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"Section 128. Surety's liability  The liability of the surety is co-extensive with that of the principal-debtor, unless it is otherwise provided by the contract."
"Section 129. 'Continuing guarantee'  A guarantee which extends to a series of transactions is called a 'continuing guarantee."
"Section 130. Revocation of continuing guarantee  A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor."

5.2) The relevant Articles in the Schedule to the Limitation Act, 1963 are extracted below :

"PROVIDED ALWAYS that the total liability ultimately enforceable against the Guarantor under this guarantee shall not exceed the sum of Rs.11,70,000/- together with interest thereon at the rate stipulated by the bank from date of demand by the Syndicate upon the Guarantor for payment."
"NOTWITHSTANDING the Borrower's Account or Accounts with the Syndicate may be brought to credit or the credit given to the Borrower fully exhausted or exceeded or howsoever the said financial accommodation varied or changed from time to time; notwithstanding any payments from time to time or any settlement of Account, this guarantee shall be a continuing guarantee for payment of the ultimate balance to become due to the Syndicate by the Borrower not exceeding Rs.11,70,000/- as aforesaid."
"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 Art. 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 :

10. Samuel (supra), no doubt, dealt with a continuing guarantee. But the continuing guarantee considered by it, did not provide that the guarantor shall make payment on demand by the Bank. The continuing guarantee considered by it merely recited that the surety guaranteed to the Bank, the repayment of all money which shall at any time be due to the Bank from the borrower on the general balance of their accounts with the Bank, and that the guarantee shall be a continuing guarantee to an extent of Rs.10 lakhs. Interpreting the said continuing guarantee, this Court held that 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 could not be said to have commenced running.