BANK OF NEW INDIA Vs. G GOVINDA PRABHU
HIGH COURT OF KERALA
BANK OF NEW INDIA LTD.
Referred Judgements :-
WATT V. MORTLOCK
AMIN CHAND V. GUNJ
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(1.)These second appeals arise out of two suits instituted by the Adoor Bank Ltd., now represented by the second appellant, the State Bank of Travancore, Defendants 2 and 3 in one suit are also defendants 2 and 3 in the other, being the agent and a clerk of the Kayamkulam branch of the Adoor Bank Ltd. but the first defendant in each suit is not the same individual. They had contracted loans from the plaintiff and were indebted to it. The plaintiff later discovered that the loans were irregular, as having been advanced on promissory notes without the sanction of the plaintiff's Head Office. The plaintiff called upon defendants 2 and 3 to explain the irregularity when they executed an agreement Ext. F or Ext. C undertaking to see to repayment being made within a month and also binding themselves personally. Relying on the original causes of action and on Ext. F, the plaintiff instituted the two suits against the two debtors and defendants 2 and 3. In these second appeals, the contentions of the third defendant who is the sole respondent are alone material. The first court decreed the suit against all the defendants, and on appeal the Subordinate Judge exonerated the third defendant on the two grounds, that Ext. F had no consideration and is unenforceable, and that the suits were barred by limitation against him.
(2.)I am unable to accept the finding that Ext. F had no consideration. Ext. F consists in the main of a statement by the second defendant acknowledging receipt of the show cause notice with copy of the report relating to the irregularity appended, admitting that the loans were advanced to the first defendant in the suits on the "advice" of the third defendant and undertaking that they would be repaid within one month on their personal responsibility and that the plaintiff would not be damnified. This statement which was signed by the second defendant was followed by an endorsement by the 3rd defendant by which he affirmed its truth and correctness and also bound himself personally. The argument of counsel, that no undertaking of personal liability is implicit in this endorsement can hardly stand in the light of the expression ''Rm³ IqSn Npa-X-e-s¸«v''. I have no doubt, as to the true Import of Ext. F. Having been called upon to explain their action, defendants 2 and 3 undertook to see to repayment within one month, and bound themselves also personally to make payment to avert loss to the plaintiff; upon this, the plaintiff forbore taking action against them whether disciplinary or otherwise. I am wholly unable to accept the argument of counsel, that Ext. F is evidence of repudiation by the plaintiff of the principal debt itself and that therefore it cannot be regarded as a contract of indemnity. The plaintiff considered that the loans were irregular, not that they were not true or that they were unenforceable. The principal debtors were of course the first defendant in the two cases. In this sense Ext. F may be held to be a contract of indemnity, with a special term by which defendants 2 and 3 rendered themselves personally liable to pay, in case the debts were not discharged within one month. The Subordinate Judge viewed this as a contract of guarantee, but the principal debtor was not in the picture and there is no suggestion that he concurred in Ext. F. The distinction between a contract of guarantee and a contract of indemnity is summarised thus, in Sanjiva Row's Indian Contract Act, 5th edition, Vol. II, page 1157 :
"In order to constitute a contract of guarantee, there must be a third contract by which the principal debtor expressly or impliedly requests the surety to act as surety. Unless that element is present, it is impossible to work out the rights and liabilities of the surety under the Contract Act. The importance of the requirement of law that in all cases of suretyship there must be privity between the creditor, the principal debtor and the surety lies in the result which follows, namely, that the surety having undertaken the obligation at the request of the debtor becomes entitled to recover from him whatever sums he has rightfully paid under the guarantee as is provided in S.145, whereas in the contract of indemnity, the indemnifier cannot on the performance of the obligation of the debtor in the absence of an assignment from the creditor, sue in his own name, the debtor, as there is no privity of contract between them and there is no subrogation to the creditor's rights."
It would therefore seem more proper to regard Ext. F as a contract of indemnity than a contract of guarantee, The distinction does not seem very material for the present purpose.
(3.)On the definition of S.2(d) of the Indian Contract Act, where at the desire of the promisor, the promise or any other person has abstained from doing something, such abstinence or forbearance is itself consideration. If, as is apparent from Ext. F, defendants 2 and 3 may be deemed to have requested the plaintiff to forbear from taking action against them for alleged irregularities, and the plaintiff to have acceded to their request and forborne from taking action, that in itself would be good consideration. It is not a necessary legal requirement, that the nature of the action which was proposed to be taken must have been specified, or that such action must have stood the test of scrutiny in a court of law. It is also not necessary that positive evidence of postponement of action should be adduced, because forbearance may be inferred from surrounding circumstances. This has been so held in Ranjit Singh v. Fateh Din, 134 Ind. Cas. 1105 (Lah) and Amin Chand v. Gunj, 119 Ind Cas 766 : ( AIR 1929 Lah. 466 ), therefore come to the conclusion that Ext. F is supported by consideration.
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