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Padmanabha Kakkothaya and ors. Vs. Keshava Derinjithaya and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial;Contract
CourtChennai High Court
Decided On
Case NumberAppeal Nos. 624 of 1946 and 33 of 1947
Judge
Reported inAIR1951Mad239; (1950)2MLJ438
ActsContract Act, 1872 - Sections 43
AppellantPadmanabha Kakkothaya and ors.
RespondentKeshava Derinjithaya and anr.
Appellant AdvocateK. Kuttikrishna Menon and ;K.N. Karunakaran, Advs.
Respondent AdvocateK.Y. Adiga, ;K.P. Adiga and ;C. Vasudeva Mannadiar and ;T.K. Raman Nambisan, Advs.
DispositionAppeals allowed
Cases ReferredAbraham Servai v. Ra
Excerpt:
.....other contributories in proportion of benefits which each one of them received at time of original contract. - - thereby the entire decree amount was satisfied. to the original promisee, namely, the karnataka bank the principal debtors as well as the surety or guarantor stand in the same footing, that is, the promisee is entitled to realise the entire sum due to him from all the executants of the promissory note or from any one of them individually. again, if the judgment-debtor inter se should be found to have enjoyed the original consideration for the debt which became merged in the decree in unequal proportions, it follows that it is such proportion, that will govern, as between them, their mutual obligations under the decree. adigacontends that the principles enunciated in this..........of rama asra in the suit and since no steps were taken to realise moneys due from rama asra. defendants 1 to 4 are not liable to pay any portion of the due share of rama asra. on the other hand, defendant 5 contended that being only a surety or guarantor as between the principal debtors and himself inter se he was not bound to pay any sum whatever. the learned subordinate judge disagreed with the contentions raised by defendant 5 and found that defendant 5 would be liable to pay rs. 1740-15-1 by way of contribution. the reason assigned by the learned judge was that the fact that defendant 5 was not one of the principal borrowers would not be enough to exclude him from the liability. as a joint executant of the promissory note, he was as much responsible for the payment of the.....
Judgment:

Govinda Menon, J.

1. Both these appeals arise out of O. S. No. 87 of 1945 on the file of the Court of the Subordinate Judge of South Kanara and, since the facts are interrelated, a common judgment would be sufficient to dispose of the contentions of the parties.

2. Defendant 5 is the appellant in App. No. 33 of 1947 and defendants 1 to 4 are appellants in App. No. 624 of 1946. The plaintiff, Vishnu Kakkothaya, Rama Asra and defendant 5 together executed a promissory note for Rs. 9000 in favour of the Karnataka Bank in Mangalore and received the proceeds. Inter se it was arranged that out of the Rs. 9000 the plaintiff was to take Rs. 4000, Vishnu Kakkothaya Rs. 2000, Kama Asra Rs. 3000, and defendant 5 was only a guarantor or surety to the bank for the repayment of the sum of Rs. 9000 by all the three other executants of the promissory note. This is common ground and there is no dispute whatever that defendant 6 when he joined in the execution of the promissory note did ao only as a guarantor and not as any beneficiary who received any part of the proceeds of the promis-aory note. Since the money was not paid in time, the Karnataka Bank brought O. S. no. 4 of 1934 on 9-1.1934 on the file of the lower Court for the recovery of the principal, interest and costs. To that suit all the executants of the promissory note were made party defendants, including the present defendant 5. Pending the disposal of the suit Rama Asra died. No steps were taken to bring on record his legal repre-aentatives in the suit, since the plaintiff did not take any action and the other defendants did not also request the Court to bring the legal representatives of the deceased Rama Asra. Therefore, the suit proceeded without any one representing Rama Asra's liability and a decree was passed against the defendants for the principal amount, interest and costs on 17-7-1934 evidenced by Ex. p-1. Consequently, the bank took out execution proceedings and during the course of the execution proceedings Viohnu Kakkothaya also died and his legal representatives who are present defendants 1 to 4 were brought on record in execution. In order to satisfy the decree, the plaintiff paid Ba. 12,748-13.5 and defendants 1 to 4 jointly paid Rs. 2458-8-0. A sum of Rs. 461 belonging to defendant 5 was in deposit with the bank which amount was appro-priated by the bank towards the balance portion of the decree amount due to it; thereby the entire decree amount was satisfied.

3. Thereafter, the plaintiff brought the suit oat of which the above appeals have arisen for contribution from defendants l to 4 forming one group and defendant 5 another. So far as the plaintiff was concerned what was claimed was that his share of the total amount due to the bank would not come to Rs. 12478 but he has paid an excess amount of Rs. 5464-0-11 and this amount he wanted to recover from the defendants. The contention of defendants 1 to 4 was that since the bank did not implead any representatives of Rama Asra in the suit and since no steps were taken to realise moneys due from Rama Asra. defendants 1 to 4 are not liable to pay any portion of the due share of Rama Asra. On the other hand, defendant 5 contended that being only a surety or guarantor as between the principal debtors and himself inter se he was not bound to pay any sum whatever. The learned Subordinate Judge disagreed with the contentions raised by defendant 5 and found that defendant 5 would be liable to pay Rs. 1740-15-1 by way of contribution. The reason assigned by the learned Judge was that the fact that defendant 5 was not one of the principal borrowers would not be enough to exclude him from the liability. As a joint executant of the promissory note, he was as much responsible for the payment of the debt as the other executants and since the plaintiff has baen made to pay more than his share of the liability the excess can be recovered from all the other debtors including defendant 5 in proportion of their liability by way of contribution. It is this finding of the learned Subordinate Judge that is attacked by defendant 5 in App. No. 33 of 1947.

4. We are of opinion that the learned Subordinate Judge has not really appreciated the correct legal position. To the original promisee, namely, the Karnataka Bank the principal debtors as well as the surety or guarantor stand in the same footing, that is, the promisee is entitled to realise the entire sum due to him from all the executants of the promissory note or from any one of them individually. The fact that as between the promisors one of them is only a surety would not detract from the right of the promisee to collect the entire amount under the contract law from such surety. But the position is absolutely different as between the joint promisors. Where one of the joint promisors was only a surety, any of the other promisors cannot claim any contribution from him for the excess amount more than his share which hehad to pay to absolve himself from liability to the original promisee. If authority for this position is needed, we have it in the judgment of Wallace and Srinivasa Aiyangar JJ., report-ed in Arunachalam Sarvai v. Nottampeer Vavu Rowther, 27 M. L. W. 597 : A. I. R.1928 Mad. 538. At page 598 the learned Judges observe as follows :

'Thus if for instance one of the judgment-debtors should have had the decree passed against him merely because he was the guarantor of the debt which wasexclusively payable by the other judgment-debtor as the principal, then it follows that the implied obligation of the principal debtor under the contract of guarantee to keep the guarantor indemnified from any loss or damage would displace or be available to be set off against the other implication of indemnity.' This is direct authority for holding that since defendant 5 was only a guarantor or surety he is not liable to pay any contribution to the principal debtors themselves. Therefore, the learned Judges' view is unsupported by law and is erroneous. The appeal by defendant 5 is, there-fors, allowed, the decree against him will be set aside and the suit as against him dismissed. Defendant 5 will be entitled to get his costs in this Court from the plaintiff alone.

5. As regards the liability of defendants 1 to 4 the position stands on a somewhat different footing. Mr. Adiga for the plaintiff invited our attention to Section 43, Contract Act, and contended that Rama Asra's share of the principal amount, interest and costs, should be divided equally between the plaintiff on the one hand and defendants 1 to 4 on the other, so that when the question of contribution comes the liability should be on a 50 : 50 basis. On the other hand, the learned counsel for the appellant in App. No. 624 contends that defendants 1 to 4 would be liable only proportionately to the extent of the benefits received by them on the original promissory note, that is, what they contend is since the plaintiff received Rs. 4000 and Vishnu Kak-kothaya Rs. 2000 the amount of Rs. 3000 and interest due from Kama Asra should be divided in the ratio of 2 : 1 i.e., the plaintiff will be entitled only to a decree for one-third of the amount and nothing more. Here again, we have the observations of the learned Judges in Arunachalam Sarvai v. Nottam Peer Vavu Rowther : AIR1928Mad588 to the following effect:

'Again, if the judgment-debtor inter se should be found to have enjoyed the original consideration for the debt which became merged in the decree in unequal proportions, it follows that it is such proportion, that will govern, as between them, their mutual obligations under the decree.'

These observations have been followed by Meredith J., in Mt. Jagpati Kuar v. Firm DemriSahu Hallchori Ram, 20 Pat. 811 at pp. 826 and 827 : : AIR1942Pat204 . But Mr. Adigacontends that the principles enunciated in this case cannot be applied to the facts of the present case because here it was the division of the contributory amount due from one of the alleged contributories between the other contributors whereas in those oases the division was between the contributories themselves in proportion of the benefit enjoyed by each one of them. He relies upon the third paragraph of Section 43, Contract Act, which lays down that it any one of two or more joint promisors makes default in such contribution, the remaining joint promisors must bear the loss arising from such default in equal shares. The learned counsel placed emphasis on the words 'equal shares' and urges that whatever amount was proportionately due from Rama Asra should be divided equally between the plaintiff on the one side and defendants 1 to 4 on the other. Otherwise, according to the learned counsel the words of para. 3 of Section 43 cannot be fulfilled and as such the contribution should be only on this basis.

6. But in our opinion para. 3 does not contemplate cases where one of the joint contributors has not paid and the others have to pay that sum though those others received the benefits in the original contract in unequal proportions. There is not direct authority so far as our attention has been invited to in the Indian Courts except certain observations contained in Abraham Servai v. Raphial Muthirian, 39 Mad. 288 : A. I. R. 1916 Mad. 675, Tyabji J., in his judgment observed as follows :

'The first view is, I think, plainly the true one. When they signed the note the parties must have contemplated that it should be paid and that the burden should be shared equally. The fact that one happens to escape from legal liability to the creditor, without the consent of his associates, and perhaps even without their knowledge, cannot be allowed to disturb the original obligation between the co-debtors, of to alter the proportions of liability or contribution, which must be ascertained from the note at the time that it was made. The duty to contribute here binds all, so long as anyone remains legally liable by virtue of the joint contract.' (The Italics are ours).

This again is a quotation from Gardner v. Brooke, (1897) 2 Ir. R. 6 where O'Brian C. J., in considering a similar matter observed as follows:

'The right comes, in equity, originally and absolutely, by the payment in discharge of a common burthen, and has no existence whatever, inchoate or complete, till the payment ia made. It Is not, therefore, affected by what affectes the contract. That rule was necessarily the consequence of Dering v. Winchelsea, (1787) 1 Cox. 318 : 2 Bos. and P. 270 because in that case the sureties were bound by different bonds, and there was no link of contract between them. And the Chief Baron states that there were precedents of contribution between co-lessees and co-feofees, which, however, was by the Statute of Marbridege and Sir William Harbert's case, 3 Rep. 11 was referred to as containing an example of contribution between parties having norelation of contract to each other. And, though the words of the writ of contribution, quoted by Fitzher-bart 'ex assensu corum' contain very early traces of the doctrine of contract, yet this element has certainly been worked out from all modern decisions. The principle came into the English from the Civil law, where it pursues exactly the same consequences, and distinctions that are found in equity, all based on community of burthen and benefit from payment, and none from agreement. So far, therefore, as rule in equity is concerned, to which the law is now made subject, the cause of action, which the Statute must apply to bar, is that arising from the fact of payment. However, as the equitable rule applies no less because there is a contract, and the extent of the relief is the same, entitling the party to the whole of the payment that he has made in excess of his share, and from the solvent patties alone, and there is a contract in this case, we have to see whether there is anything in the words of the Statute itself, as was contended, the force of which requires the collateral as well as the original remedy to be extinguished by time.'

Another decision from which some little guidance can be got is the decision in Lowe v.Dixon, (1886) 16 Q. B. D. 455 : 34 W. R. 441,At p. 458 there are observations in the followingterms:

'At law, if several persons have to contribute a certain sum, the share which each has to pay is, the total amount divided by the number of contributiona; and no allowance is made in respect of the inability of some of them to pay their shares. But, in equity, those who can pay must not only contribute their own shares, but they must also make good the shares of those who are unable to furnish their own contribution. Inasmuch, therefore, as the rules of equity prevail the defendants must make good each one half of that which Lund, Beveridge and Co. are unable to pay.'

7. From these authorities it seems clear that if one of the persons liable to contribute did not or could not pay his proportion that amount has to be divided between other contri-butories only in the proportion of the benefits which each one of them has received at the time of the original contract. Section 43, Contract Act did not envisage such a contingency, It seems to be a causus omissus. It only speaks of the liability of all the promisors to the original promisee and inter se the right of any one of the promisors to claim the excess amount from the other promisors; but, where, as in this case one of the promisors was not able to pay or nothing could be obtained from him how is the proportionate liability to be divided among the other promisors is not considered in this section. The indication contained in the decision of the Irish Court of Appeal as well as in English cases which have found favour with the learned Judges in Abraham Servai v. Ra-phial Muthirian, 89 Mad. 288 : A. I. R.1915 Mad. 675 is to the effect that in equity such amount must be divided between the other co-promisors only in proportion to the original benefit which one of them had received.

8. We have, therefore, to find out how theamount has to be divided in the present case.

The learned Subordinate Judge has found inPara. 16 of his judgment that the amount due tothe Karnataka Bank was Rs. 15,658-8-1. If thisis to be divided in the proportionate sharesamong the three joint promisors the plaintiffwill have to pay Rs. 6963-12-5, Vishnu Kokko-thaya in whose shoes defendants 1 to 4 standwould have had to pay Rs. 3481-14 2, the amountdue from Rama Asra being the 3/9th sharewould come to Rs. 5222-136. This sum ofRs. 5222-13-6 reduced by Rs. 461-2-8 which sumhas been appropriated by the Karnataka Bankfrom defendant 5 should be divided in the ratioof 2 : 1 by the plaintiff and defendants 1 to 4,i. e., deducting Rs. 461-2-8 the amount would beRs. 4761-10-10. If that is divided in the ratio of 2:1the plaintiff will have to pay Rs. 8174-7-4 anddefendants 1 to 4 Rs. 1587 3-8. Therefore, thetotal liability to defendants 1 of 4 will beRs. 3481-14-2 plus Rs. 1587-3-8 making a total ofRs. 5069-1-10. Towards this amount defendants 1to 4 have paid Rs. 2458-8-0. The balance whichdefendants 1 to 4 would have had to payto Karnataka Bank would be Rs. 2610-9-10. Theplaintiff will be entitled to a decree for a sumof Rs. 2612-9-10 with interest thereon at six percent. per annum from the date of plaint,namely, 23-3-1945. The lower Court has decreeda sum of Rs. 2764-6-4. The amount to whichthe appellants have succeeded being only asmall proportion, we direct the appellants topay the costs of the plaintiffs-respondents. Thetrial Court's decree as regards costs will stand.


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