Whether guarantor will be liable for pre-existing debt/liability prior to date of entering in to guarantee contract?

 In view of the foregoing discussion, there appears to be no controversy as
to the fact that the Guarantee Deeds executed by Respondent Nos. 2 to 4 on
30.8.1974 rendered them personally liable for any transactions or advances
made by the Appellant Bank to the Respondent Company after 30.8.1974.
There is also no controversy whatsoever that the Bank account lay dormant after
this date, all dealings having been transacted much prior thereto. Such being
the position, it is not open to the Appellant Bank to pursue Respondent Nos. 2 to
4 for recovery of debts incurred by the Respondent Company in favour of the
Appellant Bank. We may clarify that our decision is founded on the evidence
that has been recorded in this suit. We should not be misunderstood to have
held that a guarantor can, in no circumstances be fastened with liabilities which

had been incurred in the past which the guarantor assumed liability for.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVILAPPELLATE JURISDICTION
CIVIL APPEAL No. 3654 OF 2006
CENTRAL BANK OF INDIA
Vs.
VIRUDHUNAGAR STEEL ROLLING MILLS
LTD. & ORS.
Dated:December 29, 2015.
Citation:(2015) 16 SCC207

Print Page

When guarantee deed would be read against creditor bank who drafted it ?

 The decision in Sita Ram Gupta v. Punjab National Bank (2008) 5 SCC
711 is of no advantage to the Appellant Bank. That decision concerns the
possibility of a guarantor revoking his continuing guarantee, with the objective
of escaping his liability. This is not the case before us inasmuch as the defence
of Respondent Nos. 2 to 4 is that they had agreed to stand surety only for
transactions after 30.8.1974. Our attention was also drawn to B. G. Vasantha v.
Corporation Bank, Mangalore (2005) 10 SCC 215 as also M.S. Anirudhan v.
Thomco’s Bank Ltd. AIR 1963 SC 746 but these decisions do not call for a
detailed analysis. It is the Appellant Bank which drafted the Guarantee Deed,
and in case of doubt, the document would be read against it. This is the contra
proferentem rule, which is of a vintage which brooks no contradiction.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVILAPPELLATE JURISDICTION
CIVIL APPEAL No. 3654 OF 2006
CENTRAL BANK OF INDIA
Vs.
VIRUDHUNAGAR STEEL ROLLING MILLS
LTD. & ORS.
Dated:December 29, 2015.
Citation:(2015) 16 SCC207

Print Page