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K. Appukuttan Panicker and anr. Vs. S.K.R.A.K.R. Athappa Chettiar and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKerala High Court
Decided On
Case NumberA.S. No. 322 of 1963
Judge
Reported inAIR1966Ker303
ActsNegotiable Instruments Act, 1881 - Sections 37; Contract Act, 1872 - Sections 62
AppellantK. Appukuttan Panicker and anr.
RespondentS.K.R.A.K.R. Athappa Chettiar and ors.
Appellant Advocate V.K.K. Menon,; P. Subramanian Potti and; S.A. Nagendran
Respondent Advocate S. Easwara Iyer,; L.G. Potti and; C.S. Rajan, Advs.
DispositionAppeal dismissed
Cases ReferredRadha Sundar Dutta v. Mohd. Jahadur Rahim
Excerpt:
.....act, 1881 and section 62 of contract act, 1872 - appeal against decree passed in suit relating to promissory note - appellants joint executants of promissory note had undertaken unconditionally to discharge obligation under note - any alteration of agreement embodied in promissory note can only be by another written agreement - no substance in appeal - appeal liable to be dismissed. - - p-2, dated 10th march, 1955 executed by the appellants as well as the 1st defendant in favour of the 1st respondent the plaintiff. we may refer to two decisions on the point as well. we are also not satisfied that ext. the principles on which the document should be interpreted are fairly well settled and have not been disputed before us. we are not even satisfied that there arc contradictory clauses..........were only sureties and further that there has been a novation of the contract embodied in ext. p-2 promissory note by the execution of the agreement esi. p-1dated 1st june, 1955 between the 1st pespon-dent and the 1st defendant. the court below held dealing with issues 5 and 6 framed in the case that there has been no novation. it also held that defendants 2 and 3 are liable. it is not clear from the finding entered on issues 1 and 2 whether the court below came to the conclusion that defendants 2 and 3 are only sureties.3. the arguments before us centered mainly under two heads. firstly, it was urged that defendants 2 and 3 were only sureties andthat in view of the fact that the securities available to the appellants were impaired by the execution of ext. p-1, the appellants have been.....
Judgment:

P. Govindan Nair, J.

1. This is an appeal by defendants 2 and 3 from a decree passed in the suit based on a promissory note, Ext. P-2, dated 10th March, 1955 executed by the appellants as well as the 1st defendant in favour of the 1st respondent the plaintiff. The only question arising for determination in this appeal is whether the appellants can be held liable on the note.

2. It is urged that they were only sureties and further that there has been a novation of the contract embodied in Ext. P-2 promissory note by the execution of the agreement Esi. P-1dated 1st June, 1955 between the 1st Pespon-dent and the 1st defendant. The Court below held dealing with issues 5 and 6 framed in the case that there has been no novation. It also held that defendants 2 and 3 are liable. It is not clear from the finding entered on issues 1 and 2 whether the Court below came to the conclusion that defendants 2 and 3 are only sureties.

3. The arguments before us centered mainly under two heads. Firstly, it was urged that defendants 2 and 3 were only sureties andthat in view of the fact that the securities available to the appellants were impaired by the execution of Ext. P-1, the appellants have been released from their obligations by virtue of Section 139 of the Indian Contract Act. Itwas also urged that in any view of the matter Ext. P-1 spelt a granting of time to the principaldebtor and therefore the appellants have been released on the principle enbodied in Section 135 of the Indian Contract Act. Reference was also made to Section 133 of the Contract Act. The second contention was that by virtue of Ext. P-1 there has been an alteration of the agreement contained in the promissory note Ext. P-1 and it was not open to the creditor--the plaintiff to rely on the promissory note thereafter.

4. It is clear that the appellants being joint executants of the promissory note had undertaken unconditionally to discharge the obligations under the note, and therefore, will be jointly and severally liable with the 1st defendant to discharge the liability under the note. This is of course subject to Section 37 of the Negotiable Instruments Act, which makes the liability of a maker subject to contract to the contrary. Since the contract embodied in the promissory note is in writing, Section 92 of the Evidence Act is attracted and any alteration of the agreement embodied in the promissory note can only be by another written agreement. The question therefore is whether there is any suchagreement.

5. Reliance has been placed on Ext. D-1 for this purpose by the appellant. This is an agreement between the 1st defendant on the one hand and defendants 2 and 3 on the other. The plaintiff is not a party to this agreement. The fact that the plaintiff was aware of or was even present when this agreement was entered into between the 1st defendant on the one hand and defendants 2 and 3 on the other cannot bind him nor can it alter the position of the liabilities arising out of the note, Ext. P-2. The position seems to us to be clear and ourattention has not been invited to any decision which casts any doubt on what is slated above. We may refer to two decisions on the point as well. The first of these is in K. R. V. Vel-lian Clietty v. Woomidy Yiramah, 29 Ind Cas 760: (AIR 1915 Low Bur 103). The relevant passage runs thus:

'The judgment must be based on facts duly proved, Evidence Act, Section 165. The parties had reduced their contract to a written document and under Section 37, Negotiable Instruments Act, were principal debtors in the absence of a contract to the contrary. According to thenote each promised to pay jointly or severally. It was on the note that the suit was brought and under Section 92 of the Evidence Act it was impossible to travel outside it...... No evidence to contradict the note being admissible by virtue of Evidence Act, Section 92, the learned Judge cannot base his judgment on such.'

6. The other ruling is in Behari Lal v. Allahabad Bank Ltd., Cawnpore, AIR 1929 All 664 where it has been pointed out that the terms of the agreement embodied in a promissory note executed by two or more persons import a joint and several liability on the part of the executants and between this position and the plea that some of them are only sureties there is an essential antithesis.

7. We may also add that under Section 44 of the Indian Contract Act, the release of one of the joint promisors will not absolve the others. We therefore come to the conclusion that notwithstanding Ext. D-1 and in the absence of any other written contract (we will deal with the effect of Ext. P-1 separately) it is impossible for the appellants to maintain the position that they are only sureties. This being the view that we take, it is unnecessary to consider the further arguments that the liability of the appellants has been discharged by virtue of some act on the part of the creditor either in impairing the securities available to the appellants -- defendants 2 and 3 -- or by granting time to the principal debtor -- 1st defendant.

8. The only further question therefore that remains to be decided is the effect of Ext. P-1. This is a document dated 1st June, 1955 and was entered into between the plaintiff on the one hand termed as a 'Financier' in the agreement and by the 1st defendant on the other described as 'producer'. Briefly, the terms of that agreement provided for a further advance of Rs. 2,000 and odd by the Financier to the Producer in order to enable the latter to release certain rights of a Company, viz., Raymond and Co., and the Financier was en-tilled to two-thirds of the net collections from certain theatres where the picture produced by the 1st defendant was being shown. The amount so collected was to be utilised for the discharge of certain debts of the producer. The first of these is mentioned to be a debt for Rs. 26,000 and odd, apparently referring to the debt under Ext. P-2 promissory note. The second is a sum of Rs. 10,000 payable to the Indian Bank by the 1st defendant. The Financier is also entitled to deduct from the net collections 7,1/2% commission before dividing it, two-thirds for the Financier and one-third for the producer. These in short, are the terms of the agreement and it concluded with the provision in Clause XIII reading as follows :

'It is hereby agreed that this agreement shall not supersede or otherwise prejudicially affect the rights of the Financier in respect of the previous transactions with the Producer and others.'

9. On the basis of the provisions in this document it has been contended by the appel-lants that there has been a complete alteration of the agreement contained in Ext. P-2 and that the amount covered by the pronote need not be paid on demand. It is so contended on the basis of the provision in Ext. P-1 that the payee of the promissory note, viz., the 'Financier', as he is termed in Ext. P-1 should apply two-thirds of the collections from the theatres in discharge of the liability under the pronote Ext. P-2 and for the discharge of a liability of the 1st defendant, 'producer', to the Indian Bank. This, according to counsel on behalf of the appellants, effectuates a novation. We may mention at the beginning that the parties to Ext. P-2, viz., the appellants are not eo nomine or even by implication parties to the agreement Ext. P-1. Jt would therefore be impossible to come to the conclusion that there has been a novation, which means the extinguishment of the terms of an earlier contract and the creation of another between new persons at least one of whom was a stranger to the original contract and it is essential for the principle of novation to apply that there must be the mutual consent of all parties concerned.

We are also not satisfied that Ext. P-1 has the effect of altering the terms of the liability of the 1st defendant, producer, to the plaintiff, the Financier. What would have been the position had there not been Clause XIII in Ext. P-1 we need not pause to consider, for, the document before us contains that clause. The principles on which the document should be interpreted are fairly well settled and have not been disputed before us. One of these is that the document must be read as a whole and as far as possible the clauses thereof must be harmoniously construed so as to exist side by side with each other. We are not even satisfied that there arc contradictory clauses in the document. Assuming that there is a contradiction between the earlier part of the document and the last clause and notwithstanding the rule that if there is any such contradiction, it is the earlier clause that should prevail, (vide: decision in Radha Sundar Dutta v. Mohd. Jahadur Rahim, AIR 1959 SC 24 at p. 30), we do not think the principle can apply to the case where the terms of the agreement are clear and we discern such clarity from the terms of Ext. P-1, which expressly state that the previous agreements should prevail. After all, rules of construction are aids for ascertaining the intention of the parties. The following paragraph from the 'Construction of Deeds and Statutes' by C. E. Oclgers is relevant:

'The old rule was stated to be that if two parts or clauses of a deed be repugnant, the first shall be received and the latter rejected; in a will the reverse was the rule. This seems to be a mere rule of thumb, totally unscientific and only to be resorted to when all else fails.'

10. When the minds of the parties are expressed in an unambiguous manner, the principles of construction, which are at best only guides in the search for the intention of the parties, cannot be relied on to over1ride the declared intention of the parties unequivocally expressed. This being so, we do not think that either the decision of the Supreme Court already referred to or the principle embodied in the decision in Ram-kishorelal v. Kamalnarayan, AIR 1963 SC 890 at p. 894 can have any application. The 1st defendant, the producer, was willing to enter into the terms of this agreement expressly saving his obligations under the earlier agreement and it is not for us to question either the wisdom of the agreement or what can he the possible motive for such an agreement. It must be said that the document categorically expresses what is meant. We therefore negative this contention also.

11. In the light of the above, this appealcannot stand and we dismiss the same withcosts.


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