1. The petitioners were plaintiffs in a small cause suit based on a promissory note, Ex. A, dated 25th March, 1933, for a sum of Rs. 167-12-9. The promissory note reads as if it were a joint promissory note by the first and the second defendants. But it is found that it was not executed by the second defendant though it was executed by the first defendant. What happened was that the two defendants went to the plaintiffs and asked them to write a promissory note in renewal of two earlier promissory notes, the major note being Ex. C, a joint bond executed by both the first and second defendants, the lesser one being Ex. B a promissory note by the first defendant alone. While the suit note was being written the second defendant went away. The scribe wrote at the foot of the note the description of the second defendant as the person who affixed his mark, but no mark or thumb print was in fact taken from the second defendant. The first defendant executed the promissory note and he did not defend the suit nor has he appeared to oppose this revision, petition. The lower Court found that as the note was intended to be a joint note and was not executed by one of the joint promisors, there was no completed contract and the suit had to be dismissed as against both the defendants. In revision, it is contended that both the defendants are liable.
2. The case with reference to the second defendant is simple. It is based on the decision of a bench of this Court in Balayya v. Subbayya I.L.R.(1917)Mad. 1171, which held that when a party to a promissory note authorised the scribe to affix his mark and under that authority the scribe wrote words indicating that the promisor was the person who affixed the mark, but did not actually put any mark, there was a sufficient execution by the agent of the promisor to bind him. It seems to me that there are no such facts in the present case. There is No. evidence that the second defendant authorised any one to affix his mark; all that we have is evidence that he promised to execute the note and; went away without doing so. There was no execution either by him Or by a person authorised to execute on his behalf. Clearly, therefore, the decision of the lower Court so far as the second defendant is concerned is correct.
3. The position with reference to the first defendant is not so-clear and there is a good deal of rather conflicting case-law on the subject. Most of thecases decided by the Indian Courts have references to Section 87 of the Negotiable Instruments Act and are cases in which when one person has signed a bond, the signature of the other person is forged on that bond either with or without the connivance of the actual executant. We are not here concerned with any alteration of the instrument or any forgery of the signature of the second defendant. The simple position is this: When there is a promissory note purporting to be a joint promissory note of A and B and A alone executes and delivers that note and B fails to execute it, is the note binding on A, when there is no evidence one way or the other whether or not A executed only on the faith that B would also execute. It is, I think, well established that when A executes a bond on the faith that B will also execute it and that B fails to do so, B has an equity in his favour relieving him from a liability which he never intended to undertake. But it seems also to be settled that if A signed the bond without any regard to the question whether B signed it or not and if he delivered it as his bond, he is liable thereon, even though B did not sign. The English cases do to some extent distinguish between a deed and a simple contract. Seeing that under Section 46 of the Negotiable Instruments Act the making of a promissory note is completed by delivery, it is difficult to see how a person who signs and delivers a negotiable instrument is in any better position than a person who signs, seals and delivers a deed. The instrument is in law the instrument of the maker, unless he can establish any equity whereby it should not be enforced against him. It seems to be settled that the question whether a particular instrument was signed by one of the parties on the faith, that the other would also sign is a question of fact. Vide Latch v. Wedlake and Lewis Thomas (1840) 11 Ad. & 959 : 113 E.R. 678. Is this question of fact one which must be proved by the plaintiff who seeks to impose liability upon the actual executant or is it a ground of defence which must be established by the person who has signed the instrument. The latter view seems to be a correct view. It is true that Jessel, M.R., has stated in the case of Luke v. South Kensington Hotel Co. (1879) 11 Ch. D. 121
It is well settled that if two persons execute a deed on the faith that a third will do so, and that is known to the other parties to the deed, the deed does not bind in equity if the third refuses to execute.
4. This dictum has, however, been criticised by the House of Lords as going too far. In the case of Nass v. Westminster Bank, Ltd. (1940) 1 All. E.R. 485 : (1940) A.C. 366 , where their Lordships discuss the cases on this subject and point out that they are mainly cases where it was sought to impose on a man a greater liability than he had ever intended to bear, where his intention was not in doubt, and where, if he were not able to get equitable relief, he would suffer substantial loss. Their Lordships further on quote with approval the case of Ex parte Harding re Smith, Fleming & Co. 41 L.T. 517, where it is expressly decided that the person who asserts such an equity in his favour to relieve him from the obligations of the contract which he has signed must affirm and prove the grounds upon which that equity is based. Their Lordships state that:
Two propositions as regards the equity in question may safely be asserted, namely, (i) that the intention of the person who is setting it up is not a matter of mere conjecture, and (ii) that the equity comes into play only when, in its absence, the legal effect of the unconditional execution of the deed will lead to substantial injustice.
5. I may observe that the case just referred to of Ex parte Harding 41 L.T. 517 was not a case of a deed but of a simple letter of guarantee. And it was clearly laid down that the burden of proof lay upon the person who, having signed that guarantee, sought equitable relief against the obligation which it imposed. It is true that in that case the letter of guarantee did not in its actual recitals indicate an intention that other parties should also sign it. But the previous letter leading up to that letter of guarantee made this point clear.
6. Turning to the facts of the present case, there was no doubt an intention to execute a joint promissory note. But the first defendant was personally liable 'under both of the promissory notes which the suit note superseded'. There was no question therefore of his being a mere surety or guarantee and the plaintiffs could have recovered the whole amount of the two earlier promissory notes from him personally. It is true that the failure of the second defendant to execute the suit promissory note might make it difficult for the first defendant to establish a right of contribution as against him. But so far as the plaintiffs were concerned, the liability with which they propose to charge the first defendant under this note is not different from the liability which he proposed to undertake; and there is no evidence that he would have been unwilling to sign this promissory note, had it not been for the belief that the second defendant was also going to sign it. The first defendant has not denied his liability and has not put forward any plea that his liability was incurred conditionally upon the second defendant undertaking a similar liability. On these facts and on the authorities cited, it seems to me that the first defendant having signed and delivered this promissory note and having established no grounds to relieve him from the liability incurred thereunder must be held liable for the suit claim.
7. In the result, therefore, I allow the petition to the extent that the plaintiffs will have a decree for the suit claim with interest at the contract rate until to-day and subsequent interest at 6 per cent, till realisation and costs against the first defendant only. As against the second defendant, the revision petition is dismissed with costs.