Bombay High Court
Gammon India Ltd vs The Debt Recovery Appellate ... on 15 September, 2017
Bench: S.C. Dharmadhikari
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.740 OF 2006
Gammon India Limited, a company
Registered under the Companies Act,
1959, having its registered office at
Gammon House, Veer Savarkar Marg,
Post Box No.9129, Prabhadevi,
Mumbai - 400 025 .. Petitioner
V/s.
1) The Debt Recovery Appellate Tribunal;
2) The Debt Recovery Tribunal - I
at Mumbai,
Both having their office at
Schindia House, Ballard Estate,
Mumbai 400 038.
3) Andhra Bank, a body incorporate
Constituted under the Banking
Companies (Acquisition & Transfer of
Undertakings) Act, 1980 having its
Head Office at Andhra Building,
Sultan Bazar, Hyderabad-500 195
And
One of its Branch Office
Inter alia, at Nanavati Mahalaya,
18, Homi Modi Street, Fort,
Mumbai - 400 023 .. Respondents
......
Mr. Vishal Kanade i/b.M/s.Desai & Chinoy, Advocate for the
Petitioner.
Mr.Shilpan Gaonkar a/w. Tejal Kurdukar a/w. Dharmesh Pandya
i/b. M/s.Aswhin Pandya & Associates, Advocate for Respondent
No.3.
......
CORAM : S.C. DHARMADHIKARI AND
PRAKASH D. NAIK, JJ.
DATED : SEPTEMBER 15, 2017.
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ORAL JUDGMENT (PER PRAKASH D. NAIK, J.) :
The petitioner has invoked the writ jurisdiction of this
Court under Article 226 of the Constitution of India and has
prayed for issuance of the writ of certiorari and prayed for
quashing the order passed by the first respondent on 28 th
September, 2005.
2 The facts giving rise to the present petition are as
follows:
(a) The petitioner is a company registered under the provisions
of the Companies Act. Between 1976 and 1980 the 3 rd
respondent issued 42 Bank Guarantees in favour of the
State of Andhra Pradesh on behalf of the petitioner for
execution of works connected with Sri Sailam Hydro
Electric Project. The said Bank Guarantee/s were for an
aggregate value of Rs.73,90,320/-.
(b) Disputes arose between the petitioner and the State of
Andhra Pradesh under the contract between them. The
petitioner, thereafter, somewhere on 14 th June, 1984 filed
three suits in the City Civil Court at Hyderabad under
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Section 20 of the Arbitration Act, 1940. On 27th May, 1985,
the State of Andhra Pradesh invoked the said bank
guarantees issued by the third respondent.
(c) On 7th June, 1985, the respondent no.3 issued a letter to the
State of Andhra Pradesh wherein it was contended that
the invocation of Bank Guarantees by the State of Andhra
Pradesh was invalid and disputed its liability to make
payment under the same. The petitioner approached the
City Civil Court wherein three applications under Section
20 of the Arbitration Act, 1940 were pending, seeking an
injunction restraining the State of Andhra Pradesh from
encashing the said Bank Guarantees.
(d) In June 1985, the State of Andhra Pradesh filed four suits
against the respondent no.3 and the petitioner, seeking
orders directing the respondent no.3 to make payment
under the said Bank Guarantees. On 16th September, 1985,
the City Civil Court passed an interim order of injunction in
the suits filed by the petitioner restraining the State of
Andhra Pradesh from invoking the said Bank Guarantees.
The Court was also pleased to appoint an arbitrator to
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decide the disputes between the parties. On 4th November,
1986, the petitioner executed two counter guarantees in
favour of the respondent no.3. Under Clause (i) of the said
counter guarantees, the petitioner undertook to indemnify
the respondent no.3 in respect of obligations and liabilities
undertaken by it under the said Bank Guarantees.
(e) The State of Andhra Pradesh preferred an Appeal against
the said order of the City Civil Court before the Andhra
Pradesh High Court. By order dated 14 th March, 1988, the
said Appeal was rejected by the High Court. The State of
Andhra Pradesh preferred an Appeal against the Order of
the High Court before the Supreme Court. Vide order dated
17th March, 1994, the Hon'ble Supreme Court allowed the
Appeal of the State of Andhra Pradesh and vacated the
injunction restraining the encashment of the said Bank
Guarantees.
(f) On 22nd March, 1994, the State of Andhra Pradesh again
invoked the said Bank Guarantees. On 5 th May, 1994, the
petitioner deposited the entire amount of Rs.73,90,320/-
payable under the said 42 Bank Guarantees in the City Civil
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Court in the suits filed by the State of Andhra Pradesh. The
State of Andhra Pradesh was permitted by the Court to
withdraw the said amount. Having deposited the entire
amount claimed by the State of Andhra Pradesh, the
petitioner applied for dismissal of four suits filed by the
State of Andhra Pradesh before the City Civil Court.
However, this was opposed by the State of Andhra Pradesh
to press for interest on the amount for the said Bank
Guarantees.
(g) On 16th July, 1996, the suit of the State of Andhra Pradesh
was decreed against the respondent no.3. It was held by the
City Civil Court that the respondent no.3 had acted
unreasonably and in breach of its duty in refusing to make
payment immediately under the said Bank Guarantees. The
respondent no.3 was, thereafter, directed to pay costs and
interest at the rate of 12% per annum on the amount
payable under the said Bank Guarantees from the date of
filing of the said suit until 4th May, 1994.
(h) On 20th February, 1997, the respondent no.3 addressed a
letter to the petitioner calling upon the petitioner to make
payment under the counter guarantee of the amount
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payable by the respondent no.3 under the order of the City
Civil Court dated 16th July, 1996. By letter dated 29 th March,
1997, the petitioner denied its liability to make the payment
of the amount claimed by the respondent no.3. The
respondent no.3 preferred an Appeal from the Order of the
City Civil Court dated 16th July, 1996 to the High Court. By
order dated 17th November, 1998, the High Court rejected
the Appeal preferred by the respondent no.3. The said
respondent, thereafter, filed Special Leave Petition against
the order of the High Court dated 17th November, 1998
before the Hon'ble Supreme Court. Vide order dated 16 th
July, 1999, the Hon'ble Supreme Court rejected the said
Special Leave Petition. On 8th August, 1999, the respondent
no.3 made payment of an amount of Rs.81,01,122.80 to the
State of Andhra Pradesh under the decree dated 16 th July,
1996.
(i) By letter dated 2nd November, 1999, the respondent no.3
called upon the petitioner to make payment of the amount
of Rs.81,01,122.80 with interest thereon to the respondent
no.3 under the counter guarantee dated 4 th November,
1986. Vide letter dated 3 rd January, 2000, the petitioner
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denied its liability to make payment of the said amount. On
29th March, 2000, the respondent no.3 filed an application
before the respondent no.2 for recovery of an amount of
Rs.90,21,652.80 and interest thereon from the petitioner
under the counter guarantees. By order dated 18 th
November, 2003, the respondent no.2 partially allowed the
application of the respondent no.3 by directing the
petitioner to make the payment of Rs.75,43,053.28 along
with interest therein at the rate of 17.5 percent from the
date of the application till the date of realisation of the said
amount.
(j) On 29th December, 2003, the petitioner preferred an appeal
from the order of the respondent no.2 dated 18 th November,
2003, before the respondent no.1. By order dated 9 th
January, 2004, the first respondent directed the petitioner
to deposit 50% of the decreetal amount i.e. 50% of
Rs.75,43,053.28, as a precondition to the Appeal being
entertained. Subsequently, by order dated 28 th September,
2005, the Appeal preferred by the petitioner was dismissed
by the respondent no.1 by upholding the finding that the
respondent no.3 was entitled to claim the interest during
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the period from 16th September, 1985 till 17th March,1994.
Being aggrieved by the aforesaid order, the petitioner has
preferred the present petition before this Court.
3 The learned counsel for the petitioner Shri Kanade
made three submissions:
(a) That the petitioner is not liable to pay the interest claimed
by the respondent no.3;
(b) The claim is barred by the Law of Limitation;
(c) The claim was already adjudicated by the Court in the
earlier proceedings and on account of the principle of res-
judicata, the respondent no.3 cannot raise the same claim again
by preferring the application in which the impugned order was
passed.
4 It is submitted by the learned counsel for the
petitioner that the respondent no.1 has failed to appreciate that
the State of Andhra Pradesh has invoked the said Bank
Guarantees on 27th May, 1985. On that date, it is the admitted
position that there was no order of injunction or any other
restrain preventing the respondent no.3 from making payment
under the said Bank Guarantees. It is also admitted position that
the petitioner did not in any manner prevent the respondent no. 3
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from making the payment under the said Bank Guarantees at that
point of time. It was only on 16th September, 1985, that is after
three and half months that an order of injunction restraining the
encashment of the said Bank Guarantees was passed by the City
Civil Court at Hyderabad. The respondent no.3 did not make
payment under the said Bank Guarantees for a period of almost
five months, although, it was required by them to do so
immediately and unconditionally under the terms of the same and
there was no restriction whatsoever on the respondent no.3 for
honouring its commitment under the said Bank Guarantees. It is
further submitted that the respondent nos.1 and 2 has failed to
appreciate that the Bank Guarantees issued by the respondent
no.3 in favour of the State Andhra Pradesh were unconditional
and that the respondent no.3 was duty bound to honour the said
commitment under the said Bank Guarantees. In terms of the
said Bank Guarantees, the respondent no.2 was to pay the
amount immediately when called upon to do so by the State of
Andhra Pradesh unconditionally which was not done by them for
the reason best known to them. The petitioner cannot be held
liable for the unreasonable and negligent acts of respondent no.3.
It is submitted that if the respondent no.3 under the said Bank
Guarantees immediately or at any time between May and
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September 1985 made payment, as it was bound to do under the
said Bank Guarantees, the question of payment of any interest
would not have arisen at all. The respondent no.3 was required
to pay the interest as it acted in breach of its obligations under
the Bank Guarantees and not for acting in accordance with the
same. It is submitted that the first respondent had failed to
appreciate that under the counter guarantee dated 4 th November,
1986, the petitioner only undertook to indemnify the respondent
no.3 in respect of obligations and liabilities validly undertaken by
the respondent no.3 under the said Bank Guarantees and not for
any act of negligence by respondent no.3. The indemnity could
not be interpreted to cover the consequences of the breach by the
respondent no.3 of such obligations and liabilities. It is also
submitted that by decree dated 16 th July, 1996 of the City Civil
Court it was held that the respondent no.3 had acted
unreasonably and in breach of its duty under the Bank
Guarantees in refusing to make the payment immediately under
the same. The appeals filed by respondent no.3 against the
decree were rejected by High Court and Supreme Court. The
findings in the said decree have become final and binding on the
respondent. The question of petitioner indemnifying the
respondent no.3 for the interest does not arise. The petitioner
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was also defendant to the suits filed by State of Andhra Pradesh
and the decree was passed only against respondent no.3. It is
unjust to direct petitioner to reimburse the respondent no.3 for
the amount paid under the decree when it had been held that it
was respondent no.3 who was liable to make payment of the same
for it had acted in breach of its obligations under the bank
guarantees. It is submitted that the claim of respondent no.3
against the petitioner is time barred or beyond limitation. The
cause of action against the petitioner arose when the decree
directing payment of interest was passed against it i.e. on 16 th
July, 1996. The respondent no.3 called upon the petitioner to
make payment under the counter guarantee vide its letter dated
20th February, 1997. The application of the respondent no.3 was
filed before respondent no.2 on 29th March,2000. The claim was,
therefore, beyond three years and was barred by limitation. The
contract of counter guarantee stood terminated ipso facto upon
the petitioner depositing the amount of Rs.73,90,320/- in the City
Civil Court on 5th May, 1994. Hence, the cause of action arose for
the respondent no.3 on 5th May, 1994, when the petitioner
deposited the entire amount covered by the bank guarantee in
the City Civil Court. The application is also barred by res-
judicata. The matter agitated by the respondent no.3 in the said
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application was the subject matter which is already agitated
before and decided by the City Civil Court, High Court and the
Hon'ble Supreme Court. It is submitted that the City Civil Court
at Hyderabad, in its order dated 16th July, 1996 had observed that
the petitioner is not liable to pay interest and suit costs to the
respondent no.3. It is also submitted that under the indenture of
counter guarantee the petitioners are liable to pay only that
amount which the respondent no.3 was required to pay under the
bank guarantees. The impugned orders are, therefore, required
to be set aside. The findings of the respondent nos.1 and 2 are
erroneous being contrary to documents on record and law. It is
submitted that the Courts while adjudicating the aforesaid issues
had also observed at the earlier point of time that the petitioner
is not liable to pay any interest thereon. It is, therefore,
submitted that the respondent no.3 cannot hold the petitioner
responsible for making the payment of the said Bank Guarantee.
It is submitted that the issue of limitation was agitated before the
DRT as well as the Appellate Tribunal, however, the same was not
considered in proper prospectives. The Appellate Authority has
not even dealt with the said issue, although, the reference about
the issue relating to limitation was made in the order.
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5 The learned counsel for the respondent no.3
submitted that the grounds raised by the petitioner in the present
petition are devoid of any merits. It is submitted that the clauses
incorporated in the Bank Guarantee as well as the counter
guarantee are required to be noted and in view of the clauses
enumerated therein, the petitioner is liable to pay the interest.
The learned counsel pointed out Clauses 2 & 3 of the counter
guarantee, which is annexed at page no.25 of the petition.
6 It is submitted that on perusal of the said Clauses, it
is apparent that the executor to pay on demand all sums of money
as the respondent no.3 may pay to the beneficiary under the
guarantees issued by them, with interest thereon at 17.5 percent
per annum from the date of payment until repayment by executor
(petitioner). It is submitted that the petitioner cannot escape the
liability of making the payment of interest. It is submitted that in
the suits filed by the petitioner City Civil Court, Hyderabad
passed an interim order of injunction on 16 th September, 1985,
restraining State of Andhra Pradesh from invoking the bank
guarantee. The said injunction was vacated in the appeal
preferred by the State of Andhra Pradesh before the Hon'ble
Supreme Court, by order dated 17 th March, 1994. It is further
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submitted that the respondent no.3 had paid the amount on 8 th
August, 1999 to the State of Andhra Pradesh and, thereafter, the
demand was made with the petitioner on 2 nd November, 1999.
It is, therefore, submitted that the contention of the petitioner
that the application preferred by the respondent no.3 is barred by
law of limitation is devoid of any substance. It is submitted that
assuming that the arguments of the petitioner are accepted, it is
required to be noted that the first demand was made on 20 th
February, 1997, and, the refusal was made on 29 th March, 1997
and the original application was preferred on 29 th March, 2000. It
is, therefore, submitted that the said application was filed on the
last day of the limitation and, therefore, the said application is
not barred by law of limitation. It is further submitted that as per
Article 137 of the Limitation Act, 1963, the limitation prescribed
to prefer such an application is period of three years. It is
submitted that the Court at the earlier point of time has not
adjudicated upon the issue of payment of interest. The
submissions advanced by the learned counsel for the petitioner is
that the City Civil Court had held that the petitioner is not liable
to pay the interest. However, in paragraph 9 of the order dated
16th July, 1996, it was observed that so far as the liability of the
first defendant therein (petitioner) is concerned, it is stated that
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the arbitration proceedings are pending between the parties. The
plaintiff did not make claim against the defendant no.1 in the suit.
Therefore, it is held that the first defendant is not liable to pay
interest and suit costs to the plaintiff in the suit. Their dispute
regarding the amount payable would be subject to the arbitration
proceedings. The said suit is filed by State of Andhra Pradesh,
wherein the petitioner was defendant no.1 and respondent no.3
was defendant no.2. It is, therefore, submitted that the said
observations were made by the Court in the context of the
pendency of the arbitration proceedings. Otherwise, in the earlier
proceedings there is no adjudication on the issue of the payment
of interest. It is submitted that on account of the clear terms
stipulated in the counter guarantee, the petitioner is liable to pay
interest. The learned counsel relied upon the decision of the
Hon'ble Supreme Court in the case of Syndicate Bank Vs.
Channaveerappa Beleri & Ors.1
7 It is, therefore, submitted that the petition is devoid
of merits and the same may be dismissed.
8 We have perused the grounds raised by the petitioner
as well as the documents annexed to this petition. We have also
1 (2006) 11 SCC 506
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gone through the orders passed by the first respondent as well as
the respondent no.2. The respondent no.2 has observed that by
virtue of the clause stipulated in paragraph 3 of the Indenture of
the Guarantee, the applicant therein was entitled to claim an
amount of interest during the period from 16 th March, 1985 till
16th March, 1995, strictly during the period when the injunction
order was running. It was also observed that the submission that
the competent civil Court has rejected the claim of interest as
against the defendant therein and, therefore, the said question
has already being determined by the competent civil Court is
devoid of any substance. It is observed that the question of
application of principle of res-judicata does not arise. It is also
observed that the issue about the limitation raised by the
petitioner in the said application was turned down. The Appellate
Authority confirmed the order passed by the respondent no.2.
9 We do not find any reason to interfere with the orders
passed by the respondent nos.1 and 2. The respondent no.3
issued 42 bank guarantees in favour of State of Andhra Pradesh
on behalf of petitioner. The petitioner filed suits for appointment
of Arbitrator. On 27th May, 1985, the State of Andhra Pradesh
invoked bank guarantees. The State of Andhra Pradesh also filed
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suits against petitioner and respondent no.3. On 16 th September,
1985, City Civil Court, Hyderabad passed an order of injunction
restraining the State of Andhra Pradesh from invoking bank
guarantees. At the request of petitioner, respondent no.3
executed two counter guarantees in favour of respondent no.3.
The appeal preferred by State of Andhra Pradesh challenging the
injunction order was rejected. In the appeal before Supreme
Court, the said order was set aside on 17 th March, 1994. The
State of Andhra Pradesh than invoked the bank guarantees. The
petitioner deposited the amount of bank guarantees on 5 th May,
1994. On 16th July, 1996, the suits of State of Andhra Pradesh
were decreed directing respondent no.3 to pay interest on the
amount payable under the bank guarantees. The respondent no.3
challenged the said order but, could not succeed. The respondent
no.3 made payment to State of Andhra Pradesh on 8th August,
1999. Thereafter, letter of demand was issued to petitioner for
the said amount, which was replied on 3rd January, 2000, denying
liability and than the application was preferred by respondent
no.3 before the respondent no.2.
10 It is apparent that the petitioner had obtained
injunction restraining the State of Andhra Pradesh from
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recovering the amount under bank guarantees on 16th September,
1985, which was vacated on 17 th March, 1994. The suit was
prolonged on that account. The genesis for the payment under
the decree is the bank guarantee given by respondent no.3.
Neither the decree would have been passed against the
respondent no.3 bank, nor the respondent no.3 would have been
required to make any payment, had it not given the bank
guarantee on behalf of petitioner. The decree amount cannot be
segregated from bank guarantees.
11 The bank guarantee was executed by respondent no.3
in favour of Governor of Andhra Pradesh on behalf of petitioner.
After the order of injunction passed by City Civil Court,
Hyderabad on 16th September, 1995, the petitioner executed two
counter guarantees on 4th November, 1986 in favour of
respondent no.3. The petitioner undertook to indemnify
respondent no.3 in respect of liabilities incurred by them under
the bank guarantees. The counter guarantee indicates that the
same is issued by petitioner being executor in favour of
respondent no.3, in consideration of having at their request
executed guarantee/s in favour of Governor of Andhra Pradesh
and undertake to agree with the terms stated therein. The
clauses 1 to 5 of the said counter guarantee read as follows:
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"1 To keep you fully indemnified and saved
harmless in respect of each and every
obligation and liability undertaken/incurred by
you (whether directly or indirectly) under the
said guarantee/s or in renewals there of from
time to time, or otherwise howsoever.
2 To pay to you on demand all sums of money as
you may pay to the beneficiary under the
guarantee/s issued by you, with interest
thereon at 17.5 per cent per annum from the
date on which you so pay until repayment by
us. The reasonableness or propriety of any
such payment shall not be questioned and shall
be binding on us.
3 To pay to you on demand all costs, charges and
expenses (including the legal costs between
attorney and client) paid or incurred by you in
any way concerning the guarantee/s and your
obligations and liability thereunder and this
counter guarantee and your rights hereunder.
4 To indemnify you against all loss or damage in
the event of any dispute arising with respect to
the obligations under this guarantee from our
heirs, executors and administrators, successors
and assigns.
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5 This agreement shall be biding on us and our
heirs, executors and administrators/successors
and assigns and shall continue to be valid and
binding as irrevocable until you stand
discharged from the guarantee/s executed by
you, or until such time as we procure for you
the return or discharge of the aforesaid
guarantee/s renewals thereof."
On reading the said clauses, it can be gathered that
vide Clause (1) the petitioner had agreed to fully indemnify the
respondent no.3 and saved harmless in respect of each and every
obligation and liability undertaken/incurred by them directly or
indirectly under t he guarantee/s in renewal or otherwise. Clause
(2) stipulates payment on demand all sums of money as they may
pay to the beneficiary under the guarantee/s issued by
respondent no.3 with interest thereon at 17.5 percent from the
date on which they would pay until repayment by petitioner. The
reasonableness or propriety of such payment shall not be
questioned and binding on petitioner and clause 3 requires
payment on demand all costs, charges etc. incurred in
guarantees/obligations and liability under counter guarantees.
Clause 5 stipulated that the agreement is binding on executors
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till the respondent no.3 stand discharged from the guarantee/s
executed by them. By virtue of these clauses, the respondent no.3
would be entitled to claim the amount of interest. It has to be
noted that the respondent no.3 had deposited an amount of
Rs.81,01,122.80 with State of Andhra Pradesh under the decree
dated 16th July, 1998, the liability has accrued on account of bank
guarantee executed by respondent no.3 on behalf of petitioner.
The petitioner cannot be absolved from the said liability. In the
order vacating injunction by Hon'ble Supreme Court on 17 th
March, 1994, it was observed that the submission that the bank
guarantee was not in absolute terms but was a conditional one
cannot be accepted. The submissions advanced by the counsel for
the petitioner deserves to be rejected. The other argument
regarding res-judicata also cannot be accepted. On perusal of the
order passed by the City Civil Court at Hyderabad, it is clear that
no order was passed against the defendant (petitioner) since
arbitration proceedings between the defendant and State of
Andhra Pradesh were going on and the State of Andhra Pradesh
had not made any claim against the defendant in that suit.
12 Though the order passed by the respondent no.1 is
silent about the maintainability of application on the ground of
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limitation, for the reasons assigned by the respondent no.2 and
considering the factual aspect, we are of the opinion that even
though the Appellate Authority has not dealt with the said issue,
there is no merit in the submission advanced by the learned
counsel for the petitioner as the application was within the
limitation of law. It is pertinent to note that the amount in respect
to the interest was deposited by the respondent no.3 on 8 th
August, 1999 and, thereafter, on 2 nd November, 1999, the
respondent no.3 addressed a letter to the petitioner and called
upon them to make the payment of the said amount of
Rs.81,01,122.80 with interest thereon. The petitioner denied its
liability vide letter dated 3rd January, 2000. The application was
preferred by the respondent no.3 on 29th March, 2000, before the
respondent no.2 for the recovery of an amount of Rs.90,21,652.80
and interest thereon from the petitioner under the counter
guarantee. The letter dated 20 th February, 1997 issued by
respondent no.3 calling upon the petitioner to make the payment
is not significant for considering the limitation for filing the
application. Even, on perusal of counter guarantee, it is clear
that payment was to be made on demand as stipulated in Clause
(2) therein, in respect to all sums, money the respondent no.3
pays to the beneficiary under the guarantee, with interest
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thereon. The demand in the present case which is the cause of
action for filing the application is dated 2nd November, 1999,
which was made in pursuant to deposit made on 8 th August, 1999.
In our opinion, therefore, the period of limitation starts running
from the date after the amounts was deposited and the demand
was made by the respondent no.3 and the said application was
filed well within the period of limitation. The Hon'ble Supreme
Court in paragraph no.9 in the case of Syndicate Bank Vs.
Channaveerappa Beleri & Ors. (Supra) relied upon by the
respondent no.3 has stated as follows:
"9 A guarantor's liability depends upon the terms
of his contract. A 'continuing guarantee' is different
from an ordinary guarantee. There is also a
difference between a guarantee which stipulates that
the guarantor is liable to pay only on a demand by
the creditor, and a guarantee which does not contain
such a condition. Further, depending on the terms of
guarantee, the liability of a guarantor may be limited
to a particular sum, instead of the liability being to
the same extent as that of the principal debtor. The
liability to pay may arise, on the principal debtor and
guarantor, at the same time or at different points of
time. A claim may be even time-barred against the
principal debtor, but still enforceable against the
guarantor. The parties may agree that the liability of
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a guarantor shall arise at a later point of time than
that of the principal debtor. We have referred to
these aspects only to underline the fact that the
extent of liability under a guarantee as also the
question as to when the liability of a guarantor will
arise, would depend purely on the terms of the
contract."
The Apex Court in paragraph no.18 of the said
decision has also observed as follows:
"18 Some arguments were addressed about the
Article of limitation that would apply in respect of a
suit against the guarantors. Samuel (supra) held that
in the case of refusal of a guarantor to pay the
amount, the matter would be governed by Article 115
of the Schedule to the Limitation Act, 1908, which
corresponds to Article 55 of the Limitation Act, 1963.
One of the submissions made before us was that the
term 'compensation for breach of contract' in Article
55 indicates to a claim for unliquidated damages and
not to a claim for payment of sum certain (as to what
is the difference between a claim for unliquidated
damages and a claim for a sum certain or a sum
presently due, reference can advantageously be
made to the classic statement of Law by Chagla, CJ.,
in Iron & Hardware (India) Lct., Vs. Firm Shamlal &
Bros. (AIR 1954 Bom.423). If Article 55 does not
apply, then a claim against a Guarantor in such a
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situation may fall under the residuary Article 113 of
the Limitation Act, 1963 corresponding to Article 120
of the old Act. The controversy about the appropriate
Article applicable, when the claim is found to be not
exactly for 'compensation' but ascertained sum due
has been referred to as long back as 1916 in
Tricomdas Cooverji Bhoja Vs. Gopinath Jin Thakur
(AIR 1916 PC 183). Under the old Limitation Act (Act
of 1908), the periods prescribed were different under
Article 115 and 116. The periods prescribed were
also different under Article 115 and 120. But under
the 1963 Act, the period of limitation is the same
(three years) both under Article 55 and 113. Having
regard to the fact that the period of limitation is 3
years both under Article 55 and Article 113, and
having regard to the binding decision in Samuel
(supra), we do not propose to examine the
controversy as to whether the appropriate Article is
55 or 113. Suffice it to note that even if the Article
applicable is Article 113, the Bank's suit is in time."
In the light of observations of the Apex Court in the
aforesaid decision and for the reasons stated above, the
argument about bar of limitation is required to be rejected.
13 In view of the above observations, we find no reason
to interfere in the said orders passed by respondent nos.1 and 2.
No case is made out to invoke writ jurisdiction under Article 226
rpa 26/26 wp-740-06.doc
of the Constitution of India to disturb the concurrent finding of
respondent nos.1 and 2. Hence, we find that there is no merits in
the petition and the same deserves to be rejected.
14 Hence, we pass the following order:
:: O R D E R ::
(i) Writ Petition No.740 of 2006 stands rejected;
(ii) No order as to costs.
(PRAKASH D. NAIK, J.) (S.C. DHARMADHIKARI, J.)
