2006 (3) AIR Kar R 530

Supreme Court Of India

Hon'ble Judge(s): Arun Kumar, R. V. Raveendran , JJ

( A ) Contract Act (1 of 1872) S. 126 , 128, 129, 130 — Limitation Act (36 of 1963), Art. 55 — Suit for enforcement of guarantee bond — Limitation — Guarantor’s liability and as to when liability of guarantor will arise — Depends on terms of contract — Guarantee payable on demand — Limitation starts running only when actually a demand for payment is made and it was refused by guarantors — However, such a demand should not be time-barred against principal debtor i.e. it should be ‘live claim’ — Cessation of operation of accounts — Cannot be treated as refusal to pay by principal debtor — Word ‘on demand’ — Meaning of, stated. Words and Phrases — Words ‘payable on demand’ qua ‘money lent and money deposited’.A guarantor’s liability depends upon the terms of his contract. A ‘continuing guarantee’ is different from an ordinary guarantee. There is also a difference between a guarantee which stipulates that the guarantor is liable to pay only on a demand by the creditor, and a guarantee which does not contain such a condition. Further, depending on the terms of guarantee, the liability of a guarantor may be limited to a particular sum, instead of the liability being to the same extent as that of the principal debtor. The liability to pay may arise, on the principal debtor and guarantor, at the same time or at different points of time. A claim may be even time- barred against the principal debtor, but still enforceable against the gu....