Decided on July 03,1967

THARIATH Respondents


- (1.) The appellant Bank had instituted a suit for recovery of amounts due from the defendants respondents herein under a promissory note executed by them jointly along with their father deceased Lonan on 21-3-49 for an amount of Rs. 6563-3-0. Ex P 1 is the promissory note. The defence contention was that the promissory note had been executed not for any cash consideration but to secure a liability of the second defendant to indemnify the Bank against the loss caused to it by reason of the dishonour of a cheque which the second defendant discounted while he was the Agent of the Bank at its Pazhayannur Branch. The defendants further averred that several payments had been made by the second defendant in respect of this liability and that till 10-3-58 an amount of Rs. 6690/- had been remitted by him to the Bank. According to the defendants, in consideration of these payments and of the faithful and meritorious service rendered by the second defendant to the Bank, the General Body of the shareholders of the Bank had passed a resolution on 14th May 1960 resolving to write off the balance amount due from the defendant under the promissory note and that in view of the said resolution the debt had become wiped off and no further amount was due by the defendants to the Bank. They, therefore, pleaded that the suit claim based on the promissory note was not sustainable.
(2.) The Trial Court rejected the defence contention and held that the resolution of the General Body relied on by the defendants was a mere recommendation which was not binding on the Board of Directors of the Bank and that since the Board had decided to realise the full amount due by the defendants on the suit promissory note the defendants were liable to pay balance amount due on the promissory note. In this view, the suit was decreed by the Trial Court as prayed for in the plaint.
(3.) On appeal by the second defendant, the lower appellate court held that even though Ex. P 10 resolution passed in the General Body meeting held on 14-5-60 was couched in the form of a recommendation it was really a final decision taken on the matter by the General Body of shareholders and that the Board of Directors had no right to override the said decision of the General Body. It, therefore, held that in the light of Ex. P 10 resolution the liability of the defendants under the promissory note should be deemed to have been fully remitted and that the Bank was not entitled to realise any further amounts from the defendants. In the result, the decree of the Trial Court was set aside and the suit was dismissed. The plaintiff Bank has preferred this Second Appeal challenging the aforesaid decision of the lower appellate court.;

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