Limitation for recovery of guaranteed balance starts after secured asset sale and adjustment of proceeds, not recall notice.

For a State Financial Corporation's suit to recover the balance remaining after sale of secured assets under Section 29 of the State Financial Corporations Act, 1951, limitation runs from the point when the sale proceeds are adjusted and the shortfall becomes ascertainable, because the guarantor's liability on the indemnity or guarantee for the balance does not crystallise merely on default or recall. The claim was treated as governed by Article 55 of the Limitation Act, 1963, and the earlier Section 31 ruling was said not to determine this starting-point issue. Accordingly, the operative cause of action arose only after sale and adjustment, not from the recall notice.

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Issues: Whether, for a suit by a State Financial Corporation to recover the balance due after sale of secured assets under Section 29 of the State Financial Corporations Act, 1951, limitation begins on issuance of the recall notice or only after the sale proceeds are adjusted and the shortfall becomes ascertainable.

Analysis: The liability of the guarantor was linked to recovery of the balance remaining after the Corporation exercised its statutory power to take over and sell the secured assets. The right to sue on the independent contract of indemnity or guarantee did not arise merely on default or recall, because the exact balance payable could be known only after sale of the assets and adjustment of the proceeds. On that basis, the Court treated the suit as governed by Article 55 of the Limitation Act, 1963, and held that the earlier decision concerning proceedings under Section 31 of the Act did not decide the present starting-point question.

Conclusion: Limitation commenced only after the secured assets were sold and the balance due was ascertained, not from the date of the recall notice.

Ratio Decidendi: In a recovery action by a financial corporation proceeding under Section 29 of the State Financial Corporations Act, 1951, the cause of action on the guarantee or indemnity for the balance amount arises only after sale of the secured assets and adjustment of the sale proceeds.

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