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Mir Niyamath Ali Khan Vs. Commercial and Industrial Bank Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectBanking
CourtAndhra Pradesh High Court
Decided On
Case NumberCity Civil Court Appeal No. 15 of 1962
Judge
Reported inAIR1969AP294
ActsCode of Civil Procedure (CPC), 1908 - Order 6, Rule 2 - Order 20, Rule 4; Contract Act, 1872 - Sections 126 and 127; Limitation Act, 1963
AppellantMir Niyamath Ali Khan
RespondentCommercial and Industrial Bank Ltd. and ors.
Appellant AdvocateJaleel Ahmed, Adv.
Respondent AdvocateY. Sivarmasastry, Adv.
Excerpt:
banking - maintainability of suit - order 6 rule 2 and order 20 rule 4 of code of civil procedure, 1908, sections 126 and 127 of contract act, 1872 and article 85 of limitation act, 1963 - plaintiff bank instituted suit for recovery of amount drawn from current overdraft account by defendant and his relative - defendant executed collateral security in form of promissory note in favour of bank and stated himself as surety for amount advanced in future to his relative - collateral security was issued since bank was not willing to advance money by way of overdraft - accounts were mutual, open and current as overdrawing facility was provided to defendant and so article 85 applicable - as per article 85 limitation period of three years to be reckoned from close of year in which last item.....ekbote, j.1. this is an appeal from the judgment and decree of the second judge, city civil court, hyderabad given on 12-3-1957. the facts relevant for the purpose of appreciating the contentions raised before us may briefly be stated.2. the respondent-plaintiff instituted the suit for the recovery of r. 61, 853-3-10 (o. s.) against the 1st dependent and the legal representatives of mir iftikhar ali baquri, who are defendants 2 to 4, alleging inter alia that the 1st defendant and the ancestor of defendants 2 to 4, who was the brother of the 1st defendant, opened a current account on 6th february 1945 with the plaintiff-bank. under the said account, the 1st defendant and his brother used to deposit and draw by way of overdraft as per the rules of the bank as and when it was necessary. the.....
Judgment:

Ekbote, J.

1. This is an appeal from the Judgment and decree of the Second Judge, City Civil Court, Hyderabad given on 12-3-1957. The facts relevant for the purpose of appreciating the contentions raised before us may briefly be stated.

2. The respondent-plaintiff instituted the suit for the recovery of R. 61, 853-3-10 (O. S.) against the 1st dependent and the legal representatives of Mir Iftikhar Ali Baquri, who are defendants 2 to 4, alleging inter alia that the 1st defendant and the ancestor of defendants 2 to 4, who was the brother of the 1st defendant, opened a current account on 6th February 1945 with the plaintiff-Bank. Under the said account, the 1st defendant and his brother used to deposit and draw by way of overdraft as per the rules of the Bank as and when it was necessary. The 1st defendant and his brother obtained Rs. 1615-6-2 O. S. on 9-9- 1947 under the said account. The 1st defendant and his brother had agreed to pay Re. 1 per month per Rs. 100 as interest, on the amount overdrawn by them. On taking accounts from the date of the opening, that is to say from 6-2-1945 to 31-12-1948 it was found that a sum of Rs. 61,883-10 O. S. was due. The 1st defendant and his brother while drawing the mount of Rs. 1615-6-2 on 9-9-1947 confirmed the balance which was due to the Bank from them. The 1st defendant's brother died in June 1948. Defendants 2 to 4 are his legal representatives, being his wife and two sons. Dependent No. 3 on 4-1-1949 also admitted the debt and promised to repay the same. It was further stated that though the last day of payment 3-1-1947, yet in view of the acknowledgments made on 9-9-1947 and 4-1-1949 the suit was within time. It was, therefore, prayed that a decree for a sum of Rupees 61,883-3-10 be passed in favour of the plaintiff against the 1st defendant and against the assets of his brother in the hands of defendants 2 to 4.

3. The 1st defendant in his written statement denied to have opened any joint current account with the plaintiff-Bank and contended that he had no connection whatsoever with the transactions of his brother. He however, admitted that on 9-9-1947 his brother had obtained Rs. 1615-6-2 from the plaintiff-Bank. He, however, stated that he did not receive any amount. His further contention was that the confirmation of the balance of the balance in the letter was inserted later on. Defendant No. 1 signed the receipt dated 9-9-1947 at the instance of his brother. He contended that the suit was time barred. He denied his liability to pay the amount due on the current and overdraft account.

4. Defendants 3 and 4 in their written statement showed ignorance about the transactions which their father had with the Bank. They stated that whatever is written in the letter of 4-1-1949 was false. Neither the 3rd defendant spoke to the Manager of the Bank nor has he given any writing. They also contended that the suit was time barred.

5. Upon these pleadings the trial Court framed the following issues:-

1. Did the defendant No. 1 and his brother Mir Iftikhar Ali Khan jointly open a current account with the plaintiff and receive amounts to the extent Rs. 53,341-9-6 and Rs. 1615-6-2 till September 9, 1947 and did they admit in writing the dues against them as alleged?

2. Was there any contract of interest at the rate of one per cent per mensem.

3. Did the defendant No. 3 admit the debt in his writing dated January 4, 1949 Exhibit No. 1?

4. Is the writing regarding the confirmation of the balance added without knowledge of the defendants after his signature, if so what its effect?

5. Is the suit barred by limitation?

6. Is the suit not maintainable against the defendant No. 1 as he is a Military servant?

7. To what relief is the plaintiff entitled/

6. The plaintiff produced the Manager of the Bank (P. W. 1) and marked several documents. The 1st defendant came in the witness box and produced two witnesses, one of whom is the Commissioner who, at the request of the 1st defendant, had examined the Bank's accounts and submitted a report. Upon this material, the learned Second Judge held that Mir Iftikhar Ali Khan and Mir Niyamath Ali Khan must be held to have entered into a contract with the plaintiff-Bank for the overdraft current account and they were jointly and severally liable for payment of the balance of the same. Issue No. 1 was therefore, decided in favour of the plaintiff. It was found by the learned Judge that the parties and agreed to pay interest at 1 per cent per month. It was further found that the 3rd defendant was not personally liable to pay the amount. Issue 3 therefore, was found against the plaintiff. In regard to issue 4, it was found that Exhibit P. 2 was not forged. The 1st defendant failed to prove that the words alleged by him were added subsequent to the signature of the 1st defendant and his brother. The fourth issue, therefore, was found against the defendants. It was also found that the suit was not time barred in view of Exhibit P-2. The learned Judge consequently decreed the plaintiff's suit for Rs. 54, 956-15-8- O. S. that is to say e.g. Rs. 47, 105 -15-9, with costs and interest at 6 per cent per annum on the amount from 9-9-1947 until final payment. The suit was decreed against the property of Iftikhar Ali Khan in the hands of defendants 2 to 4. The rest of the claim of the plaintiff was dismissed.

7. The plaintiff did not file any appeal in so far as the part of his claim which was dismissed. It is the 1st defendant who has preferred this appeal.

8. The first problem to which we will address ourselves is as to whether the 1st defendant and his brother Iftikhar Ali Khan jointly opened the current and overdraft account with the bank as is alleged by the plaintiff. In order to prove this, the plaintiff produced the account books relating to this account and the Manager of the Bank came in the witness box. (After discussing the evidence their Lordships proceeded).

9 to 19. When once it is found that the evidence of P. W. 1 is unimpeachable that the account books show the fact that the account was jointly opened by the two brothers, and when the joint execution of Exhibits P-2, P-4, and P-5 by both the brothers is kept in view, it leaves us in no doubt that the lower Court was right in holding that joint current and overdraft account was opened by both the brothers and the both of them were liable for the amount due on that account. We therefore, find no reason to disagree with the conclusion of the Court below.

20. This is enough to dispose of the question regarding the liability of the 1st defendant. But the Court below also has held the 1st defendant liable on the ground that he has executed the two collateral securities in the form of promissory notes in favour of the Bank. We do not, however, agree with the Court below that mere execution of Exhibit P-2 by the 1st defendant would not amount to any fresh contract. It was a case of mere acknowledgment. It is however, a different thing to hold the 1st defendant liable on the ground that he was jointly responsible for the account as he had opened it along with his brother. HE can, also he held liable for the amount due on the khata as he has also executed the promissory notes as collateral securities.

21. What was contended before us by Mr. jail Ahmed the learned counsel for the 1st defendant-appellant, was that the lower Court was wrong in decreeting the plaintiff's suit on the ground that was not the case of the plaintiff in his plaint. It is true that the 1st defendant has not been sued as a surety. The suit as was brought attempts to fasten the liability on him as a joint account holder. The pleading refer to his liability as a joint account holder, It is also true that there is no specific issue as to whether the 1st defendant executed the collateral securities and held himself out liable as a surety. While it has to be regretted that a definite issue was not framed upon this point and the matter was put thus beyond controversy, nevertheless the 1st defendant could not be said to have taken by surprise when the two promissory notes which were admittedly collateral securities were marked during the course of evidence. Not only these promissory notes were produced, but there was considerable reference made to them during the examination of the witnesses produced by the parties. It is pertinent in this connection to note that once this suit was decreed ex-parte on 30-2-1953 (sic) in the lower Court. In that judgment also, reliance was placed upon these promissory notes, exhibits P-4 and P-5. It is only after the ex parte decree was set aside that 1st defendant's evidence was recorded. During the course of the 1st defendant's evidence also, these promissory notes were put to him. The lower Court has elaborately dealt with these collateral securities in its judgment. There can be thus no ground for the suggestion that the 1st defendant was not fully informed that this question of collateral security executed also by the 1st defendant would be raised and that both the promissory notes executed also by the 1st defendant would be raised and that both the promissory notes executed as collateral securities would be relied upon to prove the fact that the 1st defendant executed them and that he had held himself out as surety for the amount simultaneously advanced or agreed to be advanced in future to his brother. It is indeed the only purpose for which these promissory notes could have been given in evidence in the suit.

It is also pertinent to note that the 1st defendant or any other party did not suggest at any stage of the suit that an issue should be framed in that behalf nor at any time did any one of them object regarding the introduction of the question of collateral security and contended that it was outside the scope of the inquiry in the suit. We are therefore, satisfied that although the evidence let in on issues on which the parties actually went to trial should be normally made the foundation for decision of another and different issues, which was not present to the minds of the parties and which they had no opportunity of adducing evidence. That rule, however, has no application to the present case where the parties have gone to trial with full knowledge that the very question is in issue, though no specific issue was framed, and adduced evidence relating thereto.

22. We are not impressed by the argument that since no relief was claimed by the plaintiff on the basis of surety against 1st defendant alternatively, the Court cannot grant a decree on that basis.

23. It is true that it was not part of the plaintiff's case in the plaint that the 1st defendant stood surety for his brother in regard to suit transactions. But it was certainly pen to the plaintiff to make an alternative case to that effect and make an prayer in the alternative for a decree if the allegation of joint holders of account against defendant no. 1 could not be established by evidence. That the plaintiff could have asked such an alternative relief is not doubted. The question , however, is whether in the absence of any such alternative case in the plaint is it open to the Court to give the plaintiff on a chase for which there was no foundation laid in the pleadings and which the defendant was not called upon to meet. But when the alternative case which plaintiff could have made was admitted by the defendant either in his written statement or in his evidence and the parties adduced evidence relating to such an alternative claim, there would be nothing improper in giving the plaintiff decree upon such alternative claim. It could not be regarded that the defendant was taken by surprise in circumstances where no injustice can possibly result to the 1st defendant. It may not be proper to drive the plaintiff to a separate unit. In the instant case, the 1st defendant admitted the execution of the promissory notes. No dispute was raised before us that they were not executed as collateral securities regarding the current and overdraft account opened by the 1st defendant and his brother. The 1st defendant in fact led evidencing regard to his contention that he put his signature on the promissory notes at the request of his brother and Prof. Kishen Chand. It could not therefore, be validly taken by surprise when the plaintiff's suit was decreed by the Court below on the alternative claim. Nor he would be taken by surprise if we uphold the decree of the Court below on this alternative claim. The learned Advocate for the 1st defendant could not point out as to in what respect the 1st defendant, in the presence of his version relating to the promissory notes, would have further said any thing or adduced any further evidence. We do not therefore, think that any injustice would be caused to the 1st defendant if we uphold the decree passed against him on this alternative basis. The lower court, in our view was right firstly holding the 1st defendant responsible as a joint holder of the current account and alternatively although the lower Court has not stated so in so many words is liable as surety.

24. We are supported in this view of ours by the pronouncement of the Judicial Committee in Raja Mohan Manucha v. Manzoor Ahmed Khan, AIR 1943 PC 29 that the mortgage was void. This plea was given effect to by the two Courts below and was upheld by the Privy Council. But the Privy Council held that it was open in such circumstances, to the plaintiff to repudiate the transaction altogether and claim a relief outside it in the form of restrictions under Section 65 of the Indian Contracts Act. Although no such alternative claim was made in the plaint, the Privy Council allowed the plea ground that the respondent would not be prejudiced by such a claim at all and the matter ought not to be left to a separate suit. It is interesting to note that this relief was allowed to the appellant even though the appeal was heard ex parte in the absence of the respondent. To the same effect are the following decisions:- Firm Srinivas Ram Kumar v. Mahabit Prasad, : [1951]2SCR277 and Vishram Arjun v. Shankariah, AIR 1957 Andh Pra 784.

25. We have already dealt with the question as to whether the promissory notes were executed by the 1st defendant and his brother, and we have found the plea raised by the 1st defendant in that behalf that securities and that they carry no infirmity and can be given effect to, the lower Court, in our view, was ight in reaching the same conclusion.

26. It was then contended that two promissory notes executed as collateral securities are void because they had no consideration. The contention was that the debt was already due to the Bank and that if the 1st defendant joined in the execution of collateral securities on a date subsequent thereto, such a security bound would not be deemed to have any consideration within the meaning of Section 127 of the Indian Contract Act.

27. In order to appreciate this contention, it is necessary to read the following provisions of the Indian Contract Act, 'Section 126,

A contract of guarantee is a contract to perform of the promise, or discharge the liability, of a third person in case of this default. The person who gives the guarantee is called the 'Surety' the person in respect of whose default the guarantee is given is called the `principal debtor' and the person to whom the guarantee is given is called the `creditor'. A guarantee may be either oral or written.

Section 127:

Any thing done, or any promise made, for the benefit of the principal debtor may be a sufficient consideration to the surety for giving the guarantee.'

28. A careful reading of these two provisions would clearly indicate that the primary idea of suretyship is an undertaking to indemnify the debtor in case he does not fulfil his promise, the contract of guarantee being thus a contract to indemnify. The central point in such a case is to determine what was the contingency which the parties had in their minds when the contract of guarantee was entered into. In order to decide that question, it must be remembered that the law does not require a contract of guarantee to be necessarily in writing. It may be either oral or in writing . It might the even inferred from the course of conduct of the parties concerned. It is, however, to be borne in mind that whatever may be the form of the contract, it must be satisfactorily proved and that it must have consideration. Like any other contract, a contract of guarantee must be supported by consideration. It is however, not necessary that the consideration should flow from the creditor and be received by the surety. Consideration between the creditor and the principal debtor is a valid and good consideration for the guarantee given by the surety. There is considerable conflict of opinion as to whether the past benefit to the principal debtor amounts to a good consideration. In other words whether past consideration can be a good consideration for a contract of guarantee. Nanak Ram v. Mehin Lal, (1875) ILR 1 All 487; Varghese v. I. Abraham, AIR 1952 Trav-Co 202; Ram Narain v. Hari Singh, and Pestonji Meekji Mody v. Meherbai, AIR 1928 Bom 539 take the view that past consideration or past benefit to the principal debtor cannot be a good consideration for a contract of surety. On the other hand, Ghykan Hussain v. Faiyaz Ali, AIR 1940 Oudh 346 and Chakkan Lal v. Kanhaiya Lal, AIR 1929 All 72 take the view that the past consideration or the past benefit to the principal debtor could be a valid consideration for bound of guarantee. In this conflict, Kali Charan v. Abdual Rahman, AIR 1918 PC 226 is often referred to. While on the one hand it is claimed that the said Privy Council case approves of the former view, it is contended that apparently the security bond in that case, although was executed on a date subsequent to the compromise it was executed in pursuance of one of the terms of the compromise. Therefore it is argued that that was not a case of past consideration.

29. In our view, it is not necessary for the purposes of this case to enter into that controversy. As we are of the opinion that both the collateral securities were executed for consideration, it was either simultaneous or was executory in its character, and secondly, since the Bank was not willing to advance any more money by way of overdraft to the brother of the 1st defendant unless the collateral securities were given, the securities were supported by consideration.

30. It would be seen from Exhibit III, a statement of Current Overdraft Account of the 1st defendant and his brother that the account was commenced on 6-2-1945 with a credit balance of Rs. 540. The position on the day when Exhibit P-4, the 1st promissory note was executed on 7/11-4-1945 was that there was credit balance of Rs. 1213-15-4. There was thus no past consideration at all. Although it is not in evidence as to what (was) responsible for getting the first promissory note executed. But in the absence of any evidence to the contrary, it would not be unreasonable to presume that the Bank was not willing to allow the 1st defendant and his brother overdraw the amount unless they executed a promissory note. That such a presumption can be drawn is clear from the decision in Srinivasa Raghava Ayyangar v. Ranganatha Ayyangar, 36 Mad LJ 618 = (AIR 1919 Mad 528) at page 621 (of Mad LJ); (at p. 529 of AIR).

'Even in the absence of evidence it was open to the lower Courts to have presumed from the circumstances of the case that the security bond would not have been given unless the creditor had expressed his dissatisfaction with the promissory not payable on demand.'

It has to be noted that on the day when the promissory note was executed if it was executed on 11-4-1945, the 1st defendant and his brother were allowed to draw Rs. 2210. No question, therefore, of past consideration for this security could arise. It was either a case of simultaneous consideration or a case where the Bank refused to advance overdrafts unless collateral security was executed. This factural position was not disputed. What must follow from this fact is that the first promissory note was not executed as a collateral security for any past consideration.

31. Similar is the case in regard to the second promissory note, Exhibit P-5, executed on 14-10-1946. Exhibit III indicates that on 14-10-1946 there were in all five entries made in the ledger. The first related to the debit entry of interest of Rs. 58-13-0 the second was a debit entry of Rs. 2806-12-10, the third was a credit entry of Rs. 20,000, the 4th was a debit entry of Rs. 40,000 and the 4th again was a debit entry of Rs. 7,000. It will thus be clear that one the day when the second promissory note was executed, the 1st defendant and his brother drew from the Bank amount or Rs. 49,805-12-0. There can therefore, be no doubt whatsoever that the Bank must have refused to advance an amount of Rs. 50,000 which the 1st defendant and his brother wanted. That is why they must have executed promissory note in form of collateral security. There is no other explanation as to why the second promissory note was executed. In the face of these entries, it could not seriously be contended that the promissory note was executed for any past consideration. It has a simultaneous consideration, and in any case, the security was executed for the purpose of allowing the same day on overdraft of about Rs. 50,000. In these circumstances we do not find any difficulty in rejecting the contention of the learned Advocate for the 1st defendant that the two promissory notes executed as collateral securities were void because they were executed for past consideration.

32. The last contention, which we are called upon to determine, is in regard to the limitation. The suit, in our opinion, is within time for two reasons. Firstly because of Exhibit P-2, an acknowledgment executed by the 1st defendant and his brother on 9-9-1947. The suit was instituted on 9-9-1950. It is not disputed that if Exhibit P-2 is found to be genuine, true and valid, then no question of limitation could arise. We have already dealt with the questions relating to Exhibit P-2 raised by the 1st defendant and held that Exhibit P-2 had been executed by the 1st defendant and his brother on 9-9-1947. We also found that the 1st defendant was not justified in going back upon his admission made in reference to his document in his written statement. His contention that the last words `confirm the balance of S. S. 53341-9-6 as on 1-7-1947' were added subsequent to his signature or that they were forgery is not proved. They were there when the 1st defendant and his brother signed as is clear from the evidence of P. W. 1. On a perusal of that document we are satisfied that they are not written in different inks. They were in fact written by the same person. P. W. 1 says that the whole endorsement is in his handwriting. When once it is found, and we so hold, that Exhibit P-2 is true valid and genuine, no question of limitation can arise in this case.

33. For another reason also we do not think that the suit is barred by limitation. The nature of the account attracts, in our view, Art. 85 of the Indian Limitation Act. We were taken through the accounts. These accounts show that the 1st defendant and his brother were depositing money with the plaintiff-Bank from time to time and the Bank was allowing them to draw money in excess of the deposits with the result that the balance was frequently shifting in favour of one or the other. The two promissory notes which were executed by the 1st defendant and his brother by way of security for overdraft unmistakably point out that the overdrawing of the amount was not merely accidental but it was an understanding between the parties that the defendants would be at liberty to borrow money from the plaintiff-Bank for the purpose of their own business by overdrawing on their account. The title of the account itself suggests that it was current and overdraft account. That it was so is not in dispute, It is not possible to accept any contention that the deposits made by the 1st defendant and his brother were mere payments in the discharge of the loans which they took from the Bank. They opened an account of current and overdraft, and it is in pursuance of that account that sometimes their deposit was in excess of their liability and quite often they were overdrawing the account that sometimes their deposit was in excess of their liability and quite often they were overdrawing the amounts which were in excess of their deposit. We are therefore, satisfied that these were transactions creating independent obligations on both sides and each party could say to the other `I have an account with you' and make a demand thereon. This mutual account continued to be so down to the date when the 1st defendant and his brother made their last payment to the plaintiff, the banker on 9-9-1947. On examining the accounts in the present case, we are of the opinion that the account between the parties is such as to consist in reciprocity of dealings between them and that it does not consist merely of items on one side made up of debits and credits. We have no hesitation, therefore, in holding that it is a mutual, open and current account within the meaning of Art. 85 of the Limitation Act. That this view is current is borne out by the following decisions; Fyzabad Bank v. Ramdyal, AIR 1924 Pat 107 and Punjab United Bank Ltd., v. Mohammed Hussian, AIR 1934 Lah 358.

34. We are not persuaded to agree with the decision of Orders, J. in Govinda v. Ramaswamy, AIR 1926 Mad 224. A reading of that judgment discloses that the course of business between the parties was that the plaintiff used to draw money whenever he wanted it and was also depositing money with the defendant. It was evident in that case that the balance was shifting from one side to the other from time to time. The learned Judge observed that the account book 'resembles exactly a bank Pass book where deposits of monies are made and withdrawal of monies take place from time to time, the balance being in favour of either of the customer or of the bank as the case may be at any given moment.'

In spite of this observation, the learned Judged agreed with the District Judge that there did not appear to the independent obligations on both sides and that a mere shifting of the account from one side to the other was not enough to constitute mutual obligations. With respect we find ourselves unable to subscribe to this view. While shifting of balances by itself may not be enough to bring the case within the purview of Article 85 of the Limitation Act, but if the account is current and overdraft where there has been reciprocity of obligations and shifting of balances from one side to the other, it would be a case which would squarely fall within the ambit of Art. 85. It is difficult to agree with the learned Judges that such a transaction resembles exactly to a bank pass book where deposits of monies are made and withdrawals of monies take place from time to time. In pure current accounts, that may be so. But, unless the account is current and overdraft account, it is not possible to have the balance in favour of either the customer or the Bank at any given moment. Such a current and overdraft account normally consist of the transactions with each side creating independent obligations on the other and they are not merely transactions which create obligations on the other and they not merely transactions which create obligations on the one side, those on the other being complete or partial discharge of such obligations. They show a reciprocity of dealings, or in other words, these are transactions in which there is a mutual credit founded on a subsisting debit on the other side or an express or implied agreement for as set off of mutual debts. If the facts of given case disclose that there is a mutual account and that there has been or must have been reciprocal dealings between the parties, there could be no difficulty in characterising the nature of the account as mutual, open and current. There exists in such cases a dual contractual relationships between the parties. We would, therefore, prefer to follow the two above said decisions and with respect find ourselves unable to accept the proposition laid down in the Madras case.

35. We are clear in our view that Article 85 applies to the account in question as it is mutual, open and current.

36. Article 85 of the Limitation Act having been held applicable, the limitation would be three years to be reckoned from the close of the year in which the last item admitted or proved is entered in the account. Such year of course has to be computed as in the account. It is already held that the last entry under Exhibit P-2 appears on 9-9-1947. There is no dispute that the Bank Accounts run from 1st January to 31st December each year. Reckoned from that point of view, the suit would obviously be within time.

37. For the reasons we have attempted to give, we do not find any merit in the appeal. The appeal is consequently dismissed with costs.

38. Appeal dismissed.


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