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Swaminatha Pillai Vs. S.L. Lakshmana Ayyar and anr. - Court Judgment

LegalCrystal Citation
CourtChennai
Decided On
Judge
Reported inAIR1935Mad748; 157Ind.Cas.979
AppellantSwaminatha Pillai
RespondentS.L. Lakshmana Ayyar and anr.
Cases ReferredBurton v. Gray
Excerpt:
principal and surety - omission to sue principal debtor, whether discharges surety--discrepancy in consideration, effect of--surety's liability for interest. - .....the day book of the plaintiff, shows that an entry debiting rs. 3,000 was made in respect of the suit note. next immediately below there is an entry of credit of rs. 300 received in cash. then later on comes an entry of rs. 1,700 as having been paid by vadivel bros. marudanayagam pillai obviously the father of defendants nos. 1 and 2. in these circumstances it is meaningless to say that rs. 3,000 was not advanced by the plaintiff and that the letter of guarantee cannot, therefore, be given effect to. in my opinion the appellant is liable on his guarantee to the same extent as the 3rd defendant. in this view there is no need to consider the argument that in any event the lower court ought to have held that the 4th defendant cannot be made liable for more than the cash consideration paid.....
Judgment:

Madhavan Nair, J.

1. This second appeal arises out of a suit instituted by the plaintiff for the recovery of Rs. 3,862-3-2 being the balance due on a promissory note for Rs. 3,000 executed by the 3rd defendant, mother and guardian of defendants Nos. 1 and 2, and by one Ayyaru Pillai. Defendants Nos. 1 and 2 were impleaded on the ground that the promissory note was executed by the 3rd defendant as their guardian for purposes binding on their estate. 4th defendant was impleaded as he had given two letters of guarantee dated September 25, 1922, and September 23, 1925, guaranteeing the payment of the amount to the plaintiff. Since Ayyaru Pillai died after the execution of the promissory note he could not be made a party to the suit and his heirs also have not been impleaded. As regards the consideration for the promissory note, it is admitted that it was executed for Rs. 1,000 paid in cash, and Rs. l,700 due to the plaintiff on prior dealings carried on by the father of defendants Nos. 1 and 2 with the plaintiff, and Rs. 300 withheld for interest on he suit document for ten months.

2. The District Munsif held that t the promissory note is not binding on defendants Nos. 1 and 2 because it was not executed on their behalf by the 3rd defendant in the capacity of guardian. He also held that the 4th defendant was not liable as the Plaintiff did not pursue his remedies against one of the principal debtors Ayyaru Pillai; and he reduced the rate of interest payable on the promissory note on the ground that interest reserved is exorbitant. In the result he passed a decree on the promissory note against the 3rd defendant alone.

3. In appeal by the plaintiff the learned District Judge held that the 4th defend ant is also liable on the promissory note to the same extent as the 3rd defendant and that the plaintiff is entitled to get interest at the full rate of 24 per cent, per annum reserved in the promissory note. He held, agreeing with the Subordinate Judge, that defendants Nos. 1 and 2, are not liable. In the result, a decree was given to the plaintiff against the 3rd and 4th defendants in the light of the above findings.

4. This second appeal has been filed by the 4th defendant. The main point for determination is whether the 4th defendant is liable on the promissory note. It is also argued that he is not liable to pay any interest, and that the rate awarded is excessive.

5. 4th defendant is the brother of the 3rd defendant's deceased husband. Exhibit B is the first letter of guarantee executed by him. It bears the same date as the promissory note, September 25, 1922. In it, after referring to the promissory note executed by the 3rd defendant and Ayyaru Pillai, he stated as follows:

I therefore, request that you will advance the said amount as requested by them. If there be default in payment of the said amount and if money be due to you (from them) and in case you are not able to recover the amount so due from them, 1 agree to pay the same to you.

6. This letter of guarantee was renewed by him on September 23, 1925, about three years alter, by Ex. C. The question is whether on the above undertaking contained in Ex. B. the 4th defendant can be made liable for the amount mentioned in the promissory note in the circumstances of the case. The liability of a surety is co-extensive with that of' the principal debtor unless it is otherwise provided by the contract (see Section 128 of the Indian Contract Act) it is first It that inasmuch as the plaintiff has not hied any suit against Ayyaru Pillai the co-executant along with the 3rd defendant, ana as the claim against him has been allowed to be barred by limitation, the 4th defendant is not liable. The argument assumes that there is a contract to the contrary indicated in the obligation to pay undertaken by the 4th defendant in the document, the contract being that the 4th defendant will be liable only if the plaintiff is unable to realise his money by taking all legal steps against the principal debtors. It appears to me that to import such a special meaning in the undertaking given by the 4th defendant is, as the learned Judge says.

a straining of the meaning of the language of Ex. B. which only follows the form of every such guarantee.

7. In support of this contention that the language of the document implies a contract to the contrary, the learned Counsel for the appellant relied on. Muhammad Yusaf v. Ram Gobinda Ojha : AIR1928Cal177 , but that decision cannot be of any help in deciding the present case as what was the language used in the security bond does not appear from the judgment. No authority has been cited for the general proposition that a creditor cannot proceed against the surety unless he has first exhausted all his remedies against the principal debtor. Apart from this, it is clear that no steps could be taken against Ayyaru Pillai as he died before the suit and as he, according to P.W. No. 1's evidence, left no property and left no heirs. There is no evidence that Ayyaru Pillai had any property. In this connection attention may be drawn to the statement of the learned Judge at the end of para. 6 of his judgment.

It has not been suggested, and much less proved, that it was possible for the plaintiff to recover anything from Ayyaru Pillai's heirs any more than he could from the 3rd defendant herself.

8. In these circumstances the plaintiff cannot be found fault with for not proceeding against Ayyaru Pillai's heirs. He may be said to have done everything possible to realise the debts from the debtors by instituting the present suit. In this connection the observations of Besanquet, J. in Musket v. Rogers (1939) 132 E R 1281, may be' referred to with advantage. In that case it was held that guarantee was not avoided by plaintiff's omitting to put in suit, a Bill of Exchange drawn by the debtor and accepted by an insolvent still in prison (Crichter). It was argued that the plaintiff has not availed himself to the utmost of Crichter's acceptance. On this the learned Judge Besanquet, J. observed as follows:

The first question is whether the plaintiff has availed himself to the utmost of all the securities he held in his hands; the jury find that he has done so notwithstanding he forbore to put in suit Crichter's bill and we see no reason to find fault with the verdict.

9. This ground of exemption claimed on behalf of the appellant must be overruled.

10. The next argument in support of the claim for exemption has reference to the payment of consideration. As already stated, full consideration in actual cash was not paid under the note. A sum of Rs. 1,700 was set off against the debt due to the plaintiff on previous dealings and Rs. 300 was withheld for interest on the suit document for ten months. It is argued that what was contemplated under the promissory note and the letter of guarantee was an actual payment of Rs. 3,000 for consideration, and as that sum in full was not paid actually, the contract between the parties has been varied and that, therefore, the surety is exempt from all liability. In support of this contention Burton v. Gray (1873) 8 Ch. App. 982 : 43 L J Ch. 229, was relied on, but on the facts that decision has clearly no application. In that case the guarantee was in consideration of a bank lending the principal the sum of 1,000 for 7 days from the date of the guarantee and the bank without placing 1,000 to his credit merely honoured cheques upon his current account which did not create an overdraft of 1,000 within the 7 days. It is clear that the 1,000 was not lent within 7 days as will appear from the facts. In the present case it cannot be said that Rs. 3,000 was not paid to the debtor though at the moment only Rs. 1,000 was paid in actual cash. It is not disputed that the actual amount paid plus the set off and the interest withheld would amount to Rs. 3,000. Exhibit D, the day book of the plaintiff, shows that an entry debiting Rs. 3,000 was made in respect of the suit note. Next immediately below there is an entry of credit of Rs. 300 received in cash. Then later on comes an entry of Rs. 1,700 as having been paid by Vadivel Bros. Marudanayagam Pillai obviously the father of defendants Nos. 1 and 2. In these circumstances it is meaningless to say that Rs. 3,000 was not advanced by the plaintiff and that the letter of guarantee cannot, therefore, be given effect to. In my opinion the appellant is liable on his guarantee to the same extent as the 3rd defendant. In this view there is no need to consider the argument that in any event the lower Court ought to have held that the 4th defendant cannot be made liable for more than the cash consideration paid the point dealt with by the learned Subordinate Judge in his judgment.

11. The last argument relates to interest. Interest at 24 per cent, per annum on the amount borrowed is provided for in the promissory note. The 4th defendant has guaranteed the payment of the amount under the promissory note, in his letter of guarantee. It is clear that he is bound to pay the interest also. The illustration to Section 128 of the Contract Act and the case therein referred to show that the surety is liable not only for the amount of the bill but also for any interest and charges which may have become due on it. I agree for the reasons mentioned by the learned District Judge that the rate of 24 per cent, is not excessive.

12. In the result, the second appeal is dismissed with costs.


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