1. In this case the Subordinate Judge, who heard the case in the first instance, allowed a very extraordinary course to be adopted and one which could only lead to subsequent difficulties. The suit was filed against the 1st defendant for a debt and against the 2nd defendant on a gurantee. There was no plea that this gurantee was obtained by misrepresentation of any kind and no issue was raised as to whether there was any misrepresentation of any kind. In the cross-examination of the plaintiff's witnesses, again, there was no suggestion that there was misrepresentation of any kind. When the 2nd defendant, who was the sole witness on his side, came into the box, he at once was allowed to start off with a story that he had been misled by a misrepresentation, when he gave the letter of guarantee, that there were no pre-existing debts due by the debtor to the plaintiff. On that both the Subordinate Judge and the District Judge have recorded a finding that the plaintiff obtained the guarantee by means of misrepresentation. Such a finding cannot stand for one moment and we must reverse that finding and set it aside. If the Subordinate Judge thought that during the course of the evidence facts had come to the knowledge of the 2nd defendant which made it proper to allow him to raise a fresh plea in the course of the case, the only proper course for him was to allow the 2nd defendant to amend his written statement, and to frame a fresh issue and try that issue and take evidence upon it, and it was only then that he could properly record a finding that the plaintiff had obtained the letter of guarantee by misrepresentation. As both the lower Courts were of opinion that on this fact coming to light in the trial this question ought to have been raised, we will not differ from them but are prepared, on the 2nd defendant paying the costs of the original suit, the first appeal and this second appeal, to allow a fresh issue to be raised. Apart from this, we think that there is absolutely no answer to the plaintiff's case. It seems to us to be perfectly settled law, on the authorities cited to us of which the latest is the decision reported in A.K. A. Khan Ghuznavi v. National Bank of India 33 Ind. Cas. 34, that a debtor for whom security has been given and his creditor remain at liberty to appropriate payments after the security has been given just in the same way as they were before, and there is, therefore, nothing in the fact that payments were appropriated so as to clear off the prior indebtedness before credit was given in reduction of the liability for which the 2nd defendant stood security, in any way to affect the plaintiff's claim. Upon the 2nd defendant satisfying the conditions to which we have referred within one month, we direct the lower Appellate Court to return a finding upon the issue whether the consent of the 2nd defendant to the letter of guarantee, Exhibit A, was procured by misrepresentation of the plaintiff that there was no prior indebtedness from the 1 st defendant to him, as alleged by the 2nd defendant' at the beginning of his deposition. Fresh evidence may be taken. The finding will be submitted' in three months and seven days will be allowed for objections. In the event of the costs above mentioned not being paid by 2nd defendant in the lower Appellate Court in one month, this second appeal will be allowed and the decree of the Subordinate Judge varied by allowing the full claim against the 2nd defendant also with costs throughout.
2. In compliance with the order contained in the above judgment, the District Judge of Trichinopoly submitted the following
I am required to submit a finding-on the following issue:
Whether the, consent of the 2nd defendant to the letter of guarantee, Exhibit A, was procured by misrepresentation of the plaintiff that there was no prior indebted' ness from the 1st defendant to him as alleged by the 2nd defendant at the beginning of his deposition.2. On the side of the plaintiff further evidence Was adduced. P. W. No. 1 was re-called and a new witness P. W. No. 4 was examined. Exhibits D, D-l and E series were filed for the 2nd defendant, the 1st defendant was examined on commission.
3. The plaint is so worded as to suggest that the dealings with the 1st defendant began after Exhibit A had been given to the plaintiff's firm by the 2nd defendant (vide paragraphs 3 and 6). The written statement of the 2nd defendant is confined to meeting the case set out in the plaint. Plaintiff's witness No. 1, when examined on 12th January 1915, asserted that it was after the execution of Exhibit A that the dealings began. Plaintiff's witness No. 1 deposes that the accounts of prior dealings (Exhibit l) were not with him then. When these were produced, the fact that advances had been made to 1st defendant prior to the date of Exhibit A was admitted (vide plaintiffs witness No. 2). Plaintiff's witness No. 1 is obliged to admit that his earlier statement was wrong. The misrepresentation complained of by the 2nd defendant and referred to in the issue is that plaintiff's witness No. 1 had told him that 1st defendant bad no previous dealings with the plaintiff's firm. Two letters, Exhibits D and D-l, are now put in to show that 2nd defendant was aware of the- existence of previous dealings. These letters are proved to have been written and signed by 2nd defendant. In a postscript to Exhibit D-l on 27th November 1908 the 2nd defendant writes that 1st defendant (referred to by his Vilasam) needs Rs. 1.000 and adds I am coming.' Plaintiff's witness No. 1 deposes that 2nd defendant did come accordingly and then said that Rs. 1000 might be advanced to 1st defendant. Payment was made and entered in the account of 1st defendant. This second letter, Exhibit D, is dated 2nd December 1908 and in it the plaintiff's firm is asked to pay 1st defendant's brother Rs. 300 on behalf-of 1st defendant. Receipt is acknowledged on the letter itself and the sum is debited in the account. The 1st defendant has been examined on commission on behalf of 2nd defendant. Ha states that he gave no information to 2nd defendant about the prior dealings or the extent of his indebted-Bess to plaintiff's firm, as he was afraid that if he did so the 2nd defendant would decline to give the guarantee.
4. I think that the letters now produced establish that the 2nd defendant was aware before he executed Exhibit A that the 1st defendant had had dealings with the plaintiff's firm. He had in fact recommended the grant of advances to the 1st defendant and this within a few weeks before signing Exhibit A. I think, therefore, that the particular allegation of misrepresentation on which the 2nd defendant relies is not true. The question raised by the issue is answered in the negative.
3. This second appeal coming on for final hearing after the return of the finding of the lower Appellate Court upon the issue referred by this Court for trial, the Court delivered the following
4. We accept the finding and modify the decree of the lower Appellate Court by making the 2nd defendant also liable for the amount decreed against the 1st defendant with costs incurred subsequent to the calling for a finding.