High Court partially allows appeal, decrees Rs. 2,81,574.38 against defendants. Future interest at 8% P.A.

The High Court partially allowed the appeal, passing a decree of Rs. 2,81,574.38 against the defendants jointly and severally. Future interest at 8% P.A. was decreed on the principal sum of Rs. 1,53,000/- from the date of the suit till realization. The court upheld the trial court's decree on certain aspects, including the entitlement of the plaintiff Bank to the contractual rate of interest and the guarantors' obligation to repay the loan. Costs of both courts were imposed on the defendants.

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Issues Involved:
1. Whether the suit was barred by time.
2. Whether the acknowledgment Exh. 39 and Exh. 40 extended the limitation period.
3. Whether the guarantors were bound to pay the time-barred claim.
4. Whether the plaintiff Bank was entitled to the contractual rate of interest.
5. Determination of the principal sum adjudged and future interest.

Detailed Analysis:

1. Whether the suit was barred by time:
The principal issue was whether the suit was barred by time. The trial court held that the acknowledgment executed by the defendant No. 1 at Exh. 40 created a promise to pay the debt under section 25(3) of the Contract Act, thus the suit was not dismissed on the ground of limitation. The High Court further examined the construction of sections 18 and 19 of the Limitation Act and section 25(3) of the Contract Act. It was determined that the acknowledgment executed by the defendant No. 2 (Exh. 39) was within the limitation but not binding on the principal debtor. However, the acknowledgment by defendant No. 1 (Exh. 40) was beyond the period of 3 years from the execution of the pronote (Exh. 44), thus section 18 of the Limitation Act would not assist the plaintiff Bank in extending the limitation period.

2. Whether the acknowledgment Exh. 39 and Exh. 40 extended the limitation period:
The plaintiff Bank argued that the last repayment on 30.8.1984 extended the limitation period under section 19 of the Limitation Act. However, the court noted that for such an extension, the acknowledgment of repayment must be in the handwriting of or signed by the person making the payment. The Supreme Court's judgment in Sant Lal Mahton v. Kamla Prasad established that mere admission of repayment in evidence does not extend the limitation period. Thus, the plaintiff Bank could not benefit from the admissions of defendant No. 1 about the repayment made for extending the limitation under section 19.

3. Whether the guarantors were bound to pay the time-barred claim:
The trial court held that there was a continuing guarantee, binding the guarantors to repay the loan. The High Court did not find any contention from the defendants challenging this finding, and thus, it was upheld that the guarantors were bound to repay the loan.

4. Whether the plaintiff Bank was entitled to the contractual rate of interest:
The plaintiff Bank contended it was entitled to the contractual rate of interest on the amount acknowledged by defendant No. 1 till the date of the suit and further interest until realization. The trial court granted interest at 6% P.A. from the date of the suit till realization. The High Court found that the acknowledgment (Exh. 40) by defendant No. 1 included an express promise to pay the debt with interest, thus constituting a fresh cause of action under section 25(3) of the Contract Act. Consequently, the plaintiff Bank was entitled to the contractual rate of interest of 12.5% P.A. from 14.10.1985 till the date of the suit.

5. Determination of the principal sum adjudged and future interest:
The High Court determined that the principal sum adjudged should be Rs. 1,53,000/- after deducting repayments made by defendant No. 1. The future interest from the date of the suit till realization was awarded at a simple interest rate of 8% P.A. on the principal sum of Rs. 1,53,000/-, considering the defendant's circumstances and the nature of the transaction.

Conclusion:
The appeal was partly allowed. The High Court passed a decree in the sum of Rs. 2,81,574.38 against the defendants jointly and severally. Future interest was decreed at 8% P.A. (Simple Interest) from the date of the suit till realization on the principal sum of Rs. 1,53,000/-. The rest of the trial court's decree was maintained, and costs of both courts were saddled upon the defendants.

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