Margaret Lalita Samuel Vs. Indo
Commercial Bank Ltd. [1978] INSC 186 (25 September 1978)
REDDY, O. CHINNAPPA (J) 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 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 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,
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, 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]
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 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 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 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 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 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 925 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 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 926 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 927 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.
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 928 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 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 929 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 930
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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