UNDER SECTION 25 – INDIAN CONTRACT ACT, 1872
M.C. Chacko Vs. The State Bank of Travancore, Trivandrum
(Appeal partly allowed, parties to bear own costs)
BENCH: J.C. Shah, Ag. C.J., and G.K.Mitter, J.
ISSUES:
i) Whether the deed created a charge in favour of the State bank in order to satisfy the debt under the letter of guarantee.
ii) Whether such charge can be enforced by Kottayam bank, being a third party to contract.
FACTS:
- The High Land Bank Kottayam of which the appellant M.C. Chacko was the Manager, had an overdraft account with Kottayam Bank.
- K.C. Chacko, the father of the appellant had executed letters of guarantee in favour of Kottayam Bank agreeing to pay amounts due by High Land Bank
- A suit was filed by Kottayam Bank against High Land Bank for the recovery of the amount due in account impleading the son, wife and daughter of Appellant.
APPELLANT’s CONTENTIONS
That the claim to enforce the personal liability of the father against his legal representatives was barred by the law of limitation
RESPONDENT’s CONTENTIONS:
- That the Appellant, M.C. Chacko had personally agreed to pay the amount due under the overdraft arrangement.
- M.C. Chacko was held not personally liable to satisfy the debt under the letter of guarantee. Properties which were under the Schedule A of the deed allotted to M.C. Chacko were also held not liable to satisfy the debt due to Kottayam Bank under the letter of guarantee. A person who is not a party to a contract is not bound by the covenants of the contract, nor can he enforce the contract, subject to certain well-defined exceptions to this rule.
