TaxTMI 
TaxTMI 
2002 (6) TMI 603
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....aintiff to grant further loan facilities and they have executed the necessary guarantees in favour of the plaintiff. Later, the plaintiff has preferred a claim before the Commissioner of Payments under the Nationalisation Act claiming the amounts due under the various facilities. By award dated 12.1.1979, the Assistant Commissioner of Payments had recognised and passed orders for payment of Rs. 8,66,531.42 under UDA/DP guarantee and rejected the claim of the plaintiff for Medium Term loan of Rs. 1,28,242.62. The plaintiff has preferred CMA No. 75 of 1979 on the file of the District Judge, Coimbatore. The plaintiff bank issued advocate notice dated 6.12.79 calling upon the defendants 2 and 3 to pay a sum of Rs. 5,72,200.50 together with interest. The said amount was inclusive of a sum of Rs. 1,28,242.62 together with interest being the amount which was rejected by the Assistant Commissioner of payments under Medium Term Loan on the ground that it was pre-take over liability and the sum of Rs. 1,40,841.98 together with further interest being the amount which was rejected by the Assistant commissioner of Payments under UDA/DP. The said notice was given without prejudice to the claim i....
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....der of necessary party. The Central Government has issued a memo No. 53/3/1/75 CF dt.19.12.1975 specifically directed that the unresolved disputes between the Government Department and a Public sector Enterprise and between one Public Enterprise and another would ordinarily fall in two categories namely (i) those relating to statutory matters (ii)those relating to commercial or other agreements, but, the plaintiff has filed the suit in disregard of the above terms as such it is not entitled to claim any amount. The plaintiff has already resorted to the provisions of Sick Textiles Undertaking Nationalisation) Act 1974 and preferred an appeal and other legal action for the recovery of the amount separately. While so ,the present suit was pre matured. The guarantees were made on 22.12.1969 and 4.1.1973 as such the suit filed is barred by limitation. All the claims were prior to 1973 and the suit is filed after 9 years. Even the guarantee cannot be invoked after the main claim is barred by limitation. The main claim was said to be due as on 10.9.1969 which expired on 9.9.1972. Even assuming that the guarantee was given on 4.1.1973, it was valid upto 3.1.75. The time taken by the plaint....
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....rd defendant had executed another guarantee agreement dated 4.1.1973 for UDA/DP guarantee facility to the extent of Rs. 23,00,000/= for the purchase of 21 Textool High speed Spinning Frames for the mill. It is also admitted in the plaint that the suit was filed against defendants 2 and 3 on the basis of the Deeds of Guarantee executed by them. No reasoning was given in the plaint nor it was explained before us to justify that the first defendant was a necessary party to the suit. Hence, we concur with the finding of the learned Single Judge that the first defendant was not a necessary party. 7. Learned Counsel appearing for the appellant argued that the suit against the guarantor alone is maintainable as defendants 2 and 3 have executed Exs.P1 to P3 Deeds of Guarantee. Learned counsel appearing for the respondents argued that in the absence of the principal debtor, the claim made against the guarantors was not valid. The learned Single Judge decided the issue in favour of the plaintiff relying upon the decision in GOPILAL J.NICHANI v. M/S.TRACK INDUSTRIES AND COMPONENTS LTD. 1978 II MLJ 94 wherein a Division Bench of this Court had observed that "The Sectio....
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....y Om Parasakthi Mills Limited. The plaintiff has filed the suit invoking the Deeds of Guarantee executed by defendants 2 and 3. Hence, as rightly held by the learned Single Judge, the Central Government was not a necessary party. 11. The learned Single Judge has dismissed the suit on the ground that the claim is barred by limitation. The counsel appearing for the appellant/plaintiff has vehemently attacked the reasoning given by the learned Single Judge for arriving at the said conclusion as invalid and unsustainable in law. 12. Ex.P1 dated 8.12.1969, Deed of Guarantee is executed by the second defendant on behalf of Om Parasakthi Mills Limited, Coimbatore guaranteeing payment on demand within one week. It is evident under Ex.P1 that the second defendant has given guarantee for the term loan to the tune of Rs. 5,73,223.11 and the guarantee extends to all loans payable by Om Parasakthi Mills Limited. Ex.P2 has been executed by the third defendant guaranteeing repayment of the two term loans amounting to Rs. 5,73,223.11 besides executing Ex.P3 guaranteeing repayment of UDA/DP loan to the extent of Rs. 23,00,000/=. No doubt, defendants 2 and 3 were liable to pay the said amount.....
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....ntee have been entered into between the parties. Now, we will have a look on the terms of the Deeds of Guarantee which reads as follows:- In page 3 of Ex.P1, "The guarantee shall be a continuing guarantee and shall remain in full force until all the liabilities of Om Parasakthi Mills Limited of Rs. 5,73,223.11 plus interest and the liabilities of the Authorised Controller in respect of various new facilities granted to him are discharged in full." Similar terms are available in page 2 of Ex.P2 as follows:- "We further agree that this guarantee will be a continuing guarantee and shall remain in full force and effect till all the liabilities of Om Parasakthi Mills Ltd. under the two medium term loans are fully discharged." In page 3 of Ex.P3, Guarantee Deed, it is mentioned that "We, the undersigned the Tamil Nadu Textile Corporation Limited, hereby guarantee to the said Bank the payment on demand of all moneys at any time and from time to time hereafter due to the said bank by the b....
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....e are concerned with the period of limitation for enforcing the liability of the defendant under the surety bond ...... We hold that the suit to enforce the liability is governed by Art.115 and the cause of action arises when the contract of continuing guarantee is broken, and in the present case we are of the view that so long as the account remained live account, and there was no refusal on the part of defendant to carry out her obligation, the period of limitation did not commence to run." We agree with the view expressed by Shah,J. The intention and effect of a continuing guarantee such as the one with which we are concerned in this case was considered by the Judicial Committee of the Privy Council in Wright v. New Zealand Farmers Co-operative Association of Canterbury Ltd. 1939 AC 439. The second clause of the guarantee bond in that case was in the following terms: "This guarantee shall be a continuing guarantee and shall apply to the balance that is now or may at any time hereafter be owing to you by the William Nosworthy and Robert Nosworthy on their current account with you for goods supplied and advances....