Supreme Court of India
M/S. SUNDARAM FINANCE LIMITEDversusNOORJAHAN BEEVI AND ANOTHER
- Citation
- 2016 INSC 452
- Decided
- 29 June 2016
- Disposal
- Dismissed
- Bench
- ABHAY MANOHAR SAPRE
Holding
The limitation period began on the date of default (20 May 1984) under Article 55, making the suit filed on 25 May 1988 time‑barred.
Summary
M/s. Sundaram Finance Ltd., a hire‑purchase financier, sued Noorjahan Beevi and her husband for the balance of Rs.40,138 after seizing and selling a financed vehicle. The borrowers defaulted on the instalment payment on 20 May 1984, after which the financier seized the vehicle on 9 February 1985 and sold it on 30 May 1985. The suit was filed on 25 May 1988, more than three years after the default. The question before the Supreme Court was whether the limitation period under the Limitation Act, 1963 should be counted from the date of default, the date of sale of the vehicle, or the date of the last instalment due. The Court held that Clause 4 of the hire‑purchase agreement made the contract ipso facto terminated at the moment of default, so the cause of action arose on 20 May 1984 and the limitation period began then under Article 55. Consequently, the suit was time‑barred and the appeal was dismissed.
Issues considered
- The appropriate starting point for the limitation period under the Limitation Act, 1963 in a hire‑purchase recovery suit – date of default, date of sale of the vehicle, or date of last instalment due.
- Whether Article 55 or Article 113 of the Limitation Act governs the suit.
Legislation cited
- Limitation Act, 1963s. Article 113, s. Article 55
Subjects
Limitation ActArticle 55Article 113hire purchasedefaultcontract breachrecovery suitperiod of limitationsale of collateral
Judgment
[2016) 3 S.C.R. 420
A M/S. SUNDARAM FINANCE LIMITED
v.
NOORJAHAN BEEVI AND ANOTHER
B (Civil Appeal No. 7245 of2008)
JUNE 29, 2016
[ABHAY MANOHAR SAPRE AND ASHOK BHUSHAN, JJ.)
c Limitation Act, 1963 -Arts. 55 and 113 - Period of limitation
for filing recovery suit against defaulting borrower - Hire purchase
agreement between the financer and hirer for purchasing a vehicle
- Default in payment of instalments by hirer within a year - One
year thereajie1; company seizing the vehicle and selling it - However,
the amount recovered not sufficient to clear the amount received -
D Suit for recovery of the balance amount by the jinancer within three
years from the date of selling of the vehicle - Borrowers case that
the three years limitation period to be counted ji-0111 the first default
- Company :s case that limitation period to be counted ji-om the sale
of the vehicle - Trial court and High Court held that the suit was
E barred by limitation - 011 appeal, held: Limitation would start
running from the date the hirer defaulted in making payment and
suit was filed beyond three years from the said date, thus, was clearly
.
barred by time and was rightly dismissed by the courts below.
Dismissing the appeal, the Court
F
HELD: 1.1 There is no dispute between the parties that
the hirer committed default in payment of instalments on 20th
May, 1984. The High Court while noticing the contents of Clause
4 of the agreement held that "if the hirer commits the breach of
the agreement, the rights of the hirer under the agreement shall
G forthwith be determined ipso facto without any notice to the hirer
and all the instalments previously paid by the hirer shall be
absolutely forfeited to the owners who shall thereupon be entitled
to enter any house or place where the said vehicle may then be
seize, remove and retake possession of it and to sue for all the
instalments due and for damages for breach of the agreement.
H
420
MIS. SUNDARAM FINANCE LIMITED v. NOORJAHAN BEEV! 42 I
AND ANOTHER
The High Court further held that there is no clause in agreement A
permitting the plaintiff to sell the vehicle. 'fhe submission that
limitation to file the suit for recovery of balance amount shall
begin with effect from the date of sale this is 30th May,1985,
cannot be accepted. The contract was to be determined ipso facto
on default being committed. The power of seizing the vehicle
B
and to take possession as contemplated under Clause 4 of the
agreement was consequent to default being !-'.Ommitted by the
hirer. Thus, as per Clause 4 the right to sue accrues when the
hirer commits breach of the agreement. Committing default in
payment of installment is nothing but a breach of the agreement
and thus courts below rightly took a view that period of limitation c
for filing a suit under Article 55 shall begin with effect from 20th
May, 1984 when the default was committed by the hirer. [Paras
12, 14, 15) [427-E-I<'; 428-B-D)
1.2 The rights of the parties have to be determined as per
terms and conditions of the agreement dated 20.9.1983. The terms D
of the agreement clearly indicate that on committing a breach of
terms and conditions of the agreement the rights shall accrue to
the plaintiff to sue for balance instalments and the damages for
breach of contract. Thus, the right to sue shall not stand differed
till either sale which took place on 20th May, 1985 or till the last
date of payment of the instalment that is 20th September, 1986. E
Both the courts below have rightly taken the view that limitation
shall start running from the date the hirer defaulted in making
payment that is on 20.5.1984 and suit has been filed beyond three
years from the above date was clearly barred by time. [Para 20)
[432-D-I<')
F
1.3 In exercise of power under Clause 4 of the agreement
dated 20.9.1983 the plaintiff had taken possession of vehicle on
9.2.1985 and had immediately vide letter dated 12.2.1985 called
upon the defendant to pay them due within 10 days from the receipt
of the letter. The notice dated 12.2.1985 was received by the
G
first defendant which was also replied by the first defendant as
has been pleaded in the written statement. Thus,in any event of
the matter contract stood broken on the default and right to sue
accrued to the plaintiff on demanding the amount to be paid within
10 days. Thus, in any view of the matter suit filed by the plaintiff
was beyond three years and has rightly been dismissed by the H
422 SUPREME COURT REPORTS [2016] 3 S.C.R.
A trial court. The. High Court also did not error in dismissing the
appeal by taking the view that the suit was barred by limitation.
fl'ara 21] [433-C-F]
. Bell Alloys Steels Private Limited v. The National Small
Industries CorporatiOn Limited 1980 Legal Surveyor
B 85; Deepak Bhandari v. Himachal Pradesh State
Industrial Development Corporation Limited 2014 (2)
SCR 138 : 2015 (5) SCC 518; Himacha! Pradesh
· Financial Corporation v. Pawna and others 2015 (5)
SCC 617; Deepak Bhandari v. Himacha! Pradesh State
c Industrial Development Corporation Limited 2014 (2)
SCR138 : 2015 (5) sec 518; Syndicate Bank V.
Channaveerappa Beleri and others 2006 (3) SCR 999
: 2006 (11) sec 506 - referred to.
Case Law Reference
D
1980 Legal Surveyor 85 referred to Para 5
2014 (2) SCR 138 referred to Para6
2015 (5) sec 617 referred to Para 16
E 2014 (2) SCR138 referred to Para 19
2006 (3) SCR 999 referred to Para 20
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7245
of2008.
F
From the Judgment and Order dated I 0.04.2002 of the in AS No.
388of1992 passed by the High Court of Kerala at Ernakulam .
. Vaishnavi Subrahmanyam, Balaji Srinivasan, Advs. for the
Appellant.
G The Judgment of the Court was delivered by
ASHOK BHUSHAN, J. I. The plaintiff-appellant has filed
this appeal against the judgment dated 10th April, 2002 in A.S. No.388
of 1992 of Kerala High Court by which the High Court dismissed the
appeal filed by the plaintiff-appellant in which appeal the judgment of
H the trial court dated 29.05.1991 dismissing the suit was assailed.
MIS. SUNDARAM FINANCE LIMITED v. NOORJAHAN BEEVI 423
AND ANOTHER [ASHOK BHUSHAN, J.]
2. The brief facts necessary to be.noted in this appeal are: A
The plaintiff-appellant is_ a public limited company carrying on a
business of extending hirt! purchase facilities for commercial vehicles.
The plaintiff and the first defendant had entered int_o an agreement dated
20.09.1983 by which plaintiff had financed an amount ofRs.1,47,000/-.
The first defendant, the hirer was to clear off entireamount due in 36 B
monthly instalments. The first. defendant committed default in payment
of instalments with effect from 20th May, 1984. The.plaintiff seized the
vehicle No. KLI2447 on 9th February, 1985. Thereafter,the plaintiffvide
letter dated 12th February, 1985 called upon the defendants to settle the
contract within 10 days from the date of the receipt of the notice. The
defendants did not make any payment. The plaintiff ori 30th May, 1985 c
sold the vehicle and after adjusting the amount received from sale of
vehicle balance of Rs.40, 138/~ was furthe_r demanded. Notice dated 12th
July, 1985/22.07 .1985 was sent by the plaintiff. Reply to the notice was
given on 30th July, 1985. The plaintiff filed Original Suit No.148of1988
on 25.5.1988 praying for decree of sum of Rs.40, 138/- along with interest. D
The second defendant, the husband of first defendant was also impleaded
as guarantor. A written statement was filed by the first defendant where
execution of hire purchase agreement was admitted. The default in
payment of instalments was admitted. It was further pleaded that
provisions in Clause 4 ofhire purchase agreement regarding termination
without notice is contrary to the statutory provisions. It was further stated E
that the vehicle was not sold on best price. The defendant pleaded that
plaintiff is not entitled for any relief. The trial court framed 8 issues. One
of the issues, issue No.7 was: "whether the suit is barred by limitation".
The trial court after considering the facts held that suit is barred by
limitation. It was held that default is from 20th May, 1984 the suit ought F
to have been filed within 20.5.1987. Suit was filed on 25th May, 1988
being beyond three years was to be dismissed.
3: The plaintiff filed an appeal in the Kerala High Court. The
Kerala High Court also affirmed the judgment of the trial court and held
that suit is barred by limitation. Plaintiff has come in this appeal questioning G
the correctness of the judgment of the High Court.
4. The only question which needs to be considered was as to
whether suit filed by the plaintiff was barred by limitation. Relevant
p·rovisions·of Limitation Act, 1963 are Article 55 and Article 113 which
are to the following effect:
H
424 SUPREME COURT REPORTS [2016] 3 S.C.R.
A Article Description of suit Period of Time from which
limitation period begins to run
55. For compensation for Three When the contract is
the Three breach of years broken or (where
any contract, yearn there are successive
express or implied breaches) when the
B not herein specially breach in respect of
provided for. which the suit IS
instituted occurs or
(where the breach is
continuing) when it
c ceases.
113. Any suit for which no Three When the right to sue
period of limitation is years accrues.
provided elsewhere in
this Schedule.
5. The submissions which have been pressed by the learned
D counsel for the plaintiff that last instalment was to be paid on 20th
September, 1986 and the balance liability of the defendant could be
ascertained only after the sale of the vehicle which took place on 30th
May, 1985 and the suit was filed within three years from the date of
sale of the vehicle as well as within three years from the last date of
E payment of instalment, hence, it could not have been said to be barred
by tirne. The present was a case which was to be governed by Article
113 of the Limitation Act, 1963. The Courts below erred in applying
·Article 55. The case was fully covered by the judgment of the Madras
High Court in Bell Alloys Steels Private Limited vs. The National
Small Industries Corporation Limited(1980 Legal Surveyor 85). The
F default in payment of each of the instalments would constitute default.
Therefore, a "continuing breach", hence, the suit is well within time
from the date of default of payment of last instalment that is 20th
S~ptember, 1986.
6. Learned counsel appearing for the respondents refuting
G submissions made by the learned counsel for the appellant contended
that the trial court was correct in dismissing the suit as barred by time.
Learned counsel for the respondent has also placed reliance on the
judgment of th is Court in Deepak Blu11ulari vs. llimaclwl Pradesh
State lndustrial Development Corporation Limited,2015 (5) SCC
518.
H
M/S. SUNDARAM FINANCE LIMITED v. NOORJAHAN BEEVI 425
AND ANOTHER [ASHOK BHUSHAN, J.]
7. We have gone through the records and considered the A
submissions raised by the learned counsel for the parteis.
8. As noted above. the trial court framed issue No. 7, as to whether
the suit was barred by time. In paragraph I 0 of the judgment this issue
was dealt with in the following manner:
"JO.ISSUE NO. 7 :- According to the learned counsel B
for the defendants the suit is barred by limitation for
the reason that the date of agreement is 20. 9.83 and
the last date of payment is 20.4.84 but the suit is filed
011ly on 26.5.88. He has invited by attention to clause 4
to the effect that if any instalment is not paid within the
stipulated time whether legally demanded or not; break c
or fail to pe1form or observe any conditions on their
part therein contained. then and in such cases the rights
of the hirer under the agreement shall forth with be
determined ipso facto, without any notice to the hire1:
Therefore, according to him on 20.4.84 itself to contract D
was also determined. But the learned counsel for the
plaintiff would argue that clause 4 contains provisions
for seizure of vehicle and wlless the vehicle is sold to
balance in any cannot be ascertained and therefore the
plaintiff would get course of action 011ly 011 30.5.85,
the date of sale of the vehicle. Though I went through E
the different provisions of Ext.A2 agreement, I could
not find any provision for sale of the vehicle. Even in
Ext.A3 there is no such provisions. So this argument
cannot hold good. In the case on hand, the default is
from 20.5.84, the suit ought to have been filed within F
20.5.87. Therefore, the suit is barred by limitation.
9. The trial court has elaborately considered the submissions of
both the parties and has referred to relevant clauses of agreement dated
20.9.1983.
I 0. On the question of limitation while referring to Clause 4 of G
the agreement dated 20.9.1983 in para 4 of the judgment following was
observed:
"4 ..... Ext.A2 agreement dated 20.9.83 contains the terms
and conditions to be followed by the parties. As per
clause 4 of Ext. A2, the plaintiff is entitled to seize the H
426 SUPREME COURT REPORTS [2016] 3 S.C.R.
A vehicle even without notice in case ofdefault ofiiistalments
01; other conditions mentioned therein. Admittedly, the
defendants have committed default ofinstalments. Ifthe hirer
commits breach of the agreement. the rightJ· of the hirer
commits breach ofthe agreement. the rights ofthe hirer under
the agreement shall forthwith be determined ipso facto without
B any notice to the hirer and all the instalments previously paid
by the hirer shall be absolutely forfeited to the owners who
shall thereupon be entitled to enter any house or place where
the said vehicle may then be seize, remove and retake possession
of it and to sue for all the instalments due and for damages
c for breach ofthe agreement and.for all the costs occasioned
by the hirer :S default. So. as per the defendants. the.financier
invoked Clause 4 ofthe agreement and the vehicle was seized
and subsequently sold. The cause of action arose on
20.4.1984. The plaintiff ought io have filed the suit within
three years.from 20.4.1984. but the suit was filed only on
D 26.5.1988. The agreement be/ween the parlies were determined
on the date of default itself"
11. The High Court has come to conclusion that as per Clause 4 if
the hirer commits breach of the agreement, the rights of the hirer under
the agreement shall forthwith be determined ipso facto without any notice
E to the hirer and all the instalments previously paid by the hirer shall be
absolutely forfeited to the owners who shall thereupon be entitled to enter
any house or place where the said vehicle may then be seize, remove and
retake possession of it. Further in paragraph 6 of the judgment of the High
Court following further was observed :
"As per the agreement, the.financier is at liberty to terminate
F
the agreement ipso facto and also seize the vehicle ·withou/
notice. There is no question ofsurrender ofthe vehicle and
as stated above, the vehicle belonged to the first defendant
at the time ofthe agreement. The suit is being one for damages
for breach of contract of hire purchase. it is governed by
G Article 55 ofthe Limitation Act and therefore, the suit should
have been filed within three years.from the date ofthe breach.
Here. the breach has been cominitted on 20. 4. 84. Jn pursuance
of clause 4 of the agreement. the vehicle was sei=ed by I he
plaintiff. So, he ought to have filed the sit within three yeun
from the date of breach ofthe agre~ment. The co111rae1 11·, ''
H
M/S. SUNDARAM FINANCE LIMITED v. NOORJAHAN BEEVI 427
AND ANOTHER [ASHOK BHUSHAN. J.]
determined. on 20.4.84 itself. The argument of the A
learned counsel for the plaintiff that the vehicle was
sold only on 30. 05.1985 and the amount was credited
and then on(v the cause of action will arise cannot be
accepted since it. is a loan transaction between the.
parties and the contract has ipso factor deten11ined on
B
the date of breach of contract. It is clear from clause 4
of the agreement that the financier is at liberty to
f01feited the previous payment made by the hirer and
also seized the vehicle and sue for all the instalments
due and for damages for breach of the agreement and
for all the costs of retaking possession of the said c
vehicle and all costs occasioned by the hirers default.
Since the plaintiff invoked the said provision, the
argument advanced by the learned counsel for the
plaintiff that the last instalment is due only on
20. 09.1986 and the suit is within time cannot be
D
accepted. Since, there is no provision to sell the vehicle
and credit the amount to the loan advanced there is no
question of waiting till the sale of the vehicle. "
12. There is no dispute between the parties thatthe hirer committed
default in payment of instalments on 20th May, 1984. The High Court
has further held that there is no clause in agreement permitting the plaintiff E
to sell the vehicle. The submission of the learned counsel for the appellant
that limitation to file the suit for recovery of balance amount shall begin
with effect from the date of sale this is 30th May, 1985, does not appeal
to us. The contract was to be determined ipso facto on default being
committed. The power of seizing the vehicle and to take possession as F
contemplated under Clause 4 of the agreement was consequent to default
being committed by the hirer.
13. This Court on 12th June, 2012 passed the following order:
"Learned counsel for the appellant shall place on
record a copy of the hire purchase agreement dated 20th
G
September, 1983.
List thereafter. "
The copy of the agreement dated 20th September, 1983 having
not been placed before us, we have no option except to rely on the
contents of Clause 4 as noted by the High Court in its judgment. The
High Court has noted that agreement does not.contain any provision for H
428 SUPREME COURT REPORTS [2016] 3 S.C.R.
A sale of the vehicle hence, taking starting point oflimitation from the date
of sale of vehicle cannot be accepted.
14. As noted above, in paragraph 4 of the judgment of the High
Court while noticing the contents of Clause 4 of the agreement it has
been observed that "if the hirer commits the breach of the agreement,
B the rights of the hirer under the agreement shall forthwith be determined
ipso facto without any notice to the hirer and all the instalments previously
paid by the hirer shall be absolutely forfeited to the owners who shall
thereupon be entitled to enter any house or place where the said vehicle
may then be seize, remove and retake possession of it and to sue for all
the instalments due and for damages for breach of the agreement.. .. "
c (underlined by us).
15. Thus, as per Clause 4 the right to sue accrues when the hirer
commits breach of the agreement. Committing default in payment of
instalement is nothing but a breach of the agreement and thus courts
below has rightly taken a view that period of limitation for filing a suit
D under Article 55 shall begin with effect from 20th May, 1984 when the
default was committed by the hirer.
16. In this case it is relevant to refer the judgment of this Court in
llimachal Pradesh Financial Corporation vs. Paw11a and others,
2015 (5)SCC 617. In the above case Himachal Pradesh Financial
E Cor-poration had given a loan to a partnership firm. As security for that
loan, a mortgage deed was executed. Clause 7 of the mortgage deed
contemplated that without prejudice to the rights and powers conferred
on the Corporation under the State Financial Corporations Act, 195 I, in
the event, the partners of the industrial concern fail to pay the said principal
sum with interest, the Corporation shall be entitled to realise its dues by
F sale of the mortgaged properties, and if the sale proceeds thereof are
insufficient to satisfy the dues of the Corporation, to recover the balance
from the partners of the industrial concern. Clause 7 of the agreement
was to the following c: lect:
"3. Clause 7 uj !he mortgage deed is important. It reads
G as follows:
"Without prejudice to the abuve rights and powers
conferred on the Corporation by these presents and by_
Sections 29 and 30 of the State Financial Corporations
Act, 1951 and as amended in 1956 and 1972 and the
H special remedies available· to the Corporation under the
MIS. SUNDARAM FINANCE LIMITED v. NOORJAHAN BEEVI 429
AND ANOTHER [ASHOK BHUSHAN, J.]
said Act, it is hereby further agreed and declared that A
if the partners of the industrial concern fail to pay the
said principal sum with interest and other monies due
fi·om them under these presents to the Corporation in
the manner agreed, the Corporation shall be entitled to
realise its dues by sale of the mortgaged properties, the
B
said fixtures and fittings and other assets, and if the
sale proceeds thereof are insufficient to satisfy the dues
of the Corporation, to recover the balance from the
partners of the industrial concern and the other
properties owned by them though not included in this
security. " c
(emphasis supplied)"
17. In the above case the assets were sold on 28.3.1984 and
14.3. I 985. The sale amount could not satisfy the outstanding hence, the
notice was issued on 27.5.1985 and thereafter suit was filed on 15.9.1985.
The High Court has dismissed the s_9it as barred by limitation. In the D
appeal this Court set aside the judgment of the High Court by making
following observations in paragraphs 10 and 11:
"10. Whilst considering the question of/imitation the
Division Bench has given a very lengthy judgment
---.
running into approximately 50 pages. However, they
appear to have not noticed the fact that under Clause 7 E
an indemnity had been given. Therefore, the premise on
which the judgment proceeds i.e. that the loan
transaction and the mortgage deed are one composite
transaction which was inseparable is entirely errol1eous.
It is settled law that a contract of indemnity and/or F
guarantee is an independent and separate contract fi·om
the main contract. Thus. the question which they required
to address themselves. which unfortunately they did not,
was when does the right to sue on the indemnity arose.
In our view, there can be only one answer to this
question. The right to sue on the contract of indemnity G
arose only after the assets were sold off It is only at
that stage that the balance due became ascertained. It
is at that stage only that a .suit for recovery of the
balance could have been filed. Merely because the
Corporation acted under Section 29 of the Financial H
430 SUPREME COURT REPORTS [2016] 3 S.C.R.
A Corporations Act did not mean that the contract of
indemnity ca111e to an end. Section 29 111erely enabled
the Corporation to take possession and sell the assets
for recovery of the dues under the main contract. It
may be that on the Corporation taking action under
Section 29 and on their taking possession they became
B
deemed owners. The mortgage may have come to an
end, but the contract of indemnity, which was an
independent contract, did not. The right to clai111 for
the balance arose, under the contract of indemnity, only
when the sale proceeds were found to be insufficient.
c 11. In this case, it is an admitted position that the sale
took place on 28-3-1984 and 14-3-1985. It is only after
this date that the question of right to sue on the indemnity
(contained in Clause 7) arose. The suit having been
filed on 15-9-1985 was well within li111itation. Therefore,
it was erroneous to hold that the suit was barred by the
D
law of li111itation. "
18. The above case was based on Clause 7 of the agreement as
well as a specific power given to the Corporation under the State Financial
Corporations Act, 1951, there is no such clause akin to Clause 7 of the
mortgage deed in the present case.
E 19. Jn Deepak Bluuu/ari vs. Himac/wl l'radesh State Industrial
Development Corporation Limited,2015 (5) SCC 518 while
considering Article 55 of the Limitation Act, 1963, this Court was
considering the question whether the limitation period begins from notice
recalling loan amounts or from realisation of sale proceeds of mortgaged/
F hypothecated assets. It was held that limitation for such suit beginsfrom
the date when amount of dues for recovery are ascertained, and that
can take place only after adjusting amounts received from sale of
mortgaged/hypothecated assets. In paragraph 11 and 12 facts of the
case were noted which are to the following effect:
G "11. As per ihe defendants, the cause of action for
filing the recovery suit arose on 21-5-1990 when recall
notice was issued by the Corporation to the Company
and the guarantors. Therefore. the suit was to be filed
within a period of 3 years from the said date and
calculated in this manne1; last date for filing the suit
H was 20-5-1993. It was, thus, pleaded that the suit filed
M/S. SUNDARAM FINANCE LIMITED v. NOORJAHAN BEEVI 431
AND ANOTHER [ASHOK BHUSHAN, J.)
on. 26-12-1994 was beyond the period of 3 years from A
21-5-1990 and, therefore, the same was time-barred.
12. The Corpora/ion. on !he a/her hand, contended
that action for selling the mortgaged/hypothecated
properties of the Company was taken under the
provisions of Section 29 of the Act and the sale of these B
assets were fructified on 21-3-1994. It is on the
realisation of the sale proceeds only, that 'the balance
amount payable by the guarantors could be ascertained.
Therefore, the starting point for counting the limitation
period is 31-3-1994 and the suit filed by the
Corporati01i on 26-12-1996 was well within the period
c
of limitation. "
This Court has also referred to the judgment of the Himaclrnl
Pradesh Fi11a11cial Corporation(supra). In paragraph 27 of the
judgment the following was stated:
D
"27. We thus, hold that 11•hen the Corporation takes
steps for recovery of the amount by resorting to the
provisions of Section 29 of the Act, the limitation period
for recovery of the balance amount would start only
after adjusting the proceeds from the sale of assets of
the industrial concern. As the Corporation would be in E
·a position to know as to whether there is a shortfall or
there is excess amount realised, only after the sale of
the mortgaged/hypothecated assets. This is clear from
the language of sub-section (1) of Section 29 which
makes the position abundantly clear and is quoted F
below:
"29. Rights ofFinancial Corporation in case ofdefau/t.-
(1) Where any industrial concern, which is under a
liability to the Financial Corporation under an
agreement, makes any default in repayment of any loan
G
or advance or any instalment thereof or in meeting its
obligations in relation to any guarantee given by the
Corporation or otherwise fails to comply with the terms
of its agreement with the Financial Corporation, the
Financial C01poration shall have the right to take over
the management or possession or both of the industrial H
432 SUPREME COURT REPORTS [2016] 3 S.C.R.
A concern, as well as the right to transfer by way of lease
or sale and realise the property pledged, mortgaged,
hypothecated or assigned to the Financial
Corporation. "
This Court while taking the above view has referred to the statutory
B power given to the Corporation under the State Financial Corporations
Act.
20. The above judgment of this Court was a case where the
Court had taken into consideration the statutory power given to Financial
Corporation under Section 29 of the State Financial Corporation Act. 1951
c where the Corporation is entitled to take poss..:ssion of the assets and
transfer by way of lease or sale. Present is not a case where plaintiff
can claim to exercise any power akin to Section 29 of the State Financial
Corporations Act, 1951. The rights of the parties have to be determined
as per terms and conditions of the agreement dated 20.9.1983. The terms
of the agreement as noted by the High Court and referred to by us as
D above clearly indicate that on committing a breach of terms and conditions
of the agreement the rights shall accrue to the plaintiff to sue for balance
instalments and the damages for breach of contract. Thus, the right to
sue shall not stand differed till either sale which took place on 20th May,
1985 or till the last date of payment of the instalment that is 20th
E September, 1986. Both the courts below have rightly taken the view
that limitation shall start running from the date the hirer defaulted in
making payment that is on 20.5.1984 and suit has been filed beyond
three years from the above date was clearly barred by time. Article 55
of the Limitation Act, 1963 has also come for consideration before this
Court in Syndicate Bank vs. C/u1111wveerappa Be/eri mu/ otlters,2006
F (11) SCC 506. In paragraph 13 of the judgment following was stated:
"13. What then is the meaning of the said words used
i11 the guarantee bonds in question? The guarantee
bond states that the guarantors agree to pay and satisfY
the Bank "on demand". It specifically provides that the
G liability to pay interest would arise upon the guarantor
only from the date of demand by the BankfiJr payment.
It also provides that the guarantee shall be a conlinuing
guarantee for payment of the ultimate balance to become
due to the Bank by the borrowe1: The terms of guarantee,
H thus, make it clear that the liability to pay would arise
MIS. SUNDARAM FINANCE LIMITED v. NOORJAHAN BEEVI 433
AND ANOTHER [ASHOK BHUSHAN, J.]
on the guarantors only when a demand is made. Article A
55 provides that the time will begin to run when the
contract is "broken". Even ifArticle 113 is to be applied,
the time begins to run only when the right to sue accrues.
In this case, the contract was broken and the right to
sue accrued only when a demand for payment was made
B
by the Bank and it was refused by the guarantors. When
a demand is made requiring payment within a stipulated
period, say 15 days, the breach occurs or right to sue
accrues, if payment is not made or is refused within 15
days. If while making the demand for payment. no period
is stipulated within which the payment should be made, c
the breach occurs or right to sue accrues, when the
demand is served on the guarantor. "
21. In exercise of power under Clause 4 of the agreement dated
20.9.1983 the plaintiff had taken possession of vehicle on 9.2.1985 and
had immediately vide letter dated 12.2.1985 called upon the defendant D
to pay them due within I 0 days from the receipt of the letter. The notice
dated 12.2.1985 was received by the first defendant which was also
replied by the first defendant as has been pleaded in the written statement.
Thus, in any event of the matter contract stood broken on the default and
right to sue accrued to the plaintiff on demanding the amount to be paid
within 10 days. Thus, in any view of the matter suit filed by the plaintiff E
was beyond three years and has rightly been dismissed by the trial court.
The High Court has also not erred in dismissing the appeal by taking the
view that the suit was barred by limitation.
22. In view of the foregoing, we do not find any merit in this
appeal. The appeal is dismissed accordingly. F
Nidhi Jain Appeal dismissed.
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