JUDGMENT
Syed Shah Mohammed Quadri, J.
1. These second appeals arise out of the same facts and raise the same question of law. When they came up for hearing before a learned single judge it was represented by the learned counsel for the respondent, the Union Bank of India, (hereinafter referred to as “the Bank”), that a second appeal arising out of the same facts, which was filed by the Bank was dismissed by a learned Single Judge of this Court at the stage of admission without hearing the case fully and without allowing him to cite any decisions; on that representation this batch of second appeals was directed to be posted before a Division Bench. That is how these cases have come up before us.
2. In these second appeals, except in Second Appeal No. 791 of 1987, the defendants are the appellants. The plaintiff-respondent Bank filed suits for recovery of loan, which were decreed by the trial Court. On appeal by the defendants the learned District Judge, West Godavari District, at Eluru, confirmed the judgments of the trial Court and dismissed all but two appeals. The aggrieved defendants have filed these second appeals. It may be appropriate to mention here that the said two appeals, namely, A.S.No. 178 of 1981; and A.S.77 of 1984 were allowed by the learned District Judge. Against the judgments in those appeals, the Bank filed Second Appeal No. 241 of 1985 and Second Appeal No. 791 of 1987. The first mentioned second appeal was dismissed at the admission stage by a learned single judge on 2-4-1985. The other second appeal is now before us.
3. A brief narration of the facts giving rise to these appeals will be apposite. A scheme was evolved under which the members of the West Godavari District Co-operative Sugars Limited, Surappagudem, hereinafter referred to as “the sugar factory”, were advanced loans by the Bank for purchasing shares in the said sugar factory by the Bank. The members of the sugar factory were also promised crop loan by the Bank. The crop loan as well as the loan advanced for purchasing the shares was to be recovered by the sugar factory on behalf of the Bank from the value of the sugar cane that would be supplied to the sugar factory by the members. Under the said scheme, the defendants in the suit obtained loan from the Bank. As the facts in all these appeals are similar, it would suffice if we refer to the facts in one of the second appeals- Second Appeal No. 1013 of 1985. The appellant-defendant applied for the loan of Rs. 3,200/- on 22-6-1973, under Ex.A-2. That application was sanctioned and the defendant-appellant executed the promissory note Ex.A-3 on 13-7-1973 and a hypothecation bond Ex. A-4, on the same day. It appears on the same date the amount of loan was credited to the account of the sugar factory. The hypothecation bond, Ex.A-4, provides among other things that in the event of the borower committing default in payment of loan secured under the agreement of hypothecation or any part thereof the entire loan outstanding shall become forthwith due and payable and the bank at its option shall be entitled to take certain measures specified therein. The appellant-defendant failed to pay the first instalment which fell due on 25-11-1975 (the date on which the sugar factory is said to have been commissioned), or on 30-6-1976 (the date when it alternatively fell due) as well as the subsequent instalments. The Bank called upon the defendant by notice Ex.A-6, dated 5-5-1979 to discharge the loan along with interest at 31/2% per annum over the bank rate with a minimum of 10% with half-yearly rests, invoked Clause 13 of Ex.A-4, the hypothecation agreement. As the appellant did not pay the amount, the Bank filed the suit O.S.331 of 1980 on the file of the 1st Additional District Munsif, Eluru, on 31-3-1980 for recovery of loan amount together with interest.
4. The main defence of the appellant-defendant was that the suit was barred by limitation as it was filed beyond three years from the date of granting the loan; that the terms and conditions mentioned in Ex.A-1, loan application, cannot convert the loan into loan on instalments and that even otherwise having regard to Clause 13 of Ex.A-4, hypothecation bond, for non-payment of the first instalment the entire amount became due and payable on 30-6-1976 and therefore the suit was barred by 30-6-1979. Admittedly the suit was filed after that date, therefore the suit is liable to be dismissed.
5. The trial Court held that Article 37 of the Limitation Act was not attracted and that Article 113 of the said Act was applicable and that the suit having been filed within three years from the date of the demand was within limitation. In that view of the matter, it decreed the suit on 30-6-1981. On appeal by the defendant-appellant, the learned District Judge, West Godavari District, Eluru, confirmed the judgment of the trial Court and dismissed the appeal (A.S.146 of 1981) on 24-4-1985. Aggrieved by the judgment and decree of the appellate Court, the defendant filed the second appeal.
6. Sri.M.V.R.N. Acharya, the learned counsel appearing for the appellants, who led the batch has contended that Article 37 of the Limitation Act applies and that all the suits are barred by limitation; the loan was advanced on the basis of promissory note, Ex.A-3, and the hypothecation bond, Ex.A-4, and therefore, under the terms of Ex.A-4 the whole amount became due in June, 1976 and the suits having been filed in 1980 are clearly barred by limitation under Article 37 of the Limitation Act.
7. Sri K.Mangachari, the learned counsel for the appellant in one of the appeals, contended that Ex.A-1 could not be taken as the basis of the loan, and if it was so taken, the Bank would not be entitled to interest as Ex.A-1 did not provide payment of any interest. The learned counsel further contended that Article 37 alone was applicable and therefore the suit was barred by limitation.
8. Sri CKodandaram, the learned counsel who appeared for the appellants in some of the second appeals, contended that Ex.A-1 could not be read in isolation and that Exs. A-1, A-3 and A-4 have to be read together; so read, having regard to the conditions in Ex.A-4, the suit is clearly barred by limitation under Article 37.
9. Sri M.S.K. Sastry, the learned counsel appearing for the respondent Bank in the second appeals, conceded that Exs.A-1, A-3 and A-4 had to be read together to determine the terms and conditions of the loan. He however contended that the Bank waived the first, second and the third default and made a demand for the entire amount which became due under Ex.A-4 by issuing the suit notices and that all the suits were filed within three years from the date of the demand, and that in the circumstances of the case only Article 113 of the Limitation Act was applicable, and therefore, the suits were within limitation.
10. Sri Harnath, the learned counsel who appeared for the appellant-Bank in S.A.791 of 1987, contended that the condition in Ex:A-4 entitled the Bank to recall the whole amount in the event of default of payment of any one of the instalments and that the loanee could not be permitted to take the benefit of his own default and as the Bank waived the default, the suit filed within three years from the date of demand was within limitation.
11. On the above contentions two questions arise for consideration,-
(1) Which Article in the Schedule to the Limitation Act applies to the facts of the case; and
(2) Are the suits within limitation?
We shall deal with these questions together. The learned counsel for the parties agreed that for determining the nature of transaction Exs.A-1, A-3 and A-4 have to be read together. Ex.A-1 is the application given by the defendant-appellants to the Bank for loan. It contains certain conditions of which the one relevant for our purpose is that the loan was to be repaid in five equal instalments commencing from June, 1976 or from the date of first commissioning of the sugar factory (November, 1975). No communication was received by the defendants to their loan applications from the Bank. But from Ex.A-8 it is clear that the loan was sanctioned subject to certain conditions. Those conditions include execution of promissory note and hypothecation bond, by the applicants for loan. Subsequently the defendants-appellants executed Ex.A-3, promissory note and Ex.A-4, hypothecation bond. The relevant portion of Clause 13 of Ex.A-4 reads as follows:-
“13. In the event of one or more of the following events occurring, namely, (i) if the borrower shall make default in payment whereof is hereby secured or any part thereof or in the performance or observance of any term or undertaking contained in this security and on the part of the borrower to be observed and performed, or
xx xx xx
(viii) if any circumstances shall occur which in the sole opinion of the Bank is prejudicial to or imperils or is likely to be prejudice or imperil the security but so that this clause shall not be read sui generis with the said Clauses (i) to (vii) herein, of which the bank shall be the sole judge, then the entire balance thereof outstanding shall become forthwith due and payable and the Bank if it thinks fit shall be entitled at the risk and expense of the borrower without notice any time or times to enter (and for that purpose to do any necessary act, deed or thing) into or upon any lands, fields, premises where or wherein the hypothecated crops may be growing or standing or kept or stored and xxx xx
Provided always that nothing herein contained shall be deemed to prejudice, qualify or otherwise prejudicially effect the right of the Bank (which it is hereby expressly agreed the Bank has and shall have) to recover from the borrower the balance due to the Bank from the borrower upon the account or accounts and under the aforesaid facility/ facilities notwithstanding that all or any of the said hypothecated crops may not have been realised.”
Thus it is clear that the loan was not advanced on the conditions mentioned in Ex.A-1, but was sanctioned on the condition mentioned in the sanction-letter, that is, on the execution of the promissory note Ex.A-3 and the hypothecation bond Ex.A-4. Paragraph 9 of the plaint also refers to the application and acceptance of the terms of application and execution of the promissory note and the hypothecation bond. It is further stated therein that the bank was entitled to claim the entire amount of loan due to breach of terms of agreement of hypothecation and has recalled the entire amount due from the defendant by issuing demand notice. On these facts, in our opinion, Article 37 of the Limitation Act would apply, which is in the following terms:-
"Description of Period of Time from which
suits. Limitation period begins
to run.
Article 37: On a promissory Three Years. When the default is made unless
note or bond payable, by instalments, where the payee or obligee
which provides that if default be waives the benefit of the
made in payment of one or more provision and then when fresh
instalments the whole shall be default is made in respect of
due. which there is no such waiver."
In Column 1 of Article 37 which gives description of the suit, shows that it applies to suit based on a promissory note or bond payable by instalments which provides that if default be made in one on more instalments, the whole shall be due. Article 37 falls in part II of the schedule which deals with suits relating to contract. In the cases on hand the terms and conditions of contract of loan that the amount is payable in instalments and that if default is made in payment of one or more instalments the whole amount shall be due, have to be gathered by reading Exs.A-4, Ex. A-3 and Ex.A-4 have to be read tegether. In our view, Article 37 is not confined to suits where the terms and conditions of loan by instalments with default clause are contained in a promissory note or a bond but is also applicable to suits of the description contained therein where transaction of loan is contained in documents more than one. What is germane is the description of suit given in Column 1 of Article 37 which may be based on a single document-promissory note or bond-or on documents more than one. If that be so, the time for purposes of limitation, which is three years in such a case, begins to run when the default is made unless the payee or the obligee waives the benefit of the provision and then when fresh default is made in respect of which there is no such waiver.
12. In these cases the first instalment fell due on 30-6-1976. The second instalment fell due on 30-6-1977, and the third instalment became due on 30-6-1978. None of the said instalments was paid. A demand was, however, made by notice dated 5-5-1979 recalling the whole amount. As the very first instalment was not paid on 30-6-1976, the whole amount of loan had become due and, therefore, the limitation began to run from 30-6-1976, unless, of course, the benefit of Clause 13 was waived by the plaintiff on 30-6-1976 in which case the whole amount would become due on the second default on 30-6-1977. Again if the right to claim the whole amount was waived on 30-6-1977, that is, on the date when the second instalment became due but was not paid, then the limitation would commence from 30-6-1978 on default in payment of the third instalment, and in respect of which no waiver is claimed, and so on. It is true that the loanee-appellants cannot compel the creditor to proceed against them on the happening of the first default and that no person can be permitted to take the benefit of his own default; the option is that of the creditor. He at his option is entitled either to claim the whole amount on default of payment of any instalment or to waive the default and receive the instalment after the due date by waiving the right to claim the whole amount and allow the loanee to pay the amount which had fallen due in instalments as per the agreement. Whether the creditor has waived his right of recovering the whole amount due to the default of the loanee in non-payment of the instalment, is a mixed question of fact and law. Therefore, where the creditor has waived his right to recover the whole amount on default in payment of instalment, he will have to plead waiver. Waiver is an intentional act; it may be express or implied. The plea of waiver can be established either by leading positive evidence or having regard to the facts and circumstances of the case, it can also be inferred. But mere inaction of the creditor in enforcing the bond for recovery of the whole amount which had become due on the default of the debtor in payment of the instalment cannot, in the absence of specific pleading, be regarded as waiver so as to postpone the ‘ starting point of limitation. In the instant case, the plaintiff neither pleaded waiver, nor placed any material before the Court to show that he has waived the benefit of suing for the whole amount on the default in payment of the first instalment. Therefore, in the event of the suit having become barred by limitation, he cannot be allowed to turn round and say that waiver has to be inferred in the circumstances of the case.
13. In Nicholson Bank v. Rajagopala Aiyar, AIR 1917 Madras 47. a learned single judge of the Madras High Court held that waiver is a mixed question of law and fact and whether the inference of waiver can be drawn from the facts proved is a question of law. In that case, the bond provided that the creditor may, if he chooses, either enforce the whole debt or proceed to recover it in instalments mentioned inspite of the default made by the creditor. It was held that the conduct of the creditor in not enforcing the terms of the bond at once was an important element in considering the question of waiver.
In Vishwanath v. Sadashiva, AIR 1932 Nagpur, a Full Bench of the Nagpur High Court gave its opinion on reference that when a bond payable by instalments provides that if default is made in the payment of one or more instalments, the whole amount shall become due and default is made and the whole amount became due, but the creditor did nothing to show that he waived the benefit of the default clause during the period allowed by the Limitation Act for a suit for the whole amount, he could not subsequently sue for instalments counting limitation from the day on which these instalments would have fallen due, had there been no default clause.
14. In Jagat Jit Singh v. Manodat, AIR 1936 Cudh, 384. a learned single judge of the Oudh Chief Court took the view that where the obligee is given the right to sue for the whole amount on occurrence of default in payment of any instalments, it is open to him to waive the benefit in occurrence of the default in payment of instalments and yet to avail himself of that provision when a similar default takes place in the payment of subsequent instalment. The learned Judge held that it was not necessary for a creditor to adduce affirmative evidence in support of waiver and that it is generally to be inferred from all the surrounding circumstances of the case.
15. In Shahaji v. Tukaram, AIR 1946 Nagpur, 117. a learned single judge of the Nagpur High Court expressed the view that in a case falling under Article 75 (of Limitation Act, 1908) the plaintiff trying to get over the bar of limitation by urging waiver has to take his specific pleading on the point and support it by cogent evidence.
16. Thirumalachariar v. Varadappa, . That case came up before the High Court of Madras in second appeal. A learned Single Judge of that Court held that under Article 75 the period of limitation commences the moment there was default in payment of the instalment due; that where the suit was filed beyond three years from the date of such default, it would be prima fade out of time and would be within time only if the plaintiff had waived the benefit of the default provision. The learned Judge further held that whether there was a waiver or not was question of fact and it would have to be pleaded and established, if it was to be relied upon as a ground for the exemption from the bar of limitation provided by Article 75; the mere fact that the waiver would be to the advantage of the plaintiff inasmuch as that will save him from the bar of limitation, would not ipso facto be a proper basis for the view that he should be assumed to have waived the benefit. We are in complete agreement with the view expressed by the learned Judge.
17. In K. Madhavan v. N. Jayadevan, . Bhaskaran, J., (as he then was) held that to claim the benefit of waiver which is a mixed question of law and fact the plaintiff ought to allege and prove it, and that waiver being an abandonment of a right, it must be intentional, the intention being either express, implied or inferable from the conduct. He further observed that the plaintiff’s intention to waive his right must be manifest by his pleadings and abstinence from suing alone cannot be considered to be an act of waiver. The same view was also taken by P.A.Chowdary, J., in Second Appeal No. 241 of 1985. We are in agreement with the view expressed by the learned Judges. However, we would like to add that waiver of the right to sue for the whole amount pursuant to the terms and conditions of the bond is not the same thing as giving up the claim for the instalments which became due. Where the amount of loan is agreed to be paid in instalments, there being no default clause in the bond or the promissory note, if the debtor makes default in payment of instalments, it is open to the creditor to give up his claim to the first or the subsequent instalment, as the case may be, which are barred by limitation to bring the suit filed for recovery of the remaining instalments within limitation. Suit of this nature is governed by Article 36 of the Limitation Act. But if there is a default clause in the bond providing that on default of payment of any of the instalments the whole amount would become due, the creditor has to sue for the whole amount on the occurrence of the default. He cannot in such a situation give up the claim for the instalments which are barred by limitation and sue for the balance of the loan representing the remaining instalments, because on the happening of the default the whole amount of loan becomes due which is indivisible. In the event of waiving the benefit of the default clause on the first or the subsequent default what the creditor does is, he waives the right to sue for the whole amount on the default but allows the loanee or debtor to pay the amount as per the bond in instalments. However, on subsequent default in payment of instalments when again the whole amount becomes due and payable, the creditor, at his option, has to sue for the whole amount unless he opts to waive again. If he does not waive but does not also do anything to recover the amount which became due for over three years from the date of default, he cannot thereafter give up claim for the amount of instalments beyond three years to bring his suit within limitation; if however, he chooses to bring the suit within three years from the date of default he need not omit from the suit claim the amount of defaulted instalment in respect of which he has exercised waiver.
18. In the cases on hand as the plaintiff-Bank has not pleaded waiver as stated above, no waiver can be inferred in its favour by its omission to sue within the period of limitation from the date the whole amount became due on the default of payment of first instalment in June, 1976. The suits, having admittedly been filed beyond three years from June, 1976 are, therefore, barred by limitation and are liable to be dismissed.
19. Confronted with the situation that the waiver was not pleaded in these cases, Sri M.S.K. Sastry strenuously contended that Article 36 of the Limitation Act is not applicable, but only residuary Article 113 is attracted. He relied on the judgment of a learned single judge of the Madras High Court in Natesan Pillai v. Rathnam Pillai, 1969 (1) MLJ 82. That was a case where the amount was advanced on promissory note. Along with the promissory note a “Varthamanam letter” was executed on the same day, which provided payment of the loan amount in instalments. It also provided that in case of default by the debtor of payment of any of the instalments, the entire principal and interest would become payable on the date of default. The learned judge held that Article 73 (of 1908 Act) (Article 35 of the new Act) was not applicable but the residuary article was attracted. The learned Judge took the view that Article 35 would be attracted when the bill of exchange or promissory note payable on demand was not accompanied by any writing restraining or postponing the right to sue and in that case as the promissory note was accompanied by a “letter of Varthamanam” Article 73 of the limitation Act was not attracted and that on those facts Article 80 of 1908 Act would apply. As observed above, in the instant case, having regard to the facts of the case, it cannot be said that the amount was advanced on the promissory note and that Ex. A-1 or Ex.A-4 has to be treated as a letter postponing the date of payment. All the parties proceeded on the premise that Exs.A-1, A-3, and A-4 have to be read together to ascertain the terms and conditions of the loan and we have already held that suits of the description contained in Column 1 of Article 37, even though based on documents more than one read together, would be covered by Article 37. Therefore, on the facts of this case, the residuary Article 113 of the Limitation Act does not apply.
20. For the above reason, we set aside the judgments and decrees of the Courts below in these second appeals except Second Appeal No. 791 of 1987 which is filed by the Bank, and accordingly allow the second appeals except S.A.791 /87 which is dismissed. Having regard to the circumstances of the case the parties are directed to bear their own costs in these second appeals.