ORDER :- Five of the six guarantors sued by the petitioner State Financial Corporation have applied for recalling orders passed in the proceedings. The ostensible ground in the application is the lack of authority of this Court to receive the petition under Section 31(l)(aa) of the State Financial Corporation Act, 1951. The ground urged at the final hearing of the application is for dismissal of the petition on the count of limitation. The point of limitation is canvassed on the strength of a line found in the application that the proceedings are not maintainable. The State Financial Corporation has been afforded time to answer the point of limitation and the matter has been heard with the State Financial Corporation resisting the ground of limitation without insisting on the technical objection that such matter would not fall within the ambit of this application. 2. The principal ground originally put forth has been abandoned by the applicants. The applicants do not any longer insist that a High Court has no jurisdiction to receive a petition of such nature. The applicants were, of course, dissuaded from pursuing the primary basis of the application upon the State Financial Corporation citing the Supreme Court judgment reported at 1991 (1) Comp LJ 315 : (1991 AIR SCW 612). 3. Upon the application being robbed of its main plank, the applicants changed tack to assert that this Court could not have entertained the petition for the inordinate delay on the part of the petitioner Corporation. The Corporation was taken by surprise by the change of course midstream by the applicants and obtained an adjournment to address the issue of limitation. 4. The applicants refer to paragraphs 8, 12 and 13 of the Corporation's petition to suggest that by the time the corporation woke up to press its claim against the applicants, there was no live claim to be pursued. Paragraphs 8, 12 and 13 of the petition recount the notice issued under Sections 29 and 30 of the State Financial Corporation Act, 1951 by the petitioner Corporation, the notices issued to the guarantors and trace the clock of limitation to have started ticking from after a fortnight of the issuance of the notices to the guarantors. "8. Paragraphs 8, 12 and 13 of the petition recount the notice issued under Sections 29 and 30 of the State Financial Corporation Act, 1951 by the petitioner Corporation, the notices issued to the guarantors and trace the clock of limitation to have started ticking from after a fortnight of the issuance of the notices to the guarantors. "8. The respondent No. 1 has failed to pay the dues of petitioner No. 1 as such the petitioner No. 1 issued notice under Section 29(1) read with Section 30 of the said Act, asking the respondent No. 1 to liquidate the dues within a stipulated period, but as the respondent No. 1, failed to liquidate its dues in accordance with the said notice of the petitioner No. 1, petitioner No. 1 took over all secured assets of the respondent No. 1 on 14-2-1996. Xerox copy of the notice dated 29-9-1995 issued under Section 29(1) read with Section 30 of the said Act along with the minutes of taking over physical possession of the assets of respondent No. 1 dated 14-2-1996 are annexed hereto and marked collectively with letter 'D'." "12. The petitioners sent demand notices invoking guarantee of respondents Nos. 2 to 7 by the said notices petitioners called upon the respondents to pay the sum of Rs. 7,37,51,411.00 which sum of money was due and payable by the respondent No. 1 to the petitioner No. 1 as on 31-3-2005 within a fortnight from the date of notices. Xerox copies of the said demand notices invoking guarantee along with those of postal acknowledgment cards are annexed here to and marked collectively with the letter 'F'. "13. The cause of action of the present application arose on 22-6-2005 within the jurisdiction of this Hon'ble Court since in spite of the said demand notices the respondents have not discharged their joint and several liabilities towards your petitioners, whatsoever." 5. The applicants submit that the liability of a guarantor is co-extensive with that of the principal-debtor. The debtor-company was called upon to discharge its debt by the notice issued under Sections 29 and 30 of the 1951 Act dated September 29, 1995. The applicants seek to demonstrate that the corporation's cause of action against the guarantors arose upon the notice under Section 29 being issued or, at the very least, upon the principal-debtor failing to pay up in accordance with demand. The applicants seek to demonstrate that the corporation's cause of action against the guarantors arose upon the notice under Section 29 being issued or, at the very least, upon the principal-debtor failing to pay up in accordance with demand. The applicants suggest that the corporation's right to pursue the claim against the guarantors did not remain suspended following the issuance of the notice under Section 29 for a special notice to be issued by such subsequent date as the corporation chose, calling upon the guarantors to make good the claim or pay up the amount not realized out of the sale of the principal-debtor's assets. 6. The facts that the applicants rely on are as pleaded by the petitioner corporation. Following the notice under Section 29 of the 1951 Act, and the principal-debtor's inability to meet the demand, the corporation took possession of the assets, sold it, adjusted the consideration against its dues and only woke up in June, 2005 to raise demands on the guarantors. According to the applicants, the corporation's cause of action arose on September 29, 1995 or on the date that the assets were taken possession of upon the principal-debtor failing to pay and did not remain suspended till June, 2005 while the corporation busied itself in selling the assets and adjusting the proceeds against its claim. 7. The applicants rely on a judgment reported at 2006 (9) SCC 617 : ( AIR 2006 SC 1584 ) (Maharastra State Financial Corporation v. Ashok K. Agarwal). In such case, the State Financial Corporation issued a notice on the borrower on March 8, 1983 and thereafter instituted proceedings for an order for sale of the hypothecated property and adjustment of the sale proceeds against the outstanding liability. The attached property was put up for sale in June, 1990. There was a shortfall in the amount realized on sale and the State Financial Corporation issued notices to the sureties on December 27, 1991. On January 2, 1992 the corporation applied under Section 31(l)(aa) of the 1951 Act for recovery of the outstanding amount from the sureties. The sureties urged the ground of limitation which found favour with the Court and the decision was upheld in appeal by the Bombay High Court. 8. On January 2, 1992 the corporation applied under Section 31(l)(aa) of the 1951 Act for recovery of the outstanding amount from the sureties. The sureties urged the ground of limitation which found favour with the Court and the decision was upheld in appeal by the Bombay High Court. 8. The corporation carried the matter to the Supreme Court and argued that Art. 136 of the schedule to the Limitation Act would apply and not residuary Art. 137. The Supreme Court found that Art. 137 was the applicable provision and dismissed the appeal on the ground that even though proceedings under Section 31 of the Act were akin to execution proceedings, by dint of a legal fiction, those were not execution proceedings stricto sensu. On such finding, the Supreme Court recounted the relevant dates and found the appeal to be unmeritorious : "6..........to recall the facts of the present case, the notice demanding repayment of the amount of loan was issued against the borrower ......on 8-3-1983 and the application under Sections 31 and 32 of the State Financial Corporation (Act) was filed against the said borrower on 25-10-1983. The liability of the sureties had crystallized them. "7.........notice was issued to the sureties only on 7-12-1991 and the application for enforcement of liability against them was filed on 2-1-1992. The application, therefore, was clearly barred by time and the decision of the Courts below cannot faulted. The Courts below rightly dismissed the application on the ground that it was barred by limitation....." 9. The corporation seeks to distinguish the cited judgment on the strength of the terms of the deed of guarantee executed by the guarantors. Clauses 8 and 12 of the deed are particularly stressed :- "8. The guarantee herein contained is a continuing guarantee and shall be binding and operative until repayment is made of all moneys due to the Corporation under the said Agreement as aforesaid." "12. All sums hereby guaranteed by the Guarantor(s) shall be due and payable to the Corporation at Calcutta in terms hereof after notice in writing, requiring payment of the same shall have been delivered to or sent through registered post, addressed to the Guarantor(s) at their aforesaid addresses." 10. The corporation asserts that Clause 8 of the deed continued the guarantee till such time that all money due to the corporation was paid. The corporation asserts that Clause 8 of the deed continued the guarantee till such time that all money due to the corporation was paid. The corporation says that it was only upon sale proceeds being realized in 2004, that the corporation was aware that the entire debt of the borrower would not be discharged and looked towards the guarantors for the shortfall. There was no clause noticed by the Supreme Court in the cited judgment, according to the corporation, that kept the claim against the guarantors alive. 11. As for Clause 12 of the deed, the corporation submits that the demands under such clause were issued only on June 7, 2005, permitting the guarantors to make payment within 15 days therefrom and the corporation's right to sue to guarantors accrued upon the expiration of such period of 15 days. 12. There is no merit in the second ground urged by the corporation, particularly as the notice of September 29, 1995 was addressed to the guarantors as well. The second paragraph of such notice of September 29, 1995 can be read to imply that a demand was made on the guarantors along with the demand made on the principal-debtor. The second paragraph of the notice was clearly a demand on the guarantors to pay the amount owed by the borrower to the Corporation. 13. Clause 12 of the deed of guarantee does not require a demand to be made in a special form. The letter of September 29, 1995 is not confined merely to the corporation giving notice to the borrower that it would take over the hypothecated assets upon its demand not being met by the borrower within the time indicated. The words in such letter indicate that the notice was also in exercise of powers other than those available to the corporation under Section 29 of the 1951 Act. Such other powers included the creditor's general power to call upon the guarantor to repay the debt owing from the principal-debtor. In addressing such letter to all the guarantors, the corporation issued a demand in writing to the guarantors to repay. It was not as if the letter of September 29, 1995 was addressed to the borrower and the guarantors were marked copies thereof for their information. It was a demand made on the principal-debtor and the guarantors, which a creditor is entitled to make as the liability is co-extensive. It was not as if the letter of September 29, 1995 was addressed to the borrower and the guarantors were marked copies thereof for their information. It was a demand made on the principal-debtor and the guarantors, which a creditor is entitled to make as the liability is co-extensive. 14. The other ground put forth by the corporation is attractive, particularly in the context of the Supreme Court not having noticed such a clause in the matter that was decided by the judgment cited by the applicants. For the same purpose, the corporation has relied on a judgment reported at AIR 1979 SC 102 (Margaret Lalita v. Indo Commercial Bank Ltd.) where the Supreme Court held that in case of a continuing guarantee and an undertaking to pay any amount that may be due from a borrower, limitation does not run till the account is settled and there is refusal on the part of the guarantor to carry out his obligation. The appellant before the Supreme Court and her deceased husband executed a continuing guarantee limited to Rs. 10 lakh in respect of credit facilities accorded by the respondent Bank to the borrower. The borrower company ceased business on June 30, 1946 and authorized the bank to receive all amounts due from a third party on behalf of the borrower company. The appellant also executed a letter acknowledging her personal guarantee to repay the bank a sum of about Rs. 2.71 lakh said to be due as at December 31, 1951. 15. On November 8, 1954 the bank presented a suit to enforce the guarantee and recover a sum of Rs. 1.5 lakh after giving credit to the amount recovered after December 31, 1951. The defendant claimed that the guarantee deed of 1952 was obtained by fraud and applied for a direction on the plaintiff bank to furnish accounts. At the trial of the suit the defendant's defence of fraud was repelled but it was found that the suit was barred by limitation. In appeal before Bombay High Court, an order of remand was made and on remand the suit was decreed as claimed. The decree was upheld by the Bombay High Court and such appellate order was the subject-matter of the proceedings before the Supreme Court. 16. In appeal before Bombay High Court, an order of remand was made and on remand the suit was decreed as claimed. The decree was upheld by the Bombay High Court and such appellate order was the subject-matter of the proceedings before the Supreme Court. 16. Before the Supreme Court it was urged on behalf of the defendant that each item of loan would be a separate transaction and limitation would run individually on such items. The Supreme Court held, on a reading of the continuing guarantee furnished by the defendant and her deceased husband in 1944, that in case of such a guarantee, "so long as the account is a live account in the sense that it is not settled and there is no refusal on the part of the guarantor to carry out the obligation, we do not see how the period of limitation could be said to have commenced running. Limitation would only run from the date of breach under Art. 115 of the schedule to the Limitation Act, 1908." 17. The corporation urges, on a parity of reasoning, that Art. 55 of the schedule to the Limitation Act, 1963 (which is in pari materia with Art. 115 of the old Act), limitation in this case would run only upon the guarantor's refusal to pay after issuance of the notice of June 7, 2005. 18. The corporation would have been right if it had issued no notice to the guarantors along with its demand under Sections 29 and 30 on the borrower in September, 1995. Again, the two key aspects of the Supreme Court judgment cited by the corporation are - live account with the borrower; and, refusal to pay on the part of the guarantor. The refusal in this case was upon the guarantors failing to pay heed to the simultaneous demand issued by the corporation on September 29, 1995. The live accounts in this case would be the accounts between the corporation and the borrower. In the sense that the borrower's debt was to be discharged by the value of the sale proceeds, the accounts between the corporation and the borrower remained alive even after the sale was concluded. The live accounts in this case would be the accounts between the corporation and the borrower. In the sense that the borrower's debt was to be discharged by the value of the sale proceeds, the accounts between the corporation and the borrower remained alive even after the sale was concluded. But the guarantors had already been called upon to pay up by the notice of September 1995 and the guarantors had refused to pay despite the borrower not meeting the corporation's demand pursuant to the notice under Sections 29 and 30 of the Act. For the purpose of a claim under Section 31(l)(aa) of the Act, the time is circumscribed by Art. 137 of the schedule to the Limitation Act. Such time begins running from the date of breach on the guarantor's part. The breach, in the present case, on the part of the guarantors has to date back to the first notice or the period allowed by the corporation to the borrower and the guarantors under the first notice. The applicable period of limitation would not exclude the time taken by the creditor to proceed against the assets of the principal-debtor, for the liability of both the principal-debtor and the guarantors are co-extensive. 19. Subsequent to the takeover of the assets and the shortfall in the realization out of the sale proceeds being discovered, a liability could be fastened on the guarantors only if the claim could be pursued against the guarantors when the shortfall was discovered. The continuance of the continuing guarantee would be co-terminus with the breach on the part of the principal-debtor and the imultaneous breach on the part of the guarantors to heed the notice of September 29, 1995. 20. In making the petition, the corporation has acknowledged in the 16th paragraph thereof that it was only the liability of the guarantors that the corporation's was pursuing. On a reading of clauses 8 and 12 of the deed, it would appear that even if the liability under the guarantee continued, the liability of the guarantors would arise upon notice in writing being delivered by the corporation to them. Such notice in writing was issued on September 29, 1995 but was not pursued within time. On a reading of clauses 8 and 12 of the deed, it would appear that even if the liability under the guarantee continued, the liability of the guarantors would arise upon notice in writing being delivered by the corporation to them. Such notice in writing was issued on September 29, 1995 but was not pursued within time. Clause 8 of the deed would not keep the claim under Section 31(l)(aa) of the Act alive to a period beyond three years from the expiry of the time afforded by the corporation's first notice. 21. The application is allowed. The orders passed on the corporation's petition being ASFC 3 of 2005 are vacated. Since the corporation has treated this application and resisted it understanding it to be one for dismissal of its petition, ASFC 3 of 2005 is dismissed on the ground of limitation. G. A. No. 1939 of 2006 is allowed. In view of the harsh consequences suffered by the corporation for lack of diligence on its part, no costs are imposed on it. 22. The issue of limitation has been considered in the context of the present proceedings. If the corporation is entitled to institute other proceedings for recovery of the amount still remaining due to it, this order should not be read to curtail the corporation's rights. 23. Urgent photostat certified copy of the order may be supplied to the parties applying for it upon compliance with all requisite formalities. Application allowed.