Continuing guarantee and trust liability: no novation, restitution applies, and benefit accepted bars denial of repayment.

A continuing guarantee remains enforceable until validly revoked, and the surety's legal representatives continue to be bound where the guarantee covers a series of transactions and no written revocation is shown. Section 62 of the Indian Contract Act, 1872 requires mutual assent to substitute the original contract; mere transfer of accounts or receiver-managed dealings does not amount to novation or discharge. Where a loan is advanced for the functioning of a trust and its business, the trust may be liable in restitution under Section 70 as the beneficiary of a non-gratuitous transaction. Acceptance of that benefit can also create estoppel against denying repayment.

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Issues: (i) whether the deceased surety and his legal representatives remained liable under a continuing guarantee; (ii) whether the subsequent dealings amounted to novation or alteration of the contract; (iii) whether the trust alone was liable to repay the loan as the beneficiary of the transaction; (iv) whether the trust was estopped from denying liability after enjoying the benefit of the loan.

Issue (i): whether the deceased surety and his legal representatives remained liable under a continuing guarantee.

Analysis: The guarantee executed by the surety was construed as a continuing guarantee extending to a series of transactions. The surety had not given a written revocation of the guarantee, and the absence of proof that the bank had overborne his free consent or inserted dates later did not displace the contractual obligation. The surety was also held entitled to waive benefits available under Chapter VIII of the Indian Contract Act, 1872, and such waiver did not extinguish the liability assumed under the guarantee.

Conclusion: The deceased surety and his legal representatives remained liable for the loan.

Issue (ii): whether the subsequent dealings amounted to novation or alteration of the contract.

Analysis: Novation under Section 62 of the Indian Contract Act, 1872 requires substitution of the original contract by a new one with the consent of the parties. Mere transfer of accounts, deposits by receivers, or court-controlled handling of the hypothecated property did not amount to mutual substitution of contracts. There was no voluntary assent by the bank to discharge the original arrangement, and the receiver's intervention could not by itself alter contractual liability.

Conclusion: There was no novation or contractual alteration discharging the original liability.

Issue (iii): whether the trust alone was liable to repay the loan as the beneficiary of the transaction.

Analysis: The loan was advanced for the functioning of the trust and its publication business, and the trust derived the benefit of the non-gratuitous act. On that footing, the trust was bound to make restitution under Section 70 of the Indian Contract Act, 1872. The loan transactions entered into by entities managing the trust's affairs were treated as loans taken for the trust, making the trust liable to repay the amount.

Conclusion: The trust was liable to repay the loan as the beneficiary of the transaction.

Issue (iv): whether the trust was estopped from denying liability after enjoying the benefit of the loan.

Analysis: Estoppel was applied on the basis that the trust had accepted the benefit of the loan transactions and had acted through successive arrangements created for the trust's business. After deriving advantage from the transactions and ratifying the acts done for its benefit, the trust could not deny responsibility for repayment. The principle operated as a substantive bar against resiling from the benefit taken.

Conclusion: The trust was estopped from denying liability.

Final Conclusion: The original decree for recovery was restored, and the High Court's contrary view was set aside because the guarantee subsisted, no novation occurred, and the trust remained answerable for the debt.

Ratio Decidendi: A continuing guarantee remains enforceable until validly revoked, and liability for a loan undertaken for the benefit of a trust cannot be displaced absent mutual novation; a beneficiary that accepts the advantage of a non-gratuitous transaction may be bound in restitution and prevented by estoppel from denying repayment.

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