Enforceable promise to pay barred debt and continuing guarantee liability bind the surety under co-extensive liability principles

A written promise made after limitation has expired to pay an admitted debt on the original terms is enforceable as an independent promise under Section 25(3) of the Indian Contract Act, rather than a mere acknowledgment under Section 18 of the Limitation Act. The text also states that, where the guarantee is continuing, the principal debtor's subsequent acknowledgment or promise binds the surety because the surety's liability is co-extensive with that of the principal debtor under Section 128. On that reasoning, the suit was treated as maintainable against the guarantor and the claim was held enforceable with interest and costs.

---

---

Issues: (i) Whether Ex. P.1 and Ex. P.2 constituted acknowledgment under Section 18 of the Limitation Act, 1963 or an independent promise to pay a time-barred debt under Section 25(3) of the Indian Contract Act, 1872; (ii) Whether the subsequent acknowledgments by the borrowers bound the guarantor under Section 128 of the Indian Contract Act, 1872.

Issue (i): Whether Ex. P.1 and Ex. P.2 constituted acknowledgment under Section 18 of the Limitation Act, 1963 or an independent promise to pay a time-barred debt under Section 25(3) of the Indian Contract Act, 1872.

Analysis: The distinction between the two provisions is that an acknowledgment under Section 18 must be made before expiry of the limitation period, whereas a promise under Section 25(3) may be made after limitation has run out. Ex. P.2 referred to the original loan, quantified the outstanding dues, and contained a promise to pay the admitted amount on the same terms as the original arrangement. This satisfied the requirements of a valid promise to pay a debt barred by limitation and not merely an acknowledgment of liability.

Conclusion: Ex. P.1 and Ex. P.2 were independent promises under Section 25(3) of the Indian Contract Act, 1872 and not acknowledgments under Section 18 of the Limitation Act, 1963.

Issue (ii): Whether the subsequent acknowledgments by the borrowers bound the guarantor under Section 128 of the Indian Contract Act, 1872.

Analysis: The guarantee was treated as a continuing guarantee. Under Section 128, the surety's liability is co-extensive with that of the principal debtor unless the contract provides otherwise. In such a case, an acknowledgment or promise by the principal debtor in respect of the continuing liability binds the guarantor as well, so the claim could not be treated as time-barred against the surety.

Conclusion: The subsequent acknowledgments by the borrowers bound the guarantor and the suit was not barred by limitation against the guarantor.

Final Conclusion: The decree dismissing the suit was set aside and the plaintiff was held entitled to recover the claimed amount with interest and costs.

Ratio Decidendi: A written promise made after limitation has expired to pay a barred debt on the original terms is enforceable under Section 25(3) of the Indian Contract Act, 1872, and in a continuing guarantee the principal debtor's acknowledgment or promise binds the surety by virtue of co-extensive liability under Section 128.

---