M.C. CHACKO versus STATE BANK OF TRAVANCORE, TRIVANDRUM

Citation: [1970] 1 S.C.R. 658 · Decided: 23-07-1969 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Modified

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

M.C.CHACKO 
v. 
STATE BANK OF TRAVANCORE, TRIVANDRUM 
July 23, 1969 
[J. C. SHAH, ACTING C.J. ANO G. K. MITTER, J.] 
Charge--Guaranree-Father guaranteeing payment of overdraft account 
of Bank of which son was manager-Deed b.v father giving his properties 
to son and fanJily 1nembers-Recital in deed that /ether's liability if an)' 
tv be satisfied by the son and the properties c..Ilotred to him-If sufficient 
to creare 
charge-Right if can be 
enforced by person not pllrly to 
contract. 
A bank, of which the appellant was the Manager, had •n ovcrdrah 
account with anotbcr bank \\'hich later merged with 1he respondent. The 
appellant's father had executed from time to time letters of guarantee 
holding him.c;elf liable for the ~mount under the O\'t.'fdraft arr;inb>cn1ents. 
"fhe •ppellant's father executed a deed giving a\\.'ay his properties 10 th!! 
appelta:it, and orher n1embcrs of the family. 
·rhe 
deed 
re\."itc<l 
that 
he had c:c:ecuted the letters of guarantee at the request of rhe app!.!tlant, 
and tbl'lt the amount due to the Bank wits 10 be paid by the app~llant; but 
if any amount had to be paid l-y him (father) as per the letlcr of guara .. tcc, 
the appellant and the µropcrtic~ allotted to him were to he an'\wcrable 
tor that amount. ·rrc creditor bank tiled a suit against the debtor bank 
and also against the appcUant and his father's other heirs and legal rcpre-
scntartV'ei for the amount due under the overdraft arrangement; and claimed 
that a charge wa~ created on the properties to "'hich the deed t:X:!CUted 
by the father of the appellant related. 
The trial court decreed the suit 
against the debtor hank and al<;o -again.st the appellant limited to the 
property received by him from his father under the deed hut held that the 
claim to enforce the personal Jia.bility of the father against his legal repn:-
sentatives was barred by the law of limitation. The High Court con.firmed 
tile decree. 
On the questions (i) v.1hether under the deed a charge was 
created in favour of the creditor bank to satis'fy the debt arising under the 
Jetter of guarantee, and (ii) whether lhe charge, assuming that a charge 
arose, was enforceable by the creditor bank when it v.·as not a party to the 
deed, 
HELD : (i) In order that a charge may be created, there n1u;t be 
evidence of intention disclosed by the deed that a specified 
property or 
fund belonging to a person wao; intended to be made liable to satisfy the 
deed, 
In the present ca~e the recitals in the deed did not evidence any in1en-
tioa. of the donor to create a charge in favour of the creditor bank; Ibey 
merely set out an arrangement between the donor and the members of 
his family that the liability under the letter of guarantee if and when it 
aro•e. will be satisfied by the appellant out of the property allotted tn 
him under the deed. 
The letter of guarantee created merely a personal 
·obligation and an intention to convert a personal debt into a secured debt 
·in favour of the Bank, a third person, could not be inferred from the 
rccit!ls in the deed. 
Akal/a Suryanalayana Rao & Ors. v. Dwarapudi Basivirtddi &: Ors., 
:1.L.R. 55 Mad. 436. referred to 
A 
B 
c 
D 
E 
F 
G 
H 
M, C. CHACKO v. STATE BANK (Shah, Ag. C.J.) 
659 
A 
(ii) Even if it be granted that there was an intention to create a 
B 
c 
D 
E 
F 
G 
H 
charge the creditor-bank, n.ot being a party to the deed could not enforce 
its covenants. 
It must be taken as well settled that except in the case 
of a beneficiary under a t!rust created by a contract or in the case of a 
family arrangement to right may be enforced by a person who is not a 
party lo a contract. [662 H] 
Krishna Lal Sadhu v. Pramila 
Bala 
Dasi. I.L.R. 
55 Cal. 
!315, 
referred to. 
' 
CIVIL APPELLATE JuRJSDICTION: 
Civil Appeal No. 652 of 
1966. 
Appeal by special leave from the judgment and order dated 
Noveir.tcr 23, 1964 of the Kerala High Court in A. S. No. 502 of 
1961. 
S. V. Gupte, Anantha Krishna Iyer, S. Balakrishnan and 
R. Thiagarajan, for the appellant. 
H. R. Gokhale, J. S. Arora and K. Baldev Mehta, for the 
respondent. 
The Judgment of the Court was delivered by 
Shah, Ag. C.J. The High Land Bank Kottayam of which the 
appellant M. C. Chacko was the Manager, had an overdraft 
account with the Kottayam Bank. K. C. Chacko, father of the 
appellant, had executed from time to time letters of guarantee in 
favour of the Kpttayam Bank agreeing to pay the amounts due 
by the High Latld Bank under the overdraf

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