Central Bank of India vs Ali Mohammad and another

B.U. Wahane, J.—This appeal is directed against the Judgment and Order passed by the Civil Judge, Sr. Dn., Nagpur, on 30-11-1981, in a Special C. S. No. 337/1977, discharging the liability of the defendants Nos. 2 and 3, on the ground that the acknowledgement given by the principal debtor does not save limitation against the surety, relying upon the case of Ramchandra vs. Vithoba, 1960 N.L.J. 74. In this appeal, thus, the following questions are raised before me for determination:

Whether the terms 1 and 7 of the Guarantee Bond override the provisions of sections 133, 134, 139 and 141 of the Contract Act?

Whether, an acknowledgement or execution of the promissory note Exh. 57 by the principal debtor will save the limitation against the sureties-defendant Nos. 2 and 3, though they are neither the parties to the execution nor given their consent?

Whether the period of limitation would start running only upon the demand being made to the principal debtor as well as guarantors thereby extending the statutory provisions of limitation of 3 years.

(This ground is not raised in the memo of appeal. Being, agitated during the course of argument it was opposed by the other side).

The facts giving rise to file the suit, in brief, are as under :-

The appellant/plaintiff alleges that it is a body Corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, having its Head Office at Bombay. The Divisional Office of the plaintiff is situated at Kamptee Road, Nagpur. The suit transaction took place at the Station Road Branch of the plaintiff at Nagpur.

On 6th October, 1971, the plaintiff sanctioned and advanced the loan of Rs. 23,950/- to the defendant No. 1 Awarkhan Chhotekhan for purchase of Ambassador Car to run as a Taxi on the guarantee of the defendant Nos. 2 and 3 i.e. Ali Mohamed s/o Mohamed Hussain and Hazi Wazir s/o Dadumiya (who died during the pendency of the proceedings before the trial Judge). The original defendant Nos. 1, 2 and 3 had agreed to pay interest at the rate of 6 per cent, per annum over the rate of interest of the Reserve Bank of India, subject to a minimum of 12 per cent per annum with quarterly rests. For this loan, the defendant No. 1 i.e. the principal debtor, executed an agreement of hypothecation whereby he hypothecated the Ambassador Car No. MHG 203. The original defendant No. t i.e. the principal debtor/borrower agreed to satisfy the loan amount by monthly installment of Rs. 500/-. The defendants Nos. 2 and 3 executed the guarantee bond for recovery of the loan. They had also agreed under this agreement that they will not be entitled to any of the rights conferred on them as sureties by sections 133, 134, 139 and 141 of the Indian Contract Act. They as a guarantor had agreed that the guarantee shall remain in force until written notice is given by them.

On 15th July .1972, on the request of the defendant No. 1 the principal borrower, the appellant/plaintiff advanced the loan of Rs. 1,400/- to him tor purchase of a Meter for the Taxi. At that time also the defendant No.

I agreed to pay interest on this amount at the rate of Rs. 6 per cent per annum over the bank rate with a minimum of 12 per cent per annum with quarterly rests. The defendant No. 1 had agreed to repay this amount with the original loan. The defendant No. 1 neither repaid the amount of the loan nor observed the repayment schedule.

On 6th October 1974, the defendant No. 1 renewed the loan documents and executed a promissory note for Rs. 22,000/-. According to the plaintiff, this amount was inclusive of the dues under the promissory note dtd. 15th July 1972. This time, the defendant No. 1 agreed to repay the amount of loan with interest at the rate of 8 per cent per annum over the rate of interest of the Reserve Bank of India, subject to a minimum of 15 per cent per annum with quarterly rests. The defendant No. 1 also executed a fresh agreement of hypothecation of Taxi.

On 21st July 1975, the plaintiff served the defendant Nos. 1 to 3 with notices calling upon them to repay the dues. The extract of the account shows the balance against the principal borrower to the tune of Rs. 29,301.99/-. According to the plaintiff the cause of action for the suit arose at Nagpur on 6th October 1971 and 6th October 1974.

The defendant No. 1 the principal borrower filed his written statement and admitted that he procured the loan of Rs. 23,950/-, as also that the defendant Nos. 2 and 3 were his guarantors for the repayment of his loan. However, he denied to have agreed to pay the rate of interest as alleged. Similarly, he admitted the fresh loan of Rs. 1,400/- and also the execution of Promissory Note dtd. 6th October 1974 for Rs. 22,000/-. However, he denied to have agreed to pay the higher rate of interest as alleged.

The defendant No. 2/respondent No. 1 submitted his written statement vide Exh. 40 and denied all the plaint allegations. He contended that his signatures were obtained on the printed guarantee bond without explaining the contents thereof and, therefore, the terms did not bind him. He further contended that the plaintiff did not consult him when the fresh loan of Rs. 1,400/- was given to the principal borrower on 15th July 1972, as also while executing the fresh promissory note for Rs. 22,000/- on 6th October, 1974. He specifically contended that the suit of the plaintiff against him is barred by limitation, he not being the party to the transaction dtd. 15-7-1992 and 6-10-1974. Similarly, it is contended that the contents of the letter of guarantee dtd. 6-10-1971 are not binding and operative as the terms and conditions are against the Law and public policy. It is also submitted that the suit is barred by limitation against the defendants.

Shri Nagle, the learned counsel for the Appellant/plaintiff and Shri Manwarbhai the learned counsel for the respondent, took me through the record. The plaintiff examined one Digambar s/o Laxmanrao as witness No. 1 and Shri Ashokkumar Wani as witness No. 2. The evidence of the witness No. 1 is not relevant for adjudicating the issues. However, the evidence of Ashokkumar (P.W. 2) speaks about the loan transaction. The evidence of this witness is in respect of the loan amount of Rs. 1,400/- which was advanced on 15-7-1972 to the principal borrower who is not the party in the appeal. He also stated that on 6-10-1974, the defendant No. 1 renewed his liability by executing a promissory note Exh. 57. Exh. 58 is the agreement of hypothecation. According to this witness Exh. 57 covers the outstanding bills against the defendant No. 1 to both the advances. In the cross-examination he admitted that:

The original agreement dated 6-10-1971 was continued till the change of the document in 1974.

Shri Nagle, the learned counsel for the appellant/plaintiff submitted that the learned lower Court committed an error in declining to follow the decision of the Kerala High Court reported in The Wandoor Jupiter Chits (P.) Ltd. (in Liquidation) Vs. K. P. Mathew and Another, , and following the Judgment of our High Court reported in 1960 NLJ Note 74. It is further submitted that the learned lower Court failed to appreciate the entire contents of terms Nos. 1 and 7. The learned counsel further submitted that the contract of guarantee in suit was a contingent contract and hence the cause of action against the respondent arose only on 21 st July 1977, when the appellant/Bank demanded the payment of the guaranteed amount under the terms of the guarantee Exh. 54, The plaintiff''s claim against the respondents was thus within time.

It will be relevant to reproduce the terms Nos. 1 and 7 of the Guarantee Bond Exh. 54.

Term No. 1 :

I/We agree that the amount hereby guaranteed shall be due and payable to you on your serving me/us with notice requiring payment of the amount, and such notice shall be deemed to have been served on me/us either by actual delivery thereof to me/us or by dispatch thereof to me/us by registered post at my/our address written hereunder or any other address in India to which I/we may by written intimation given to the Bank request notices addressed to be dispatched.

Term No. 7:

I/We hereby consent to your making any variance that you may think fit in the terms of your contract with the principal to your determining, enlarging or varying any credit to them to your making any composition with them or promising to give them time or-not to sue them and your parties with any security you may hold for the guarantee debt. I/We also agree that I/We shall not be discharged from my/our liability by your realising the principals or by any act or omission of yours the legal consequence of which may be to discharge the principals or by any act of yours which would but for this present provision be inconsistent with my/our rights as sureties or by your omission to do any act which, but for this present provision your duty to me/us would have required you to do. Though as between the principals and myself as sureties only, we agree that as between yourselves and me I/we am/our principal DEBTOR jointly with them and accordingly, I/We shall not be entitled to any of the rights conferred on sureties by sections 133. 134, 139 and 141 of "the Contract Act."

It is no doubt that the term No. 7 speaks that I/we hereby con sum to your making any variance that you may think fit in the terms of your agreement with the principal to your determining, enlarging or varying any credit to them to your making any composition with them or promising to give them time or not to sue them and your parties with any security you may hold for the guarantee debt. I/we also agree that I/we shall not be discharged from my/our liability.

The meaning of the word "Enlarge" as per the Judicial Dictionary means:

To put off or extend the time for doing anything. Thus, enlarging a rule signifies extending the time for doing that which by a rule of Court is required to be done. The word "vary" may have different meanings in different contexts but in its ordinary use as well as in legal phraseology, it is quite comprehensive and is not restricted to minor changes. (See words and phrases legally defined, Vol. V, P. 276).

The word ''vary'' has a quite different connotation. The very conception of the word is change. It must be change or alteration, making of something new or to modify. In any case the original cannot remain the same if it is varied, but on the other hand, if something is only revised, it may remain the same though with a slight improvement therein.

Shri Nagle, the learned counsel for the appellant Bank, therefore, submitted that a grant of fresh loan of Rs. 1,400/- on 15-7-1972 and acknowledgment of earlier loan vide Exh. 57, is an enlargement or varying the earlier contract dtd. 6 10-1971 in view of term No. 7 of a Guarantee Bond Exh. 54. Under the circumstances, the respondents defendants cannot absolve from their liabilities and, therefore, the question of limitation is not attracted.

A reliance has been placed on the case of The Wandoor Jupiter Chits (P.) Ltd. (in Liquidation) Vs. K. P. Mathew and Another, , in which it is held:

Debtor acknowledging the debt - Surety continues liable to be sued in the extended period. Surety not exonerated under the provisions of the Contract Act and also under sections 18 and 20(2) of the Limitation Act. 1963.

It is further observed that:

Acknowledgement does not involve the making of another contract under sections 134 and 135 whereby the creditor discharges the debtor or makes a composition with him. Nor is section 137 of the Contract Act attracted because mere forbearance to sue even for a time beyond the period of limitation does not operate to discharge the surety. An acknowledgement does not also impair the remedy of the surety against the debtor u/s 139 of the Contract Act.

The learned counsel for the appellant/plaintiff relied on the case of Kanchanlal Chandulal Patikh vs. Bank of India, reported in I (1991) BC 119 (DB) Bombay High Court. Their Lordships held that:

Under the guarantees "the undersigned jointly and severally hereby guarantee that due payment two days after demand in writing, of all advances. liability" would be made. The period of limitation would, therefore, start running only upon a demand being made. The suit is filed within 3 years of the demand being made and is, therefore, in time.

It is further held that :

We see no novation, expressed or implied. The liability of the 3rd and 4th defendants under the guarantees executed by them remained and was not in any way affected by the renewals of the guarantees taken from the 5th defendant.

In this case the first loan was advanced to the first defendant on April 26, 1968. The defendant Nos. 2, 3 and 4 executed the deed of guarantee in favour of the bank. The 5th defendant the State of Maharashtra also executed the deed of guarantee in favour of the Bank. Again in November, 1968, the first defendant approached the Bank for another loan and the same was advanced on 21st November, 1968 and it was repayable on demand with interest. The defendants No. 2, 3 and 4 also executed the deed of guarantee. The 5th defendant the State of Maharashtra, also executed a deed of guarantee in favour of the said Bank. The said account No. 1 was operated upon from time to time.

The learned Single Judge rejected the submission made on behalf of the defendants that the suit was barred by limitation and that it was not maintainable. The Hon''ble Judge held that there was no novation which absolved the 2nd, 3rd and 4th defendants of their liability under the deeds of guarantee. The Division Bench also confirmed the order of the Single Judge in Appeal No. 458/82.

It is, thus, apparent from the facts that on both the occasions when the loan was advanced to the first defendant, the defendants Nos. 2, 3 and 4 executed the deed of guarantee of continuing security and of lieu and set off were executed. Similarly, when the defdt. No. 1 acknowledged the debt in respect of the accounts nos. 1 and 2 on July 16, 1970, the defendants 2, 3 and 4 confirmed that their guarantees were on full force and effect. Prior to this, on September 2, 1969 and June 2. 1970, the 5th defendant executed two deeds of guarantee guaranteeing repayment to the plaintiffs of the amounts due under Accounts Nos. 1 and 2. On October 8, 1971. Central Government took over the management of the 1st Deft, under the provisions of section 16-A of the Industries (Development and Regulation) Act, 1951 and appointed National Textile Corporation as the Authorised Controller thereof.

On February 6, 1973 the plaintiffs called upon the Authorised Controller to repay the amounts due under the said Accounts Nos. 1 and 2. The Authorised Controller acknowledged the sum due in the said accounts Nos. 1 and 2 with interest by their 2 letters dtd. 22 June. 1973. On March 27, 1974, the 5th defendant executed 2 deeds of guarantee in respect of the said accounts Nos. 1 and 2. On March 20. 1975 and March 25/27, 1975 respectively the plaintiff''s advocates called upon the first defendant and the second, third and fourth defendants and the fifth defendant to pay the amounts due in respect of the said Accounts Nos. 1 and 2. The suit was filed on September 26, 1975.

On December 2. 1981 the suit was decreed. The learned Judge rejected the submission made on behalf of the defendants that the suit was barred by limitation and that it was not maintainable. He held that there was no novation which absolved the second, third and fourth defendants of their liability under the deeds of guarantee.

Considering the facts before Their Lordships it has been rightly held by Their Lordships that there was no change either of the amount or in terms and conditions in the subsequent acknowledgements of the earlier contract, expressly or impliedly because from time to time the defdts. had executed the deed of guarantee in respect of the advance.

Shri Manwarbhai, the learned counsel for the respondent No. 2 resisted the claim of the appellant and submitted that it has been rightly held by the learned trial Court that the suit in respect of the respondents Nos. 2 and 3 is barred by limitation. Similarly, it is submitted that the appellant Bank wants to take the protection against the guarantors by depriving them of all the advantages of the statutory provisions of sections. 133, 134. 135, 139 and 141 of Indian Contract Act, 1872. It is further submitted that the principal debtor was advanced Rs. 1,400/-on 15-7-1972 to which the respondent No. 2 and deceased defendant No. 3 were not the parties. Similarly, the defendants Nos. 2 and 3 were not the parties to Exh. 57 i.e. the Promissory Note alleged to have been executed by the principal borrower on 6-10-1974. In other words, it means that when there was a second loan transaction and fresh transaction, on terms, entered into between the appellant and the principal borrower on 6-10-1974 no fresh guarantee bonds were executed by the defendant Nos. 2 and 3. In plaint para 7, it is averred that "the defendant No. 1 neither repaid the amount of loan nor observed the repayment schedule. According to the plaintiff, on 6-10-1974, the defendant No. 1 renewed the loan documents. He executed a promissory note for Rs. 22,000/- on 6-10-1974. This amount includes the dues under the pro-note dtd. 15-7-1972. The defendant No. 1 agreed to repay the amount of loan with interest at the higher rate i.e. at the rate of 8 per cent per annum over the Bank rate with a minimum at the rate of 15% per annum with quarterly rests. He also executed a fresh agreement of hypothecation on the same day and hypothecated the Taxi No. MHG 203".

It is not disputed that at the time of initial loan as well as at the time of another loan of Rs. 1,400/-which was advanced on 15-7-1972, the rate of interest agreed was at the rate of 6 per cent per annum over the Bank rate with a minimum at the rate of 12 per cent per annum with quarterly rests. The rate of interest was increased to at the rate of 8 per cent per annum over the Bank rate, subject to minimum rate of 15 per cent per annum while executing the promissory note-from the principal borrower to which admittedly the defendant Nos. 2 and 3 were not the parties as also never confirmed or given their assent. Therefore according to Shri Manwarbhai, the learned counsel for the respondent No. 2, this is nothing but the novation or alteration of the contract. In view of this fact and under the provisions of section 62 of the Indian Contract Act, the original contract dtd. 6-10-1971 was not in force and is wiped off. Thus, none of the terms of the agreement remained operative. Section 62 of the Indian Contract Act, 1872 reads as under:-

Effect of novation, recession and alteration of a contract - If the parties to the contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.

Shri Ashokkumar Wani (P.W. 2) the sub-accountant in the plaintiff''s Station Road Branch at Nagpur in the cross-examination stated that;

The original agreement dtd. 6-10-1971 was continued till the change of documents in 1974.

In view of this admission, it cannot be said that it is merely a minor enlarging the scope of the contract or varying the terms of the contract. The document Exh. 57 dtd. 6-10-1974 a Promissory Note also does not speak that this is an acknowledgement in respect of the earlier two loans advanced. On behalf of the plaintiff the extract of accounts in respect of the account of the principal borrower is placed on the record. There is no entry dtd. 6-10-1974 to the effect that a Promissory Note was executed, the earlier accounts were renewed and the principal borrower has executed the Promissory Note vide Exh. 57 for Rs. 22,000/-. There is also no entry that on 6-10-1974 the principal borrower was indebted to Rs. 22,000/-.

The provisions of section 18 of the Limitation Act, 1963 are regarding the acknowledgment in writing. The import of the section is that before the expiration of the prescribed period for a suit in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, therefore, the period of limitation shall be computed from the time of the acknowledgment. Even a receipt in lieu of old doubt may amount to an acknowledgment. Acknowledgment means the definite admission of liability. It is not necessary that there should be promise to pay. Simple admission of debt is sufficient. There must be conscious acknowledgement that the party concerned is liable to pay under the document on which reliance is placed. Acknowledgement must be an acknowledgement of the existing loan. Mere acknowledgement of the execution of the Promissory Note without anything more does not amount to an admission of subsisting liability so as to give fresh period of limitation for suit on pronote as held in the case of K. Ganapathy Vs. Vaidyalingam, . An acknowledgement must distinctly and definitely relate to the liability in respect of the right claim. It is evident from the mere perusal of Exh. 57 the promissory note, that there is no whisper that this promissory note is continuing earlier debt. Besides the Promissory Note it is expected to obtain the receipt from the principal debtor regarding the dues against him. In this case, besides the promissory note Exh. 57, no receipt has been executed. The facts in the instant case as discussed above do not amount an acknowledgement of the outstanding or subsisting liability by fresh promissory note Exh. 57. Similarly the acknowledgement does not entitle the creditor to claim interest at higher rate than which was prevailing up to the date of the acknowledgement. Definitely it will amount to novation or fresh contract between the creditor and debtor.

Considering all these aspects, I have no hesitation to hold that the appellant and the principal borrower have agreed to substitute a new contract in the form of promissory note Exh. 57, admittedly to which the respondents were not the parties. Therefore, in view of the provisions of section 62 of the Indian Contract Act, 1872, the original contract ceases.

Exhibit 54, the guarantee deed does not expressly provide that the acknowledgement of the principal borrower will bind the sureties even though they will not be the parties to the acknowledgement. In the case of Federal Bank of India (Punjab) Ltd. Vs. Som Dev Grover and Others, , it is held that:

Unless it appears otherwise in the terms of the surety''s contract, an acknowledgement or payment by a debtor does not extend limitation against the surety.

Similar question has been discussed in the case of Hazara Singh Gujjar Singh Vs. Bakhshish Singh Mula Singh and Another, . The learned Judge has considered the scope of section 19 of the Limitation Act. Section 19 is in these terms:-

19(1). Where, before the expiration the period prescribed for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed or by some person through whom he derives title or liability a fresh period of limitation shall be computed from the time when the acknowledgement was so signed.

(2) Where the writing containing an acknowledgement is undated, oral evidence may be given of the time when it was signed; but, subject to the provisions of the Indian Evidence Act, 1 of 1872, oral evidence of its contents shall not be received.

Explanation I....

Explanation II. For the purposes of this section ''signed'' means signed either personally or by an agent duly authorised in this behalf.

Explanation III.

It will be apparent from the language of this section that the acknowledgement has to be by a party or person against whom the right is claimed. In the present case the debt is sought to be recovered both against the principal debtor as well as the surety. Therefore, the right is claimed against both. The acknowledgement is only by one. Therefore, the right will only be saved qua one and not qua the other by whom there is no acknowledgement.

The learned trial Court as well as Shri Manwarbhai, the learned counsel for the respondent relied upon the case of Ramchandra vs. Vithoba, reported in 1960 NLJ Note 74. The learned Single Judge observed that;

Acknowledgement given by the principal debtor does not save limitation against the surety.

In the case before His Lordship the plaintiff Ramchandra and others have filed the suit against the defendant No. 1 Vithoba and defendant No. 2 Devidas. The defendant No. 2 is the principal borrower while the defendant Vithoba was the guarantor. The defendant No. 2 Devidas purchased the goods from the shop of the plaintiff on 3-11 -1951 and the defendant No. 1 Vithoba passed the letter of guarantee on the very day. Then after certain repayments were made, Rs. 470/- were found due. On 18-10-1954 the defendant No. 2 Devidas gave an acknowledgement of this amount. But for this acknowledgement, the plaintiffs'' suit would have been time barred as the suit has been filed on 15th October 1957. The limitation as against the defendant No. 2, therefore, stands extended as a result of this acknowledgement and the claim against him is not barred by time. Vithoba has not, in any way, acknowledged his liability as a guarantor. On the basis of this fact, it is held that the guarantor Vithoba was liable to pay the amount on the day when the liability accrued as against Devidas. The acknowledgement given by the principal debtor would not save limitation as against the surety. The claim against Vithoba will, therefore, be time barred and, therefore, the decree was passed against the defendant No. 2 Devidas and the suit was dismissed against the defendant Vithoba the - guarantor.

Shri Manwarbhai, the learned counsel for the respondent attracted my attention to the sections 133, 134. 135, 139 and 141 of the Indian Contract Act, 1872. Section 133 of the Indian Contract Act, reads as under:-

Discharge of surety by variance in terms of contract - Any variance, made without the surety''s consent, in the terms of the contract between the principal (debtor) and the creditor, discharges the surety as to transactions subsequent to the variance.

Section 134 of the Indian Contract Act, reads as under:-

Discharge of surety by release or discharge of principal debtor - The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or Commission of the creditor, the legal consequence of which is the discharge of the principal debtor.

Section 135 of the Indian Contract Act, reads as under:-

Discharge of surety when creditor compounds with, gives time to or agrees not to sue, principal debtor. A contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor, discharges the surety, unless the surety assents to such contract.

Section 139 of the Indian Contract Act, reads as under:-

Discharge of surety by creditor''s act or omission impairing surety''s eventual remedy - If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged.

Section 141 of the Indian contract Act, reads as under:-

Surety''s right to benefit of creditor''s securities -A surety is entitled to the benefit or every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and if the creditor loses, or without the consent of the surety, parts with such security the surety is discharged to the extent of the value of the security.

The above provisions make it clear that any variance in terms of contract, when creditor compounds with, gives time to satisfy loan and promises not to sue the principal debtor, creditor does any act inconsistent with the right of the surety, without surety''s consent, surety is discharged. There is no express provision even to bind surety in future means to waive their legal right by giving consent in advance to future act. Such can''t even be viewed from letter and spirit of these provisions. The learned counsel for respondents amply proved that without the consent of the sureties the appellant Bank entered into another contract on 15-7-1972 and advanced the loan of Rs. 1,400/-, so also without any assent of the sureties the document Exh. 57 i.e. the promissory note got executed from the principal borrower on 6-10-1974.-It is, thus, clear that it is a variance made without the surety''s consent. So also there is a composition and thereby granted time to the principal borrower to satisfy the loan amount and thereby discharged the sureties as there was no assent of the sureties to the fresh contracts.

A reliance has been placed on the case of State Bank of India vs. Machine Well Industries and others, reported in Company Cases Vol. 53, 1983 at page 830, wherein His Lordship considered sections 133 and 135 of the Indian Contract Act and discussed at page 840 as under:-

But the question still remains as to whether a surety can waive his rights u/s 133 or 135 of the Contract Act and give consent in advance to the future acts in contravention of the provisions of those sections. The language of those sections indicates that a consent in advance could not be given. The language of section 133 debars a creditor from making a variance in the terms of the contract without the consent of the surety. That means that if there is a variance, the surety must consent to the same simultaneously and not in advance. The words "without the surety''s consent" clearly indicate that the consent should be given along with or at the time of the variance and there could not be any such consent when no variance had been made or even though the same was not in contemplation. Similarly, words "unless the surety assents to such contract" occurring in section 135 also indicate that the consent should exist at the time of the acts mentioned in the said provision. The word ''''assent" suggests present tense which is indicative of the fact that the assent should be simultaneous with the composition, etc., mentioned in section 135. In fact the statutory rights of a surety or guarantor cannot be abridged by a contractual provision in the deed of guarantee unless it had been specifically provided in section 133 or section 135 of the Contract Act that such rights were subject to a contract.

From this it is crystal clear that mere inclusion of some terms in the deed of guarantee cannot bypass the statutory provisions of sections 133 and 135 debarring the guarantor to take the benefit of the statutory provisions. Items Nos. 1 and7of the deed of guarantee is, thus, cannot be taken into consideration in view of the specific provisions of sections 133, 134, 135, 139 and 141 of the Indian Contract Act.

In the case of Kanailal Mookerjee Vs. Kali Mohan Chatterjee, , it is held that :-

The principles underlying sections 133 to 141, Contract Act, apply to bonds in favour of courts although the sections may not be by themselves applicable.

Further, it is held that:-

By agreeing to the provision of cl. (2) of the said consent decree the decree-holder in effect gave time to the judgment-debtor and came within the mischief of section 135 of the Act, and that, therefore, the surety was discharged.

A reliance has been placed on the case of Bankim Bihari Roy Vs. Halima Bibi and Another, . In this case a security was executed in favour of the court u/s 145, CPC for performance of the decree. There was a compromise without notice to the surety between the decree-holder and judgment-debtor, and thereby time to execute the decree was extended under the compromise. On this point, Their Lordships held that:

The principle of section 135 of the Indian Contract Act comes into play and the surety is discharged.

Again in the case of Mahomedalli Ibrahimji Vs. Lakshmibai Anant Palande, , it is observed that :-

Where a person stands surety for a debtor called upon under Order 38, Rule 5 to furnish security for production of property and the suit is compromised, provided the rights of the surety are prejudiced by the compromises and provided the compromise was not contemplated by the surety when entering into suretyship the passing of the decree in terms of the compromise has the effect of discharging the surety.

In the case of Parvatibai Harivallabhdas Vani Vs. Vinayak Balvant Jangam, , Their Lordships discussed the relations of principal debtor and surety and held that:-

The general principles underlying the law of suretyship (and in particular the principle that the rights of surety are not to be interfered with without his consent) may be applied and ought to be applied, even though the provisions of the Contract Act do not govern the case.

In the case before Their Lordships security bonds were executed by sureties during the pendency of a suit against their principal debtor. A decree having been passed against the principal debtor, the decree-holder took out execution proceedings. The principal debtor i.e. the judgment-debtor, went up in appeal against the decree and execution against him was stayed on offering of fresh securities for the decretal amount. Question was whether the old sureties were discharged by reason of the acceptance of the new surety in appeal. Held that "the case was one in which the Court itself was responsible for substituting fresh sureties, and although it was not for the old sureties to allege and prove that they were materially prejudiced, yet in fact they were so prejudiced and hence the first sureties were discharged".

Considering the facts and circumstances of the case and the views expressed by the various Courts as discussed in the preceding paras, the respondents/sureties not being the parties to the subsequent transactions which took place between the appellant and the principal borrower, the respondents are discharged from their liabilities. It is also admitted by the plaintiff''s witness Shri Ashokkumar (P.W.2) that" the original agreement dtd. 6-10-1971 was continued till the changes of the document of 1974''''. Thus, the respondents/ sureties are discharged in view of the provisions under sections 133 and 135 of the Indian Contract Act. Unless the statute permits, the party to the contract cannot be permitted to change the law of the land by so-called terms in the agreement itself, as such recourse being sought to Exh. 54 i.e. the deed of guarantee. The acknowledgement got executed by the plaintiff on 6-10-1974 from the principal debtor does not save limitation against the surety. The facts of the case of Kanchanlal Chandulal Parikh vs. Bank of India, 1 (1991) BC 119 (Bombay High Court), are altogether different than the case before me. In that case, in respect of the documents subsequently executed the defendant Nos. 2, 3, 4 and 5 were the consenting parties. In the instant case, admittedly the respondents were neither the parties to the subsequent transactions nor they gave assent at any subsequent time.

The issue (point) No. 3 though not taken in the memo of appeal and opposed by the learned counsel for the respondents, it being legal one, it needs consideration. The plaintiff/appellant advanced the loan to the principal borrower, and executed the agreement of hypothecation vide Exh. 53. The cause of action or limitation begins on the date of the execution of the deed or promissory note itself. Any suit, appeal or application for the recovery of the loan should be instituted within the stipulated period of 3 years from the date of execution of promissory note. Section 3 of the Limitation Act, 1963, specifies that in case the suit, appeal or application filed after the prescribed period, it shall be dismissed although the limitation has not been set up as defence.

The provisions of section 18 of the Limitation Act, 1963 extend the period of limitation if before expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or right has been executed in writing and signed by the party against whom such property or right is claimed.

Article 21 of the schedule of the Limitation Act, 1963 is in respect of the transaction where money lent under an agreement that shall be payable on demand and the period of limitation is 3 years and the time begins to run when the loan is made. Article 35 deals with the bill of exchange or promissory note payable on demand and not accompanied by any writing restraining or postponing the right to sue. The period of limitation is again 3 years and the period begins to run from the date of the bill or note.

It is, thus, clear from the above provisions that the prescribed limit to institute the suit, to prefer appeal and make application is 3 years and time begins from the date of the execution of the deed. Even if the word has been used in Articles 21 and 35 that the amount shall be payable on demand, the time will not run from the date of demand because statutes provide that time begins means cause of action begins from the date of the execution of the agreement, deed or note. It means, creditor has to make demand within the prescribed period of 3 years. No other contrary view is possible in view of the specific provisions. Suppose if a demand of loan amount is made on the last day of the specified period of limitation of 3 years, and if it is construed that time will begin from the date of demand, which is against the statutory provisions and such extension would be even in absence of an acknowledgement of earlier dues, the time would be extended from that date. If such view is taken then the statutory provisions of limitation to institute the suit, to prefer an appeal and to file an application will be redundant. It is no doubt, the Article 22 of the Limitation Act deals with the money deposited under an agreement that it shall be payable on demand, including money of a customer in the hands of his banker so payable. Under this Article also the limitation prescribed is of 3 years and time begins from the date of demand is made. This case is applicable in the case where the customers used to deposit money or articles in the banks and there is specific agreement that on demand the money or articles shall be payable or returnable on. demand. For example: Customer deposits money in the bank and wants to withdraw either by cheque or draft and presents the same instrument, the Bank is liable to pay on demand. If there is refusal, from the date of refusal the period of limitation begins to run. But it will not be applicable in case of fixed deposit, because no customer is expected to demand and return of his amount kept in the fixed deposit for certain period as well as the banker is not obliged to return the same on the demand of the customers. Therefore, there is difference and distinction between the deposit and loan. What is deposit or loan has been considered in the case of V.E.A. Annamalai Chettiar and Another Vs. S.V.V.S. Veerappa Chettiar and Others, , in which it is observed that :-

Whether a transaction is a transaction of loan or deposit does not depend merely on the terms of the document but has got to be judged from the intention of the parties and all the circumstances of the case. Even though the transaction is a transaction of deposit the deposit can be coupled with an agreement that it will be payable on demand. Such an agreement can be express or implied and if an express agreement in that behalf is recorded in the document the transaction of deposit cannot be thereby converted into a transaction of loan and the words we shall pay the said sum cannot convert the document into a promissory note. The promise to pay will be involved in a promissory note as well as in a deposit within the meaning of Article 60, Limitation Act and the Court will have regard to the intention of the parties and the circumstances of the case in order to arrive at the conclusion whether the document is a note.

In view of these provisions if the fresh limitation is to begin from the date on demand, extending the statutory provision of limitation, the statutory provisions of limitations would be redundant and thereby it will be contrary and violative to the provisions of law.

In the result I do not find any substance in the appeal and hence it is dismissed. Parties to bear their own costs.