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Namburi Venkata Kristnayya Vs. Karnedan Kothari - Court Judgment

LegalCrystal Citation
CourtChennai
Decided On
Judge
Reported in156Ind.Cas.827
AppellantNamburi Venkata Kristnayya
RespondentKarnedan Kothari
Cases ReferredRadhakissen Chamaria v. Durga Prasad Chamaria
Excerpt:
evidence act (i of 1872), section 92 - contract act (ix of 1872), section 132--promissory note--joint executants--plea by one executant that he signed only as surety for the other--maintainability--english rule, whether applicable to india. - .....v. durga prasad chamaria : air1932cal328 . it is not necessary to discuss these decisions in detail. it is sufficient to observe that all of them support his contention. before i conclude i may refer to section 132 of the indian contract act and the illustration to that section which runs as follows:a and b make a joint and several promissory notes to c. a makes it, in fact, as surety for b and c knows this at the time when the note was made. the fact that a, to the knowledge of c made the note as surety for b is no answer to a suit by c against a upon the note.13. this illustration is precisely similar to the present case. with respect to the point under consideration, so far as promissory notes are concerned, the indian legislature has not accepted the principle laid down in the.....
Judgment:

Madhavan Nair, J.

1. The 2nd defendant is the appellant. The suit instituted by the plaintiff was for the recovery of money due on a promissory note executed by the 1st and 2nd defendants in his favour. The 2nd defendant contended that he executed the promissory note only as a surety to the knowledge of the plaintiff, that he was exhonerated by the plaintiff from his liability, and that in any event by reason of the plaintiff's conduct he being a surety was deprived of the security against the 1st defendant and was thereby discharged. We are not concerned in the Second Appeal with the plea of exhoneration. On the remaining pleas the following issues were framed by the District Munsif:

(a) Whether the 2nd defendant is entitled to plead that he is only a surety to the knowledge of plaintiff?

(b) If he is a surety was he deprived of the security against 1st defendant by reason of the plaintiffs conduct, and is he discharged thereby.

(c) Was there a valid contract of sale of 1st defendant's properties to plaintiff as alleged by 2nd defendant and does it exhonerate 2nd defendant from all liability?

2. On all these issues the District Munsif recorded findings in favour of the 2nd defendant and dismissed the suit as against him. In appeal by the plaintiff the same points as decided by the District Munsif were set down as points for determination. The learned Subordinate Judge came to the conclusion that having regard to Section 92 of the Evidence Act it was not open to the 2nd defendant to plead that he was only a surety and as the promissory note Ex. A. distinctly showed that both the defendants were equally liable, the lower Court's decree dismissing the suit as against the 2nd defendant was set aside and a decree was given against him also. This Second Appeal has been filed by the 2nd defendant against that decree.

3. Under Section 4 of the Negotiable Instruments Act the maker of a promissory note gives an unconditional undertaking to pay the sum of money mentioned in the note. Under Section 124 of the Contract Act a surety is a person who undertakes a liability which is conditional on the failure of another person to discharge the liability. There is thus an essential incompatability between the position of a surety and that of an executant of a promissory note.

4. Section 92 of the Evidence Act forbids proof in variation of the terms of the contract. There can be no doubt that if an executant of a promissory note is allowed to prove that he is a surety he is clearly varying the terms of the contract which he is forbidden to do by Section 22 of the Evidence Act. This position is not denied by the appellant's learned Counsel. But what he says is this, that in proving that to the knowledge of the plaintiff he is only a surety and thereby invoking the necessary incidents of a suretyship contract as between himself and the plaintiff he is not in any way varying the terms of the contract as between himself and the let defendant which is all according to him what he is prevented from doing by Section 92 of the Evidence Act. In support of this position the learned Counsel referred notably to two English decisions, an observation in the commentaries on the Evidence Act by Woodroffee and Ameer Ali and a decision of the Rangoon High Court. English referred to namely Pooley Richard v. William Thang (1857) 119 E.R. 1307 and Greenough v. Maclekhand (1880) 121 E.R. 162 support the appellant's contention. On this point the law is thus stated in the 10th Edition of Chalmers Bills of Exchange p. 259, Illustration 8 which is as follows:

C is the holder of a joint and several notes made by B and X. X signed merely to accommodate B, and as surety for him, G knowing this, agrees for a consideration to give time to B. X is thereby discharged.

5. It will appear from the English decisions that the debts of proving contrary to the terms of the contract that he was only a surety on the ground that the plaintiff had the knowledge of it when he took the note was allowed to a joint executant of the promissory note upon equitable grounds and not on grounds allowable at common law. This is clearly pointed out by Williams, J. in Greenough v. Maclekhand (1880) 121 E.R. 162 wherein he says after referring to the doctrine of equity and explaining the reasons for it that 'a common law lawyer might feel difficulties in the way of arriving at such a doctrine.' It is argued by the respondents learned Counsel that the law of evidence in India is codified and that the provisions of Section 92 of the Evidence Act should be given effect to without allowing any equitable exceptions to the same. This contention is amply supported by authority. In Balkishendas v. Legge 22 A. 149 : 27 I.A. 58 : 4 C.W.N. 153 : 7 Sar. 601 : 2 Bom. L.R. 523 . Their Lordships of the Privy Council observe as follows:

Their Lordships do not think that oral evidence of intention was admissible for the purpose of construing the deed or ascertaining the intention of the parties. By Section 92 of the Indian Evidence Act (Act I of 1872) no evidence of any oral agreement or statement can be admitted as between the parties to any such instrument or their representatives in interest for the purpose of contradicting, varying or adding to or substracting from, its terms, subject to the exceptions contained in the several provisos. It was conceded that this case could not be brought within any of them. The oases in the English Courts of Chancery which were referred to by the learned Judges in the High Court have not, in the opinion of their Lordships; any application to the law of India as laid down in the Acts of the Indian Legislature. The case must, therefore, be decided on a consideration of the contents of the documents themselves with such extrinsic evidence of surrounding circumstances as may be required in what manner the language of the document is related to existing facts.

6. Referring to those observations Benson and Bashyam Ayyangar, JJ. stated in Achuta Rama Raju v. Subbaraju 25 m. 7 that 'after this clear statement of the law by the Highest Judicial Tribunal it is unnecessary for us to consider the decisions of the Court of Chancery and the decisions of this and of other High Courts in India based chiefly on the decisions of the Court of Chancery.'

7. In this connection see also Dathoo v. Ramachandra 30 B. 111 . In these two judgments the Privy Council say in Maung Kyin v. Ma Shwe La 42 Ind. 642 : 45 C. 320 : 15 A.L.J. 825 : 33 M.L.J. 648 : 3 P.L.W. 185 : 6 L.W. 777 : 22 C.W. 257 : 23 M.L.T. 36 : 27 C.L.J. 175 : 20 Bom. L.R. 278 : (1918) M.W.N. 300 : 9 L.B.R. 114 : 11 Bur. L.T. 21 : 44 I.A. 236 .

the judgment of the Board, as pronounced by Lord Davey reference is to Balkishendas v. Legge 22 A. 149 : 27 I.A. 58 : 4 C.W.N. 153 : 7 Sar. 601 : 2 Bom. L.R. 523 has been rightly followed and applied.

8. It follows from these decisions that exceptions allowed by the Courts of Chancery in England to the rule of law enacted in India under Section 92 of the Evidence Act should not be given effect to in this country. If this is so, then the contention of the appellant, however, much it is supported by the English decisions should not be accepted. The passage from Woodroffee and Ameer Ali's commentary to Section 92 of the Evidence Act relied on by the appellant's learned Counsel is as follows:

Similarly one of the several obligors of a bond or Bill of Exchange would not be allowed in answer to the obligee's action on the joint instrument to maintain a plea that he was a surety only; except of course in a case where a money-lender made advances on the security of a joint and separate note being well aware at the time that one of its writers was a surety only. (The Italics are mine). (See 9th Edition page 562).

9. No authority is given by learned Authors in support of the statement which I have put in Italics. This passage was accepted as laying down the correct law in Maung Sein Ma Saw 82 Ind. Cas. 816 : A.I.R. 1924 Rang. 360 : 3 Bur. L.J. 112. But it has not been referred to in Maung Ko Gyi v. U Kyaw 103 Ind. Cas. 79 : 5 R. 168 : A.I.R. 1927 Rang 199 the latest decision of the Rangoon High Court wherein it was held that oral evidence to show that one of the executants of a monetary bond to the knowledge of the money-lender signed it only as a surety is not admissible.

10. The question under consideration has already been dealt with in our Court in Narasimma v. Ramasami 18 Ind. Cas. 696 : 24 M.L.J. 91 : 13 M.L.T. 104 : (1913) M.W.N. 336. In that case

the 2nd defendant contested his liability on the ground that, although he executed the note as a principal jointly with the 1st defendant, it was agreed at the time of the execution that he should be regarded, only as a surety for the 1st defendant for whose sole benefit it was executed and ho was released from liability inasmuch as the plaintiff gave time to the 1st defendant for payment....

11. From the judgment it would appear that the vakil for the appellant cited several English cases according to which a parol agreement as between the joint executants of a document that one of them should be liable only as a surety could be proved against the promisee if he assented to such an agreement or was aware of it. The learned Judges Benson and Sundara Ayyar, JJ. overruled the contention with this observation

we cannot in India allow any equitable exceptions to the provisions of Section 92 of the Evidence Act.

12. This decision was applied in Sornalinga Mudali v. Pachi Naicken 22 Ind. Cas. 1 : 38 M. 680 : 14 M.L.T. 559 : (1914) M.W.N. 27 : 26 M.L.J. 113. The learned Counsel for the respondent drew my attention to the following decisions of the Indian Courts, all of which support him. See a) Abdul Hameed v. Punjab National Bank, Ltd., Rawalpindi 147 Ind. Cas. 785 : A.I.R. 1933 Lah. 965 : 6 R.L. 449 : 35 P.L.R. 259. Behari Lal v. Allahabad Bank, Ltd. Cawnpore 122 Ind. Cas. 602 : : AIR1929All664 , Radhakissen Chamaria v. Durga Prasad Chamaria : AIR1932Cal328 . It is not necessary to discuss these decisions in detail. It is sufficient to observe that all of them support his contention. Before I conclude I may refer to Section 132 of the Indian Contract Act and the illustration to that section which runs as follows:

A and B make a joint and several promissory notes to C. A makes it, in fact, as surety for B and C knows this at the time when the note was made. The fact that A, to the knowledge of C made the note as surety for B is no answer to a suit by C against A upon the note.

13. This illustration is precisely similar to the present case. With respect to the point under consideration, so far as promissory notes are concerned, the Indian Legislature has not accepted the principle laid down in the well-known English decisions.

14. For the above reasons I would hold, rejecting the appellant's contention that it is not open to him to prove that between him and the plaintiff he is only a surety and that in consequence by the conduct of the plaintiff towards the 1st defendant his liability is discharged. The decree of the lower Court is confirmed and the Second Appeal is dismissed with costs.


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