ORDER
A. Subbulakshmy, J. (Chairperson)
1. The Bank filed original application (TA) before the DRT for recovery of the amount. The TA was disposed of by the Presiding Officer, DRT-II, Chennai, and the TA was allowed and decree was passed as against defendants 1 to 5 and D-6 was discharged from the loan liabilities. Aggrieved against the order passed by the Presiding Officer, DRT-II, discharging D-6, the Bank has preferred this appeal.
2. Counsel for the appellant Bank submitted that the respondent D-6 executed continuing guarantee under Ex. A9 and as it is a continuing guarantee. D-6 is liable till he revoked that guarantee and any revocation letter sent by D-6 will operate only with regard to the future transactions after the revocation notice and for the prior transactions this continuing guarantee will hold good and D-6 will be liable for the suit claim until it was revoked and only for the future transactions D-6 may not be held liable. Counsel for the respondent D-6 submitted that it is not a continuing guarantee and as D-6 has sent revocation letter revoking the continuing guarantee, he is discharged from this liability immediately when he sent that revocation letter and the order passed by the Presiding Officer, DRT-II, discharging D-6 is perfectly justified. Section 129 of the Contract Act deals with continuing guarantee which states that a guarantee which extends to a series of transactions is called a ‘continuing guarantee’. A continuing guarantee is one which extends to a series of transactions and is not exhausted by or confined to a single credit or transaction. A continuing guarantee is usually given as security for an overdraft facility, since the overdraft fluctuates in amount and will often continue for an indefinite period. Guarantees for bank overdrafts usually state in terms that they are to be by way of continuing security, and that they are not to be satisfied, discharged or affected by any intermediate payment or settlement of account.
3. Ex. A-9 the document executed by D-6 the guarantor, the guarantee executed by D-6 is a continuing guarantee, the loan transaction being that overdraft facility. So, it goes without saying that it is a continuing guarantee. In Ex. A9 also it is specifically stipulated that the guarantee is a continuing guarantee and the guarantor can give notice and revoke his guarantee by issuing six months’ notice and it shall be binding on the representatives and estates of the guarantor until the expiry of six months after a notice in writing of revocation of guarantee is received by the Bank. Since the loan transaction is for an overdraft facility and the recital in the document also shows that it is a continuing guarantee, it is only a continuing guarantee and D-6 has executed the document for continuing guarantee only.
4. The clause pertaining to this is mentioned in the guarantee letter executed by the guarantor D-6 which reads as follows:
“Whereas the Guarantor has requested the Bank to grant financial assistance to the Borrower by way of facilities, including guarantees subject to the specific condition that the Guarantor shall unconditionally guarantee the repayment of all amounts advanced and all liabilities guaranteed by the Bank as also all amounts which may be advanced and all guarantees which may be issued by the Bank from this day till the expiry of a period of six months of the actual service on the Bank of a specific notice of revocation in writing.”
5. As per the contract entered into between the guarantor and the Bank under the guarantee letter, it is a continuing guarantee and it is binding on the guarantor notwithstanding the death of the guarantor; and it is thereby binding on the representatives and the estates of the deceased guarantor until the expiry of six months after notice in writing of revocation of the guarantee is received by the Bank. D-6 mainly rests on the letter of revocation sent by him in the years 1992 and 1993 and contends that he is discharged of his liability because he sent the revocation letter. The letter sent by the guarantor dated 22.9.1992 is marked as Ex. A16. Under Ex. A1 6, D-6 has admitted that he has given guarantee but he is not in a position to extend the guarantee any more and requested the Bank to relieve him from the guarantee and to arrange some other guarantor and has requested the Bank not to connect his business with the above guarantee. In Ex. A16, D-6 has stated that under the present condition he is not in a position to extend the guarantee and requested to relieve him from the guarantee. D-6 also relies upon another letter Ex. A18 dated 22.5.1993. This letter Ex. A18 is only a reply notice sent by D-6 to the Bank for the notice issued by the Bank with regard to the recovery of the amount. In Ex. A18, D-6 has nowhere stated that he is revoking the guarantee and he is discharged from his liability. In Ex. A1 8, D-6 has stated that on 22.9.1992, D-6 sent another letter revoking his guarantee and the Bank has received it.
6. Counsel for the appellant Bank states that no such letter revoking the guarantee was received by the Bank. Counsel for the appellant Bank submits that what he meant by non-receipt of letter is only with regard to the letter dated 16.3.1991 alleged to have been sent by the respondent to the Bank. He fairly submits that the alleged letter dated 16.3.1991 was not received by the Bank but the Bank is in receipt of the letter dated 22.9.1992 Ex. A16. Ex. A16 clearly indicates that the appellant is not in a position to extend the guarantee any more and he has requested the Bank to relieve him of the liability. This letter Ex. A16 dated 22.9.1992 clearly amounts to revocation of guarantee. So, from 22.9.1992 the appellant has not guaranteed for the repayment of the loan. The condition stipulated in Ex. A9 indicates that the continuing guarantee will be in force for a period of six months from the date of the guarantee revocation letter. So, from the date of letter Ex. A16 i.e. 22.9.1992, the continuing guarantee will be in force for a period of six months i.e. 21.3.1993. Till such period i.e. 21.3.1993, D-6 guarantor is liable under the continuing guarantee. Counsel appearing for the appellant Bank submitted that there was no more transaction after 1992 and the Bank has filed the O.A. on the outstanding as in the year 1992 since no further transactions took place after the revocation of guarantee letter dated 22.9.1992. The appellant is liable for the claim by the Bank for the amount due till 21.3.1993 and after that date D-6 guarantor will not be liable.
7. Section 130 of the Contract Act deals with revocation of continuing guarantee Section
130 states that “A continuing guarantee may at any time be revoked by the surety, as to future
transactions, by notice to the creditor”. So, it implies that only for future transactions the
continuing guarantee will not apply after issuance of revocation notice. As per the agreement,
even for the period of six months after issuance of notice the continuing guarantee will be
in force. D-6 guarantor remains responsible for any sum incurred by the principal debtor
governed by the guarantee upto the time of six months after notice was given. As per Section
130 of the Contract Act, even if any revocation letter is given, it will operate only for the
further transactions and not for the past transactions. Viewed at any angle, there is no ground
to discharge D-6 from his liability. The argument advanced by the Counsel for the respondent
D-6 does not hold good. D-6 is liable for the suit claims upto 21.3.1993. The order passed
by the Presiding Officer, DRT-II, discharging D-6 from the loan liability is liable to be set
aside and it is set aside. The order passed by the Presiding Officer, DRT-II, Chennai, in other
respects is not disturbed.
8. Counsel for the respondent submits that the claim as against the respondent D-6 is barred by limitation since the suit was not filed immediately after the revocation letter was sent in 1992. The revocation letter by D-6 was sent on 22.9.1992. Counsel for the appellant Bank submitted that the period of limitation is three years from the date of revocation of the agreement as per Section 55 of the Limitation Act. Under Section 55 the period of limitation runs upto three years from the date of revocation of that guarantee i.e. from 22.9.1992. Even the six months’ time provided under the notice expires by 21.3.1993. The suit having been filed on 15.3.1994, the OA as against D-6 is not barred by limitation and it is in time. So, the period of limitation has to run from March, 1993.
9. Appeal allowed. Decree is passed as against D-6 also for the amount due to the Bank on the said loan transaction till 21.3.1993 and decree is passed as against D-6 accordingly.