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Union of India (Uoi) Vs. Narayanasetti Jugadeswararao and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal No. 252 of 1975
Judge
Reported inAIR1981AP215
ActsIndian Contract Act - 1872 - Sections 128, 133 and 139; Railways Act, 1890 - Sections 57, 149, 149(1), 149(7) and 149(8); Sale of Goods Act - Sections 2(4)
AppellantUnion of India (Uoi)
RespondentNarayanasetti Jugadeswararao and ors.
Appellant AdvocateS.P. Srivastava, Adv.
Respondent AdvocateMohan Reddy, Adv. for ;E. Ayyapu Reddy, ;D.K.S. Reddy and ;P. Swaroop Reddy, Advs.
DispositionAppeal dismissed
Excerpt:
.....act, 1890 and rules 149 (1), (7) and (8) of general rules framed under railways act, 1890 - indemnity bond executed - one person gave surety - creditor made alterations in terms of contract - rights of surety not to be interfered - interruption in rights of surety by creditor - held, liability of surety ends as terms of contract materially altered. - - r, was endorsed by him in favour of chinnari gopalam and brothers for valuable consideration and thus practiced fraud upon the plaintiff and so, the defendants 1 to 9 as members of the joint family and the 10th defendant as surety to the indemnity bond, are bound to indemnify the plaintiff, claiming in all a sum of rs. chinnari gopalan and brothers, in turn, endorsed the r. this note must be endorsed by the sender in favour of..........at parvathipuram. the 9th defendant despatched 232 bags of mustard seeds from parvathipuram railway station to midnapur railway station on 18-1-1952, addressed to sell he was given a railway receipt for the same, he subsequently transferred the r. r. in favour of 'chinnari gopalam and brothers'. he then approached the station master, parvathipuram railway station and, by falsely representing to him that he had lostthe r. r., executed an indemnity bond in favour of the railway with the 10th defendant as the surety. subsequently, ha went to midnapur and produced the indemnity bond at midnapur railway station and got the consignment delivered to srikrishna oil mills, midnapur. consequently, chinnari gopalam and brothers filed a suit, o. s. no. 16 of 1953, against the present.....
Judgment:

Seetharama Reddy, J.

1. This appeal by the plaintiff, the Union of India represented by the General Manager, South Eastern Railway, is against the judgment of the Addl. Subordinate Judge, Srikakulam in O. S. No. 38 of 1961, which dismissed the suit as against the 10th defendant (sole respondent herein) and decreed it for Rs. 22,096-35 P. against the the defendants 1 to 9 with proportionate costs and subsequent interest at 51/2 per cent per annum from the date of suit till the date of realisation. Defendants 1 to 9, though originally impleaded as respondents 2 to 10 in this appeal, were later deleted by the order of this Court dated 10-7-1976 as not necessary parties.

2. The relevant facts of the case are: The plaintiff brought the suit against the defendants 1 to 10. Defendants 1 to 9 are inter-related, constituting a joint family. The 10th defendant is the maternal uncle of the 9th defendant. The plaintiff's case is that the defendants 1 to 9 were joint and that the 9th defendant, as the manager of the joint family, was carrying on joint family trade for the benefit of the joint family under the name and style of Sanka Sambanna and Brothers at Parvathipuram. The 9th defendant despatched 232 bags of mustard seeds from Parvathipuram Railway Station to Midnapur Railway station on 18-1-1952, addressed to sell He was given a railway receipt for the same, He subsequently transferred the R. R. in favour of 'Chinnari Gopalam and Brothers'. He then approached the Station Master, Parvathipuram Railway Station and, by falsely representing to him that he had lostthe R. R., executed an indemnity bond in favour of the Railway with the 10th defendant as the surety. Subsequently, ha went to Midnapur and produced the indemnity bond at Midnapur Railway Station and got the consignment delivered to Srikrishna Oil Mills, Midnapur. Consequently, Chinnari Gopalam and Brothers filed a suit, O. S. No. 16 of 1953, against the present plaintiff, who was impleaded as the 1st defendant, and the present defendants 1 to 9 who were impleaded as defendants 2 and 10 respectively, for recovery of an amount of Rupees 11,992-6-7, which was the amount said to have been paid by them as consideration for the transfer of the R. R. in their favour. The suit was dismissed as against the present plaintiff and decreed as against the present defendants 1 to 9. Chinnari Gopalam and Brothers, however, preferred an appeal to the High Court in A. S. No. 764 of 1964 which was allowed by decreeing the suit against the present plaintiff. In view of that, the plaintiff herein paid an amount of Rupees 19,017-15 P. to Chinnari Gopalam and Brothers in full satisfaction of the decree. The plaintiff has. therefore, filed the present suit against the defendants 1 to 10, alleging that the 9th defendant, by executing the indemnity bond on the false representation that the original R. R, was lost, fraudulently took delivery of the consignment though in fact the R. R, was endorsed by him in favour of Chinnari Gopalam and Brothers for valuable consideration and thus practiced fraud upon the plaintiff and so, the defendants 1 to 9 as members of the joint family and the 10th defendant as surety to the indemnity bond, are bound to indemnify the plaintiff, claiming in all a sum of Rs./- 22,47-19p.

3. The 1st defendant remained ex parte, and the defendants 2 and 3 did not file any written statement. Defendants 4 to 8 claimed that the defendants 1 to 9 were not joint and they were not carrying on any joint family trade with the 9th defendant as manager, and pleaded that they had no knowledge about the' case and hence they were not liable at all. The 10th defendant, however, pleaded that he had no knowledge about the prior endorsement in favour of Chinnari Gopalam & Brothers by the 9th defendant; that he did not execute any indemnity bond along with the 9th defendant, that the 9th defendant merely requested him to put his signature on ablank paper representing to him that it was needed for some formal transaction, and that even if the indemnity bond is to be taken to have been duly executed by him as surety, it is null and void as he was a minor at that time. He further pleaded that the 9th defendant and the plaintiff colluded and acted fraudulently enabling the 9th defendant to take delivery of the consignment, notwithstanding the fact that the Station Master, Midnapur, was informed about the availability of the R. R. and who, in turn, had instructed the goods clerk not to deliver the goods unless the R, R. was produced, and so he was not liable to pay anything to the plaintiff.

4. The trial Court, on an appreciation of the evidence let in, held that the joint family was not established as divided and so the fraudulent transaction made by the 9th defendant was binding on the other members, that there was a collusion between the Railway staff and the 9th defendant with regard to the delivery of the goods to the 9th defendant, and that the 9th defendant, who fraudulently gained, is liable to pay to the plaintiff and consequently, the defendants 1 to 8 are also liable along with the 9th defendant. It, however, held that the liability of the 10th defendant is not co-extensive with that of the 9th defendant and, therefore, the 10th defendant is not liable. The suit was eventually decreed for Rs. 22,096-35 p. against the defendants 1 to 9.

5. In this appeal, the only question that has been canvassed by Sri S. P. Srivastava, learned counsel for the plaintiff, is that the liability of the sole respondent herein (10th defendant) is certainly co-extensive with that of the 9th defendant. The contention is twofold, Firstly the respondent stood as surety by subscribing his signature to the indemnity bond executed by the 9th defendant admittedly on the strength of which the goods were delivered to the 9th defendant and since the responsibility of the surety runs along with the indemnity bond, his liability is co-extensive. Secondly, the equivocal plea raised by the respondent stating that he has only signed on a blank paper and that he had no knowledge of any fraud being played by the 9th defendant and that in any event he was not liable as he was a minor at the time of the execution of the indemnity bond, establishes quite evidently that the respondent had prior knowledgeof the endorsement of transfer by the 9th defendant in favour of Chinnari Gopalam and Brothers and, therefore, he being privy to the fraud, cannot escape the liability.

6. In order to answer affirmatively the above contentions, the appellant must clinchingly establish that the respondent surety had prior knowledge of the endorsement of transfer by the 9th defendant in favour of Chinnari Gopalam and Brothers,

7. The undisputed facts are that the 9th defendant consigned the goods at Parvathipuram Railway station on 13-1-1952 in favour of self to be delivered at Midnapur Railway Station and obtained the R. R. (Ex. B-l). Subsequently, this R. R. was transferred in favour of Chinnari Gopalam and Brothers by the 9th defendant, which endorsement of transfer is found on the back of Ex. B-l. Soon thereafter, the 9th defendant executed the indemnity bond (Ex. A-29) before the Station Master, Parvathipuram Railway Station, representing that the R. R. was lost and the goods may be delivered to Srikrishna Oil Mills, Midnapur, on his instructions. Under this indemnity bond, the respondent herein stood as surety to the 9th defendant. Chinnari Gopalan and Brothers, in turn, endorsed the R. R. in favour of the Andhra Bank, Parvathipuram, by receiving an amount of Rupees 11,378/-. Subsequently, the Andhra Bank sent the R. R. to the Imperial Bank Midnapur, for taking delivery of the consignment and handing it over to Srikrishna Oil Mills, Midnapur, after collecting the stated sum from them. The Imperial Bank, on receipt at the said R. R. sent a communication of the same on 22-1-1952 itself to the Station Master, Midnapur, The Andhra Bank also sent an express telegram on 23-1-1952 to the Station Master, Midnapur, informing him that the Imperial Bank, Midnapur, held the R, R. and that delivery should be made only on the production of it. The Station Master, in turn, instructed the Goods Clerk not to deliver the consignment unless the R. R. was produced Notwithstanding this, the Goods Clerk delivered the goods at the instance of the 9th defendant to the representative of Srikrishna Oil Mills on the strength of the indemnity bond.

8. It is in this setting the liability of the surety will have to be considered.

9. At the outset, it may be stated that no evidence has been let in to show thatthe respondent-surety was either a party to the endorsement in favour of Chinnari Gopalam and Brothers by the 9th defendant or that he had any knowledge of such endorsement.

10. So, the question, in the main, is whether the liability of the respondent-surety is co-extensive with that of the

principal debtor (9th defendant) within the meaning of Section 128 of the Indian Contract Act. The statutory provisions relevant in this behalf be noticed. Section 128 of the Indian Contract Act reads:

'The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.'

Section 133 of the Indian Contract Act is as follows:

'Any variance made without the surety's consent, in the terms of the contract between the principal debtor and the creditor, discharges the surety as to transactions subsequent to the variance.' Section 139 of the Indian Contract Act is as under:

'If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged.' Since in this case -- and it is not in dispute -- it has not been established that the respondent-surety had knowledge about the prior endorsement made by the 9th defendant in favour of Chinnari Gopalam and Brothers, and, in point of fact, it has been explicitly mentioned in the indemnity bond, Ex. A-29, that since the R. R. is lost, the indemnity bond has been executed, the conclusion is inescapable that the respondent-surety had no knowledge whatsoever about the prior endorsement at a time when he stood as surety for the 9th defendant under the indemnity bond. So, the question is, if there is any variation without the surety's consent in the terms of the contract between the principal debtor and the creditor, whether it gives rise to discharge of the surety in relation to any transaction subsequent to the variance. The answer is obviously in the affirmative. In fact, if the creditor's act is inconsistent with the rights of the surety or it the creditor fails to do any act which is his duty towards the surety to do, then that also gives rise to discharge of the surety. In our view, this is the effect of reading Sections 128, 133 and 139 in combination.

11. In this case, it is not in dispute that on 22-1-1952 and 23-1-1952, intimations were received by way of a telegram and a letter respectively from the Imperial Bank and the Andhra Bank by the Station Master, Midnapur Railway Station, informing him that the Imperial Bank, Midnapur, held the R. R. and that delivery should be made only on the production of the same.

12. The R. R. is a document of title to the goods as laid down under Section 2(4) of the Sale of Goods Act. When once the title-holder intimates that he is holding the R. R. and the same will be produced for due delivery of the goods, then delivery to any other person will be wrongful at his own peril.

13. In this case, the Station Master, Midnapur Railway Station, himself instructed his subordinate who was the Goods Clerk not to part with the goods unless the original R. R. was produced and despite that, the goods were delivered to the 9th defendant on the production of the indemnity bond. Surely, this causes a variance in the terms of the contract, because the surety was not informed of the availability of the R. R. by any one on behalf of the Railway Department before the goods were delivered to the 9th defendant nor is there evidence to show that the surety consented to the goods being delivered to the 9th defendant, having had such knowledge. If that be so, it squarely falls within the protective umbrella under Sections 133 and 139 of the Indian Contract Act, as the creditor acted inconsistently with the rights of the surety by failing to inform him about the availability of the R. R., which, in our undoubted view, resulted in the discharge of the surety. The surety therefore, is absolutely absolved of any liability for the creditor.

14. There is yet another aspect which exonerates the surety. Section 57 of the Indian Railways Act and Sub-rules (1), (7) and (8) of Rule 149 of the General Rules framed under the Indian Railways Act may be noticed :--

'Section 57. Power for railway administrations to require indemnity on delivery of goods in certain cases.-- Where any animals, goods or sale-proceeds in the possession of a railway administration are claimed by two or more persons, or the ticket or receipt given for the animalsor goods is not forthcoming, the railway administration may withhold delivery of the animals, goods or sale-proceeds until the person, entitled in its opinion to receive them, has given an indemnity, to the satisfaction of the railway administration, against the claims of any other person with respect to the animals, goods or sale-proceeds.'

'Rule 149. Delivery of goods when railway receipt is lost:-- (1) When a railway receipt has been lost, mislaid or is for other reasons not forthcoming, the railway reserves the right to demand an Indemnity Note before giving 'delivery of animals or goods therein concerned,

XX XX XX XX (7) In the case of goods sent value payable or goods consigned by the sender to 'self' when the railway receipts have been lost, delivery may be granted only when the person claiming the consignment produces a stamped Indemnity Note, signed by the sender

and counter-signed by the Station Master of the forwarding station. The name stamp of the forwarding station must be impressed on the Note immediately below the signature of the Station Master. This Note must be endorsed by the sender in favour of the person to whom the consignment is to be delivered.

(8.) It is further incumbent on the person claiming delivery to execute a second stamped Indemnity Note signed by him along with a surety and two witnesses to the satisfaction of the Station Master at the destination station before delivery can be effected.'

15. What is manifest from the aforesaid provisions is that it is incumbent upon the railway authority to obtain a second indemnity note, executed by the person claiming delivery along with a surety and two witnesses to the satisfaction of the Station Master before any delivery could be effected. This second indemnity note is in addition to the first indemnity note signed by the sender and countersigned by the Station Master of the forwarding station, in a case where the railway receipt is said to have been lost or mislaid or is not forthcoming for one reason or the other. Admittedly, in this case, the second indemnity note has not been obtained by the railway authorities at the | destination station before parting with the goods in due compliance of the rules, This circumstance also, by itself, gives rise to the discharge of the surety's liability,

16. Viewed from any angle, the liability of the surety-respondent is co-extensive with that of the principal debtor till the point when the goods arrived at Midnapur Railway Station: but it became conterminous at the time when the intimation about the availability of the R. R. was received by the Station Master, Midnapur, The delivery of the goods to the 9th defendant by the Railway Authorities after having had the knowledge of the availability of the R. B. without the consent or instructions of the surety, is fatal, to the right of the plaintiff to fix any liability on the surety. We have, therefore, no hesitation in expressing our concurrence with the finding of the trial Judge who concluded that there was collusion between the Railway staff and the 8th defendant with regard to the delivery of the goods to the 9th defendant and that, since in the indemnity bond itself it is stated that the R. R. was lost and on account of the reason, the indemnity bond was executed by the 9th defendant, and if the Railway staff knew that there was the original R. R. with somebody else and ignoring the same they delivered the goods on the strength of the indemnity bond, it means that the object with which the bond was issued was frustrated and in such an event, the delivery of the goods to the 9th defendant by the Railway staff should be deemed to be a breach of the main condition under which the indemnity bond was executed, and that, therefore, the liability of the 10th defendant is not co-extensive with that of the 9th defendant.

17. In the circumstances, we find no merit in the first contention raised by the learned counsel for the appellant and it is, therefore, rejected The second contention has equally no merit. However equivocal the pleas might be, it is for the appellant to establish that the surety had the prior knowledge vis-a-vis the endorsement made by the 9th defendant in favour of Chinnari Gopalam and Brothers. There is neither any positive evidence to that effect nor the faintest suggestion in thecross-examination to that effect. It that be so, it will be an exercise in futility to embark upon and conclude on inferences, The contention is, therefore, rejected,

18. In the result, the appeal is dismissed. No orders as to costs.


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