Case: Syndicate Bank Vs. Channaveerappa Beleri

time-barred. To clarify the above, the following illustration may be useful: Let us say that a creditor makes some advances to a borrower between 10.4.1991 and 1.6.1991 and the repayment thereof is guaranteed by the guarantor undertaking to pay on demand by the creditor, under a continuing guarantee dated 1.4.1991. Let us further say a demand is made by the creditor against the guarantor for payment on 1.3.1993. Though the limitation against the principal debtor may expire on 1.6.1994, as the demand was made on 1.3.1993 when the claim was live against the principal debtor, the limitation as against the guarantor would be 3 years from 1.3.1993. On the other hand, if the creditor does not make a demand at all against the guarantor till 1.6.1994 when the claims against the principal debtor get time-barred, any demand against the guarantor made thereafter say on 15.9.1994 would not be valid or enforceable. Be that as it may. 15. The respondents have tried to contend that when the operations ceased and the accounts became dormant, the very cessation of operation of accounts should be treated as a refusal to pay by the principal debtor, as also by the guarantors and, therefore the limitation would begin to run, not when there is a refusal to meet the demand, but when the accounts became dormant. By no logical process, we can hold that ceasing of operation of accounts by the borrower for some reason, would amount to a demand by the Bank on the guarantor to pay the amount due in the account or refusal by the principal debtor and guarantor to pay the amount due in the accounts. 16. In view of the above, we hold that the time began to run not when the operations ceased in the accounts in mid-1986, but on the expiry of 15 days from 12.10.1987 when the demand was made by the Bank and there was refusal to pay by the guarantors. The suit filed within three years therefrom is, therefore, in time.17. In the view we have taken, it is not necessary to consider the meaning of the words live account used and referred to in Samuel (supra). Suffice it to say that the interpretation by the courts below placed on the words live account, that they refer to an account which is operational and not dormant, may not be sound. This Court itself had indicated that live account means an account that is not settled. The use of the term settled gives an indication that a live account refers to an account where the balance has not been struck by an "account stated" or "account settled". We may in this behalf, refer to the following observations in Bishun Chand v. Girdhari Lal & Anr. (AIR 1934 PC 147): "The essence of an account stated is not the character of the items on one side or the other but the fact that there are cross items of account and that the parties mutually agree the several amounts of each and, by treating the items so agreed on the one side as discharging the items on the other side pro tanto, go on to agree that the balance only is payable. Such a transaction is in truth bilateral, and creates a new debt and a new cause of action.""There can be account stated although the balance of indebtedness is not throughout in favour of one side. It is irrelevant whether the debt in favour of the final creditor is created at the outset by one large payment or consists of several sums of principal and several sums of interest. Nor is it material whether the only payments made on the other side were simply payments in reduction of such indebtedness or were payments made in respect of other dealings. In any event items must be ascertained and agreed on each side before the balance can be struck and settled." 18. Some arguments were addressed about the Article of limitation that would apply in respect of a suit against the guarantors. Samuel (supra) held that in the case of refusal of a guarantor to pay the amount, the matter would be governed by Article 115 of the Schedule to the Limitation Act, 1908, which corresponds to Article 55 of the Limitation Act, 1963. One of the submissions made before us was that the term compensation for breach of contract in Article 55 indicates to a claim for unliquidated damages and not to a claim for payment of sum certain (as to what is the difference between a claim for unliquidated damages and a claim for a sum certain or a sum presently due, reference can advantageously be made to the classic statement of Law by Chagla, CJ., in Iron and Hardware (India) Ltd., Vs. Firm Shamlal & Bros (AIR 1954 Bom. 423 ). If Article 55 does not apply, then a claim against a Guarantor in such a situation may fall under the residuary Article 113 of the Limitation Act, 1963 corresponding to Article 120 of the old Act. The controversy about the appropriate Article applicable, when the claim is found to be not exactly for compensation but ascertained sum due has been referred to as long back as 1916 in Tricomdas Cooverji Bhoja v. Gopinath Jin Thakur (AIR 1916 PC 183). Under the old Limitation Act (Act of 1908), the periods prescribed were different under Article 115 and 116. The periods prescribed were also different under Article 115 and 120. But under the 1963 Act, the period of limitation is the same (three years) both under Article 55 and 113. Having regard to the fact that the period of limitation is 3 years both under Article 55 and Article 113, and having regard to the binding decision in Samuel (supra), we do not propose to examine the controversy as to whether the appropriate Article is 55 or 113. Suffice it to note that even if the Article applicable is Article 113, the Banks suit is in time.19.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]16. In view of the above, we hold that the time began to run not when the operations ceased in the accounts in mid-1986, but on the expiry of 15 days from 12.10.1987 when the demand was made by the Bank and there was refusal to pay by the guarantors. The suit filed within three years therefrom is, therefore, in time.17. In the view we have taken, it is not necessary to consider the meaning of the words live account used and referred to in Samuel (supra). Suffice it to say that the interpretation by the courts below placed on the words live account, that they refer to an account which is operational and not dormant, may not be sound. This Court itself had indicated that live account means an account that is not settled. The use of the term settled gives an indication that a live account refers to an account where the balance has not been struck by an "account stated" or "account settled". We may in this behalf, refer to the following observations in Bishunri Lal & Anr. (AIR 1934 PCessence of an account stated is not the character of the items on one side or the other but the fact that there are cross items of account and that the parties mutually agree the several amounts of each and, by treating the items so agreed on the one side as discharging the items on the other side pro tanto, go on to agree that the balance only is payable. Such a transaction is in truth bilateral, and creates a new debt and a new cause of action.""There can be account stated although the balance of indebtedness is not throughout in favour of one side. It is irrelevant whether the debt in favour of the final creditor is created at the outset by one large payment or consists of several sums of principal and several sums of interest. Nor is it material whether the only payments made on the other side were simply payments in reduction of such indebtedness or were payments made in respect of other dealings. In any event items must be ascertained and agreed on each side before the balance can be struck and settled.Some arguments were addressed about the Article of limitation that would apply in respect of a suit against the guarantors. Samuel (supra) held that in the case of refusal of a guarantor to pay the amount, the matter would be governed by Article 115 of the Schedule to the Limitation Act, 1908, which corresponds to Article 55 of the Limitation Act, 1963. One of the submissions made before us was that the term compensation for breach of contract in Article 55 indicates to a claim for unliquidated damages and not to a claim for payment of sum certain (as to what is the difference between a claim for unliquidated damages and a claim for a sum certain or a sum presently due, reference can advantageously be made to the classic statement of Law by Chagla, CJ., in Iron and Hardware (India) Ltd., Vs. Firm Shamlal & Bros (AIR 1954 Bom. 423 ). If Article 55 does not apply, then a claim against a Guarantor in such a situation may fall under the residuary Article 113 of the Limitation Act, 1963 corresponding to Article 120 of the old Act. The controversy about the appropriate Article applicable, when the claim is found to be not exactly for compensation but ascertained sum due has been referred to as long back as 1916 in Tricomdas Cooverji Bhoja v. Gopinath Jin Thakur (AIR 1916 PC 183). Under the old Limitation Act (Act of 1908), the periods prescribed were different under Article 115 and 116. The periods prescribed were also different under Article 115 and 120. But under the 1963 Act, the period of limitation is the same (three years) both under Article 55 and 113. Having regard to the fact that the period of limitation is 3 years both under Article 55 and Article 113, and having regard to the binding decision in Samuel (supra), we do not propose to examine the controversy as to whether the appropriate Article is 55 or 113. Suffice it to note that even if the Article applicable is Article 113, the Banks suit is in time.