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[Cites 13, Cited by 0]

Gujarat High Court

Gujarat Industrial Investment ... vs Ramanbhai Chandulal Parikh on 11 July, 2025

                                                                                                              NEUTRAL CITATION




                               C/FA/822/1984                               JUDGMENT DATED: 11/07/2025

                                                                                                              undefined




                                IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                               R/FIRST APPEAL NO. 822 of 1984


                        FOR APPROVAL AND SIGNATURE:


                        HONOURABLE MR. JUSTICE HEMANT M. PRACHCHHAK

                        =======================================
                                Approved for Reporting          Yes     No
                                                                Yes      -
                        =======================================
                             GUJARAT INDUSTRIAL INVESTMENT CORPORATION LTD.
                                                     Versus
                                    RAMANBHAI CHANDULAL PARIKH & ORS.
                        =======================================
                        Appearance:
                        MR RD DAVE(264) for the Appellant(s) No. 1
                        MR ASHOK L SHAH(737) for the Defendant(s) No. 5
                        SERVED BY PUBLICATION IN NEWS for the Defendant(s) No.
                        1,2,3,4
                        =======================================

                          CORAM:HONOURABLE MR. JUSTICE HEMANT M.
                                PRACHCHHAK

                                                       Date : 11/07/2025

                                                       ORAL JUDGMENT

1. Present first appeal is filed by the appellant (original plaintiff) against the judgment and decree dated 19.05.1983 passed by the learned Judge, Court No.3, City Civil Court, Ahmedabad (hereinafter be referred to as "the trial Court") in Civil Suit No. 912 of 1977 whereby the trial Court dismissed the Page 1 of 17 Uploaded by V.R. PANCHAL(HC00171) on Fri Jul 11 2025 Downloaded on : Fri Jul 11 23:47:26 IST 2025 NEUTRAL CITATION C/FA/822/1984 JUDGMENT DATED: 11/07/2025 undefined suit.

2. Facts of the present case are that the said suit was filed against respondent No.1 and late Shri Chandulal Pitambardas Parikh, who died during the pendency of the suit and is now represented by respondents No.1, 2 and 3 as legal representative of Shri Chandulal Pitambardas Parikh and Shri Kanchanbhai Chandulal Parikh as the Guarantor and the National Textile Corporation Limited, New Delhi (respondent No.5) for recovery of an amount of Rs.19,20,886.93 paise with interest at the rate of 9 1/2% per annum on Rs.9,50,000/- till payment and costs.

2.1 The appellant states that the said suit against respondent No.1 had abated. The appellant had conceded before the trial Court that the claim against repsondent No.5 could not be pressed and, therefore, no decree against it could be passed at the trial of the suit. That the respondents have filed their written statements before the trial Court opposing the suit.

2.2 The trial Court has, after hearing the both sides and considering the evidence on record, framed the following issues at Exhibit 61:-

(1) Has the suit been filed within the period of limitation? (2) Is the suit contrary to and barred by the provisions -

1. the stick tetile undertaking (Nationalization) Act, Page 2 of 17 Uploaded by V.R. PANCHAL(HC00171) on Fri Jul 11 2025 Downloaded on : Fri Jul 11 23:47:26 IST 2025 NEUTRAL CITATION C/FA/822/1984 JUDGMENT DATED: 11/07/2025 undefined 1974,

2. the Industries (Development and Regulations) Act, 1951, and

3. the Bombay Relief Undertakings (Special Provision) Act, 1958 ?

(3) Does the suit suffer from the vice of misjoinder of parties as contended by defendants no.2 and 3 ?

(4) Does the suit suffer from the vice of non-joinder of parties on account of plaintiff having not joined the authorized controller and the Government of India as party defendants to the suit as contended by defendants nos.2 and 3 ?

(5) Do defendants no.2 and 3 prove that on account of the provisions of the Sick Textile Undertakings (Nationalization) Act, 1974, all the aspects of the undertaking of defendant no.1 having vested at first in the Central Government and thereafter in defendant no.4 and then in defendants no.5 and 6l they as guarantors have been released from their liability to the plaintiff ? (6) Do defendants no.2 and 3 prove that their liability as guarantors has come to an end on the administration of the mills of defendant no.1 having been taken over by the authorized controller ?

(7) Do defendants no.2 and 3 prove that the deed of guarantee executed by them is without consideration ? (8) Do defendants no. 2 and 3 prove that the plaintiff was negligent in taking proper and necessary timely steps for Page 3 of 17 Uploaded by V.R. PANCHAL(HC00171) on Fri Jul 11 2025 Downloaded on : Fri Jul 11 23:47:26 IST 2025 NEUTRAL CITATION C/FA/822/1984 JUDGMENT DATED: 11/07/2025 undefined realization of its dues and that, therefore, they as guarantors have been discharged from their liability ? (9) Do the defendants no.2 and 3 prove that the plaintiff has committed acts and omissions inconsistent with their rights with the result that their eventual remedy against defendant no.1 has been impaired and that, therefore, they as guarantors have been discharged from their liability ?

(10) Do defendants no.2 and 3 prove that the only remedy now open to the plaintiff is to approach the Commissioner for payment appointed under the Sick Textile Undertakings (Nationalization) Act, 1974 ?

(11) Does the plaintiff prove that the defendants or any of them owe to it Rs.19,20,886.95 as claimed in the plaint ?

                        (12)       What order and decree ?


                        2.3      The trial Court has, on appreciation of evidence, answered

issues No.1 to 10 in negative and issue No.11 in affirmative partly and issue No.12 as per final order.

2.4 The trial Court has, considering the evidence on record and submissions canvassed on behalf of both the sides, dismissed the suit.

3. Being aggrieved and dissatisfied with the impugned judgment and decree, the appellant has preferred the present appeal.

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NEUTRAL CITATION C/FA/822/1984 JUDGMENT DATED: 11/07/2025 undefined

4. Heard Mr.R. D. Dave, learned counsel appearing for the appellant at length. Though served, the respondents have chosen not to remain present before the Court.

5. Mr.Dave, learned counsel appearing for the appellant has submitted the same facts which are narrated in the memo of appeal and has submitted that the trial Court has committed an error in coming to the conclusion that the suit was barred by limitation and the guarantee bond was a deed of simple guarantee. He has submitted that the guarantee was a continuing guarantee as contemplated under Section 129 of the Indian Contract Act and the disbursement of the loan at different stage would amount to "series of transaction" as mentioned in the deed of guarantee and/or Section 129 of the Indian Contract Act. He has submitted that the trial Court has committed an error in coming to the conclusion that the liability under the deed of guarantee was incurred by the respondents in May 1970 and the period of limitation was three years from that day and, therefore, the suit was barred by limitation. He has submitted that the approach of the trial Court on the construction of the deed of guarantee is false and not in conformity with the provisions of the law. He has submitted that the decisions of the Hon'ble Supreme Court as well as this Court and/or other High Courts relied upon by the appellant have not been considered by the trial Court while passing the impugned judgment and decree.

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NEUTRAL CITATION C/FA/822/1984 JUDGMENT DATED: 11/07/2025 undefined 5.2 Mr.Dave, learned counsel for the appellant has submitted that in view of the aforesaid facts and the decisions, the appeal deserves to be allowed and the impugned judgment and decree deserves to be quashed and set aside.

5.3 Mr. Dave, learned counsel for the appellant has submitted that the trial Court has complete overlooked and ignored the fact that the respondents have applied for financial assistance somewhere in the year 1970 and the amount of financial assistance to the tune of Rs.12,00,000/- was advanced to the respondents for the purpose of purchasing 10% Redeemable Cumulative Preference Shares and they have accepted the terms and conditions of the loan advance, which are stipulated in the loan agreement, hence, the said amount was not repaid along with interest and, therefore, the appellant has initiated proceedings to recover the amount from the principal borrower as well as guarantors, however, the same was not considered by the trial Court while dismissing the suit. He has submitted that the trial Court has mainly dismissed the suit for delay in initiation of the proceedings that the suit was not filed within the limitation. He has submitted that at the same time, the trial Court has committed an error of law and facts in considering the fact that it is continuous correspondence between the appellant and the respondents. He has also submitted that the trial Court has committed serious error of law and facts while considering the case of the present appellant has wrongly applied law laid down by the Hon'ble Supreme Court. It is submitted that since Page 6 of 17 Uploaded by V.R. PANCHAL(HC00171) on Fri Jul 11 2025 Downloaded on : Fri Jul 11 23:47:26 IST 2025 NEUTRAL CITATION C/FA/822/1984 JUDGMENT DATED: 11/07/2025 undefined the guarantee was continued and, therefore, the cause of action was surviving at the time of filing the suit, however, the trial Court has come to the conclusion that it was a simple guarantee and not continuing guarantee which would cover under Section 129 of the Indian Contract Act and, therefore, the period of limitation was already gone and the suit was time barred whereby the trial Court has completely discarded the facts and evidence on record. He has submitted that in fact though there was specific contention raised by the appellant and it was agitated before the trial Court that it was a continuous guarantee which was covered under Section 129 of the Indian Penal Code and therefore the right to issue was arisen and the limitation for the suit and the same was without any opportunity given to the appellant.

5.4 Mr. Dave, learned counsel for the appellant has submitted that the guarantee executed by the respondents was a continuing guarantee and therefore, the limitation for filing the suit against the respondents was required to be reckoned from the date of issuance of the demand notice by the appellant. He submitted that the demand notice was dated 05.07.1976 and the suit was filed against the respondents on 24.03.1977 and, therefore, the suit against the respondents was filed within the time limit. Mr.Dave, learned counsel has further argued that the first installment for repayment of the loan was due and payable and therefore, liability of respondent No.1 to repay the entire loan was continuing liability till the last installment was to be Page 7 of 17 Uploaded by V.R. PANCHAL(HC00171) on Fri Jul 11 2025 Downloaded on : Fri Jul 11 23:47:26 IST 2025 NEUTRAL CITATION C/FA/822/1984 JUDGMENT DATED: 11/07/2025 undefined paid and therefore, the guarantee executed by the respondents was to continue till the last installment was due and payable by respondent No.1 and therefore, the guarantee given by the respondents was a continuing guarantee and the limitation for filing the suit could not be said to have been over on completion of three years from the date of first installment but the limitation would be reckoned from the date of the demand notice issued by the appellant i.e. 05.07.1976 and therefore, the suit filed by the appellant against the respondents was within time.

5.5 In support of his submissions, Mr.Dave, learned counsel has relied upon the following decisions :-

(1) Mohammad Mustafa Vs. Sri Abu Bakar and others reported in AIR 1971 SC 361;
(2) State Bank of India Vs. S. N. Goyal reported in AIR 2008 SC 2594 : (2008) 8 SCC 92;
(3) Gujarat Industrial Investment Corporation Ltd Vs. Rajit Suodhbhai Shah and others reported in 2013 (5) GLR 4289;

5.6 Relying on all the above-said authorities, Mr.Dave, learned counsel has submitted that the guarantee given by the respondents for all the purposes was a continuing guarantee. Reading the terms of the guarantee, intention of the parties could well be gathered and the respondents in unequivocal terms have guaranteed for repayment of full loan amount Page 8 of 17 Uploaded by V.R. PANCHAL(HC00171) on Fri Jul 11 2025 Downloaded on : Fri Jul 11 23:47:26 IST 2025 NEUTRAL CITATION C/FA/822/1984 JUDGMENT DATED: 11/07/2025 undefined irrespective of time limit. Whether a particular guarantee is a continuing guarantee or not, could be carved out from the terms of the guarantee itself and the intention of the parties derived from the said terms. As per his submission, the guarantors very clearly intended to pay the loan amount till the entire dues under the loan sanctioned by the appellant is cleared.

5.7 Mr.Dave, learned counsel has submitted that the appeal deserves to be allowed and the impugned judgment and order passed by the trial Court deserves to be quashed and set aside.

6. Of course, this appeal was admitted way back in the year 1984. It is to be noted that though the notice was served upon the respondents, they have chosen not to appear before the Court. It appears that earlier the respondents represented by the concerned counsel, but after retirement of the concerned counsel, again the notice came to be issued by the Court and it was served upon the respondents, however, they have chosen not to remain present. Since the matter is pending from 1984, therefore, no further time is required to be granted for service of the notice and the appeal is proceeded in absence of the respondents. Earlier, the appeal was heard by the Coordinate Bench of this Court, however, the judgment was not pronounced within a reasonable time and hence the matter was released and, therefore, the matter is come up for hearing before this Court.

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7. From the record, it appears that the suit was filed in the year 1977 by the appellant for recovery of the amount of Rs.19,20,886.93 paisa along with the interest at the rate of 9 1/2% on the amount of Rs.9,50,000/-.

8. The contention raised by Mr.Dave, learned counsel with regard to the dismissal of the suit on the ground of limitation is concerned, the trial Court has prima facie inferred from the record that since the guarantee which was advanced by the respondents is a simple in nature and it was not continuous and it is not continued guarantee and, therefore, invoking under Section 129 of the Indian Contract Act, the cause of action cannot be stretched. So far as the evidence of the respondents as discussed and the reason recorded by the trial Court in para - 14 onward are concerned, the trial Court has not considered the fact that the guarantee was continuing guarantee and not required to be renewed by the respondents. Though the trial Court has framed issues in favour of the appellant, the trial Court has also framed the issue that the suit was filed within a period of limitation and in fact, the trial Court has considered the fact that since the guarantee was not continued guarantee and, therefore, the suit was not filed within limitation period, for which, whether the guarantee was continued or not or there was no any issue framed by the trial Court. With regard to the guarantee is concerned, there was no issue framed on the contrary, the trial Court has framed the issues No.6, 7 and 8 as under:-

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NEUTRAL CITATION C/FA/822/1984 JUDGMENT DATED: 11/07/2025 undefined "(6) Do defendants no.2 and 3 prove that their liability as guarantors has come to an end on the administration of the mills of defendant no.1 having been taken over by the authorised controller ?
(7) Do defendants no.2 and 3 prove that the deed of guarantee executed by them is without consideration ?
(8) Do defendants no. 2 and 3 prove that the plaintiff was negligent in taking proper and necessary timely steps for realization of its dues and that, therefore, they as guarantors have been discharged from their liability ?"
9. The said issues answered in negative and, therefore, the contention raised by Mr.Dave, learned counsel deserves to be considered in light of the facts of the present case. On perusal of the record and the impugned judgment and decree passed by the trial Court, the finding recorded by the trial Court is without jurisdiction as the trial Court has not framed the issue with regard to the nature of the guarantee, however, the suit was decided on that count only.
10. It is relevant to refer to and reproduce the provision of Section 129 of the Indian Contract Act hereinbelow.
"Continuing guarantee".

129."Continuing guarantee".-A guarantee which extends to a series series of transactions is called a "continuing guarantee".

11. On perusal of the provisions of Section 129 of the Indian Contract Act, it appears that when the continuing guarantee advanced by the guarantors, hence, it is not required to be renewed and therefore it cannot be said that it is a simple Page 11 of 17 Uploaded by V.R. PANCHAL(HC00171) on Fri Jul 11 2025 Downloaded on : Fri Jul 11 23:47:26 IST 2025 NEUTRAL CITATION C/FA/822/1984 JUDGMENT DATED: 11/07/2025 undefined guarantee and not continued guarantee.

12. Before dwelling into facts of the case, it is relevant to refer to the decision of this Court in the case of Rajit Subodhbhai Shah (supra) wherein the Division Bench of this Court had an occasioned to discuss such issue at length and the contention raised by the appellant was dealt with in para - 12 which reads as under:-

"12. Before we deal with the rival contentions of the learned counsel for both the parties, I may refer to the relevant terms of the guarantee executed by the respondents.
"1. This Guarantee shall be continuing security binding on us and our respective personal representatives until the expiration of three calender months from the receipt by the Corporation of a notice in writing to discontinue it and notwithstanding the discontinuance by or any release or granting of time or indulgence to us this Guarantee shall remain a continuing security and if discontinued by notices this Guarantee shall nevertheless continue to be available (subject to the aforesaid limit of total amount) for and shall extend for all indebtedness and liabilities of the principal to you at the date of receipt of such notice whether then certain or contingent and whether then payable forthwith or at some future time or times and all guarantees signed by the Principal and delivered to you and that in the event of any one of us or both of us dying or becoming under disability the liability of the executors, administrators or legal representatives of the person dying and of his estate shall continue until the expiration of three calender months from the receipt by the Corporation of a written notice given by such legal representatives to determine this Guarantee. You shall be at liberty on receipt of any such notice as contemplated in this Clause at any time within the three calender months to appropriate all payments subsequently made to you by the principal and not expressly appropriated to the account without prejudice to our respective estate's liability to the extent aforesaid.
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2. The Guarantee is additional and without prejudice to any securities or obligations which you may now or hereinafter have from us or any of us, from the principal or from anyone else in respect of any indebtedness or liabilities hereby guaranteed and all rights and remedies in respect thereof are reserved.
3. This Guarantee shall be continuing Guarantee and shall not be considered as wholly or partially satisfied or exhausted by any payments from time to time made to the Corporation or any settlement of any accounts or by reason of the account being brought to a credit at any time or from time to time. The Guarantee shall continue in force notwithstanding the discharge of the principal by operation of law or by the death of any of us or both of us and shall cease only on payment of the amount guaranteed hereunder by us.
4. We expressly agree that the Corporation shall have full discretionary power, without our further assent or knowledge and without discharging or in any way affecting our respective liability under this Guarantee, from time to time AND at any time to negotiate with the Principal and settle and/or alter the terms and conditions, to promise to grant time or indulgence to or not to sue the Principal or any person liable with or for the Principal, whether as Guarantors or otherwise or compound or make any other arrangements with the Principal or any person so liable with or from the Principal as the Corporation may think fit and to hold over, renew, vary, exchange or release in whole or in part and from time to time any securities held or to be held by the Corporation for or on account of the moneys and liabilities intended to be hereby secured or any part thereof. We also jointly and severally agree that we shall not be discharged from our liability by your releasing the Principal debtor or by any act or omission of yours the legal consequences of which may be to discharge the Principal debtor or any act or omission of yours which would, but for this present provision, be inconsistent with our rights as sureties or by your omission to do any act, which, but for this present provision, your duty to us would have required you to do. We hereby consent to each and every of the acts mentioned above as you may think fit. Moreover, though as between the principal debtor and us, we are sureties only, we agree that as between yourselves and ourselves, we are Principal debtors jointly with the principal and accordingly we shall not be entitled to any of the rights conferred on Page 13 of 17 Uploaded by V.R. PANCHAL(HC00171) on Fri Jul 11 2025 Downloaded on : Fri Jul 11 23:47:26 IST 2025 NEUTRAL CITATION C/FA/822/1984 JUDGMENT DATED: 11/07/2025 undefined sureties by Sections 133, 134, 135, 139 and 141 of the Contract Act...."

13. In the case of Mohammad Mustafa (supra), the Hon'ble Supreme Court has held and observed in para - 5 as under:-

"5. The High Court by its Judgement dated 7.04.1966 dismissed the appeal of the appellant, 1st defendant, but partly allowed the cross-appeal of the respondent. It held that the properties mentioned in List C-1, C-2, D-1 and F are also joint properties. In the course of its Judgement it observed:
"The true position appears to be this: Sanaullah had three pharmacies. He was getting old. He placed the three pharmacies in charge of his three sons for purposes of management. There was no gift as alleged by the appellant. Management of three pharmacies by the three sons separately continued after Sanaullah's death. As each brother was incharge of one pharmacy, profits were not distributed. This arrangement continued upto the date of the suit."

This finding having been reached without proper pleadings and necessary issues the same cannot bind any of the parties to the suit though it does indicate the serious injustice that is likely to happen to the appellant because of his defective pleadings."

14. So far as the invoking the guarantee is started from the date of the notice came to be issued under Article 55 of the Limitation Act is concerned, the Division Bench of this Court has held that the facts of the case for the purpose of Limitation Act, would be governed by Article 55 of the Limitation Act and since the suit was filed within three years from the date of the demand notice, the suit filed by the appellant was within the time limit. The learned Judge has thus committed error in holding that the Page 14 of 17 Uploaded by V.R. PANCHAL(HC00171) on Fri Jul 11 2025 Downloaded on : Fri Jul 11 23:47:26 IST 2025 NEUTRAL CITATION C/FA/822/1984 JUDGMENT DATED: 11/07/2025 undefined suit filed by the appellant against the respondents was time barred. The judgment and decree passed by the learned Judge dismissing the suit of the appellant against the respondents, therefore, cannot stand upon scrutiny of law. It is an admitted fact that in the present case on receipt of the notice, the suit was filed within time and, therefore, the finding recorded by the trial Court is erroneous and illegal and thus, the impugned judgment and decree deserves to be quashed and set aside.

15. So far as another question with regard to absence of the pleadings, the trial Court has not framed the issue relatives to the nature nature of guarantee. Mr.Dave, learned counsel has referred to the decision of the Hon'ble Supreme Court in the case of S. N. Goyal (supra) and has submitted that in the absence of appropriate pleading on a particular issue, there can be no adjudication of such issue; adjudication of a dispute by a Civil Court is significantly different from the exercise of power of judicial review. Thus, without framing the issue with regard to nature of guarantee, the trial Court has decided the same and dismissed the suit only on that ground. In view of the above, I am in agreement with the said fact. It is well settled by the decision of the Hon'ble Supreme Court that unless and until there is specific pleadings in framing of the issue relates to the said pleadings, the finding recorded by the trial Court is illegal, unjust and improper. In the absence of the pleadings includes the averments and grounds to challenge the order of removal on the said additional ground. No issue was framed in that behalf.

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NEUTRAL CITATION C/FA/822/1984 JUDGMENT DATED: 11/07/2025 undefined No amount of evidence on a plea that was not put forward in the pleadings can be looked into. In the absence of necessary pleading and issue, neither the trial court nor the appellate court could have considered the contention and recorded a finding thereon. However, in the present case, the trial Court, without framing the issue with regard to the nature of the guarantee, has recorded the finding and dismissed the suit and therefore it is clear violation of settled legal principle under the provision of Order XX Rule 4 of the Civil Procedure Code. Sub Clause (1) and (2) of Order XX Rule 4 reads thus:-

"4.Judgment of Small Cause Courts. - (1) Judgments of a Court of Small Causes need not contain more than the points for determination and the decision thereon.
(2) Judgment of other Courts. - Judgments of other Courts shall contain a concise statement of the case, the points for determination, the decision thereon, and the reasons for such decision."

16. In the present case, the trial Court has gone beyond the pleadings and even no issue with regard to the nature of guarantee has been framed, however, on the ground of limitation, the trial Court has dismissed the suit. Mr.Dave, learned counsel has referred to the decision in the case of Mohammad Mustafa (supra) and submitted that in the finding having been reached without proper pleadings and necessary issues the same cannot bind any of the parties to the suit though it does indicate the serious injustice that was likely to happen to the plaintiff because of its defective pleadings.

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17. In view of the facts, this Court is of the opinion that the trial Court has committed an error of facts and law in passing the impugned judgment and decree and hence the same deserves to be quashed and set aside.

18. In the result, the appeal is allowed. The judgment and decree dated 19.05.1983 passed by the learned Judge, Court No.3, City Civil Court, Ahmedabad in Civil Suit No. 912 of 1977 insofar as the respondents are concerned is hereby quashed and set aside. Consequently, the suit against the respondents is allowed. The appellant shall be entitled to recover Rs.19,20,886.93 paise from the respondents No.2 and 3 with interest at the rate of 9 1/2% per annum from the date of the suit till the same is realized. Decree shall be drawn accordingly. Registry is directed to transmit back the record and proceedings to the trial Court forthwith.

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