bench judgment of this court in O.S.A.No.285 of 2000. In that case also, the Division
Bench of this Court followed the decision of Mrs. Margaret Lalita Samuel Vs. The Indo Commercial Bank Ltd., and observed as follows:
We have already referred to the relevant terms of the guarantee executed by the appellant. Those terms indicate in no uncertain terms that the
liability of the guarantor was to be a continuing one and was capable of being enforced independently of the loan agreement and the mortgage
executed by the principal debtor. The term ""continuing guarantee"" does not imply that such guarantees are confined only to running accounts and
no other. The term ""continuing"" refers to the time frame covered by the terms of the guarantee and the liability of the guarantor under such a
guarantee continues to remain enforceable till such time there is a breach thereof. Even in the case of Lalita Samuel, referred to above, this aspect
has been pointed out by the Apex Court. In this case also, there was no repudiation of the liability of the guarantor, before the proceedings were
instituted in the Court for enforcing the terms of the guarantee. The action against the guarantor was taken after it was found that the sale proceeds
of the hypothecated property were wholly insufficient to meet the total liability of the borrower. The guarantor, under the terms of the guarantee,
remained liable for the payment of those sums and the application filed to enforce that liability, which was still outstanding was within the period of
limitation.
The learned counsel appearing for the appellant has also relied on the Division Bench judgment of the Kerala High Court in Union Bank of
India, Ernakulam Vs. T.J. Stephen and Others, . That was a case in which the defence taken was that the defendants are not liable to pay the
amount even though they have executed a continuing guarantee. The continuing guarantee was executed on 21.8.1970. According to the Bank, the
debt was kept alive on account of the acknowledgement of the liability of the debt by the first defendant. The plea of defendants 2 and 3 was that
the acknowledgement made by the first defendant is not binding on defendants 2 and 3 and so as regards defendants 2 and 3, there is no cause of
action for the Bank since the same has been barred by limitation. The facts of the case are not identical to that of the present case.
Ex.D.3 dated 7.3.1977 makes a ocean of change in the proposition of law. It is now well settled that the Courts should not place reliance on
decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of
Courts are not to be read as Euclid''s theorems nor as provisions of the statute. These observations must be read in the context in which they
appear. Judgments of courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary
for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not
interpret judgments. They interpret words of statutes, their words are not to be interpreted as statutes. In London Graving Dock Co.Ltd. v. Horton
1951 AC 737 , Lord Mac Dermot observed :
The matter cannot of course, be settled merely by treating the ipsissima vertra of Willes, J. as though they were part of an Act of Parliament and
applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actually used by that
most distinguished judge.
The following words of Lord Denning in the matter of applying precedents have become locus classicks:
Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may
alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one
case against the colour of another. To decide, therefore, on which side of the line a case falls, the broad resemblance to another case is not at all
decisive.
Precedent should be followed only so far as it makes the path of justice, but you must cut the dead wood and trim off the side branches else you
will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it.
The above said observations of the Supreme Court in Haryana Financial Corporation and Another Vs. Jagdamba Oil Mills and Another, :would
apply in all force to the facts of the case. Hence, we are of the view that there is absolutely no infirmity or irregularity in the finding given by the
learned Judge of this Court on the point of limitation and the contention of the learned counsel for the appellant has to be rejected and the same is
rejected as untenable in the facts and circumstances of the case. As already stated, no other point has been canvassed by the learned counsel.
In the result, the appeal deserves no merit consideration and as such it is dismissed. However, there is no order as to costs. Consequently, the
connected C.M.P.No.16059 of 1990 is closed.