- (1.) BRIJESH Kumar, J. The first appeal is preferred against the judgment and decree dated 5-10-77 passed by the Civil Judge, Malihabad, Lucknow, in Regular Suit No. 82 of 1975. The plaintiff/appellant had filed a suit for recovery of a sum of Rs. 17,49,397,31 from the defendants. The defendant No. 1 is M/s. Pradeep Steel Re-rolling Mills Pvt. Ltd, sued through its Managing Director, Keshav Prasad. Defen dant No. 2 is Keshav Prasad Vaid who has been the Managing Director of the Com pany. The defendants Nos. 3 and 4, namely, Naval Kishore Vaid and Sri Jugal Kishore Vaid, respectively, were the Directors of the Company, defendant No. 1. The defendants Nos. 2, 3 and 4 were sued as guarantor for the repayment of loan advanced to the defendant No. 1, the Company. Defendant No. 3, Naval Kishore Vaid, since dead, his heirs are on the record as respondents Nos. 3/1 to 3/4.
(2.) THE points raised in the appeal, mainly relate to questions of law, involving very little of facts. THE bare necessary facts are that defendant No. 1, namely, M/s Pradeep Steel Re-rolling Mills Pvt. Ltd. , applied to the plaintiff, namely, the Canara Bank, Vidhan Sabha Marg, Lucknow, for advancing loan and other credit facilities. THE plaintiff had granted the loan and the facilities to defendant No. 1. THE Defendant No. 1, in consideration of the loan and the facilities, extended by the plaintiff, executed a hypothecation agreement. Certain over draft facilities were further given later on for which another hypothecation deed was ex ecuted by defendant No. 1. Defendant Nos. 2,3 and 4 also executed separate guarantee deeds for re-payment of loan and the amount on account of over-draft facilities given to defendant No. 1 upto a maximum limit of Rs. twenty lacs. Under the agree ment they made themselves jointly and severally liable to pay the entire bank dues, alongwith the defendant No. 1. Cash credit limit is said to have been increased later on executing necessary documents. On non payment of dues outstanding against the defendants, the plaintiff filed a suit against the Company, namely, defendant No. 1 and its three Directors as guarantors who stood surety for repayment of the amount due. A number of issues were framed by the trial court. THE suit was decreed as against defen dant No. 1 alone but it was dismissed as against defendant Nos. 2, 3 and 4. THE ap pellant has challenged the dismissal of its suit as against defendant Nos. 2. 3 and 4 who, according to the appellant, are equally liable jointly and severally alongwith the Company, defendant No. 1, for the payment! of outstanding amount, hence the suit should have been decreed as against them also. The main defence taken on behalf of the defendants was that the guarantee deeds were executed without any consideration after the loan had been advanced, hence they were invalid. The other plea on which the cause was defended was that the guaran tee deeds were not tripartite but were entered into between the guarantor and the Bank alone, leaving aside the principal debtor, hence on that count too the guaran tee deeds were invalid and inoperative. Issue No. 3 was framed by the trial Court to the following effect: "3. Whether the guarantee executed by defendants No. 2,3 and 4 is not valid and binding/" The issue was decided in favour of the defendants and against the plaintiff/ap pellant. The learned counsel for the appel lant has challenged the findings recorded by the trial court on issue No. 3. The guarantee deeds executed by defendant Nos. 2 to 4 are exhibits 7, 8 and 9 on the record. Learned trial court has found that guarantee deeds do not bear the signature of the borrower, namely, M/s. Pradeep Steel Re-rolling Mills Pvt. Ltd, hence it remained contract be tween the plaintiffs Bank on one hand and defendants Nos. 2, 3 and 4 on the other, separately. The learned trial court, while considering the above question, has placed reliance upon a decision of Madras High Court, 49 Madras 156 (1926) Periannianna Murrakayar v. Banians and Co. , wherein it has been held that in order to constitute a con tract of guarantee, there must be a third contract by which the principal debtor ex pressly or impliedly request the surety to act as such. The trial court, on the ground that there was no signature of the principal debt or on the guarantee deed held that it was nothing but a waste paper, in the eyes of law.
(3.) THE trial court has also recorded a finding that loan and over-draft facilities were provided by the plaintiff/appellant to the defendant No. 1 even prior to execution of the guarantee deed, therefore, it was a guarantee deed executed later without any consideration, hence not valid. It is ob served by the trial court itself that con sideration in the guarantee agreements are that the plaintiff would pay something to the principal debtor. It is also observed that such a promise made would be sufficient consideration but in the present case the loan and facilities had already been ex tended by the Bank and the guarantee agreement was entered into after a lapse of 26 days. In this situation, according to learned trial court, illustration (c) of Sec tion 127 of the Indian Contract Act was attracted which provides and reads as fol lows : "a seals and delivers goods to B. C. afterwards, without consideration agrees to pay for them in default of B. THE agreement is void. " According to trial court exactly the same factual situation is prevailing in the present case as indicated in the above quoted illustration. THE guarantee agree ment, thus, has been held to be void and not enforceable. THE trial court has, in its judg ment, referred to a decision, reported in Allahabad 1877 at page 487, Nanak Ram v. Mehi Lal in which the guarantor had ex ecuted a separate guarantee bond after the money had already been advanced. THE guarantor was not a party to the agreement. THE bond was held to be void for want of consideration. We may first take up the question as to whether it is necessary that there must be a tripartite agreement so as to bind the guarantor for repayment of the dues. Ac cording to the trial court the principal debt or, creditor and the guarantor all should have entered into the agreement. Learned counsel for the appellant has submitted that it is not necessary that there must always be a written agreement between the principal debtor and the surety as well. Such an agree ment can also be inferred or there can be an implied request on the part of the principal debtor to the guarantor which would satisfy the requirement. Reliance has been placed upon a decision reported in A. I. R. 1937 Oudh 19 (Raja) Jagannath Baksh Singh v. Chandra Bhukhan Singh and another. It is a Division Bench decision of the Oudh Chief Court. It was held that for a contract of surety there should be concurrence of the principal debtor, the creditor and the surety but it is not necessary that there must always be evidence to prove such an agreement. An implied request on the part of the principal debtor can be inferred from the facts and circumstances which would be sufficient compliance of the requirement. In that case the principal debtor was present at the house of the surety when the surety had written a letter to the creditor taking upon himself the responsibility of repayment in case of any difficulty in payment of the amount by the debtor to the creditor. The implied request on the part of the principal debtor was inferred and the surety was held to be responsible for making the payment. In the case of Punjab National Bank Ltd. v. Sri Bikram Cotton Mills Ltd. and another reported in AIR 1970 S. C. 1973, the Hon'ble Supreme Court has observed that a contract of guarantee requires concurrence of the principal debtor, the surety and the creditor, the surety undertaking an obliga tion at the request express or implied of the principal debtor. It is, thus, clear from the observation of the Hon'ble Supreme Court that implied request can also be inferred on the part of the principal debtor and it would not always be necessary that he must sign the agreement of surety. Similar view has also been taken in a decision, reported in AIR 1979 Patna 151, Prasanjit Mohtha v. The United Commercial Bank Ltd, holding that the request on the part of the principal debtor may be implied as well. As a matter of fact in the case of Periannianna Murrakayar v. Baniaons and Co. (Supra), which has been relied upon by the trial court, it has been held that a valid contract of suretyship should be at the request "actual or construc tive" of the principal debtor". Thus such a request or agreement can be construed from the facts and circumstances of the case. In one of the Division Bench decisions of this Court reported in 1993 LCD 275, U. P. State Bridge Corpn. Ltd. v. M/s National Building Construction Company Ltd. , It has been held that an implied request of surety by the principal debtor would be sufficient for a contract of guarantee. It need not be an express request. The legal position, which thus emerges from the decisions referred to above, is that for the purpose of contract of guarantee under Section 126 of the Con tract Act, it would not always be necessary that there must be an express request on the part of the principal debtor to the guaran tor, in undertaking the guarantee of pay ment, or must be a party to the agreement. An inference of implied request would meet the legal requirement.;