Full Judgment Text
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PETITIONER:
MARGARET LALITA SAMUEL
Vs.
RESPONDENT:
INDO COMMERCIAL BANK LTD.
DATE OF JUDGMENT25/09/1978
BENCH:
REDDY, O. CHINNAPPA (J)
BENCH:
REDDY, O. CHINNAPPA (J)
CHANDRACHUD, Y.V. ((CJ)
SARKARIA, RANJIT SINGH
CITATION:
1979 AIR 102 1979 SCR (1) 914
1979 SCC (2) 396
CITATOR INFO :
R 1979 SC1436 (5)
ACT:
Constitution of India-Arts. 136-141-Substantial
justice-If erroneous order of remand results in substantial
justice whether this Court should interfere-
Limitation Act 1908-Schedule-Articles 57, 115-
Continuing guarantee-When does limitation run-Liability of
Bank guarantee-If claim given up without specifying any
particulars whether it can be taken into consideration
against the unproved debts.
HEADNOTE:
The respondent plaintiff is the Indo Commercial Bank
Ltd. now taken over and represented by the Punjab National
Bank. In 1943 C. B. Samuel, the husband of the appellant-
defendant with other persons floated a company known as the
Modern Hindustan Food Products Ltd. Co. at Poona. The
company opened with the plaintiff Bank a current account
which was later converted into an over-draft Account with
the maximum limit of Rs. 10/- lakhs. C. B. Samuel, the
Managing Director of the company executed a Promissory Note
for Rs. 10 lakhs and he and his wife, the defendant executed
a guarantee bond by which they jointly and severally
guaranteed to the Bank, the repayment of all moneys which
shall at any time be due to the Bank from the Company, on
the general balance of their account with the Bank or on any
account whatever. The guarantee was to be a continuing
guarantee to the extent of Rs. 10 lakhs at any one time. The
Company ceased business on 30th June, 1946 and thereafter
the Company entered into an arrangement with the Bank by
which the Bank was authorised to receive all amount due from
the Director General of Food Supplies, or from any other
person or Department and appropriate the sums collected
towards the money due to the Bank from the Company. An
irrevocable power of attorney authorising the Bank to do so
was executed by the Managing Director. All Bills and
documents were accordingly handed over to the plaintiff bank
for realisation of the amount due to the Company. C.B.
Samuel died on 27th April, 1951. The defendant by her letter
dated 2nd February, 1952, acknowledged her personal
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guarantee to repay to the plaintiff the sum of Rs. 2,71,531
which was stated to be balance due to the plaintiff from the
Company as on 31st December, 1951. To that, a sum of Rs.
21,886/- was to be added by way of interest. The Bank
recovered a sum of Rs. 57,964 and thus the balance due was
Rs. 2,35,453/-. The Bank filed the present suit in November,
1954 to enforce the guarantee bond against the defendant and
to recover a sum of Rs. 1,50,000. It was stated in the
plaint that a sum of Rs. 85,453 was given up and the suit
was filed to recover the sum of Rs. 1,50,000/- only. The
defence of the defendant was that the suit was barred by
limitation, that the letter dt. 2nd February, 1952 was
obtained from her by fraud and that she was, in any case,
not liable to pay amounts disputed by her in para 15 of her
written statement. She also pleaded that the plaintiff had
deliberately withheld production of the accounts between
1943-46 during which period most of the transactions took
place and that if these accounts were produced, she would be
in a position to challenge other items as well.
915
Soon after filing the written statement, the defendant
filed an application in the trial court to direct the
plaintiff to produce among other documents, the accounts
from 1943 onwards. The Trials Judge by his Order dt. 10th
March, 1955 directed the plaintiff to produce the documents
within two weeks from that date. The plaintiff did not
produce the documents. Subsequently, however, an extract of
the accounts from 1943 to 1946 was produced. On the date of
the hearing of the suit, the defendant filed an application
Ext. 85, seeking a direction from the Court, that the
plaintiff be allowed to produce any documentary evidence
which they might possess in support of the items mentioned
in the schedules even till the time the evidence is finished
and the defendant be allowed to deny, under the
circumstances mentioned, the items mentioned in schedule
‘B’. Alongwith the application, the defendant filed two
schedules; Schedule ‘A’ showing the items specifically
denied by the defendant in her written statement and
Schedule ‘B’ showing the items which were denied by her
after the accounts from 1943 to 1946 were produced in Court
by the plaintiff. The application was opposed by the
plaintiff. The trial court dismissed the application on the
ground that it was belated. The trial court observed that if
the defendant wanted to dispute any item from the accounts,
she should have got the accounts produced even before she
filed the written statement. The court, observed that the
defendant had no doubt filed the earlier application but
when the plaintiff failed to produce the accounts within two
weeks, she did not take further action in the matter.
The trial court found that letter dated 2nd Feb. 1952
was not proved to have been obtained by fraud. The court
found that the defendant who was a highly educated lady had
subscribed her signature to Ext. 55 fully knowing its
contents. The trial court however, held that the suit was
barred by limitation. The trial court also held that there
was no proper proof of the several debit items and that they
were suspicious.
The plaintiff filed an appeal to the High Court of
Bombay. The High Court held that the suit was not barred by
limitation but that on the material placed before the Court,
it was impossible to pass a decree in favour of the
plaintiff, for any amount alleged to be due by the
defendant. The High Court also observed that the trial Judge
was wrong in dismissing the application. The High Court,
however, thought that in order to do justice between the
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parties, it was necessary to give the plaintiff-bank an
opportunity to prove the various items which were challenged
by the defendant in her written statement and in her
application Ext. 85, and further to give the defendant an
opportunity to lead evidence in support of her contention
that the entries were in respect of accounts which she was
not liable to pay. The High Court remanded the suit to the
trial court for fresh disposal in the light of the
observations made by it after raising additional issues if
necessary.
On remand, the trial court raised two additional
issues. The trial court held that the plaintiff proved two
items in dispute as given in the written statement and
Exhibit 85. The trial court negatived the defendant’s case
that the debit entries were in respect of the amounts which
she was not liable to pay. The trial court based these
conclusions primarily on the letter dt. 30th June, 1950
passed by the Company in favour of the Bank acknowledging
the balance due, at the foot of the overdraft account as on
30th June, 1950 was Rs. 4,90,523. The trial Judge held that
the letter of acknowledgment was
916
binding on the defendant. The suit was decreed for a sum of
Rs. 1,50,000/-. In an appeal filed by the defendant, the
High Court considered the evidence relating to each item and
found that the debit items amounting to Rs. 68,761/- were
not proved to be binding on the defendant. The High Court,
however, held that since this amount was less than Rs.
85,453/- which had been given up by the plaintiff, the High
Court affirmed the decree passed by the trial court. The
High Court gave a finding relating to three letters signed
by the defendant herself as Director of the Company in the
year 1945.
In an appeal by special appeal, the appellant contended
:
(1) that there was no justification for the order of
remand passed in the first instance by the Bombay
High Court. On the finding arrived at by the
Bombay High Court, that the plaintiff had failed
to prove any of the debit items, the original
decree of the trial court dismissing the suit
should have been affirmed. When the application
Ext. 85 was filed by the defendant, the plaintiff
opposed it. The appellate Court, therefore, was
not justified in giving a further opportunity to
the plaintiff to prove the debit items.
(2) the suit was time-barred. Each of the debit item
constituted a distinct loan and gave rise to a
separate cause of action, every one of which was
barred by limitation.
The respondent contended that :
(i) the initial order of remand made by the High Court
was justified in the special circumstances of the
case. Even if the order of remand could not be
fully justified, this is not a fit case for
interference under Art. 136 having regard to the
justice of the matter as disclosed by the
subsequent findings of the trial court and the
appellate Court.
(ii) the suit was really one to enforce the guarantee
bond, that the guarantee was a continuing
guarantee and, therefore, the suit could not be
said to be barred by limitation.
Partly allowing the appeal the Court,
^
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HELD : The contention of the appellant that each item
of overdraft was independent loan and that Art. 57 of the
Schedule to the Limitation Act 1908 applied, is erroneous.
[922G-H, 924B]
Basante Kumar Mitra v. Chota Nagpur Banking Association
Ltd. A.I.R. 1948 Pat. 18; Brajendra Kishore Roy Chowdhury v.
Hindustan Co-operative Insurance Society Ltd., ILR 44 Cal.
979; National and Grindlays Bank Ltd. v. Tikam Chand Daga
and Anr. A.I.R. 1964 Cal. 358; Uma Shankar Prasad v. Bank of
Bihar Ltd. & Anr., A.I.R. 1942 Pat. 201 distinguished.
It is unnecessary for the purpose of the present case
to go into the question of the nature of an overdraft
account. The present suit is in substance and truth one to
enforce the guarantee bond executed by the defendant. The
guarantee bond itself provides that the guarantee shall be a
continuing guarantee
917
and the defendant undertook 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
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, the period of limitation does not commence
running. Limitation would only run from the date of breach
under Art. 115 of the Schedule to the Limitation Act, 1908.
[923A-B, 924A-B]
Wright and Anr. v. New Zealand Farmers Cooperative
Association of Canterbury Ltd., 1939 A.C. 439; approved.
Parr’s Banking Co. Ltd. v. Yates [1898] 2 K.B. 460
found to be over-ruled.
Gradford Old Bank Ltd. v. Sutcliffe, [1918] 2 K.B. 833;
referred to.
In the present case, the overdraft account which was
guaranteed by the defendant by the execution of the
guarantee bond continued to be a live account even after the
company ceased its business. A power of attorney was
accepted by the company in favour of the Bank for
realisation. Certain amounts were received. The defendant
herself executed letter dt. 2nd Feb. 1952 acknowledging her
liability in respect of the guarantee. Thus, far from
repudiating the liability and breaking the contract of
continuing guarantee, the defendant accepted her obligation
under the guarantee bond in respect of the overdraft account
which continued to be live at least upto 29th September,
1952. The suit was filed on 8th November, 1954 and was,
therefore, clearly within time under Article 115 of the
schedule of Limitation Act, 1908. [926A-F]
The correctness of an order of demand passed by the
High Court which could not then be questioned by filing an
appeal in the Supreme Court against that order because such
an appeal was not competent could nevertheless be challenged
later in the appeal before the Supreme Court arising out of
the final judgment in the action. [927A-B]
Satyadhyan Ghoshal and Ors. v. Smt. Beorajin Debi and
Anr. [1960] 3 S.C.R. 590; Lonankutty v. Thomman and Anr.
[1976] Suppl. SCR 74; Jasraj Inder Singh v. Hemraj Multan
Chand [1977] 2 SCR 973; relied on.
It does not, however, mean that the Supreme Court will
every time exercise its discretionary powers under Art. 136
of the Constitution merely because it finds that the High
Court had wrongly passed an order of remand at an earlier
stage of the case. If the Supreme Court is satisfied that as
a result of the order of the remand substantial justice has
been done to the parties in the consequential proceedings,
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the Court can decline to exercise its power to interfere
under Art. 136. Art. 136, is not meant to correct every
illegality brought to the notice of the Supreme Court nor to
undo, merely on account of such illegality, an adjudication
which has done substantial justice to the parties. On the
other hand, Art. 142 of the Constitution expressly confers
powers upon the Supreme Court in the exercise of its
jurisdiction to pass such decrees to make such order as is
necessary for doing complete justice in any case or matter
pending before it. On account of the special circumstances
of the case, the High Court remanded the case in the
interests of justice. Whether or not, the order of remand is
capable of being justified under the provisions of the Code
of Civil Procedure, the interest of justice had been done
between the parties as a result of subsequent proceedings.
In the special
918
circumstances of this case, the Supreme Court will not
interfere with the decree of the lower court merely because
the earlier order of remand passed by the High Court may not
be capable of being justified. [927B-D, 928A, C]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2133 of
1968.
Appeal by Special Leave from the Judgment and Order
dated 25-9-1967 of the Bombay High Court in First Appeal No.
247 of 1960.
B. D. Bal, Mrs. Jayashree Wad and S. B. Wad for the
Appellant.
V. C. Mahajan, S. K. Mehta, K. R. Nagraja and P. N.
Puri for the Respondent.
The Judgment of the Court was delivered by
CHINNAPPA REDDDY, J.-The defendant in the action is the
appellant in this appeal by special leave. The respondent-
plaintiff is the Indo Commercial Bank Ltd., Madras, now
taken over and represented by the Punjab National Bank. We
will hereafter refer to the plaintiff as the Bank. In 1943
Kawasji Karanjia and JaI Karanjia and C. B. Samuel, husband
of the defendant, floated a company known as the Modern
Hindustan Food Products Ltd. at Poona. Jal Karanjia, C. B.
Samuel and the defendant were Directors of the Company. The
Company opened a current account with the plaintiff bank in
1943 which was later converted into an overdraft account
with the maximum limit of Rs. 25,000/-. By a subsequent
arrangement dated 19th June, 1944, the limit of the
overdraft account was raised to Rs. 10 lacs. C. B. Samuel,
as Managing Director of the Company, executed a promissory
note for Rs. 10 lacs and he and his wife Margaret Samuel
(defendant) executed a guarantee Bond (Exhibit 57) by which
they jointly and severally guaranteed to the bank the
repayment of all money which shall at any time be due to the
Bank from the Company on the general balance of their
account with the bank, or on any account whatever. The
guarantee was to be a continuing guarantee to the extent of
Rs. 10 lacs at any one time. We will have occasion to refer
to the terms of the bond in detail later. The overdraft
facility was utilised by the Company and amounts were drawn
from the Bank at various times. The Company ceased business
on 30th June 1946, and thereafter the Company entered into
an arrangement with the plaintiff bank by which the
plaintiff bank was authoroised to receive all amounts due
from the Director General of Food Supplies, Government of
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India, or from any other person or Department and
appropriate the sums collected towards the money due to the
bank from the Company. An irrevocable power of attorney
authorsing the bank to do so was executed by C. B. Samuel as
Managing Director
919
of the Company. All Bills and documents were accordingly
handed over to the plaintiff bank for realisation of the
amount due to the Company. C. B. Samuel died on 27th April
1951. By her letter Exhibit 55 dated 2nd February 1952, the
defendant acknowledged her personal guarantee to repay to
the plaintiff the sum of Rs. 2,71,531-8-6 which was stated
to be the balance due to the plaintiff from the Company as
on 31st December, 1951. Adding a sum of Rs. 21,886-6 Ans-0
ps. by way of interest from 1st January 1952 till 30th
September, 1953, and deducting a sum of Rs. 57,964-14-6 said
to be the amount recovered between those dates, the balance
due on 8th November, 1954, was stated to be Rs. 2,35,453-1-
0. On 8th November, 1954 the present suit was filled by the
Bank to enforce the guarantee bond against the defendant
Margaret Samuel and to recover a sum of Rs. 1,50,000/- from
her. It was stated in the plaint that a sum of Rs. 85,453-1-
0 was remitted and the suit was laid to recover the sum of
Rs. 1,50,000/- only. Alongwith the plaint an extract of the
account subsequent to 1946 was filed.
The defence of Margaret Samuel, to the extent that is
relevant for the purposes of the present appeal, was that
the suit was barred by limitation, that the letter dated 2nd
February, 1952 was obtained from her by fraud and that she
was, in any case, not liable to pay amounts disputed by her
in paragraph 15 of her written statement. She also pleaded
that the plaintiff had deliberately withheld production of
the accounts between 1943 to 1946 during which period most
of the transactions took place and that if those accounts
were produced she would be in a position to challenge other
items as well.
Soon after filing the written statement the defendant
filed an application in the Trial Court to direct the
plaintiff to produce, among other documents, the accounts
from 1943 onwards. The Trial Judge by his order dated 10th
March 1955 directed the plaintiff to produce the documents
within 2 weeks from the date. The plaintiff did not produce
the documents within the time allowed. Subsequently,
however, an extract of the accounts from 1943 to 1946 was
produced on 1st September 1955, the date of hearing of the
suit. On 10th October, 1955, the defendant filed Exhibit 85,
an application seeking a direction from the Court "that the
plaintiff be allowed to produce any documentary evidence
which they might possess in support of the items mentioned
in the schedules even till the time the evidence is finished
and the defendant be allowed to deny, under the
circumstances mentioned all the items mentioned in Schedule
‘B’, with her
920
explanation for the items". Alongwith the application the
defendant filed two schedules, Schedule ‘A’ showing the
items specifically denied by the defendant in her written
statement and schedule ‘B’ showing the items which were
denied by her after the accounts from 1943 to 1946 were
produced in Court by the plaintiff. The application was
opposed by the plaintiff. The Trial Court dismissed the
application on the ground that it was belated. The Trial
Court observed that if the defendant wanted to dispute any
item from the accounts she should have got the accounts
produced even before she filed the written statement. No
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doubt she had filed an application soon afterwards to direct
the plaintiff to produce the accounts and other documents
within two weeks, but when the plaintiff failed to produce
the accounts within two weeks, she did not take any further
action in the matter. Having failed to take steps to compel
the plaintiff to produce the accounts earlier, the Court
said, she could not seek to dispute the items after the
plaintiffs had closed the evidence of their side. Thereafter
the Trial of the suit was concluded.
At the trial the plaintiff relied primarily upon
Exhibit 55 the letter of acknowledgment dated 2nd February,
1952. This letter of acknowledgment, as already mentioned by
us was alleged by the defendant to have been obtained from
her by fraud. The learned Civil Judge found that the letter
was not proved to have been obtained by fraud. He held that
the defendant, who was a highly educated lady, had
subscribed her signature to Exhibit 55 fully knowing its
contents. He, however, held that the suit was barred by
limitation. The learned Civil Judge also held that there was
no proper proof of the several debit items and that they
were suspicious. The suit was, therefore, dismissed.
The plaintiff filed an appeal to the High Court of
Bombay. The High Court held that the suit was not barred by
limitation. The High Court observed that on the material
placed before the Court, it was impossible to pass a decree
in favour of the plaintiff-bank for any amount alleged to be
due by the defendant. The High Court also observed that the
Trial Judge was wrong in dismissing the application (Exhibit
85). The High Court, however, thought that in order to do
justice between the parties it was necessary to give the
plaintiff bank an opportunity to prove the various items
which were challenged by the defendant in her written
statement and in her application (Exhibit 85) and further to
give the defendant an opportunity to lead evidence in
support of her contention that the entries were in respect
921
of amounts which she was not liable to pay. The High Court
remanded the suit to the Trial Court for fresh disposal in
the light of the observations made by it, after raising
additional issues if necessary.
After remand the Trial Judge amended original issue No.
9 and added issue No. 9-A. He allowed the parties to lead
evidence. The two issues which were tried by him were issues
9 and 9-A which were as follows :
"9. Does plaintiff prove the items in dispute as
given in the written statement and in Ex. 85 ?
9-A. Does defendant prove that the debit entries
are in respect of amounts which she is not liable to
pay ?"
On an elaborate consideration of the evidence, the Trial
Judge answered issue No. 9 in the affirmative and issue No.
9-A in the negative basing his conclusion primarily on
Exhibit 99 a letter dated 30th June 1950, passed by the
Company in favour of the bank acknowledging that the balance
due at the foot of the over-draft account as on 30th June,
1950 was Rs. 4,90,523-5-7. The Trial Judge held that the
letter of acknowledgement was binding on the defendant. The
suit was decreed for a sum of Rs. 1,50,000/- with further
interest and costs.
The defendant preferred an appeal to the High Court of
Bombay. The High Court considered the evidence relating to
each item of debit in great detail and found that debit
items amounting to Rs. 68,761-7-0 were not provide to be
binding on the defendant. As this amount with interest was
less than the amount of Rs. 85,453-1-0 which had been given
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up by the plaintiff in the plaint, the High Court affirmed
the decree passed by the Trial Court. The finding of the
High Court in regard to the various debit items were greatly
influenced by a group of three letters Exhibit 104, dated
30th June, 1945, Exhibit 105 dated 27th November, 1945 and
Exhibit 106 dated 6th December, 1945 signed by the defendant
herself as Director of the Company. On the basis of these
three letters the High Court took the view that,
substantially, all the entries of debit made prior to 1st
December, 1945 must be held to have been proved.
In this appeal by special leave Shri B. D. Bal, learned
Counsel for the defendant-appellant argued that there was no
justification for the order of remand passed in the first
instance by the Bombay High Court. He submitted that on the
finding arrived at by the Bombay High Court that the
plaintiff had failed to prove any of the debit items, the
original decree of the Trial Court dismissing the suit
should have
922
been affirmed. He said that when the defendant filed Exhibit
85, proposing that the plaintiff should be given an
opportunity to adduce evidence to prove the debit items, the
plaintiff opposed the application. The Appellate Court was,
therefore, unjustified in giving a further opportunity to
the plaintiff to prove the debit items. Shri Bal further
urged that the suit was barred by limitation. His contention
was that each of the debit items constituted a distinct loan
and gave rise to a separate cause of action, everyone of
which was barred by limitation. In regard to Exhibits 104,
105 and 106 Shri Bal urged that the defendant had merely
signed the letters which were put up for her signature,
without personally verifying the correctness of the
statements made in the letters. His argument was that it was
most unlikely that the defendant would have personally
verified the accounts and satisfied herself about the
correctness of the several debit items, before signing the
letters put up before her. Shri Bal also argued that in any
case a sum of Rs. 50,000/- which was in deposit with the
Government and which the Bank was entitled to receive under
the tripartite arrangement made between the Company, the
Bank and the Government should have been deducted from the
amount of decree. He also urged that two items of debit
which related to the transfer of funds to the personal
account of C.B. Samuel should also be excluded.
Shri Vikram Mahajan, learned Counsel for the plaintiff
argued that the initial order of remand made by the Bombay
High Court was justified in the special circumstances of the
case. He further argued that even if the order of remand
could not be fully justified, it was not a fit case for
interference under Article 136 of the Constitution, having
regard to the justice of the matter as disclosed by the
subsequent findings of the Trial Court and the Appellate
Court. On the question of limitation he submitted that the
suit was really one to enforce the guarantee bond, that the
guarantee was a continuing guarantee and therefore, the suit
could not be said to be barred by limitation. He urged that
the defendant was an educated person well versed in business
affairs and the High Court was right in attaching importance
to the three letters Exhibit 104, 105 and 106.
We may first consider the question of limitation. As
already mentioned by us, the submission of Shri Bal was that
every item of an overdraft account was an independent loan,
limitation for the recovery of which was determined by
Article 57 of the schedule to the Limitation Act, 1908.
Limitation, according to the learned Counsel, started to run
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from the date of each loan. He relied on Basante Kumar Mitra
v. Chota Nagpur Banking Association Ltd,.(1) Brajendra
923
Kishore Ray Chowdhury v. Hindustan Cooperative Insurance
Society Ltd. National and Grindlays Bank Ltd. v. Tikam Chand
Daga & Anr., and Uma Shankar Prasad v. Bank of Bihar Ltd. &
Anr. In our view it is unnecessary for the purposes of the
present case to go into the question of the nature of an
overdraft account. The present suit is in substance and
truth one to enforce the guarantee bond executed by the
defendant. In order to ascertain the nature of the liability
of the defendant it is necessary to refer to the precise
terms of the guarantee bond rather than embark into an
enquiry as to the nature of an overdraft account. Exhibit 57
is the guarantee bond executed by the defendant and her
husband on 23rd October, 1944. It is addressed to the Indo-
Commercial Bank Ltd., Madras, and is in the following terms:
"Dear Sirs,
In consideration of your having agreed to allow
overdraft accommodation upto Rs. 10,00,000/- (Rupees
Ten Lakhs only) to the Modern Hindustan Food Products
Ltd., Poona, we, C. B. Samuel and M. L. Samuel, the
undersigned do hereby jointly and severally guarantee
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 bankers) 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 Rs. 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."
924
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 Article 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
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the Company to the bank. We are concerned with the
period of limitation for 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
a 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 and Anr.
v. New Zealand Farmers Cooperative Association of Canterbury
Ltd. 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
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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 advanced 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 of) 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. If that be
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 used for had been constituted".
Later it was again observed (at p. 450):
"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 debits
over the total credits, and accordingly at the date of
the counterclaim the Association’s claim against the
plaintiff for payment of the unpaid balance due from
the Nosworthys, with interest, was not statute-barred."
This was precisely the view which J.C. Shah, J.,
expressed in the passage already extracted by us, with which
we expressed our agreement. We may add here that in Wright’s
case the Privy Council appeared not to approve of the
decision in Parr’s Banking Company Ltd. v. Yates(1), where
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it had been observed that the statutory limitation would run
from the date of each advance. As noticed in Paget’s Law of
Banking (8th Edition) at pp. 82-83, the
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authority of Parr’s case has been overruled so far as the
guarantor is concerned by the judgment of the Court of
Appeal in Bradford old Bank Ltd. v. Sutcliffe(1).
Now, the overdraft account which was guaranteed by the
defendant by the execution of the guarantee bond dated 23rd
October, 1944, continued to be a ‘live’ account even after
the Company ceased its business on 30th June, 1946. A power
of Attorney was executed by the Company in favour of the
plaintiff bank and amounts due to the Bank were realised and
credited in the overdraft account. A sum of Rs. 2,19,784-4-0
was received from the Director General of Food Supplies on
27th June, 1950. On 6th September, 1950, another sum of Rs.
1,15,229-15-0 was received from the Director General of Food
Supplies and credited to the account or the Company. Again
on 27th January, 1951, 14th March, 1951 and 29th September,
1952, several amounts received by way of refund of Income-
tax were credited to the Company in its account. The amount
credited on 29th September, 1952 was Rs. 24,022-0-10. The
overdraft account was thus a live account at least till 29th
September, 1952. The Company executed various promissory
notes and letters of acknowledgement. The defendant herself
as guarantor executed, on 2nd February, 1952, Exhibit 55,
acknowledging her liability in respect of the guarantee
given by her. Paragraph (a) of the letter is as follows:
"In respect of the personal guarantee which myself
and my husband have given to the bank, the amount due
to the bank as on 31st December, 1951 is Rs. 2,71,531-
8,6."
Thus far from repudiating her liability and breaking the
contract of continuing guarantee, the defendant accepted her
obligation under the guarantee bond in respect of the
overdraft account which continued to be live at least upto
29th September, 1952. The suit which was filed on 8th
November, 1954, was therefore, clearly within time under
Article 115 of the schedule to the Limitation Act, 1908.
We may mention here that it was the contention of Shri
Bal that the letter dated 2nd February, 1952, was obtained
from the defendant by fraud. Both the Trial Court and the
High Court have found that there was no fraud and that the
letter was written by the defendant voluntarily and with
full knowledge of its contents. We accept the finding of the
Trial Court and the High Court that the letter was not
obtained by any fraud practiced upon the defendant.
The next question is about the legality and the
consequences of the illegality, if any, of the original
order of remand. It cannot be
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disputed, and indeed it was not disputed before us, by Shri
Mahajan, that the correctness of an order of remand passed
by the High Court which could not then be questioned by
filing an appeal in the Supreme Court against that order
because such an appeal was not competent could nonetheless
be challenged later in the appeal before the Supreme Court
arising out of the final judgment pronounced in the action
vide Satyadhyan Ghoshal & Ors v. Smt. Beorajin Debi &
Anr.(1); Lonankutty v. Thomman & Anr.(2); Jasraj Inder Singh
v. Hem Raj Multan Chand(3). It does not, however, mean that
the Supreme Court will, every time, exercise its
discretionary power under Article 136 of the Constitution
merely because it finds that the High Court had wrongly
passed an order of remand at an earlier stage of the case.
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If the Supreme Court is satisfied that as a result of the
order of remand substantial justice has been done to the
parties in the consequential proceedings, the Supreme Court
may decline to exercise its discretionary power to
interfere. The jurisdiction under Article 136 is not meant
to correct every illegality brought to the notice of the
Supreme Court, nor to undo, merely on account of such
illegality, an adjudication which has done substantial
justice to the parties. On the other hand, Article 142 of
the Constitution expressly confers powers upon the Supreme
Court, in the exercise of its jurisdiction, to pass such
decree or make such order as is necessary for doing complete
justice in any case or matter pending before it. In the case
before us, the Bombay High Court no doubt found that on the
material placed before it there was no option except to non-
suit the plaintiff. The High Court, however, appears to have
felt that the plaintiff bank which had rested its case in
the Trial Court almost entirely on the acknowledgement dated
2nd February, 1952, was, perhaps misled into doing so
because of the order passed by the Trial Judge on the
application Exhibit 85, filed by the defendant. In the order
dated 11th October, 1955, passed on the application Exhibit
85, the Trial Judge had observed that the defendant should
have taken proper steps earlier if she wanted to dispute the
debit items and that having failed to take proper steps she
had to pay the penalty for her laches. That order might have
made the, plaintiff believe that it was unnecessary to
adduce any more evidence. Though the High Court did not
expressly state that the plaintiff was misled by the order
of the Trial Judge, it is clear from a perusal of the remand
order of the High Court that the High Court felt that the
order made on the application Exhibit 85, was responsible
for the
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failure of both the plaintiff and defendant to adduce
appropriate evidence in regard to the several debit items.
It was in those circumstances that the High Court, in the
interests of justice, remanded the suit to the Trial Court
in order to enable both parties to adduce necessary evidence
regarding the items of debit. Whether or not the order of
remand is capable of being justified under the provisions of
the Code of Civil Procedure, we are of the view that the
interests of justice have not suffered but on the other hand
substantial justice has been done between the parties as a
result of the subsequent proceedings. The Trial Court and
the High Court have in their judgments fully and
exhaustively discussed the liability of the defendant in
regard to each of the debit items. In the special
circumstances of this case we do not think that we will be
justified in interfering with the decrees of the Lower
Courts merely because the earlier order of remand passed by
the High Court may not be capable of being justified.
As mentioned by us earlier the High Court placed great
reliance on the three letters dated 30th June, 1945, 27th
November, 1945 and 6th December, 1945, and it was because of
those letters the High Court upheld all the items of debit
made prior to 1st December, 1945. We think that the High
Court was right in doing so. The first of the letters
Exhibit 104, is a letter addressed by the Bank to the
Company informing the latter that the balance due at the
foot of the account as on 30th June, 1945, was Rs. 6,81,242-
9-5. The letter contains an endorsement by the defendant as
a Director of the Company confirming the correctness of the
statement. The second letter dated 27th November, 1945
(Exhibit 105) is a letter addressed by the Company to the
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Bank. It is signed by the defendant on behalf of the
Company. By this letter the Company complained about the
dishonour of two cheques for Rs. 20,000/- each despite the
fact that the Company had not exceeded the overdraft limit.
In the letter it was pointed out that while the overdraft
balance was Rs. 10,14,380-7-6, a bill for Rs. 89,789/- had
been sent by the Company to the Bank on 22nd November, 1945.
The letter while taking the plaintiff to task for
dishonouring the cheque requested the bank to send a
statement of account as on 30th November, 1945. This letter
is of great importance since it shows that the Company was
aware of the correct balance of the overdraft account
without reference to the bank. It is apparent from the
letter that the Company had kept an account of the debits
and that any statement of account sent by the Bank was being
verified by the Company with reference to the
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Company’s books. It may be noticed here that by another
letter dated 19th December, 1945, the bank informed the
Company that the balance due upto 30th November, 1945, was
Rs. 10,60,913-8-11 and this was confirmed on behalf of the
Company by C. B. Samuel himself. The third letter is Exhibit
106 dated 6th December, 1945. This letter refers to the
Bank’s statement of account for the month of November, 1945,
and draws the bank’s attention to the fact that the balance
of Rs. 9,29,339-15-1 as on 12th November, 1945, had been
shown as carried over as Rs. 9,29,540-5-4, on 14th November,
1945. There was a difference of Rs. 200-6-3. This letter was
also signed by the defendant on behalf of the Company. The
letter indicates that any statement sent by the bank to the
Company was being carefully examined by the Company. In
regard to these letters the case of the defendant was that
she had merely signed the letters which were put up to her
by the office and that she had no personal knowledge of the
statements made in the letters. We agree with the Trial
Court and the High Court that this case of the defendant
cannot be accepted. A review of her deposition and the
several transactions into which she has entered before and
after her husband’s death clearly indicate that she is an
educated lady, an intelligent woman and ‘a man of the world’
if a woman may be so described. We do not have the slightest
doubt that the defendant could not have signed those letters
without satisfying herself about the correctness of their
contents. Having regard to the circumstance that the
defendant herself had signed the three letters Exhibit 104,
105 and 106 and having regard to the further circumstance
that two of these letters contained positive indications
that the statements of account submitted by the Bank had
been verified with reference to the Company’s books, the
High Court took the view that debit items upto 1st December,
1945, could be safely held to have been proved by the bank.
We see no reason to take a view different from that taken by
the High Court.
Shri Bal urged that under the tripartite arrangement
between the bank, the Company and the Govt., the Bank was
entitled to receive the amount of Security lying in deposit
with the Government and therefore, the item of debit of Rs.
50,000/- made on 17th July, 1944, in the loan account of the
Company should be deducted from the total of the debit
items. We are unable to agree with the submission of Shri
Bal. In the first place no dispute concerning this item was
raised either in the written statement of the Company or in
Exhibit 85. In the 2nd place. this is also one of the items
of debit made prior to 1st December, 1945 and it must have
been duly verified
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before the letters Exhibit 104, 105 and 106 were written.
Shri Bal also objected to two items of debit dated 30th
September, 1944 and 30th June 1945, representing amounts
transferred from the Company’s account to the personal
account of C.B. Samuel. Both these debits were made prior to
1st December, 1945, and, therefore, we do not think we will
be justified in excluding them.
As a result of the foregoing discussion we agree with
the High Court that the plaintiff bank failed to prove items
of debit totalling Rs. 68,761-7-0. Allowing interest from
the various dates of debit, the total amount which has to be
deducted from the claim of the plaintiff bank is Rs. 80,894-
8-4. The question now is whether this has to be deducted
from the sum of Rs. 2,35,453-1-0 which the plaintiff
mentioned in paragraph 8 of the plaint as the amount due to
the bank out of which the plaintiff was giving up the sum of
Rs. 85,453-1-0 or from the sum of Rs. 1,50,000/- for the
recovery of which alone this suit was filed. The High Court
thought that since the plaintiff had given up the sum of Rs.
85,453-1-0 as the plaintiff was doubtful about the recovery
of the amount from the defendant, the Court would be
justified in deducting the sum of Rs. 80,894-8-4, from the
sum of Rs. 2,35,453-1-0 instead of from the sum of Rs.
1,50,000/. We do not think there is any justification for
the course adopted by the High Court. The plaintiff did not
choose to mention in the plaint the particular items of
debit which he was giving up. There is, therefore, no reason
why the amount given up by the plaintiff should be treated
as attributable to the items of debit which have now been
found to be not proved. We are, therefore, of the view that
the total of the unproved debit items together with interest
i.e. the sum of Rs. 80,894-8-4 should be deducted from the
sum of Rs. 1,50,000/- for which amount only the plaintiff
filed the suit. The plaintiff is, therefore, entitled to a
decree for Rs. 69,105-7-8 with interest at 4% from the date
of suit till realisation. The appeal is allowed to the
extent indicated. Having regard to the circumstances of the
case, the parties will bear their own costs throughout.
P.H.P. Appeal allowed in part.
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