IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD THURSDAY, THE TWENTY SECOND DAY OF JULY TWO THOUSAND AND TEN PRESENT HON’BLE SRI JUSTICE G.V.SEETHAPATHY C.C.C.A.No.133 OF 1994 Between:- Canara Bank, Abid Road Branch, Rep. by Senior Manager, Hyderabad. …Appellant A n d Mr.K.P.Jain …Respondent HON’BLE SRI JUSTICE G.V.SEETHAPATHY C.C.A.No.133 OF 1994 JUDGMENT: This appeal is directed against the decree and judgment dated 07-03-1994 in O.S.No.165 of 1997, on the file of the V-Additional Judge, City Civil Court, Hyderabad, wherein the suit filed by the appellant for recovery of a sum of Rs.1,71,661-51 Ps, was decreed against the first defendant, but the same was dismissed as against the second defendant. 2. Heard the learned counsel for the appellant. None appeared for the respondents, though served with notice. Perused the records. 3. The first defendant is the principal borrower and the second defendant was a guarantor for the loan secured from the plaintiff bank. The first defendant remained ex parte. The second defendant filed a written statement contending that he did not execute any document of guarantee and did not acknowledge the liability and, therefore, he is not liable to pay any amount due by D-1. He further pleaded that the suit claim against him is barred by limitation. 4. On the strength of the above pleadings, the trial Court framed the following issues: i) Whether the plaintiff is entitled to the suit amount with future interest at prayed for? ii) Whether the suit is bad for misjoinder of parties? iii) Whether the suit is barred by limitation? iv) Whether the court fee paid is excessive as well as valuation of the suit? v) Whether the defendant No.2 is not liable to pay any amount to the plaintiff as alleged? vi) To what relief? 5. During trial, P.W.1 was examined and Exs.A-1 to A-24 were marked on behalf of the plaintiff bank. No oral or documentary evidence was adduced by the defendants. 6. On a consideration of the evidence available on record, the trial Court answered all the issues in favour of the plaintiff, except issue No.3 wherein it was held that the suit as against second defendant is barred by limitation since acknowledgement of debt by principal debtor does not amount to acknowledgement by surety also. The trial Court further held that the first defendant, who is the principal borrower, remained ex parte and the second defendant did not choose to examine himself and the various documents on record disclose that the suit transaction is true and the defendants are jointly and severally liable and it further held that since the suit against second defendant is barred by time, he is not liable to pay any amount to the plaintiff. Accordingly, the suit was decreed against the first defendant and was dismissed against the second defendant. Aggrieved by the same, the plaintiff-bank filed the present appeal. 7. As can be seen from the impugned judgment, the suit transaction and the execution of the various documents by the defendants in connection with the loan transaction are not disputed. In fact, the first defendant remained ex parte and the second defendant though filed written statement did not choose to give any evidence denying the truth of the transaction or the execution of the various documents, including the agreement of guarantee executed by him. The second defendant has not chosen to give any evidence disputing the transaction or execution of the document or denying his liability. In VIDHYADHAR V. MANIKRAO AND ANOTHER[1], the Apex Court held as under: “Where a party to the suit does not appear in the witness box and states his own case on oath and does not offer himself to be cross-examined by the other side, a presumption would arise that the case set up by him is not correct as has been held in a series of decisions passed by various High Courts and the Privy Council beginning from the decision in Sardar Gurbakhsh Singh V. Gurdial Singh (AIR 1927 PC 230: 32 CWN 119). The finding of the trial Court that the first defendant as principal borrower and the second defendant as guarantor have executed the various documents pertaining to the loan transaction, therefore, remains unchallenged. The trial Court, however, dismissed the suit against the second defendant on the ground that the suit as against him is barred by limitation because there was no acknowledgment of debt by the second defendant. 9. In a decision in THE WANDOOR JUPITER CHITS (P) LTD. (IN LIQUIDATION) V. K.P.MATHEW AND ANOTHER[2], it was held as follows: “Acknowledgement of the debt under S.18, Limitation Act which provides for a fresh period of limitation would itself be sufficient, in the context of a contract of guarantee, to keep the surety’s liability alive. Surety’s contract being separate and collateral could not be equated to that of a co-debtor or joint contractor within the meaning of S.20(2), Limitation Act so that the surety could not plead that the written acknowledgement by the debtor could not keep his (surety’s) liability alive. The surety could not also plead discharge under Sec.133, Contract Act since the debtor’s acknowledgement would not create a contract different from the one the performance of which the surety had guaranteed. The acknowledgement does not involve the making of another contract under Ss.134 and 135 (Contract Act) whereby the creditor discharges the debtor or makes a composition with him. Nor is S.137 (Contract Act) attracted because mere forbearance to sue even for a time beyond the period of limitation does not operate to discharge the surety. An acknowledgement does not also impair the remedy of the surety against the debtor, under Section 139.” 10. In SMT.R.LILAVATI V. BANK OF BARODA AND OTHERS[3], it was held thus: “As the surety had specifically empowered the principal to give consent on behalf of the surety, in respect of all matters concerning the debt, the acknowledgement of liability given by the principal was binding on the surety, although the surety was personally not a party to the acknowledgment. The acknowledgment given by the principal, being biding on the surety, limitation was saved even as against the surety.” 11. In UNION BANK OF INDIA, ERNAKULAM V. T.J.STEPHEN AND OTHERS[4], it was held as under: “We hold that in a case of a continuing guarantee so long as the guarantee has not been withdrawn or so long as the guarantors have refused to perform their obligation under the agreement of guarantee and a suit has been filed within the time prescribed under Art.55 of the Limitation Act, the guarantors are liable for the agreement for the amounts found due to the creditor from the principal-debtor. In this case there is no withdrawal of the obligations under the guarantee by the guarantors and there was no previous refusal by the guarantors before the institution of the suit. In the circumstances, we hold that defendants 2 and 3 are also liable for the amounts claimed in the suit by Bank. Hence there will be a decree for the amounts decreed by the trial Court as against defendants 2 and 3 also.” 12. In MRS.MARGARET LALITA SAMUEL V. INDO COMMERCIAL BANK LTD.,[5], the Apex Court held as follows: “The guarantee is seen to be a continuing guarantee and the undertaking by the defendant is to pay any amount that may be due by the company at the foot of the general balance of its account or any other account whatever. In the case of such a continuing guarantee, 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, we do not see how the period of limitation could be said to have commenced running. Limitation would only run from the date of breach under Art.115 of the schedule to the Limitation Act, 1908.” 13. In view of the principles laid down in the above decisions and having regard to the fact that the guarantee bond executed by the second defendant operates as a continuing guarantee for the loan borrowed by the first defendant from the plaintiff bank and there being no withdrawal of the guarantee by the second defendant at any point of time and there being no refusal on his part to carry out the obligation at any point of time prior to filing of the suit, it must be held that the second defendant’s liability is co-extensive with that of the first defendant, the principal borrower, and notwithstanding the absence of separate acknowledgement of debt or liability by the second defendant, he continues to be liable, as the acknowledgement of liability by the principal borrower would be binding on him. The finding of the trial Court that the suit as against the second defendant is barred by limitation is, therefore, unsustainable and the same is liable to be set aside and is accordingly set aside. 14. In the result, the appeal is allowed and consequently the suit is decreed against the second defendant for a sum of Rs.1,71,661-51 Ps with subsequent interest at 12% per annum from the date of suit till the date of decree on Rs.1 lakh and thereafter at the same rate till realization. There shall be no order as to costs. ____________________ G.V. SEETHAPATHY,J 22nd July 2010. Lrkm [1] (1999)3 SCC 573 [2] AIR 1980 KERALA 190 [3] AIR 1987 KARNATAKA 2 [4] AIR 1990 KERALA 180 [5] AIR 1979 SC 102