Case: J.G. Glass Limited Vs. Indian Bank &amp; Another

to you, the Indo Commercial Bank Limited the repayment of all money, which shall at any time be due to you from the said Modern Hindustan Food Products Ltd., on the general balance of their accounts with you or on any account whatever such balances to include all interest, charges, commission and other expenses which you may charge as banker and also the due payment at maturity of any promissory note or other negotiable instrument on the security or in respect of which any credit or advance shall be made. And we hereby declare that this guarantee shall be a continuing guarantee to the extent at any one time for Rupees 10,00,000/- (Rupees Ten Lakhs only) and shall not be considered wholly or partially satisfied by the payment at any one time or at different times of any sums of money due on such general balance of account but shall extend and cover and be a security for every and all further sums at any time due to you thereon. And we further declare that you may grant to the Modern Hindustan Food Products Ltd., any indulgence without discharging our liability." 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. When the Bombay High Court considered the matter in the first instance and held that the suit was not barred by limitation, J.C. Shah, J. speaking for the Court said: "On the plain words of the letters of guarantee it is clear that the defendant undertook to pay any amount which may be due by the Company at the foot of the general balance of its account or any other account whatever we are not concerned in this case with the period of limitation for the amount repayable by the Company to the bank. We are concerned with the period of limitation of enforcing the liability of the defendant under the surety bond ............. we hold that the suit to enforce the liability is governed by Art. 115 and the cause of action arises when the contract of continuing guarantee is broken, and in the present case we are of the view that so long as the account remained live account. and there was no refusal on the part of defendant to carry out her obligation, the period of limitation did not commence to run."We agree with the view expressed by Shah J. The intention and effect of a continuing guarantee such as the one with which we are concerned in this case was considered by the Judicial Committee of the Privy Council in Wright v. New Zealand Farmers Co-operative Association of Canterbury Ltd. 1939 A.C. 439. The second clause of the guarantee bond in that case was in the following terms: "This guarantee shall be a continuing guarantee and shall apply to the balance that is now or may at any time hereafter be owing to you by the William Nosworthy and Robert Nosworthy on their current account with you for goods supplied and advances made by you as aforesaid and interest and other charges as aforesaid." A contention was raised in that case that the liability of the guarantor was barred in respect of each advance made to the Nosworthys on the expiration of six years from the date of advance. The Judicial Committee of the Privy Council expressed the opinion that the matter had to be determined by the true construction of the guarantee. Proceeding to do so, the Judicial Committee observed (at p. 449): "It is no doubt a guarantee that the Association will be repaid by the Nosworthys advance made and to be made to them by the Association, together with interest and charges; but it specifies in col. 2 how that guarantee will operate namely, that it will apply to (i.e. the guarantor guarantees repayment OX the balance which at any time thereafter is owing by the Nosworthys to the Association. It is difficult to see how effect can be given to this provision except by holding that the repayment of every debit balance is guaranteed as it is constituted from time to time, during the continuance of the guarantee, by the excess of the total debits over the total credits. It that be the true construction of this document, as their Lordships think it is, the number of years which have expired since any individual debit was incurred is immaterial. The question of limitation could only arise in regard to the time which had elapsed since the balance guaranteed and sued for had been constituted.That document, in their opinion, clearly guarantees the repayment of each debit balance as constituted from time to time, during the continuance of the guarantee, by the surplus of the total debit over the total credits, and accordingly at the date of the counterclaim the Associations claim against the plaintiff for payment of the unpaid balance due from the Nosworthys, with interest, was not statute-barred." 10.In the instant case also the account was alive, not settled and there was no refusal on the part of the guarantor to carry out its obligation and the continuing guarantee was subsisting. Therefore, the Appellant was very much liable. 11.Under the aforesaid facts and circumstances, we do not find any substance in the contention of Mr. Mhamane, the learned Counsel for the Appellant that the suit claim is barred by law of limitation.

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

Explanation:
0[ds]Over and above, the Appellant had also executed a promissory note on 24th September, 1975 and the reference of the same is made in the covering letter dated 4th September, 1978 while executing another promissory note on that very day. Therefore, it is not that after 1974 upto 1978 no document was executed as contended. The published balance sheets of Appellant upto 1981, show clearly the liability of the Appellant. For the aforesaid reasons, the contention that the claim is barred by law of limitation, has no merit whatsoever.8.We have also perused the reasoning of the Trial Court. We do not find anything erroneous or illegal in the reasoning and findings of the trialthe instant case also the account was alive, not settled and there was no refusal on the part of the guarantor to carry out its obligation and the continuing guarantee was subsisting. Therefore, the Appellant was very much liable. 11.Under the aforesaid facts and circumstances, we do not find any substance in the contention of Mr. Mhamane, the learned Counsel for the Appellant that the suit claim is barred by law of limitation.