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

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When it is necessary to obtain succession certificate?

Holding that the Succession Certificate was necessary only if the decree had been obtained on the basis of a pre-existing debt in Narayanaswami Naidu v. Chellammal and Ors. 1970 (2) M.L.J. 633, a Single Judge observed as follows:

...I agree that a plaint reading of Section 214(1)(a) and (b) clearly shows that the intention of the legislature was that a succession certificate was necessary only if a decree had been obtained on the basis of a pre-existing debt. The emphasis throughout is on the word "debt". In my view, in order to attract the provisions of Section 214(1)(a), a decree must be sought for on a pre-existing debt due to the deceased and the order sought to be executed by the legal representatives must be for the payment of a debt due to the deceased. If the decree is not for the payment of money due prior to the institution of the suit but for damages or compensation for breach of contract or for tort, then the decree would not be one for a debt due to the deceased. Where costs have been awarded to the deceased in the suit, the decree cannot be said to be for a debt. Section 214(2) of the Act does not purport to define the word "debt", but merely states that it includes any debt except rent, revenue or profits payable in respect of land used for agricultural purposes. The meaning of the word "debt" has therefore to be ascertained by reference to the judicial decisions cited supra. The meaning adopted by the Courts also tallies with the ordinary connotation of the word as accepted in public parlance. The word "debt" is defined in Concise Oxford Dictionary as money, goods or services owing. The emphasis is upon the word "Owing" and this necessarily cannotes that there must be a pre-existing debt....

Madras High Court

Kaliammal And Ors. vs R. Dhanaraj, A. Duraisamy And The ... on 12 December, 2006

Equivalent citations: (2007) 1 MLJ 390

Bench: R Banumathi

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