SITA RAM GUPTA versus PUNJAB NATIONAL BANK AND ORS.

Citation: [2008] 4 S.C.R. 636 · Decided: 10-03-2008 · Supreme Court of India · Bench: TARUN CHATTERJEE · Disposal: Dismissed
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Judgment (excerpt)

[2008] 4 S.C.R. 636 
A 
SITA RAM GUPTA 
...(--.-;,. 
. II. 
PUNJAB NATIONAL BANK AND ORS. · 
(Civil Appeal No. 1878 of 2008) 
B 
MARCH 10, 2008 
(TARUN CHATTERJEE & HARJIT SINGH BEDI, JJ.) 
Indian Contract Act 1872 Section 130: 
y-
Continuing guarantee - Revocation - . Guarantor -
c Liability of - Held: Agreement entered into between Bank and 
Guarantor clearly providing that the Guarantee ·shall be 
continuing guarantee and remain in operation in respect· of 
subsequent transaction - The Agreement was lawful - Letter · 
written by the guarantor to Bank withdrawing guarantee was of 
D no effect in terms of guarantee clause in the agreement -
Hence, High Court rightly held that the guarantor cannot claim 
benefit of the provisions uls. 130 of the Act on groun.d that it 
~ 
was waived by him. 
E 
The question which arose for consideration in this 
appeal was that in view of the statutory provision under 
s. 130 of the Indian Contract Act as to whether the High 
Court' was ju~tified in holding that the appellant-guarantor 
was liable to pay the decretal loan amount as advan·ced 
F 
by the Bank to defendant Nos. 1 to 4 even when he had 
revoked the guarantee before such loan was actually paid 
,._ 
by the bank to defendants, when the suit was already filed 
y 
J 
long back by the bank against the defendants for recovery 
1-
of such loan. 
G 
Dismissing the appeal, the Court 
HELD: 1.1 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 in the agreement 
r-
of guarantee itself. The agreement of guarantee clearly 
H 
636 
I 
l 
SITA RAM GUPTA v. PUNJAB NATIONAL BANK AND 
637 
ORS. 
provides that the guarantee shall be a continuing A 
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 B 
subsequent transactions. This was an agreement entered 
into by the appellant with the Bank, which is binding on 
him. (Para - 6) [641-E-H] 
1.2 The agreement cannot be said to be unlawful nor 
the parties have alleged that it was unlawful either before C 
the Trial Court or before the High Court. Therefore, the 
agreement of guarantee entered into by the appellant with 
the Bank was lawful. (Para - 6) [642-A-B] 
1.3 The High Court has rightly held and that the 
appellant cannot claim the benefit under Section 130 of D 
the Indian Contract Act because he had waived the benefit 
by entering into the agreement of guarantee with the Bank. 
(Para - 7) [642-B-C] 
Shri Lachoo Mal vs. Shri Radhey Shyam, (1971) 1 SCC E 
619; Brijendra Nath Bhargava and Anr. vs. Harsh Wardhan 
and Ors. (1988) 1 sec 454 and Bank of India and Ors. vs. 
O.P.Swamakar & Ors. (2003) 2 SCC 721 - referred to. 
Halsbury's Laws of England, Vol. 8, 3rd Edn. - referred to. 
F 
1.4 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 th~ agreement in the manner as G 
indicated 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 . H 
638 
SUPREME COURT REPORTS 
(2008] 4 S.C.R 
A his guarantee had already stood revoked. (Para - 8) 
[643-A-C] 
1.5 Even if a letter was written to the Bank by the 
appellant' withdrawing the guarantee given by him, it was 
contrary to the clause in the agreement of guarantee. 
B Therefore, it was not open to the appellant to revoke the 
guarantee as the appellant had agreed to treat the 
guarantee a~· a continuing one and was bound by the 
terms and conditions of the said guarantee. (Para - 8) 
c 
D 
E 
[643-E-F] 
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 1878 
of 2008. 
From the final Judgment and Order dated 11.05.2006 of 
the High Court of Delhi at New Delhi in RF.A No. 71 of 1985 
Rishi Maheshwari, R.K. Maheshwari and Raj Kµmar 
Kaushik for the Appellant. 
Dhruv Mehta, Yashraj Singh Deora and Harshvardhan Jha 
(for M/s. K.L. Mehta & Co.) for the Respondents. 
The Judgment of the Court was delivered by 
TARUN CHATTERJEE, J. 1.
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