Appeal allowed, surety's liability not extended by debtor's actions. Limitation Act interpretation.

The appeal was allowed, setting aside the judgment and decree of the appellate court. The trial court's decree, dismissing the suit against defendant No. 2 due to limitation, was restored. The court emphasized that the surety's liability could not be extended by the principal debtor's acknowledgment or part-payment unless explicitly authorized. The decision was based on legal precedents and the interpretation of the Limitation Act, ensuring the surety's liability was not unjustly extended. No costs were ordered for the appeal.

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Issues Involved:
1. Execution and Validity of Promissory Note
2. Surety's Liability and Role
3. Limitation Period for Filing Suit
4. Effect of Part-Payment by Principal Debtor on Limitation Period for Surety
5. Interpretation of Surety Bond

Detailed Analysis:

1. Execution and Validity of Promissory Note:
The court established that the promissory note for Rs. 5,000 dated 19th September 1968, executed by defendant No. 1, was duly proved. Defendant No. 2 stood as surety for this note. The trial court confirmed the validity of the promissory note and the surety's role.

2. Surety's Liability and Role:
The appellant-defendant No. 2 was a surety for the loan taken by defendant No. 1. The appellate court interpreted the surety bond (Ex. 43) to mean that the surety had accepted his position as a principal debtor. This interpretation was crucial in determining the surety's liability.

3. Limitation Period for Filing Suit:
The trial court found that the suit against defendant No. 2 was barred by limitation, as the acknowledgment of debt by defendant No. 1 did not extend the limitation period for defendant No. 2. The appellate court, however, disagreed, stating that the payments made by defendant No. 1 extended the limitation period against defendant No. 2 as well.

4. Effect of Part-Payment by Principal Debtor on Limitation Period for Surety:
The central legal issue was whether part-payment or acknowledgment by the principal debtor (defendant No. 1) could extend the limitation period against the surety (defendant No. 2). The court cited several precedents, including Division Bench judgments of the Bombay High Court and the Calcutta High Court, which held that part-payment or acknowledgment by the principal debtor does not extend the limitation period against the surety unless the surety has made such acknowledgment or part-payment or authorized the principal debtor to do so on his behalf.

5. Interpretation of Surety Bond:
The surety bond (Ex. 43) contained recitals indicating that the surety agreed to be treated as a joint debtor along with the principal debtor. Despite this, the court held that even if the surety was treated as a joint debtor, Section 20(2) of the Limitation Act, 1963, would not extend the limitation period against the surety due to part-payment or acknowledgment by the principal debtor.

Conclusion:
The appeal was allowed, and the judgment and decree of the appellate court were set aside. The trial court's decree, which dismissed the suit against defendant No. 2 on the ground of limitation, was restored. The court emphasized that the surety's liability could not be extended by the principal debtor's acknowledgment or part-payment unless explicitly authorized. The decision was based on established legal precedents and the interpretation of the Limitation Act, ensuring that the surety's liability was not unjustly extended. There was no order as to costs of the appeal.

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