Union Bank Of India vs Neeru Malhotra And Ors.

Ranjit Singh, J

The Tribunal below while allowing the O.A. filed by the appellant-Bank has dismissed the claim against respondent Nos. 1, 2 and 3. The claim of the Bank, however, has been allowed against respondent No. 4 - M/s. Faishan Flairs India (P) Ltd. as well as against respondents 5 to 7. The Bank is held entitled to recover Rs. 32,69,125 from defendants 4 to 7 jointly and/or severally with costs and interest @ 12% p.a. from 5.8.1996 onwards till recovery. Aggrieved against the finding returned by the Tribunal in dismissing the O.A. against respondents 1 to 3, the Bank has filed this appeal. The facts noticed, in brief, are that the Bank had granted Packing Credit Limit of Rs. 220 lacs to the respondent-company on 28.3.1994. Respondents 2 and 3 were the Directors of the company who executed relevant documents. The facility was to carry interest with a minimum of 13% p.a. with quarterly rests.

The company utilized the limit from time-to-time and respondent No. 1 to 3 executed deed of guarantee for Rs. 6 lacs. On 17.10.1994, the Packing Credit Limit was enhanced and fresh documents were executed. FDBP Limit of Rs. 10 lacs was sanctioned for which respondents 2 and 3 executed documents. On 27.7.1995, Packing Credit Limit was enhanced to Rs. 11 lacs. FDBP limit was enhanced to Rs. 26.80 lacs. Documents were executed by respondents Raman Mehta, Smt. Geeta Mehta, Mr. Rajan Malhotra and Mr. Ram Raghubir Pandey and Mr. Kuldeep Singh. Respondent 7 created equitable mortgage of his property - Plot No. 25, Khasra No. 567, Mahavir Nagar, Block L in Village Nangli Jalab, Near Tilak Nagar, Delhi and respondent No. 3 pledged with the Bank the India Development Bond of the face value of USD 20000/- equal to about Rs. 7 lacs as the collateral security. On 11.6.1995, respondents executed fresh documents and charge was registered with the Registrar of Companies. In July 1994, Smt. Neeru Malhotra (respondent No. 1) sought to withdraw as guarantor, but was informed that since guarantee executed by her was continuing, the liability would continue till it was cleared. On 26.6.1996, the appellant-Bank issued notice calling upon the respondents to repay the outstanding amount and ultimately O.A. for recovery of an amount of Rs. 33,46,957/- was filed claiming the amount with interest 21% p.a. with quarterly rests.

Respondents Nos. 4, 5, 6 and 7 were declared ex parte on 24.12.1997. Respondent Nos. 1 and 2 filed a joint written statement stating that the Bank without their consent, by executing a subsequent and new contract, had made variance in the terms of the contract between the Bank and the respondents who were proceeded ex parte. As per them, the variance in the terms of the contract would result in their being absolved and discharged from the liability of the guarantee. It is stated that the respondent No. 1 stood discharged from the liability or guarantee on or after 17.10.1994 when new contract of guarantee was entered into between the Bank, its borrower and new guarantors. This was confirmed by letter 14.8.1995. It is stated that on withdrawal of respondent Nos. 1 and 2 as Directors, respondents 5 and 6 had taken over the company and transaction after 7.6.1995 on behalf of the company were conducted by respondents 5 and 6. In the reply, it is further stated that the information on resignation from the directorship was furnished by respondents 1 and 2 and the Bank had accepted the change in the constitution and composition of the company. It is urged that the Bank had closed the old accounts and opened new accounts for P.C. Limit, FDBP/FUDBP Limit and had obtained fresh guarantees, discharging the answering respondents. It is also pleaded that immovable property No. 245, Jagriti Enclave owned by respondent Nos. 1 and 2 was never subject-matter of mortgage. They would also allege contributory negligence and responsibility on the Bank in enhancing the limit. Reference is made to a letter of July 1995 where respondent Nos. 1 and 2 had withdrawn their guarantee for dealings subsequent to the date of letter.

Respondent No. 3 had filed a written statement pleading that no cause of action was there against the said respondent. As per the stand of the said respondent, the application filed was barred by limitation and the said respondent pleaded that he stood discharged as per Sections 134 and 139 of the Indian Contract Act. As per respondent No. 3, he had not executed any surety bond on 22.8.1995 for Rs. 37,80,000/-. He would plead that he was away to Bombay for his business from 17.7.1995 to 12.8.1995. The said respondent accordingly would plead that the Bank had obtained his signatures on blank papers which was insufficiently stamped and are not admissible in evidence. The respondent accordingly pleaded that he is not liable and responsible for any limit allowed to the company as he ceased to be the Director w.e.f. 21.6.1995. Respondent No. 3 also states to have sent necessary intimation to the Bank and had also requested the Bank to return the India Development Bonds. The stand of the respondent further was that he never stood as guarantor on 27.7.1995 and his signatures on the deed are forged and fabricated. Plea further was that the Bank had enhanced the limit without his knowledge and consent and thus surety and guarantee, if any, on his part would stand discharged because of omission and commission of the Bank in enhancing the limit without his consent and knowledge.

The Tribunal below, on the basis of pleading, culled out the points requiring adjudication of decision. Since the dispute is only on the point relating to the extent of liability of respondents 1 to 3 claim against whom has been disallowed, this issue alone would now require consideration. On this issue, the Tribunal below has found that the sureties were discharged by the subsequent contract entered into by the company with the Bank. As a result thereof, respondents 1 to 3 were held to have been discharged from the liability. It is also held that no document was produced to prove mortgage of the property of respondents 2 and 3. Accordingly, the said respondents were held not liable. Thus, the finding on this issue is on the basis of a finding returned on issue No. 2 which was to the effect 'whether the agreements with defendants 2 and 3 (respondents 5 and 6) after 22.7.1995 discharged defendants 4, 5 and 6 (respondents 1, 2 and 3 respectively)?'.

The Tribunal, in this regard, has considered the pleading and evidence on record. Reference is made to AW 2/25 dated 24.7.1995, which is a copy of resolution which says that the new Directors i.e., respondent Nos. 5 and 6 would jointly and severally guarantee to the Bank for repayment of all amounts availed by the company from time-to-time under all the aforesaid facilities. Reference is also made to number of other documents. Thereafter, the Tribunal has considered the implication of these subsequent agreements. The Tribunal has finally held that company was taken over by respondent Nos. 5 and 6 and respondents 1 and 2 had no interest in the company any long. They had also addressed the Bank about the new Directors and about the change in the constitution and composition of the company. The Tribunal, therefore, held surety/guarantee as per the guarantee deed executed by them in favour of the Bank stood discharged.

The Counsel for the appellant would submit that respondent Nos. 1 to 3 had signed the guarantee deeds on 28.3.1994 and then the deed dated 17.10.1994. As per the Counsel, they had also signed guarantee deed dated 22.7.1995 which was for Rs. 37,80,000/-. The Counsel would admit that respondents had written a letter dated 17.7.1995 for withdrawing the guarantee, but the appellant-Bank had rejected their request on 25.7.1995. The submission by the Counsel for the appellant, therefore, is that the said respondent never stood discharged from the guarantees they had offered and the Tribunal was not justified in relieving them. The Counsel would alternatively plead that even if it is held the Bank had not proved the guarantee dated 22.7.1995, then also the said respondents cannot be relieved of their surety/guarantee in view of their earlier two guarantees being continuing guarantees in which the said respondents had waived their rights under Sections 133, 134, 135, 139 and 141 of the Indian Contract Act.

The Counsel for the appellant would also find fault with the finding returned by the Tribunal in making comparison of signatures on the deed of guarantee that, too, after rejecting the contention of the respondent Nos. 1 to 3 that these documents were signed by them in blank. The Counsel would urge that the Tribunal below ought to have appreciated that respondent Nos. 1 to 3 had admitted their signatures on the document while stating these were got singed in blank and in this background the action of the Tribunal in comparing the signatures for reaching any conclusion was really uncalled for. It is also urged that the execution of the documents having been accepted, the order for recovery was required to be issued. The finding returned by the Presiding Officer rejecting the plea of the respondents that they were not present in Delhi, as per the Counsel for the appellant, was enough to hold that the guarantees stood proved. The Counsel would accordingly challenge the finding returned by the Tribunal that the signatures of respondents 1 to 3 did not bear resemblance to the admitted signatures of the said respondents, which even was not the plea raised by them. The Counsel would further contend that merely because some other Directors were added or that respondent Nos. 1 to 3 ceased to be the Directors was not enough to automatically discharge them of their liability on the ground of variation of contract. It is urged that Tribunal has erred in holding that these respondents stood relieved of their personal guarantees merely because of the resolution of the Board of Directors authorizing the respondent Nos. 5 and 6 to operate the Bank account. It is in this context pleaded that the Tribunal failed to appreciate that the guarantees were continuing guarantees and respondent Nos. 1 to 3 were prohibited and debarred from raising a plea of variance as they had waived their rights conferred on the sureties under Sections 133, 134, 135, 139 and 141 of the Contract Act.

Counsel appearing for respondent Nos. 1 and 2 would contest the submission made by the Counsel for the appellant besides urging that appeal is hopelessly barred by time. As per the Counsel, the appellant-Bank has not approached this Tribunal with clean, hands and has placed distorted facts to obtain a favourable order. The plea is that the appeal is liable to be dismissed on this ground.

On the basis of pleading, it may first have to be seen if respondent Nos. 1 to 3 had signed guarantee deed dated 22.7.1995 or not. The alternative plea of the Counsel for the appellant that even otherwise the respondents 1 to 3 would be responsible and liable on the basis of their earlier guarantees can then be considered.

The finding by the Tribunal in, this regard is that the signatures on the documents AW2/16, AW2/17 and AW2/18 have no resemblance with the admitted signatures of the defendants (respondents 1 to 3). The Tribunal has noticed that the names of the signatories have not been mentioned. It is then noticed that the signatures of defendant No. 6 (respondent 3) was apparently different from his admitted signatures on AW 1/11, AW 1/1, AW 1/4.

Respondent No. 3 had contended before the Tribunal below that he was in Bombay on the day he is alleged to have endorsed his signatures on this document at Delhi. In support, he had also produced one witness, who was also subjected to cross-examination. The finding of the Tribunal is that evidence of respondent No. 3 and his witness was not enough to establish the plea raised as it did not inspire confidence. The Tribunal has observed that both respondent No. 3 and his witness had boarded the plane on 17.5.1995 and returned to Delhi on the same day. The tax bills and the hotel receipts were not considered worth discussion. The Tribunal, however, has held that since the new Directors had taken over and had admitted all the responsibilities and pending liabilities, there would not be any chance for these respondents to execute these guarantee deeds AW2/16, AW2/17 and AW2/18.

The submission by the Counsel for the appellant that the exercise by the Tribunal in comparing the signatures were uncalled for may have substance. Having regard to the nature of the plea advanced by the respondents, this exercise may not have been called for. The plea by the respondents was that their signatures had been obtained on blank paper in advance. Thus, the signatures were not being disputed. Ordinarily, the plea in regard to the signatures having been rejected, the finding by the Tribunal on this ground possibly could not have been sustainable. The deeper analysis of the evidence, however, would show that the appellant-Bank was not successful in proving the execution of guarantee deed dated 22.7.1995. The appellant-Bank has relied upon the evidence of Mr. N.R. Agarwal in this regard, in his affidavit of evidence, this witness had deposed that on 22.7.1995, defendant No. 6, 5, 2, 7 and 3 (respondents 3, 2, 5, 7 and 6) had signed and executed guarantee deeds guaranteeing repayment of the amount to the extent of Rs. 37.80 lacs. These guarantee deeds were identified to be appearing at pages 64 to 68, 69 to 73, 74 to 78, 79 to 83 and 138 to 142 of the documents filed which are AW 2/16, AW 2/17, AW 2/18, AW 2/19 and AW 2/9 respectively. This witness deposed that documents at 64 to 68 and 69 to 73 were signed in his presence after the same were filled in by Mr. V.K. Kaul whereas documents at pages 74 to 78, 79 to 83 and 138 to 142 were signed in his presence after the same were filled by the witness.

Both the witnesses were cross-examined by the Counsel for the respondents. In response to the cross-examination addressed by the Counsel for respondent No. 3 (defendant 6), Mr. V.K. Kaul has stated that he was transferred from the branch from where the respondents had availed credit facilities in November 1995. As per the witness, he did not visit the branch thereafter. In his affidavit, the witness stated that he had been with the branch till May 1995, but in his cross-examination he had showed his presence to be till November 1995. When asked to explain this contradiction, the witness replied that he was not able to recollect exactly whether he was transferred in May or in November 1995. He, however, conceded that he did not meet respondent No. 3 in July 1995.

This witness was also cross-examined by Counsel for defendants 4 and 5 (respondents 1 and 2). The witness stated that he was not aware whether the branch had received any notice from defendants 4 and 5 (respondents 1 and 2) in July 1995. The witness also stated that he did not know whether the said respondents had any dealing with the branch after serving notice in July, 1995.

The Counsel for the respondents would also refer to the cross-examination of Mr. N.R. Agarwal. While under cross-examination, this witness deposed that he did not remember whether defendant No. 5 (respondent 2) had resigned from the directorship of the company on 7.6.1995. The witness further replied that he had not brought any document to show that the said respondent continued as Director of the company even after 7.6.1995. The witness even conceded that he did not see defendant No. 5 visiting the branch of the Bank after 7.6.1995 and that he did not meet respondent No. 5 after 7.6.1995. The witness ultimately conceded that he could not recognize or identify the signatures of defendant No. 5 (respondent 2). This witness otherwise had denied the suggestion put by Counsel for defendant No. 6 (respondent 3) that the letter of guarantee dated 22.7.1995 was not filled up by Mr. V.K. Kaul in his presence. This evidence, of course, would stand in contradiction to the evidence given by Mr. V.K. Kaul who clearly stated that he had been transferred from the Bank in May 1995. This witness who was alleged to have filled the guarantee deed on 7.7.1995 also admitted that he had not met defendant No. 6 (respondent 3) in July 1995. In the state of this evidence, it is not possible to believe that the guarantee deed dated 22.7.1995 was got signed from the said respondents. In these state of evidence led by the appellant, the plea canvassed by the appellant that respondents 1 to 3 had signed the guarantee deed on 22.7.1995 cannot be held to have been proved to the satisfaction of judicial conscience. The finding by the Tribunal thus may not call for interference so far as signing of this guarantee deed dated 22.7.1995 by respondents 1 to 3 is concerned.

Let us know proceed to see if any responsibility could be fastened on respondents 1 to 3 on the basis of earlier guarantees dated 28.3.1994 and 17.10.1994. While considering this aspect, the plea by the said respondents that they stood discharged from their surety/guarantee on the ground of novation of the contract will also have be considered. If the liability of the respondents is found continuing on the basis of earlier guarantees, the plea of novation of contract may have to be considered in that light.

In support of his plea that these guarantees being continuing ones would not stand revoked even upon subsequent joining of some new Directors, the Counsel for the appellant has relied upon the judgment in the case of Sita Ram Gupta v. Punjab National Bank & Ors., III (2008) SLT 516 : II (2008) BC 691 (SC) : AIR 2008 SC 2416. In this case, the Supreme Court was considering the judgment passed by the Delhi High Court whereby it had set aside the judgment and decree passed by the Additional District and Sessions Judge against the appellant before the Court who was a guarantor in respect of a loan advanced by Punjab National Bank. The question which was raised before the Court was whether the High Court was justified in holding that the appellant who was a guarantor of the loan advanced was liable to pay the decretal amount on the ground that the appellant had revoked that guarantee before such loan was actually paid. This plea was on the basis of the provisions of Section 130 of the Indian Contract Act.

To decide this question, the Supreme Court looked into the agreement of guarantee entered between the Bank and the appellant guarantor. After making reference to the guarantee and emphasizing the part reading "The Guarantors hereby declare that this guarantee shall be continuing guarantee and shall not be considered as cancelled or in any way affected by the fact that at any time the said accounts may show no liability against the Borrower or may even show a credit in his favour but shall continue to be guarantee and remain in operation in respect of all subsequent transactions", the Court, after examining the facts, has held that High Court was perfectly justified in holding that the appellant was liable to pay the decretal amount to the Bank in view of the clause mentioned earlier in the agreement itself. Counsel for the appellant had based his submission on Section 130 of the Contract Act to urge that this merely provided for revocation of continuing guarantee as to future transaction by notice to the creditor and in the case the guarantee was revoked long before the loan was granted and suit filed, the appellant was not liable to pay the decretal amount to the Bank. The Hon'ble Supreme Court, while considering this submission, has held that this was a case of agreement entered into by the appellant with the Bank which was binding on him. The question, therefore, was whether the statutory provision of Section 130 shall override the agreement of guarantee. Finding that the agreement could not be said to be unlawful nor the parties had alleged that it was unlawful, the issue was considered. The Court, in this context, considered whether the appellant had waived his right under the Act. The Court has accordingly held that the High Court had rightly held that the appellant could not claim benefit under Section 130 of the Contract Act because he had waived his right by entering into agreement with the Bank. Court has referred to general principle that everyone has a right to waive and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual in his private capacity. Halsbury's Laws of England, Vol. 8, 3rd Edn., in para 248 at page 143 records as under:

"As a general rule, any person can enter into a binding contract to waive the benefits conferred upon him by an Act of Parliament, or, as it is said, can contract himself out of the Act, unless it can be shown that such an agreement is in the circumstances of the particular case contrary to public policy...."

Finding that the appellant had clearly agreed that the guarantee agreement that he had entered into with the Bank was a continuing guarantee and the same was to continue and remain in operation for all subsequent transactions, the Court found that it was not open to the appellant to turn around and say that in view of Section 130 of the Contract Act he had revoked the guarantee before the loan was advanced so he will not be liable to pay the determined amount as guarantor to the Bank. The Court thus did not accept this submission and upheld the order passed by the Delhi High Court.

The position of law that would emerge from the above judgments is that a person can waive his right available to him under law. In this context, the guarantees dated 28.3.1994 and 17.10.1994 may now be examined. Guarantee dated 28.3.1994 admitted to have been signed by the respondent is AW 1/15. In Clause 7 of this guarantee, the respondents had specifically agreed that this guarantee would continue to remain in force and they would continue to be liable thereunder for all amounts due and payable to the Bank by the principal even though the principal has not renewed the documents or even the amounts due to the principal gets time barred. The respondents further agreed, as can be seen from Clause 8 of the guarantee deed, that they had consented to the appellant's making any variance that it may think fit in terms of the contract with the principal to appellant's determining enlarging or varying any credit to him or making any composition with him or promising to give him time or not to sue him and to appellant's parting with any security appellant may hold for the guaranteed debt and accordingly the respondents shall not be entitled to claim any of the rights conferred on Sureties by Sections 133, 134, 135, 139 and 141 of the Contract Act. The Clauses 7 and 8 of the guarantee deed are as under:

"7. I/We further specifically agree that the guarantee shall continue to remain in force and I/We shall continue to be liable thereunder for all amounts due and payable to you by the principal/s even though the principal/s has/have not renewed the documents and even though the amounts due from the principal/s gets time barred and you cannot recover the same from the principal by filing a suit or any legal proceedings against the principal/s."

"8. I/We hereby consent to your making any variance that you may think fit in terms of your contract, with the principal/s to your determining enlarging or varying any credit to him/them to your making any composition with him/them or to promising to give him/them time or not to sue him/them and to your parting with any security you may hold for the Guaranteed debt and accordingly I/We shall not be entitled to claim any of the rights conferred on sureties by Sections 133, 134, 135, 139 and 141 of Contract Act."

It may, thus, be seen that the respondents have waived their rights available to them under Sections 133, 134, 135, 139 and 141 of the Contract Act. This was a continuing guarantee and was to remain in force till all the amounts due and payable to the principal by the principal were not recovered.

Similar clauses are contained in the guarantee deed executed on 17.10.1994. The effect of these guarantees is, therefore, required to be seen even if it is held that they had not executed the guarantee deed dated 22.7.1995.

The Counsel for the respondent Nos. 1 and 2 would rely upon the judgment in the case of Satish Chandra Jain v. National Small Industries Corporation Ltd. & Ors., I (2002) SLT 43 : AIR 2003 SC 623. This was a case where the appellant stood as a guarantor to the funding done to his son's proprietary business venture. The son converted his proprietary business into private limited company. Creditor gave consent to this change. Fresh agreement was entered into under which the company became hirer and the appellant's son with another became guarantors. The company defaulted, when the suit for recovery was filed against the company and the two guarantors on the basis of a subsequent agreement. Appellant before the Supreme Court was not made as a party. No reference was made to the first agreement in the plaint. The property of the appellant was included in the recovery certificate. This was held not proper. The Court has held that subsequent agreement amounted to novation of the agreement by which the appellant's guarantee stood discharged. The Hon'ble Supreme Court in this case has not considered the guarantee and whether the appellant had waived his rights under Sections 133, 134, 135, 139 and 141 of the Contract Act. Apparently, the view formed by the Hon'ble Supreme Court is based on the fact-situation in this case. It is quite obvious that the recovery certificate issued against the appellant in the absence of claim in the pleading would not other-wise have been sustainable. This judgment, therefore, may not have any application to the fact-situation in the present case.

The Counsel for the respondents has then referred to the case The Indian Bank, Madras v. S. Krishnaswamy & Ors., I (1990) BC 221 (DB) : AIR 1990 Madras 115. This was a case where the plaintiff stood surety to the loan given by the Bank to a Mill. The Mill was subsequently taken over by the Government. A fresh agreement was entered into between the Government and the Mill. This was not made known to the surety. This was a case of parties to the contract agreeing to a new contract or to resile or to alternate. In this regard, it is held that the original contract need not to be performed as is the purview of Section 62 of the Contract Act. The decision in this case also was on the basis of a clear fresh contract between the Government and the Mill which would be a distinguishable feature in this regard. The question of waiver of rights under various provisions of the Contract Act thus did not arise in this case as well.

Reference is then made to the case of Anil Kumar & Ors. v. Central Bank of India & Ors., AIR 1997 H.P. 5. This was in regard to the liability of a co-surety. One of the sureties had withdrawn the guarantee well in time by informing the Bank that principal debtors were likely to wind up their business and his guarantee be cancelled. Other surety did not take any step in forewarning the Bank that the principal debtors were likely to wind up their business. The Court, while releasing surety withdrawing guarantee from liability, saddled the other surety with the liability for repayment of the loan with principal debtors. The decision was held proper. The Court has held that clause in the guarantee bind the surety and so he will not be entitled to any of the rights conferred by Sections 134 to 139 and 141 of the Contract Act and that it does not defeat the provisions of Chapter VIII of the Act.

Without further multiplying the judgments which may be relevant in this regard, the discussion can be cut short as the issue apparently has now been decided by the Hon'ble Supreme Court in the case of KB. Basavaraj (Dead) by LRs. & Anr. v. Canara Bank & Ors., 2010 (1) Kar. LJ 588. This issue on the basis of this judgment was considered by this Tribunal while deciding Appeal No. 320/14 titled Sudhir Kumar Khurana v. Punjab & Sind Bank & Ors., decided on 27.10.2014. This Tribunal considered the question on the basis of various judgments to hold as under:

".... The Court in this case has considered the contract between the parties. After examining the agreement executed between the appellant and the Bank, the Court has observed that one of the conditions clearly shows that the guarantee to be a continuing one under Section 129 of the Indian Contract Act. As per Section 130 of the Contract Act, a continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor. The deed of guarantee in the case before the Court had mentioned that while between the guarantor and borrower, the guarantor is only a surety; yet between the Bank and the guarantor, the surety is the principal debtor and his liability would be co-extensive to that of the borrower. The Court has accordingly observed that the guarantor himself waived off his rights under Chapter VIII of the Act which conferred on surety. The Court, therefore, approved the decision of Karnataka High Court in T. Raju Shetty v. Bank of Baroda, AIR 1992 Karnataka 108, whereby it had been held that surety can waive off his rights under various provisions of Chapter VIII of the Contract Act. It is farther observed that it is in line with long established precedents that anyone has a right to waive the advantages offered by law provided they have been made for the sole benefit of an individual in his private capacity and does not infringe upon the public right or public policy. This principle was reiterated in Lachoo Mal v. Radhey Shyam, (1971) 1 SCC 619. Further on the principles of continuing guarantee, the position was cleared by the decision of the Supreme Court in Sita Ram Gupta v. Punjab National Bank & Ors., III (2008) SLT 516 : II (2008) BC 691 (SC) : (2008) 5 SCC 711. The Court in this case has held that it is not open to a party to revoke a guarantee when he had agreed to it being a continuing one and thus would be bound by the terms and conditions of the agreement executed at the time of entering into the guarantee."

While coming to the above conclusion, this Tribunal had not only considered and taken note of the case in the case of S. Perumal Reddiar v. Bank of Baroda & Ors., AIR 1981 Madras 180, but the other judgments in the case of Central Bank of India v. Ali Mohammad & Anr., 1993 Civil Court Cases 668 (Bombay); C.N. Sundaram v. Chennai Finance Company Limited & Ors., 2006 3 Civil Court Cases 422 (AP) and N. Sanjeeva v. State Bank of Travancore, II (2000) BC 158 : 2006(1) ISJ (Banking) 650; State Bank of India v. Machine Well Industries & Ors., (1983) 53 Comp Cas 830 (Delhi). In view of the law laid down by the Hon'ble Supreme Court, the other judgments relied upon by the Counsel for the respondents may not require any further consideration in detail. It can, therefore, be said that the respondent Nos. 1, 2 and 3 are not entitled to claim exemption from the liability arising out of contract of guarantee in view of terms of the of the guarantees dated 28.3.1994 and 17.10.1994. I am thus of the view that respondents are not entitled to claim any protection under Sections 133, 134, 135, 139 and 141 of the Indian Contract Act. This could not be a case of novation of contract.

Respondent No. 3 has also questioned the guarantee dated 22.7.1995 on the ground that by then he had already resigned from the Board and had written a letter to the Bank in this regard. Contention is that the said respondent ceased to be a Director of the company and all the liabilities of the company was the responsibility of the other Directors. Respondent No. 3 had also approached the Bank to return the India Development Bonds which the Bank failed to return. As per the said respondent, the Bank had obtained his signatures on this guarantee on blank and misused them to fabricate documents. It is accordingly pleaded that the said respondent never gave guarantee dated 22.7.1995. This issue has been discussed by me in detail and the finding has been recorded above.

Since the liability has now been determined on the basis of those guarantees, which concededly had been signed by respondent No. 3 as well and which had been held to be continuing guarantees, his liability in this regard has to be examined in view of the finding recorded above.

The Counsel for respondent No. 3 on this aspect would submit that recovery against the respondents on the basis of these guarantees would be barred by limitation. The submission by the Counsel is that the recovery on the basis of the guarantee given in the year 1994 is barred by time. No such plea was taken in the written statement filed by this respondent. However, the said respondent has sought stay of the present suit in terms of Section 10, CPC as the matter in issue is also directly and substantially in issue in a previous suit instituted, which was pending before Civil Judge, Delhi. The plea of the appellant was also that he stood discharged of surety under Sections 134 and 139 of the Contract Act. The Counsel has also relied upon the provisions of Section 23 of the Contract Act to urge that the consideration or object of an agreement was not lawful as it involved or implied injury to the person or property of another. The Counsel would submit that there is difference between waiver and estoppel and this is a case of waiver whereby the Bank had waived its rights to recover the amount from the respondent by entering into a new agreement. The Counsel would also plead that on account variance made without the consent of the respondent, the said respondent shall stand discharged of liability as to the transaction made subsequent to that.

The aspect of waiver has to be considered in the light of the provisions contained in Sections 133, 134, 135, 139 and 141 of the Contract Act. I have already made reference to Clauses 7 and 8 of the guarantee deeds. The respondent having waived his right available to him under Sections 133, 134, 135, 139 and 141 of the Contract Act, cannot now be heard making complaint in this regard. The issue of limitation apparently does not arise and cannot be urged at this stage. The clauses in the deed of guarantee otherwise would also stand against the respondent. The respondent had agreed that in the event of principal being a limited company, etc. then the guarantee shall remain effective notwithstanding any death, retirement, change, accession or addition, as fully as if the person or persons constituting or trading or acting as such body, committee, firm, partnership, trustees or debtors or joint account, at the date of principals' default or at any time previously was or were the same as at the date thereof. The respondent had also given guarantee that Bank shall not be bound to enquire into the powers of the principal or any agents acting or purporting to act on the principal's behalf and the Bank may recover against the respondent to the extent mentioned notwithstanding that any security given or to be given to the Bank may be void, defective or formal or informal, etc. In this view of the matter, the plea of the Counsel for respondent No. 3 is found without any merit. The liability of the respondents, therefore, would continue to remain. The finding returned by the Tribunal in holding defendants 4, 5 and 6 (respondents 1, 2 and 3) not liable, therefore, is set aside and the appeal is allowed. Respondent Nos. 1, 2 and 3 (defendants 4, 5 and 6 in the O.A.) shall be jointly and severally liable to pay the amount determined by the Tribunal below along with the other defendants in the O.A. already held liable. Recovery certificate may be amended accordingly by the Tribunal below.