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PUNJAB NATIONAL BANK V. SURENDRA PRASAD SINHA AIR 1992 SC 1815 (K. RAMASWAMY, J.)

PUNJAB NATIONAL BANK V. SURENDRA PRASAD SINHA AIR 1992 SC 1815 (K. RAMASWAMY, J.)

 

FACTS

  • The respondent and his wife became guarantors S who took a loan of Rs. 15000 in 05/05/1984 from the appellant. Respondents executed a security bond, handing over a Fixed Deposit Receipt for a sum of Rs. 24000 whose maturity value was to be Rs. 41292 on November 1988.
  • S committed default in payment of the debt, after which the appellant adjusted the sum of Rs. 27,037 due and payable by S as on December, 1988 and the balance sum of Rs 14,254.40 was credited to the Savings Bank Account of the respondent.
  • The respondent alleged that the debt became barred by limitation as on May 5, 1987. The liability of the respondent being coextensive with that of the principal debtor, his liability also stood extinguished as on May 5, 1987.
  • A criminal case was filed by the respondent against the appellant and its employee accusing them of embezzlement, financial neglect, abetment, etc. and the trial court as well as the High Court rejected the appellant’s plea for quashing the criminal proceeding.

 

ISSUE

  • Whether the debt became barred by limitation and the respondent’s liability thereto.

  

HELD

The debt was held to be time barred but the appellants still had the right to get the loan back. The appeal was allowed.

  • The rules of limitation are not meant to destroy the rights of the parties. Section 3 of the Limitation Act, 1963 only bars the remedy, but does not destroy the right, which the remedy relates to. The right to the debt continues to exist notwithstanding the remedy is barred by the limitation. Only exception in which the remedy also becomes barred by limitation is that the right itself is destroyed.
  • Though the right to enforce the debt by judicial process is barred under Section 3 read with the relevant article in the schedule, the right to debt remains. The time barred debt does not cease to exist by reason of Section 3.
  • That right can be exercised in any manner than by means of a suit.
  • The debt is not extinguished, but the remedy to enforce the liability is destroyed. What Section 3 refers is only to the remedy but not to the right of the creditors. Such debt continues to subsist so long as it is not paid. It is not obligatory to file a suit to recover the debt. It is settled law that the creditor would be entitled to adjust, from the payment of a sum by a debtor, towards the time barred debt. It is also equally settled law that the creditor when he is in possession of an adequate security, the debt due could be adjusted from the security in his possession and custody.
  • Undoubtedly the respondent and his wife stood guarantors to the principal debtor, jointly executed the security bond and entrusted the F.D.R. as security to adjust the outstanding debt from it at maturity. Therefore, though the remedy to recover the debt from the principal debtor is barred by limitation, the liability still subsists.
  • The respondent had abused the process and laid a complaint against all the appellants without any prima facie case to harass them for vendetta.