Case Note & Summary
The case involves a first appeal filed by Padmakar Krushnarao Bhagwatkar, who was the guarantor/defendant No.2 in a suit filed by the State Bank of India (respondent No.1) for recovery of loan amounts. The loan was sanctioned on 25.09.1984 to Techno Mech. Enterprises (respondent No.2), a proprietory concern owned by the appellant's brother. The appellant executed a guarantee agreement. A sum of Rs.4,02,115.11 was due and not paid despite demand. The bank filed a suit for joint and several recovery from the principal debtor and the guarantor. The borrower filed a written statement and a counter claim, while the appellant filed a written statement contending that the bank should recover from the borrower's property and that the guarantee was only for three years. The trial court framed issues and received evidence. The borrower did not lead evidence. The trial court decreed the suit jointly and severally against both defendants. The appellant challenged the decree in the High Court. The High Court noted that the appellant did not lead any evidence to prove that the guarantee was limited to three years. The court held that the liability of a guarantor is co-extensive with that of the principal debtor under the Indian Contract Act, 1872. The appeal was dismissed with no order as to costs.
Headnote
A) Contract Law - Guarantee - Liability of Guarantor - Sections 126, 128, 145 of the Indian Contract Act, 1872 - The appellant stood as guarantor for a loan sanctioned to his brother's proprietory concern. The trial court decreed the suit jointly and severally against the principal debtor and the guarantor. The guarantor appealed contending that the guarantee was only for three years. The High Court held that the guarantor failed to prove the alleged limitation of three years, and the liability of a guarantor is co-extensive with that of the principal debtor. The appeal was dismissed. (Paras 1-6)
B) Evidence Act - Burden of Proof - Section 101, 102 of the Indian Evidence Act, 1872 - The appellant/guarantor contended that the guarantee was limited to three years. The court noted that the appellant did not lead any evidence to prove this contention. The burden was on the appellant to establish the alleged limitation, which he failed to discharge. Hence, the contention was rejected. (Paras 5-6)
Issue of Consideration
Whether the appellant/guarantor is liable to pay the decretal amount jointly and severally with the principal debtor, and whether the guarantee was limited to a period of three years.
Final Decision
The appeal is dismissed. The decree passed by the trial court is confirmed. No order as to costs.
Law Points
- Guarantee agreement
- liability of guarantor
- joint and several liability
- limitation period for guarantee
- burden of proof on guarantor
Case Details
2005 LawText (BOM) (12) 105
First Appeal No. 7 of 2005
Shri A. Shelat for appellant, Shri S.N. Kumar for Respondent No.1, None for Respondent No.2
Padmakar S/o. Krushnarao Bhagwatkar
State Bank of India, Techno Mech. Enterprises
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Nature of Litigation
First appeal against decree in suit for recovery of loan amount by bank against principal debtor and guarantor.
Remedy Sought
Appellant/guarantor sought to set aside the decree passed against him by the trial court.
Filing Reason
Appellant challenged the decree on the ground that his guarantee was limited to three years and that the bank should recover from the principal debtor's property.
Previous Decisions
Trial court decreed the suit jointly and severally against both defendants.
Issues
Whether the appellant/guarantor is liable to pay the decretal amount jointly and severally with the principal debtor?
Whether the guarantee was limited to a period of three years?
Submissions/Arguments
Appellant contended that the guarantee was only for three years and therefore he was not liable.
Appellant contended that the bank should recover the loan from the property of defendant No.1.
Respondent bank argued that the appellant is jointly and severally liable as guarantor.
Ratio Decidendi
The liability of a guarantor is co-extensive with that of the principal debtor under the Indian Contract Act, 1872. The appellant failed to prove that the guarantee was limited to three years. Therefore, the appellant is jointly and severally liable to pay the decretal amount.
Judgment Excerpts
This first appeal, filed by the borrower/ guarantor challenging the decree passed against him by the learned Civil Judge Senior Division, Nagpur, was taken up for disposal at the stage of admission...
The appellant, who was arrayed as defendant No.2 in the suit, stood as a guarantor and executed necessary agreement of guarantee.
The appellant also filed written statement contending that the plaintiff Bank should recover the loan from the property of defendant No.1. It was also contended that the guarantee was only for the period of three years and therefore, the appellant was not liable.
The appellant did not lead any evidence to show that the guarantee was limited to three years.
Procedural History
The suit was filed by the bank in the court of Civil Judge Senior Division, Nagpur. The trial court decreed the suit jointly and severally against the principal debtor and the guarantor. The guarantor filed First Appeal No. 7 of 2005 in the High Court of Judicature at Bombay, Nagpur Bench. The appeal was taken up for disposal at the stage of admission and dismissed on 12.12.2005.
Acts & Sections
- Indian Contract Act, 1872: 126, 128, 145
- Indian Evidence Act, 1872: 101, 102
