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Muhammad Insha Allah Khan Vs. Muhammad Ubed-ullah and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAllahabad
Decided On
Judge
Reported in(1921)ILR43All132
AppellantMuhammad Insha Allah Khan
RespondentMuhammad Ubed-ullah and ors.
Excerpt:
.....doubt that the first part of the document which we have already quoted does clearly show that the surety bond should remain operative after their deaths and that their estate, if any, would remain liable for the defalcations of zahur-ul-hasan, and that the operation of the bond would continue so long as he was in service. that case, however, was not a case of a guarantee for good service. 6. as an ordinary rule of law it might be said that where a continuing relationship is constituted on the face of a guarantee, there is a strong reason for holding that the guarantee cannot be annulled during the continuance of that relationship except where there is a contract to the contrary. if either or both guarantors died within a month, let us say, of the peon's employment that was a matter..........security bond, because it is admitted and is quite clear that the provisions of section 131 of the indian contract act would apply to this case. a large number of cases, both indian and english, have been cited during the course of the argument, but as the english law on the subject of continuing guarantees is somewhat different from the indian law, we wish to confine ourselves to the indian cases and the indian contract act alone, the important portions of the security bond which we have to construe are:(1) that the sureties bound 'ourselves, our heirs, executors, administrators and the representatives jointly, and each of us binds himself, his heirs, executors, administrators and representatives severally, formally etc.' and (2) 'provided always that neither of the two sureties shall.....
Judgment:

Gokul Prasad, J.

1. The facts which have given rise to this revision are as follows: It seems that Syed Zahur-ul-Hasan was a candidate for service in the Postal department and had to furnish two sureties for good conduct during his term of service. On the 25th of March, 1902, he executed a personal, security bond, with two sureties in the form prescribed by the Postal department. The two sureties were Hafiz Abdul Rahim and Insha Allah Khan. Hafiz Abdul Rahim died in 1910, and in 1916 Zahur-ul-Hasan embezzled a sum of Rs. 482-2-0. The postal authorities recovered the amount from the surviving surety, Insha Allah Khan. The present suit is by him to recover half of this amount from the heirs of his deceased co-surety Hafiz Abdul Rahim. The suit was brought in the Court of Small Causes at Meerut and was decreed. The defendants come here in revision and contend that the court below has erred in decreeing the suit, as the security bond ceased to be operative as against the deceased surety after his death. This revision came up for hearing before a Judge of this Court sitting alone, and having regard to the importance of the question of law he referred it to a Bench of two Judges.

2. The decision of the question raised in this revision depends upon the terms of the security bond, because it is admitted and is quite clear that the provisions of Section 131 of the Indian Contract Act would apply to this case. A large number of cases, both Indian and English, have been cited during the course of the argument, but as the English law on the subject of continuing guarantees is somewhat different from the Indian law, we wish to confine ourselves to the Indian cases and the Indian Contract Act alone, The important portions of the security bond which we have to construe are:

(1) that the sureties bound 'ourselves, our heirs, executors, administrators and the representatives jointly, and each of us binds himself, his heirs, executors, administrators and representatives severally, formally etc.' and (2) 'provided always that neither of the two sureties shall be at liberty to terminate his suretyship except upon giving to the head of the laid postal circle for the time being 6 calendar months' notice in writing of his intention so to do, etc, etc.' and in the event of any such notice being given, the liability of the surety by whom it shall be given, shall be thereby determined in respect only of acts and omissions happening after the expiration of the said period of months.

3. Section 131 of the Indian Contract Act runs as follows:

The death of the surety operates, in the absence of any contract to the contrary, as a revocation of a continuing guarantee so far as regards future transactions.

4. The question, therefore, which arises is whether there is any Contract to the contrary in this document which takes it out of the provisions of the said section There is no doubt that the first part of the document which we have already quoted does clearly show that the surety bond should remain operative after their deaths and that their estate, if any, would remain liable for the defalcations of Zahur-ul-Hasan, and that the operation of the bond would continue so long as he was in service. It is, however, contended that the insertion in the latter part of the agreement, that a surety could terminate his liability by giving 6 months' previous notice shows that this Agreement could be terminated at any time, and therefore, would ipso facto terminate with the death of the surety. We do not think that this contention is a sound one. The only exception to the previous part of this bond, which was to enure during the whole of the period of the service of Zahur-ul-Hasan, was that 6 months' notice would terminate it. There was no other contingency contemplated and we will not be justified in importing another condition, that the death of one of the sureties, by itself, would terminate the responsibility.

5. The case of Gopal Singh v. Bhawani Prasad (1888) I.L.R. 10 All. 531 has been cited on behalf of the opposite party. That case, however, was not a case of a guarantee for good service. In the special terms of that lease this Court came to the conclusion that the guarantee was to remain in existence during the full term of the lease which had been given en the basis of that guarantee. The Judges did not decide in that case whether it was a case of continuing guarantee within the meaning of Section 131 of the Indian Contract Act or not, but they came to the conclusion that having regard to the terms of the agreement and the circumstances under which it was executed, there was no doubt that the parties intended that the guarantee given by the surety should continue during the whole of the currency of the lease which was arrived at on the face of that guarantee, and it was on their interpretation of the security bond that they held that in that particular case the liability continued notwithstanding the death of the surety This case illustrates what is meant by the words in the absence of any contract to the contrary 'used in Section 131 of the Indian Contract Act. We have not been referred to any other Indian cases which were decided under the Indian Contract Act. The case of James Lyall & Co. v. Amorabutty Dossee (1873) 20 W.R. 12 is of not much help inasmuch as it was decided without any reference to the Indian Contract Act.

6. As an ordinary rule of law it might be said that where a continuing relationship is constituted on the face of a guarantee, there is a strong reason for holding that the guarantee cannot be annulled during the continuance of that relationship except where there is a contract to the contrary. The Indian Legislature has, however, modified this general rule by enacting Section 131 of the Indian Contract Act. Having regard to the terms of the particular security bond, we cannot but come to the conclusion that the parties intended that the security should continue during the continuance of the service of Zanur-ul-Hasan. The death of one of the sureties during the continuance of the service did not affect the contract of guarantee, and in our opinion the claim of the plaintiff respondent was rightly decreed by the court below. We, therefore, dismiss this application with costs.

Ryves, J.

7. I have had the advantage of reading my learned brother's judgment and I agree with his conclusion that this application must be dismissed, and I also agree generally with his reasons. 1 only wish to add a few words because at the close of the arguments I was inclined to think that the estate of the deceased guarantor could not be held liable for a default made years alter his death, because under the contract of indemnity there was a condition that either one or both of the guarantors could, at any moment, terminate his or their liability, and that this condition differentiated this case from that of Lloyds v. Harper (1880) L.R. 16 Ch. D. 290. On further consideration I have come to the conclusion that I was wrong in chinking that one or either of guarantors could terminate his liability automatically by a notice to that effect. If that had been so the result might have been different.

8. We have to interpret the bond and gather from it what was, in fact, the intention of the parties, that is to say, what, in fact, was the contract. It is quite clear that the postal authorities would never have admitted the peon into their service unless his honesty during the whole course of his employment had been guaranteed by two approved guarantors, who bound themselves, not only jointly and severally but also their estate, that they would, to the extent of Rs. 1,000, be responsible in case of the peon's default. What the Post Office postulated was a guarantee commensurate with the peon's employment. But as the exigencies of the service might result in the peon's being transferred from the place of his original employment to a distant locally they made a very reasonable condition in favour of the guarantors, namely, that either or both of them would be entitled at any time to give notice that he or they wished to revoke his or their guarantee, and that on their giving such notice to the proper postal authorities in the place where the peon happened to be then employed, then after the expiry of six months, their liability under their guarantee would terminate, so far as future losses were concerned. So long, and until, the guarantors or either of them gave notice of his or their intention to revoke their guarantee, 6 months after the receipt of that notice, the postal authorities had what they demanded as a condition of the peon's employment, that is, that up to the extent of Rs. 1,000 they were safeguarded against his dishonesty. If either or both guarantors died within a month, let us say, of the peon's employment that was a matter perfectly indifferent to the postal authorities. Unless and until the period of six months had elapsed after a notice to revoke, their liability, the contract of indemnity remained and the estate of both was liable. There must have been hundreds or even thousands of persons who had been employed under similar indemnity bonds, In fact, the bond in question is on a printed standard form and is obviously used in all similar cases. The postal authorities could not possibly keep in touch with its thousands of guarantors nor was there any necessity why they should, Each of these subordinate appointments was only made after two approved guarantors bad guaranteed each individual servant's good conduct and honesty during his service and until one or either of these guarantors had given notice that after six months of its due receipt he or they would not be bound in the future. The postal authorities had ample time on receipt of such notice to call on the peon to supply other approved security or make other suitable arrangements. It seems to me therefore clear that on a proper construction of the contract, as no notice was given by Hafiz Rahman as contemplated in the bond during his life or after his death by iris representatives, his estate must be held liable in this suit. I agree in dismissing this application with costs.

9. The order of the Court is that the application for revision is dismissed with costs.


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