1. This is a summary suit filed by the Indian Specie Bank (in liquidation) by its liquidator against Nagindas Hurjivandas Nanavati, who, on the 31st of July 1913, drew a bill of exchange for Rs. 10,000 on Maganlal Motilal payable to the Indian Specie Bank or order at their office in Bombay twelve months after date. On the 10th of August 1913, the bill was accepted by Maganlal Motilal. The bill fell due on the 3rd of August 1914, and, as it was payable at the Bank and the acceptor did not attend to satisfy his obligations on the bill, it became thereby dishonoured. On the 4th of August, notice of dishonour was given to the drawer. The defendant applied for leave to defend the suit and, in support of his application, filed an affidavit on the 23rd of February 1916 He alleged that the amount due by the acceptor had been duly tendered to the plaintiff but it had not been accepted and he claimed to be entitled to bring in Maganlal Motilal as third party. On the 25th of February, an order was made giving the defendant leave to defend and also giving him leave to serve Maganlal Motilal with a Third-party notice. Notice was served and when directions were asked for, an order was made on the 1st of April that the third party Maganlal Motilal be at liberty to defend the suit on condition that there should not be two sets of costs in the event of the costs being made payable by the plaintiff.
2. It is not disputed that the acceptor did not pay what was due on his acceptance on the 3rd of August, but, on the 6th of August, his solicitors wrote to the plaintiff:
As you are aware the Specie Bank is indebted to our clients in the sum of Rs. 8,000 in respect of two amounts, viz., Rs. 5,500 and Rs. 2,500 borrowed by the Bank on their fixed deposit receipts, dated 24th and 30th September 1913 respectively, and bearing interest at 5 per cent, per annum. The Bank is thus indebted to our client in the total sum of Rs. 8072-8-11 being the amount of the principal and interest up to the 29th November 19i 3, the day on which the petition to wind up the Bank was presented. On your consenting to set off the paid amount of Rs. 8072-8-11 against the said sum of Rs, 10,000 our client is ready and willing to pay off the balance which please note.
3. It is also admitted that, on the 20th of August, Messrs. Hiralal and Co., on behalf of Maganlal Motilal, tendered to the plaintiff Rs, 1927-7-;, the balance due on the acceptance after giving credit for the amount due by the Bank on the deposit receipts.
4. Now it is admitted that the acceptance was not met on the 3rd of August. It is quite clear that, as between the liquidator . of the Bank and the acceptor, the liquidator was not entitled to claim from the acceptor the full amount of the acceptances and leave the acceptor to prove his claim on the deposit receipts in liquidation and trust to see what dividend he would get. It would be a most extraordinary state of law if such an action could be permitted on the part of a liquidator. In my opinion a liquidator is bound to allow a set off in such a case, and, therefore, if Maganlal had gone to the Bank on the 3rd of August and tendered the difference between the amount of the acceptance and what was due on the deposit receipt, the liquidator would have been bound to accept it. It is quite true that, on the 3rd of August, as Maganlal did not do that, the plaintiff had recourse to the drawer, but the liability of the acceptor remained, and if he had at any time afterwards fulfilled his liability, then it must necessarily follow that the liability of the drawer which was only the liability of a surety, would be released. I will take it that the drawer's liability was running from 3rd August to 29th August, but on the latter date the principal debtor made a good tender of what was due to him on his acceptance and that tender extinguished the liability of the drawer. As a matter of fact it was not accepted by the liquidator and, in my opinion, the liquidator in refusing to accept that tender was wrong.
5. But assuming that the tender was not made and that the liability of the drawer as a surety still continued, he was still entitled to the benefit of any set-off which existed in favour of the principal debtor as against the creditor, and therefore when the difference was paid into Court with the written statement after the third party notice, he would still be entitled to claim relief on payment of that difference. However, not only was a good tender made by the principal debtor on the 29th of August but the full amount that could possibly be recovered from the acceptor is now in Court, and, therefore, it is quite clear that the liability of the drawer is gone.
6. It is suggested that the plaintiff-Bank was entitled to recover the full amount from the drawer whatever the acceptor might but it would be most inequitable if the bank could brush aside any claim made by the acceptor and say to the drawer : ' Now that the bill is dishonoured on the due date, I am not concerned with what the acceptor may do. I am not concerned with any tender he may make. 1 am determined to get the money out of you on your liability as a surety and leave you to your remedy against him.' In spite of dishonour the drawer remains a surety and will always remain a surety and a surety will always be discharged as soon as the principal debtor acts in such a way as to discharge himself from the principal liability.
7. Therefore, in my opinion, the suit must be dismissed, the plaintiff being at liberty to take the money out of Court if it is not taken already. Plaintiff to pay the third party's costs and the defendant's costs up to Ist of April including costs reserved.