Ramaswami, J. - (1.) This appeal is brought, by special leave, from the judgment of the High Court of Kerala dated September 11, 1963 in Appeal Suit No. 444 of 1960.
(2.) On February 27, 1956 respondents to 8 to 6, as partners of respondent No. 2 firm, entered into an agreement with the then Travancore Forward Bank Ltd. undertaking to open in the books of the Bank at Ernakulam a Cash Credit Account to the extent of Rs. 1,00,000 to remain in force until closed by the Bank and to be secured by goods to be pledged with the Bank. The said respondents also agreed that, if they failed or neglected to repay the Bank on demand the amount due to the Bank, it shall be lawful for the Bank, without any notice to them, to sell or otherwise dispose of all securities, either by public auction or by private contract and to apply the net proceeds of such sale towards the liquidation of the debt. It was also agreed that if any balance was still left the Bank shall be at liberty to apply any other money in the hands of the Bank standing to the credit of the said respondents towards repayment of the debt. The agreement between the Bank and the said respondents is Ex. P1. By Clause 2 of the document the borrowers agreed not to pledge or encumber the security nor permit any act whereby the security hereinbefore expressed to be given to the bank shall be in any way prejudicially affected. Clause 3 provided as follows:- That the Borrowers shall with the consent of the Bank be at liberty from time to time to withdraw any of the goods for the time being pledged to the Back and forming part of the Securities the subject of this Agreement provided the advance value of the said goods is paid into the said account or goods of a similar nature and of at least equal value, are substituted for the goods so withdrawn. Provided always that with the previous consent of the Bank the Borrowers shall be at liberty to withdraw any of the goods for the time being pledged to the Bank without paying into the said account such advance value as aforesaid or substituting any goods as aforesaid provided the necessary margin required hereunder is fully maintained." Clauses 8 and 9 are to the following effect:- "8. That the Borrowers shall make and furnish to the Bank such statements and returns of the cost and market value of the securities and a full description thereof and produce such evidence in support thereof as the Bank may from time to time require and shall maintain, in favour of the Bank a margin of 10 per cent at Bank's discretion between the market value from time to time of the Securities and the balance due to the Bank for the time being. Such margin shall be calculated on such valuation of the Securities as fixed by the Bank from time to time and shall be maintained by the Borrowers either by the delivery of further securities to be approved by the Bank or by cash payment by the Borrowers immediately on the market value for the time being of the securities becoming less than the aggregate of the balance due to the Bank plus the amount of the margin as calculated above; 9. That the Borrowers shall be responsible for the quantity and quality of the goods pledged with the Bank and also for the correctness of Statements and Returns furnished by them to the Bank from time to time as mentioned above. The Borrowers have assured the Bank that all information regarding the quantity, quality, value, etc; and other description of the goods pledged with the Bank as given in the said statements and a returns is or would be correct and the Bank has agreed to advance monies under the above account on such representations. The Borrowers further declare and agree that the goods pledged with the Bank have not been actually weighed and/or valued and in order to verify the quantity or quality of the goods pledged or Statements and Returns furnished by the Borrowers, the Bank shall be at liberty at any time, in its discretion, to get the goods weighed and valued at the expense of the Borrowers and the Borrowers agree to accept as conclusive proof the result of such weighment and valuation as certified by an authorised officer of the Bank. If, on such weighment and valuation the goods pledged are found to be short or less than the weight as shown by the Borrowers, or of a lower value so as to affect the stipulated margin, the Borrowers undertake to make up the deficit on demand and to re-imburse the Bank for all losses, damages or expenses incurred by the Bank on that account." On March 7, 1956, the appellant executed Ex. P-4, the letter of guarantee in favour of the Bank, guaranteeing the liability of the borrowers in respect of the cash credit account up to a limit of Rupees 1,00,000 and in respect of liability under bills discounted up to a limit of Rs. 45,000. Clause 5 of the letter of guarantee reads as follows:- "To the intent that you may obtain satisfaction of the whole of your claim against the customer, I agree that you may enforce and recover upon this guarantee the full amount hereby guaranteed and interest thereon notwithstanding any such proof or composition as aforesaid, and notwithstanding any other guarantee, security or remedy, guarantees, securities or remedies, which you may hold or be enticed to in respect of the sum intended to be hereby secured or any part thereof, and notwithstanding any charges or interest which may be debited in your account current with the customer, or in any other account upon which he may be liable."
(3.) Respondents 2 to 6 neglected to pay the amount due to the Bank in the said account and the goods pledged with the Bank were consequently sold with notice to the said respondents and the proceeds were credited to the account of the respondents. The amount due to the Bank as on September 30, 1957 was Rs. 73,931.35. Respondents 3 to 5 had a Suspense Account with the Bank to the extent of Rs. 5,000 and the said amount was adjusted in the account. Respondent No. 6 had a deposit of Rs. 5,000 with the Bank and the same was also adjusted in the said account. Under the Cash Credit Account, the balance due to the Bank as on May 21, 1958, stood at Rs. 40,856.34. A sum of Rs. 77.24 was due to the Bank from respondents a to 6 as per short bills account as on April 23, 1958. The Bank served registered notices of demand on respondents 2 to 8 as well as the Appellant and on their failure to make the payment of the amount due the Bank filed a civil suit against the said respondents and the appellant, being Original Suit No. 171 of 1958 for recovery of Rs. 40,933,58 in the court of the Subordinate Judge at Ernakulam. Respondents 2 to 6 did not contest the suit. The appellant, however, contested and filed a Written Statement exonerating himself from the liability on the allegation that the contract of guarantee was discharged on account of the misconduct of the creditor-bank. The Subordinate Judge of Ernakulam granted a decree in favour of the Bank as against respondents 2 to 6 and also against the appellant by his judgment dated December 9, 1958. The judgment of the Subordinate Judge was confirmed in appeal by the High Court of Kerala on September 11, 1963 in Appeal Suit No. 444 of 1960.;