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CASE NO.: Appeal (civil)  1878 of 2008

PETITIONER: Sita Ram Gupta

RESPONDENT: Punjab National Bank and Ors

DATE OF JUDGMENT: 10/03/2008

BENCH: TARUN CHATTERJEE & HARJIT SINGH BEDI

JUDGMENT: J U D G M E N T REPORTABLE

CIVIL APPEAL NO 1878 OF 2008 [ Arising out of SLP [C] No.21358 of 2006 ]

TARUN CHATTERJEE, J.

1.      Leave granted. 2.      This appeal arises out of the final judgment and decree          dated 11th of May, 2006 passed by the High Court of Delhi at New  Delhi in RFA No.71 of 1985 whereby the High Court had set aside  the judgment and decree dated 12th of November, 1984 passed by  the Additional District and Sessions Judge dismissing the suit filed  against the appellant who was a guarantor in respect of loans  advanced by the Punjab National Bank [ in short ’the Bank’] \026  respondent no.1 to M/s Rangaa Trades and Exports Pvt. Ltd. \026  respondent no.2 in this appeal.  By the impugned judgment, the High  Court affirmed the decision of the Additional District and Sessions  Judge and held that the suit filed by the Bank be decreed against the  original defendant Nos.1 to 4 for a sum of Rs.42,874/-  including  interest at the rate of 19.5 per cent per annum with quarterly rests  from the date of filing of the suit till realization. At this stage, we  may note that the said decree against the defendant nos.1 to 4 has  now become final as no appeal was preferred by the said defendant  nos. 1 to 4 against the said decree. Feeling aggrieved by the  aforesaid judgment of the High Court, this special leave petition has  been filed by the guarantor appellant in respect of which leave has  already been granted. 3.      The only question that was raised on behalf of the appellant  was that in view of the statutory provision under section 130 of the  Indian Contract Act, 1872 (in short "the Act"), whether the High  Court was justified in holding that the appellant who was a  guarantor of the loan advanced to the defendant nos. 1 to 4 was  liable to pay the decretal amount on the ground that the appellant  had revoked the guarantee before such loan was actually paid to  the defendant Nos. 1 to 4 and long before the suit was filed by the  bank against the defendants for recovery of such loan.  

4.      In order to decide the question raised by the learned counsel  for the appellant, we may look into the agreement of guarantee  entered into by the bank with the appellant as guarantor, which  reads as under:  "The guarantors hereby guarantee jointly and  severally to pay the bank on demand all principal,  interest, costs, charges and expenses due and which  may at any time become due to the Bank from the  borrower, on the accounts opened in respect of the

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said limits (hereinafter called the ’said accounts’)  down to the date of payment and also all loss or  damages, costs, charges and expenses and in the case  of legal costs, costs as between attorney and client  occasioned to the Bank by reason of omission, failure  or default temporary or otherwise in such payment by  the Borrower or by the Guarantors or any of them  including costs (as aforesaid) of enforcement or  attempted enforcement of payment by suit or  otherwise or by a sale or realization or attempted sale  or realization of any security for the said indebtedness  or otherwise howsoever or any costs (which costs to  be as aforesaid) charges or expenses which the Bank  may incur by being joined in any proceeding to which  the Bank may be made or may make itself party either  with or without others in connection with any such  securities or any proceeds thereof.           The Guarantors hereby declare that this guarantee  shall be a continuing guarantee and shall not be  considered as cancelled or in any way affected by the  fact that at any time the said accounts may show no  liability against the Borrower or may even show a  credit in his favour but shall continue to be guarantee  and remain in operation in respect of all subsequent  transactions." (Emphasis supplied)  

Keeping the agreement of guarantee, as noted hereinabove, in  mind, let us now look into the facts of the present case. It is an  admitted position that the guarantee issued by the appellant to the  Bank was subsequently cancelled by his letter dated 31st of July,  1980 written to the Manager of the Bank and in that view of the  matter, the appellant sought to substantiate his case that since his  guarantee had stood revoked before the loan was in fact taken by  the defendants from the bank, in view of Section 130 of the Act, he  was not liable to pay the loan taken by the defendants in respect of  which the appellant was a guarantor. The trial court, as noted  herein above, dismissed the suit against the appellant and in appeal  by the Bank, the High Court had reversed the decree passed by the  trial court and granted decree in favour of the Bank and against the  appellant. Subsequent to the revocation of guarantee by the  appellant, there were transactions in respect of the loan between  the defendant Nos. 1 to 4 and 6 and the bank. The suit was filed for  recovery of loan by the Bank against the appellant as well as the  other defendant Nos. 1 to 4 and 6.  

5.      The learned counsel appearing for the appellant, relying on  Section 130 of the Act, sought to argue that in view of the fact that  Section 130 clearly provides for revocation of a continuing  guarantee as to future transactions by notice to the creditor and as  in the present case, the guarantee was revoked long before the loan  was given and the suit filed, the appellant was not liable to pay the  decretal amount to the Bank. Accordingly, he submitted that the  High Court was not justified in reversing the judgment of the trial  court and in decreeing the suit against the appellant. This  submission of the learned counsel for the appellant was seriously  contested by Mr. Dhruv Mehta, the learned counsel appearing on  behalf of the Bank. According to       Mr. Mehta, the submission of  the learned counsel for the appellant cannot be accepted in view of  the clause in the agreement of guarantee itself, as noted herein  earlier. Before we proceed further and in order to decide the  submissions made on behalf of the parties before us, it would be  appropriate to reproduce Section 130 of the Act, which reads as  under: -

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"Revocation of continuing guarantee \026 A  continuing guarantee may at any time be revoked  by the surety, as to future transactions, by notice to  the creditor."

6.      We have carefully examined the submissions made on  behalf of the parties and also the relevant clauses in the agreement  of guarantee. In our view, the High Court was perfectly justified in  holding that the appellant was liable to pay the decretal amount to  the Bank in view of the clause, as mentioned herein earlier, in the  agreement of guarantee itself. The agreement of guarantee clearly  provides that the guarantee shall be a continuing guarantee and  shall not be considered as cancelled or in any way affected by the  fact that at any time, the said accounts may show no liability  against the borrower or may even show a credit in his favour but  shall continue to be a guarantee and remain in operation in respect  of all subsequent transactions.  This was an agreement entered into  by the appellant with the Bank, which is binding on him.  Therefore, the question arises whether the statutory provision  under Section 130 of the Act shall override the agreement of  guarantee. In our view, the agreement cannot be said to be  unlawful nor the parties have alleged that it was unlawful either  before the Trial Court or before the High Court. Let us, therefore,  keep in mind that the agreement of guarantee entered into by the  appellant with the Bank was lawful.

7.      The question is whether the appellant, having entered into  such an agreement of guarantee with the Bank, had waived his  right under the Act. In our view, the High Court has rightly held  and we too are of the view that the appellant cannot claim the  benefit under Section 130 of the Act because he had waived the  benefit by entering into the agreement of guarantee with the Bank.  In Shri Lachoo Mal Vs. Shri Radhey Shyam, [(1971) 1 SCC 619],  this Court observed that the general principle is that everyone has a  right to waive and to agree to waive the advantage of a law or rule  made solely for the benefit and protection of the individual in his  private capacity which may be dispensed with without infringing  any public right or public principle. In Halsbury’s Laws of  England, Vol. 8, 3rd Edn., it has been stated in para 248 at page 143  as under: - "As a general rule, any person can enter into a  binding contract to waive the benefits conferred  upon him by an Act of Parliament, or, as it is  said, can contract himself out of the Act, unless it  can be shown that such an agreement is in the  circumstances of the particular case contrary to  public policy. Statutory conditions may, however,  be imposed in such terms that they cannot be  waived by agreement, and, in certain  circumstances, the legislature has expressly  provided that any such agreement shall be void."  (Emphasis supplied)

In Brijendra Nath Bhargava and anr. Vs. Harsh Wardhan and  ors.  [(1988) 1 SCC 454], it has been observed at page 461 in para  10 that if a party had given up the advantage he could take of a  position of law, it was not open to him to change and say that he  could avail of that ground. The same principle has been followed  in Bank of India and Ors. Vs. O.P.Swarnakar & Ors. [(2003) 2  SCC 721].  

8.      Keeping this principle in mind, we now look at the clause in  the agreement of guarantee, as noted herein earlier. There cannot

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be any dispute that the appellant had clearly agreed that the  guarantee that he had entered into with the Bank was a continuing  guarantee and the same was to continue and remain in operation  for all subsequent transactions. Having entered into the agreement  in the manner indicated above, in our view, it was, therefore, not  open to the appellant to turn around and say that in view of Section  130 of the Act, since the guarantee was revoked before the loan  was advanced to defendant Nos. 1 to 4 and 6, he was not liable to  pay the decretal amount as a guarantor to the Bank as his guarantee  had already stood revoked. In this view of the matter, we are not in  a position to accept the submissions of the learned counsel for the  appellant and we hold that in view of the nature of guarantee  entered into by the appellant with the Bank, the statutory provision  under Section 130 of the Act shall not come to his help. The  findings arrived at by the High Court while deciding the first  appeal were that the amount shown due in the accounts of the Bank  against the appellant and the defendants was neither cleared by the  defendants nor by the appellant. Therefore, even if a letter was  written to the Bank by the appellant on 31st of July, 1980  withdrawing the guarantee given by him, it was contrary to the  clause in the agreement of guarantee, as noted herein earlier.  Therefore, it was not open to the appellant to revoke the guarantee  as the appellant had agreed to treat the guarantee as a continuing  one and was bound by the terms and conditions of the said  guarantee. For this reason, it is difficult to accept the submissions  of the learned counsel for the appellant that in view of the statutory  provision under Section 130 of the Act, after the revocation of the  guarantee by the appellant, he was not liable to pay the decretal  amount to the Bank. No other point was raised by the learned  counsel for the appellant.  Accordingly, there is no merit in this  appeal. The appeal is thus dismissed. There will be no order as to  costs.