Skip to content


Ram NaraIn Vs. Lt. Col. Hari Singh and anr. - Court Judgment

LegalCrystal Citation
SubjectContract;Civil
CourtRajasthan High Court
Decided On
Case NumberSecond Appeal No. 159 of 1958
Judge
Reported inAIR1964Raj76
ActsContract Act, 1872 - Sections 127 and 128; Code of Civil Procedure (CPC) , 1908 - Order 41, Rule 22(3)
AppellantRam Narain
RespondentLt. Col. Hari Singh and anr.
Appellant Advocate Chandmal, Adv.
Respondent Advocate Sumerchand, Adv.
DispositionAppeal dismissed
Cases ReferredPrasad Singh v. Kashinath Singh
Excerpt:
- - faiyaz ali khan, air 1940 oudh 346, it has been held that the word 'done' in section 127 shows that past benefit to the principaldebtor can be good consideration for a bond of guarantee. 13. from all the cases aforesaid as well as from the language of section 127 it clearly emerges that the creditor must have done some thing for the benefit of the principal debtor to sustain the validity of a contract of guarantee. the case decided in air 1940 oudh 346, however, lays down that the use of the word 'done' in section 127 is indicative of the inference that past benefit to the principal debtor can be good consideration. is concerned this claim must fail firstly on the ground that lt......done or any promise made for the benefit of the principal debtor must be contemporaneous to the surety's contract of guarantee in order to constitute consideration therefor. a contract of guarantee executed afterwards without any consideration is void. the case decided in air 1940 oudh 346, however, lays down that the use of the word 'done' in section 127 is indicative of the inference that past benefit to the principal debtor can be good consideration. with great respect, i regret, i am unable to agree with the interpretation put oy their lordships in this judgment. it is giving the word 'done' an unnatural meaning. in kali charan's case, air 1918 pc 226 the circumstances were that though the agreement was executed subsequently but it was in pursuance to an earlier agreement......
Judgment:

B.P. Beri, J.

1. This is a plaintiff's second appeal directed against the judgment and decree of the District Judge, Ganganagar dated 19th March, 1958 who has set aside the money decree, of the trial Court against one of the defendants.

2. A Joint Hindu family firm of the name and style of Asaram Kedarmal instituted a suit in the Court of the Civil Judge, Suratgarh for the recovery of a sum of Rs. 6,400/8/6 as principal and Rs. 2,657/7/6 as interest against Harisingh Sikh and Lt. Col. HarisinghTo avoid confusion I shall be referring in this judgment one as Harisingh and the other as the Lt. Col. The plaintiff started money dealings with Harisingh who was a tenant of the Lt. Col. The latter undertook the responsibility of paying if any of the dues of Harisingh remainedunpaid. The transactions between the plaintiff and Harisingh were settled and cleared off and Harisingh executed an entry in the account book of the plaintiff for having received a sum of Rs. 7500/- in cash on 18-12-1953. The Lt. Col. signed this entry stating that he was responsible for the repayment of this amount of money. Other items consisting of the sum of Rs. 175/- and Rs. 21/- which remained due on the basis of the previousaccounts together with another sum of Rs. 3/- were also claimed. A credit was given in this Khata for Rs. 1298/7/6 from some separate account of the It. Col.and thus the total claim made by the plaintiff came to Rs. 9058/- inclusive of interest at the rate of Rs. 1/4/- per cent per mensem.

3. Harishigh admitted the existence of the previousaccounts between him and the plaintiff and pleaded that it was settled and cleared. He denied having executed the entry in the sum of Rs. 7500/- and contended that he had never borrowed this amount. The claim for interestwas also disputed. He pleaded that he used to deliver his entire agricultural produce to the plaintiff's firm and in fact he had paid the plaintiff's dues five times over.Some other legal pleas were also raised which are no longer in controversy and need not be mentioned.

4. The Lt. Col. repudiated the claim of the plaintiffand denied the allegation that he had undertaken the responsibility for the re-payment of the alleged loan. Hepleaded lack of consideration for his suretyship although he admitted having signed the entry. He explained hissignatures by saying that Harisingh and the plaintiff hascertain old accounts over which there was some dispute. Harisingh refused to sign the entry unless the positionof his previous accounts was clarified and it was for the purpose of explaining the accounts to Harisingh that he had undertaken the responsibility and put his signatures and not for repaying the alleged debt

5. The Civil Judge, Suratgarh passed a decree for the principal amount of Rs. 6204.62nP. against Harisingh and the Lt. Col. but dismissed the suit in respect of other claims. Dissatisfied with this judgment and decree the Lt. Col. preferred an appeal before the District Judge, Ganganagar and the plaintiff preferred cross-objections. The learned District Judge held that no cash consideration passed between the parties at the time of the execution of the entry in the account book and, therefore, the Lt. Col. as a surety was not liable in view of the provisions of Section 127 of the Indian Contract Act. He found that no rate of interest having been mentioned in the entry he was unable to accept the plaintiff's version that thedefendant agreed to pay interest at the rate of Rs. 1/4/- per cent per mensem and accordingly rejected the cross-objections. Aggrieved against this judgment and decree the plaintiff has now preferred this second appeal.

6. The learned counsel for the appellant contends that Ex. P-2 admittedly bears the signature of the Lt. Col. whereby he had undertaken the responsibility of repaying the loan. This loan had for its consideration the earlier dealings between the parties. Therefore, the contract of guarantee entered into by the Lt. Col. cannot be describedto be without consideration. The next argument urged by him is that in view of the previous dealings between the parties the appellant is entitled to interest at the rate of Rs. 1/4/- per cent per mensem and the courts below were in error in not awarding the same to the plaintiff.

7. The points for determination which arise in this case are :-

1. Whether the contract of guarantee entered into by the Lt. Col. as evidenced by Ex. 2 is supported by consideration?

2. Whether the appellant's claim for interest ought to have been decreed?

8. According to Section 126 of the Indian Contract Act, 'A 'contract of guarantee' is a contract to perform the promise, or discharge the liability, of a third person in case of his default.' Guarantee is, therefore, in the nature of 'a collateral engagement to answer for the debt, default or mis-carriage of another as distinguished from an original and direct engagement for the parties own act.' (Chitty on Contracts, Vol. II, 22nd (1961) Edition). On the question of consideration necessary to support an engagement of guarantee the relevant section of the Indian Contract Act is 127, which reads as follows :

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

For the validity of a contract of guarantee it is adequate consideration if 'anything is done or any promise made for the benefit of the principal debtor.' The nature of the things done which constitutes such consideration can be gleaned from some decided cases to which reference has been made by the learned counsel for the parties.

9. In Nanak Ram v. Mehin Lal, ILR 1 All 487 where N. advanced money to) K. on a bond hypothecating K.'s property, arid mentioning M. as surety for any balance that might remain due after realization of K.'s property, M. being no party to K.'s bond, but having signed a separate surety-bond two days subsequent to the advance of the money, it was held that the. subsequent surety bond was void for want of consideration under Section 127 of the Indian Contract Act.

10. In Kali Charan v. Abdul Rahman, AIR 1918 PC 226 the surety bond though executed at a date subsequent to the principal agreement (a compromise approved by a Court) was executed in pursuance of one of the terms of the agreement and their Lordships of the Privy Council held that it amounted to something done or a promise made for the benefit of the principal debtor was, therefore, a sufficient consideration for a surety for giving a guarantee.

11. In Chakhan Lal v. Kanhaiya Lal, AIR 1929 All 72, a person stood surety for his brother for the payment of a sum, part of which was due on previous debts of the brother, part was due on hundis jointly executed by both, part was paid at the time the person agreed to stand as surety and part was to be paid later on by the creditor who did not pay the same. It was agreed that the surety would be released on payment of a certain sum. The learned Judges held that there was sufficient consideration for the undertaking of suretyship for the whole sum to render it valid even though the surety may not have benefited from any of the advances made.

12. In Ghulam Husain Khan v. Faiyaz Ali Khan, AIR 1940 Oudh 346, it has been held that the word 'done' in Section 127 shows that past benefit to the principaldebtor can be good consideration for a bond of guarantee. Hence, where a lessee has agreed to pay the amount due under the lease by certain instalment and after some days a person executes a surety bond binding himself to pay certain amount in default of payment of instalments the surety bond cannot be said to be without consideration.

13. From all the cases aforesaid as well as from the language of Section 127 it clearly emerges that the creditor must have done some thing for the benefit of the principal debtor to sustain the validity of a contract of guarantee. There is some divergence, however, on the view whether the benefit is given at the time of the execution of the guarantee or even a past benefit can constitute a valid consideration for the sustenance of such an engagement.

In order to appreciate the question whether in the present case there is adequate consideration or not it will be profitable to recall the circumstances in which the guarantee in the case before me was given. In para-graph 3 of the plaint the plaintiff stated that the defendants, namely, Harisingh and the Lt. Col. began their money dealings [ ^^ysu nsu 'kq: fd;k** ] and the Lt. Col. undertook the responsibility for the repayment of the loan of Rs. 7500/-. In Ex. 2 dated 18-12-1953 it is stated that Harisingh received cash amounting to Rs. 7500/-. On this entry the Lt. Col. has stated ' ^^bl [kkrs ds ysu nsu dk ftesokj eS gwa** and he has signed these words. If the plaintiff had succeeded in proving the case that the sum of Rs. 7500/- was given in cash to Harisingh, the principal debtor, by the creditor and the Lt. Col. guaranteed the performance of this contract then the contract of guarantee was obviously supported by consideration, and would have been enforceable against the Lt. Col.

The facts as they transpired at the time of the trial are that no cash was given on 18-12-1953 and the amount mentioned in Ex. 2 was a result of past accounts between the parties from which a balance of Rs. 7500/- remained to be paid. According to the version of the plaintiff himself the previous account consisted of several items which were borrowed by Harisingh from time to time long before the execution of document Ex. 2. The learned District Judge has also found that the debt covered by Ex. 2 was contracted by defendant 1 Harisingh long before the execution of the document (Ex. 2) and no cash consideration as alleged by the plaintiff in his plaint and shown by him in his account books has been proved to have passed to Harisingh at the time of the execution of Ex. 2. A reference to the previous accounts goes to show that all the previous dues were paid off by Harisingh on 16-12-1963 (Cf. Ex. A.6). This is an unequivocal admission in the plaintiffs own account book. The cass which comes out from the plaintiff's account books, therefore, is that previous accounts were squared up on 16-12-1953 and the document (Ex. 2) came to be written on 18-12-1953. The cash alleged to have been paid by Ex.2 was in fact never paid. If Harisingh stood discharged o1 all his liabilities on 16-12-1953 and according to the account books of the. plaintiff no cash passed when Ex. 2 came to be written nothing was done by way of benefit to Harisingh on 18-12-1953 when Lt. Col. came to execute the endorsement of guarantee on Ex. 2. Assuming for the sake of argument that Harisingh executed this Khata(Ex. 2) for the past benefits and in constitution of previous accounts so far as the Lt. Col. is concerned the question still remains whether they will constitute valid-consideration.

14. A reference to illustration (c) of Section 127 of the Indian Contract Act may be made. It reads :

'A. sells and delivers goods to B. C. afterwards, without consideration, agrees to pay for them in default of B. The agreement is void.'

From this illustration, I feel fortified in my conclusion that anything done or any promise made for the benefit of the principal debtor must be contemporaneous to the surety's contract of guarantee in order to constitute consideration therefor. A contract of guarantee executed afterwards without any consideration is void. The case decided in AIR 1940 Oudh 346, however, lays down that the use of the word 'done' in Section 127 is indicative of the inference that past benefit to the principal debtor can be good consideration. With great respect, I regret, I am unable to agree with the interpretation put oy their Lordships in this judgment. It is giving the word 'done' an unnatural meaning. In Kali Charan's case, AIR 1918 PC 226 the circumstances were that though the agreement was executed subsequently but it was in pursuance to an earlier agreement. Illustration (c) to Section 127 completely negatives a consideration which the Oudh Court has chosen to give to Section 127 of the Indian Contract Act. Apart from this the case originally set out by the plaintiff was that Ex. 2 had for its consideration cash. The Lt. Col. had challenged this fact in his written statement and the plaintiff changed his case in the course of trial. No consideration qua Harisingh passed from the plaintiff at the time of execution of Ex. 2 nor was anything done for his benefit on that day. The contract of guarantee, therefore, in my opinion, has been rightly held by the learned District Judge to be one without consideration.

15. So far as the claim of Interest is concerned evidently none is available against the Lt. Col. as his very liability as a surety has been held by me to be nonexistent. So far as the claim of interest against Harisingh is concerned who is not represented before me the trial Court disbelieved the evidence of the oral agreement pleaded by the plaintiff that the rate of interest agreed upon was 15 per cent per annum. Asaram (P.W. 1) has not, stated anything on this score. Ram Naraln (P.W. 2), how-ever, deposed that the interest agreed upon was Rs. 1/4A per cent per mensem between the parties. Before the appellate Court cross-objections were filed by the plaintiff claiming interest which was disallowed by the trial Court. It is conceded by the learned counsel for the parties that no notice as required by Order 41, Rule 22 (3), C. P. c. was served on Harisingh and this non-compliance is fatal.

Reliance in this connection has been placed on Nage-shwar Prasad Singh v. Kashinath Singh, ILR 37 Pat 1375, wherein it has been held,--

'It is true that notice is to be served by the Court, but for service of such notice the party concerned had to take steps. Order 41, Rule 13, also speaks of the Court sending notice of appeal, but It is obvious that, if the appellant does not take steps for service of notice, the appeal has to be dismissed, and likewise, in my opinion, the non-serive of notice of the cross-objection on the defendants respondentsis fatal in this case. In that view of the matter,the cross-objection must be dismissed.'

The result of this omission is that no cross-objection for the claim of the interest existed against Harisingh before the District Judge and the judgment of the first appellate Court, therefore, became final qua Harisingh and no decree for interest can now be passed against him.

16. The claim for interest against Harisingh is not maintainable because the existence of a contract for the payment of interest based on oral evidence is a question of fact disbelieved by the trial Court end rejected by the first appellate Court and the same is now not available for challenge in second appeal. It is also not maintainable against Harisingh because no valid cross-objections for such a claim were filed against him in the first appellate Court. So far as the claim against the Lt. Col. is Concerned this claim must fail firstly on the ground that Lt. Cal.'s liability as a surety has been found not to exist, no question of claim for interest, therefore, arises. This is also not available because the liability of the surety is co-extensive with that of the principal debtor.

17. This appeal, therefore, is dismissed. The Lt. Col. is entitled to costs of this appeal.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //