Madras High Court
Subramania Gurukkal And Another vs State Bank Of India (Adb) ... on 28 April, 2000
Equivalent citations: [2001]103COMPCAS899(MAD), 2000(3)CTC630
Author: D. Murugesan
Bench: D. Murugesan
ORDER
1. These second appeals have been preferred by the defendants in the suit challenging the judgment and decree passed by the learned sub judge, Vridhachalam in A.S.No.40 of 1984 and in A.S.No.46 of 1984 allowing the appeals filed by the plaintiff/respondent herein. The plaintiff/respondent in the second appeals filed two suits in O.S.No.1345 of 1982 and O.S.No.1346 of 21982 before the learned District Munsif, Vridhachalam for recovery of a sum of Rs 11,720. According to the plaintiff, the first defendant obtained a sum of Rs 11,720 from the plaintiff-bank towards agricultural loan for the period 1976-1977 and executed two promissory notes for a sum of Rs.5,600 each on 28.5.76 to and in favour of the second defendant who in turn transferred the same in favour of the plaintiff-bank. On the same day both the defendant have also jointly executed a standing crop hypothecation agreement. The said promissory note were renewed jointly by both the defendants on 16.2.79. However, on 12.2.82, the first defendant alone renewed the promissory notes and the second defendant did not renew the same. When the defendants failed to return the loan when demanded the plaintiff was compelled to file the suits.
2. The suits were resisted by the first defendant stating that the revival letter dated 12.2.82 said to have been written by him was not genuine as the same was obtained by coercive measure, therefore the same cannot be taken into consideration and in the absence of such revival, letter the suits were barred by limitation. The second defendant resisted the suits on the ground that he did not execute any revival letter and therefore the suits were barred by limitation.
3. On the basis of the above pleadings the trial Court framed as many as five issues, more particularly as to (1) whether the alleged letter dated 12.2.82 reviving the promissory notes was true and reliable? and (2) whether the suits were filed within the period of limitation? The trial Court while considering the first issue namely as to whether the revival letter dated 12.2.82 was genuine or obtained by coercive method, came to the conclusion that the said revival letter was obtained by coercive method and therefore the same cannot be taken into consideration while considering the question of limitation. The trial Court therefore, held that the suits filed beyond the period of three years from 16.2.79 were barred by limitation. The trial Court also found that the standing crop hypothecation agreement cannot be taken into consideration for the purpose of deciding the question of limitation and accordingly dismissed the suits.
4. However, on appeal at the instance of the plaintiff-bank, the lower appellate Court accepting the case of the plaintiff held that the first defendant had in fact gave the revival letter dated 12.2.82 and therefore the suits were not barred by limitation as the same were filed within the period of three years from 12.2.82. The lower Appellate Court further held that the hypothecation agreements marked as Exs. A-5 and A-6 have to be taken into consideration for the purpose of the limitation and if that be so, so long as the said agreements are alive, the suits cannot be construed as barred by limitation. On the above findings, the appellate Court decreed the suits.
5. It is against the said judgment and decree the defendants have preferred the above-second appeals. The following question of law had been framed by this Court when the second appeals were admitted:-
"Whether the lower appellate Court was right in the view it took that the suits are not barred by limitation is the substantial question of law which arises for consideration in these second appeals?"
6. Thiru.C.R.Prasannan, learned, counsel for the appellants submitted that inasmuch as the period for which the promissory notes were renewed from 16.2.79 had come to end on 15.2.82 and in the absence of any further revival letter in the eye of law, the suits filed after the period of three years from 16.2.79 is hit by the limitation. The learned counsel further argued that the alleged revival letter dated 12.2.82 written by the first defendant was obtained by coercive manner and the said revival letter cannot stand to the scrutiny of law and therefore cannot be taken into consideration while deciding the question of limitation. The learned counsel further argued that in so far as the second defendant is concerned, he did not even execute any such alleged revival letter and therefore the suits are clearly barred by limitation against the second defendant. The learned counsel further submitted that the standing crop hypothecation agreements namely Exs.A-5 and A-6 will not in any way help the plaintiff to sustain the contention as to the period of limitation. In this regard, the learned counsel placed reliance on the pronouncement of the Apex Court in the judgment reported in Municipal Council, Ahmed Nagar and another v. Shah Hyder Baig and others . The learned counsel relying upon the above judgment argued that the question of limitation is a mixed question of law and fact and factually in the absence of any revival letter in the eye of law the lower appellate Court ought not to have come to a different conclusion when the trial Court on proper appreciation of evidence had held that the revival letter dated 12.2.82 was obtained by coercive method from the first defendant and therefore the same cannot be taken into consideration at all. Therefore, the learned counsel submitted that the suits were barred by limitation and the lower appellate Court also ought to have dismissed the suits.
7. Thiru.R.Sreekrishnan, learned counsel appearing for the respondent firstly would contend that after the amendment to the Code of Civil Procedure in the year 1976, the High Court can entertain and dispose of the second appeals only in terms of the amended provisions of Section 100, C.P.C. The cases on the hand did not fall under any of the clauses enumerated under Section 100 of C.P.C. and therefore the learned counsel would contend that the substantial question of law framed at the time of admission of the second appeals will not come within the purview of Section 100, C.P. C. Therefore the learned counsel submitted that the second appeals should be dismissed. Secondly, the learned counsel contended that as per the standing crop hypothecation agreements namely Exs.A-5 and A-6, the question of limitation has to be considered from the date of breach under Article 55 of Schedule to The Limitation Act, 1963 only and not on the basis of the promissory notes executed by the defendants. For the said submission, the learned counsel relied upon the judgment of the Apex Court reported in Margaret Lalitha Samuel v.
Indo-Commercial Bank Ltd., . The learned Counsel further Submitted that on facts the lower appellate Court had come to the conclusion that the clauses of Standing Crop Hypothecation agreements clearly contain, a clause of continuing guarantee and the findings arrived on facts need not be interfered. Further the learned counsel submitted that even on merits, the suits filed against the first defendant were well within the limitation as the first defendant had given revival letter on 12.2.82.
8. I have given my careful consideration to the rival, contentions. Let me first consider the question as to whether the suits are barred by limitation. It is well established principle that in a suit for money claim, the suit should be initiated within a period of three years from the date of the breach. In the given case, the promissory notes were initially executed on 28.5.76 and were renewed for a further period of three years on 16.2.79. The suit, if filed on the basis of the promissory notes ought to had been filed on or before 15.2.82. However the suits were filed on 10.11.82 and in such event the suits were barred by limitation. However, yet another question to be considered by this Court while deciding the question of limitation is as to whether the standing crop hypothecation agreement can form the basis of the suits and if so whether the suits are barred by limitation if preferred on the basis of the said hypothecation agreement. The standing crop hypothecation agreements have been marked as Exs.A-5 and A-6. In the said agreement the relevant clauses relied upon by the learned counsel for the respondent are Clause Nos. 1 and 22 which read as follows:-
CLAUSE NO.1:
Till the due payment and adjustment of the liability under the Demand Promissory Notes the whole of the crops existing or to be raised from time to time in future whether already sown or to be sown in future for the current and future agricultural seasons or standing crops or cut and stacked on the lands of the total extent of 10 acres situated at Seppakkam villages, Vridhaichalam Taluk, South Arcot District and more Particularly described in the schedule hereto (hereinafter called on i.e. "Said Land") or stored at the Borrower's godowns, threshing floors, granaries or premises or whereverelse held on account of on behalf of the Borrower Shall Hereby Stand Hypothecated to the Bank or its assigns by way of first charge as security for the payment to the Bank on demand of all moneys payable by the Borrower to the Bank in respect of the said Cash Credit Account/Accounts and also as security for payment and discharge of all the liabilities of the Borrower to the Bank solely or jointly with others together with all interests, charges, costs and expenses payable to or incurred by the Bank in respect thereof.
CLAUSE No.22:
In consideration of the Bank agreeing at the request of the Guarantors to grant accommodation to the Borrower and. as part of the security therefor, the said Guarantor personally guarantee to the Bank the sufficiency from time to time of the quantity and value of the Goods hereby hypothecated on the terms hereof and agree that the Bank shall be free without reference to the Guarantors to grant time and make any arrangement with the Borrower or any party liable and to vary renew, release, realise aid deal with the said goods and any securities, obligations or decrees aforesaid as the Bank think fit without impairing the obligations of the said Guarantors to the Bank in respect of the Guarantee or otherwise and also that if the Guarantors be more than one individual alt should be bound hereby jointly and severally.
In order to appreciate the question as to whether is there any continuing guarantee in the above clauses of standing crop hypothecation agreement. As per clause 1 of the said agreement it is clear that the guarantee expressed therein by the defendants is a continuing guarantee and the liability to repay survives till the due payment and adjustment of liability under demand promissory notes is fully honoured. In a case of 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 carryout obligation, the period of limitation would commence running only from the date of breach under Article 55 of Schedule to The Limitation Act, 1963. Article 55 of the Schedule to The Limitation Act, 1963 prescribes a period of three years in respect of suits filed for compensation for the breach of contract express or implied not specially provided for. In the said article relevant point for limitation is when the contract is broken (or there are no successive breaches), when the breach is in respect of which the suit is instituted occurs (where the breach is continuing) when it ceases. The said article has come up for consideration before the Apex Court on the application of the said. Article in case of continuing guarantee. The Apex Court in the judgment reported in Margaret Lalitha Samuel v. Indo-Commercial Bank Ltd., has held. as follows in paragraph 10:-
"In the case of a continuing the guarantee and. an undertaking by the defendant to pay any amount that may be due by a company to a bank on the general balance of its account or in other account so long as the account is alive account in the sense that it is not settled, and. there is no refusal on the pert of the guarantor to carry out the obligation, the period, of limitation for a suit to enforce the bond would not be said, to have commenced, running, Limitation would, only run from the date the breach under Article 115 of the Schedule to The Limitation Act, 1908".
In view of the above categorical pronouncement it has to be now seen as to whether the present two appeals fit-in with the above principles. It is admitted fact that the defendants have executed promissory notes 'when the first defendant took loan from the plaintiff-bank. It is also not disputed, that, the defendants have jointly executed standing crop hypothecation agreements marked as Exs.A-5 and A-6. The relevant clauses extracted above would clearly indicate that the defendants have in clear terms assured that till the due payment and discharge of the liability under the demand promissory notes the whole of the crops existing or to be raised, from time to time in future whether already sown or to be sown in future for the current and future agricultural sessions or standing crops are cut and stacked on the lands shall stand hypothecated to the bank or its assigns by way of first charge as security for the payment to the bank on demand of all moneys payable. Therefore it is very clear that till such time there was a breach under Article 55 of Schedule to The Limitation Act, 1963, it should be construed that the account is a live account. In the circumstances, the period of limitation shall commence running only when there was a breach under Article 55 of the Schedule to The Limitation Act, 1963. When the loan amount was not repaid, the plaintiff-bank in their lawyer's notice dated 9.6.82 marked as Ex.A-13 demanded the repayment. For the said demand, the first defendant namely Subramania Gurukkal in his reply dated 3.8.82 marked as Ex. A-15 while admitting the loan, took a stand that the claim for repayment was barred by limitation. The lawyer's notice issued to the second defendant was not replied though acknowledged. Therefore, the relevant date for the purpose of limitation would be from the date of the breach namely 3.8.82 when the first defendant declined to repay the loan, of course on the ground of limitation. If that date is taken into consideration, the suits filed on 10.11.82 were well within the period of three years and therefore the same were not barred by limitation. In that view of the matter the contention of the learned counsel for the appellant that the suits were barred by limitation as the same has been filed beyond a period of three years cannot be accepted. In a case of continuing guarantee even if the period of three years was over when a claim is made on the basis of the promissory note, so long as the amount is not settled by the borrower and the account is alive, the limitation will start only from the date of breach under Article 55 of Schedule to The Limitation Act, 1963 when there is a subsisting agreement proving continuing guarantee. Such a breach occurred in this case only when, the first defendant refused to repay the loan amount in his letter dated 3.8.82. Therefore the contention of the learned Counsel for the respondent that the suits were not barred of limitation has to be accepted. Accordingly, I hold that the suits are not barred by limitation. The next question would be as to whether the plaintiff is entitled, to the repayment of loan amount with interest. The defendants did not dispute the loan, or the actual, amount taken as loan. All that the defendants had pleaded was that the suits were barred by limitation. When once I hold that the suits were not barred by limitation, the plaintiff is entitled to succeed in respect of the claim for return of loan amount with interest. Therefore, I hold that the plaintiff is entitled to the repayment of loan amount with interest. The further contention of the learned counsel for the respondent that the present second appeals are liable to be dismissed, as the question of law framed would not come within the purview of the amended provisions of Section 100. I do not consider that a decision on this submission is necessary in this case in view of the fact that I have held in favour of the plaintiff on other grounds. Therefore, I am of the view that the contention raised by the learned counsel for the respondent with regard to the jurisdiction of this Court to decide the appeals in the absence of any substantial question of law need not be considered in the present second appeals.
9. For the above said reasons, I do not find any error in the judgment and decree of the appellate Court in coming to the conclusion that the suits were not barred by limitation and consequently the substantial question, of law framed by this Court is answered in favour of the plaintiff and accordingly the second appeals are dismissed confirming the judgment and decree of the lower appellate Court. However, there is no order as to costs.