1. This suit was filed by the Eastern Bank Ltd on 3rd Oct., 1969 for a decree for a sum of Rs. 7,51,718.96p and the sale of the securities referred to in the schedules annexed to the plaint and the application of the sale proceeds towards the pro tanto satisfaction of Bank's claim against the defendant 1 as the principal debtor and defendants 2, 3, 4 and 5 as the guarantors in consideration of the loans granted or to be granted by the plaintiff Bank to the defendant 1 for which it is claimed in the plaint, defendants 2, 3, 4 and Sri D. N. Mukherjee and original defendant 5 stood as sureties.
2. The plaintiff Bank's case is that the defendant 1 had a current account with overdraft facilities with the condition that such loans would carry interest at the rate of 10% per annum. The plaintiffs (hereinafler to be referred to as Bank) case is that as security for the advances made by the bank in the said overdraft account the defendant 1 deposited and placed with the plaintiff diverse goods and merchandise which the plaintiff held and possessed subject to the terms and conditions contained in the letter of pledge dt. 18th Dec., 1967.
3. The Bank's case is that the defendants 2, 3, 4 and the original defendant 5, executed a letter of guarantee on or about 26th Aug., 1964 in consideration of the loans granted or to be granted by the Bank to the defendant --The said question has been pleaded in Para (3) of the plaint and in Para (h) of the plaint : the guarantee was said to be continuing guarantee.
3A. It has been pleaded in Para 7 of the plaint that between 10th Nov., 1966 and 20th Nov., 1966 the plaintiffs advanced five loans to the defendant 1 aggregating to Rs. 2,05,449/-against documents of title to goods alleged to have been sold by the defendant 1 to diverse purchasers and bills of exchange drawn by the defendant 1 on the said purchase for the price of the said goods.
4. Plaintiff's further case is that on various dates between 13th July, 1966 and 22nd Nov., 1966 the plaintiff advanced to the defendant 1 at the letter's request several loans, termed as 'import demand loans' on security of diverse quantities of merchandise pledged by the defendant 1 and on terms and conditions contained in the relative letters of pledge executed by the defendant 1. In consideration of the said advance the defendant 1 executed promissory notes in respect of each of the said loan promising to repay the amounts of advance. The plaintiffs claim as made out in the plaint (Para 13) are as follows : --
'Under Current overdraftaccount -- Rs. 74,237.41 p.Under Inland bill purchaseaccount -- Rs. 2,60,360.67 p.Under Import demand loanaccount -- Rs. 4,17,120.88 p.'
and all these three accounts as stated before total claim is Rs. 7,51,718.96p.
5. It may be noted that defendant 5 Sri B. N. Mukherjee one of the guarantors died during the pendency of the suit and the heirs have been substituted in his place. It may be mentioned that the defendants 2 and 3 did not file any written statement and the suit was decreed ex parte by this Court against the defendants 3 and 4 in 1977 on the evidence of one Sri N. K. Seal, an employee of the bank.
6. Before me defendant 4 and the substituted heirs of defendant 5 have contested.
7. The defence of defendant 4 is that the letter of guarantee signed by the defendant 4 dt. 26th of Aug., 1964 was to be in force or to be operative for a period of one year only commencing from 12th Mar., 1964 as was specifically mentioned in the Bank's letter dt. 19th Mar., 1964 to the first defendant on the basis of which the said guarantee dt. 26th Aug., 1964 was given and as the loans mentioned in the said letter dt. 19th Mar., 1964 were specifically sanctioned for one year only from the said date that is to say from 12th Mar., 1964 all dues became repayable within one year from 12th Mar., 1964 and consequently the guarantee was enforceable within a period of three years from 12th Mar., 1965 and as the suit was filed on 3rd Oct., 1969 the claim is barred by the laws of limitation. Moreover all the claims on the basis of which claim is sought to be made out in the plaint are beyond the date of termination of guarantee -- as such the Bank has no case against the defendant 4 and the original defendant 5.
8. His further defence is that the value of the goods mentioned in Schedule 'B' to the plaint far exceeded the sum of Rs. 74,237.41 p which was the alleged claim of the plaintiff under current overdraft account as mentioned in the particulars -- Para 13 of the plaint.
9. Regarding the claim of the Bank as made out in Paras 7, 8 and 9 of the plaint, the defendant 4 disowns any liability for the said transactions as his case is that he was not concerned with nor was liable for any of the alleged loans stated therein.
10. The case of the defendant 5 (since deceased) is that so far as advance of moneys by the bank to the defendant 1 is concerned it was against the security of goods or against hypothecation of goods kept either in the godown of the bank or in a godown under complete control of the bank and also advances were made against the value of the bills given to the bank for collection from customers of defendant 1 who, sold such goods to different customers. Advance was also made against security of goods imported into India from foreign countries and covered by shipping documents which are documents of title for such goods.
11. His case is that plaintiff used to allow the defendant 1 to overdraw the accounts with the said bank up to a certain percentage of the value of the goods or of bills or of such imported goods leaving a sufficient margin to safeguard against any probable future fluctuation. This defendant's (defendant 5) case is as made out in the written statement the securities were always sufficient or adequate to cover the dishonour of any such bills by any of the customers of the defendant 1.
12. Moreover, his defence is that the bank used to verify and scrutinise the bills before any fund could be advanced to defendant 1. According to him, there could not be any question of any loss to the bank nor can there exist any outstanding dues in favour of the plaintiff bank unless the officers and employees concerned of the bank acted fraudulently or in collusion with the employees of the officers of the said defendant 1 there could not exist any occasion for any outstanding dues against the defendant No. 1 by the Bank.
13. In Para 4 of the written statement it has been stated that on or about 19th Mar., 1964 the bank addressed a letter to the defendant 1 stating that their directors in London had sanctioned the limits (limits were mentioned in the letter) for a further period of one year w.e.f. 12th Mar., 1964.
14. In Paragraph 5 of the said defendant states by the said letter of the 19th Mar., 1960 that for the first time the plaintiff bank also wanted that all the facilities offered to the defendant 1 company were to be guaranteed by all the directors namely, M/s. D. N. Saha, K. M. Wahi, B. B. S. Jetley and D. N. Mukherjee in their individual capacities jointly and severally.
15. In Para 6 it was written against the said background this defendant along with the defendants 2, 3 and 4 were asked to put their respective signatures on a printed form styled as 'letters of guarantee'.
16. In answer to the question that the guarantee was a continuing guarantee as pleaded in the plaint this defendant states that though the guarantee was in the nature of a continuing guarantee its life was for a period of one year only from 12th Mar., 1964. His further case as it was the duty of the plaintiff bank to verify and scrutinise the goods covered by such policy and inspect the same to make a correct assessment of the value thereof after verifying the correctness of the statement of the bill. If the plaintiff bank fail to do its duty to retain 25% of the value of such bills towards margin without making any scrutiny or verification the same must be due to the result of fraud and/or collusion of the employees concerned of the plaintiff bank responsible for the transaction with the plaintiff bank. He further pleads such acts of the bank can only be considered as variance of the terms of the contract between the bank and defendant 1 and such variance should be considered responsible for discharging the said defendant as to the transaction subsequent to such variance. It was also pleaded that the records will disclose that any advance or advances made by the bank should be and must be considered to be imports made by the defendant 1 and any loan offered against the same to the defendant 1 could not be utilised for the importation of goods made in the account of any other person, firm or company. According to him, the records will disclose that all advances made by the plaintiff bank against the importation of goods were not made for the account of the defendant 1 company but had been made for the imports of goods made in the account of the company or firm other than the defendant 1 company and this was done without the consent of the defendant 5 though he had been made involved as a surety because of his execution of the letter of guarantee dt. 26th Aug., 1964. His case is : this variance discharged him as to the transaction subsequent to the variance. Moreover, his case is that it was the duty of the bank to get itself apprised of the correct value of the goods imported and if the bank failed in its duty to make any such enquiries as to correct C. I. F. value of such goods as imported, the same must be on account of fraud or collusion between the employees concerned of the bank and the persons dealing with the affairs of the defendant company. This is also a variance and made without the consent of the defendant and this defendant 5 should stand discharged for such variance.
17. His further case is that at the time of the contract of suretyship the property that was given as a security to the plaintiff bank by the defendant 1 could not be dealt with or frittered away or dissipated without his consent because his liability as suretyship demanded that he should get the advantage of those securities and if those securities were allowed to be lost, destroyed or dissipated, such an action would exonerate the defendant No. 1 to the extent of any loss for the loss of such securities.
18. In Paragraph 12 of his written statement he stated that the suit was instituted five years after the execution of the said letter of guarantee by the defendant No. 5 along with other defendants. His case is that subject to what has been stated hereof the guarantee existed only for one year from 12th Mar., 1964 to 12th Mar., 1965 and any of the liabilities created on or before 12th Mar., 1965 remained outstanding on a subsequent date the defendant can at most be made liable therefor provided the same could be considered to remain active on the date of the suit in spite of the laws of the limitation. One of his main arguments for being exempted from liabilities would appear from Para 4 of his written statement where he states in support of his contention that his guarantee executed on 12th Mar., 1964 ended on 11th Mar., 1965 --that another guarantee was proposed to be executed in 1966 (which was similar in nature) as would appear from the Ext. 2 and other circumstances but the said defendant did not execute any. This argument was advanced by the defendant 4 as well as substituted heirs of the defendant 5.
19. His further contention is that (page 27 of the written statement) the cheques issued in the account referred to in Para 1 of the plaint were not all issued for the benefit of the defendant 1 in respect of whose liability alone the letter of guarantee in question had been executed by defendant 5 along with the other defendants. The bank however had allowed many of such facilities offered to the defendant 1 for being utilised by persons or firms or company other than the defendant 1 and accordingly this defendant claims that he was discharged from the liabilities as a surety. This defendant's defence with regard to Paras 7 and 8 of the plaint has been summarised in Para 16 (page 29) of the written statement.
20. His first defence is that he was a surety for any transaction between the plaintiff bank and the defendant No. 1 on any date before 12th Mar., 1965. All the alleged loans for which the liability is sought to be fixed upon the contesting defendants were purported to have been advanced to the defendant 1 by the plaintiff bank admittedly during the period between 10th Nov., 1966 and 20th Nov., 1966 and as such this defendant cannot be held liable for any of the seven loans mentioned in the plaint in that regard or any part thereof.
21. Secondly, there was variance in the terms of agreement and accordingly the defendant 5 could not be made responsible for any of these seven loans based on bills drawn on any person other than the defendant 1 or any part thereof.
22. With regard to the statements in Para 9 of the plaint relating to import demand loans which the plaintiff advanced to defendant 1 between 13th July 1966 and 22nd Nov. 1966 which defendant denies as liability or responsibility or any transaction between the plaintiff bank and the defendant 1 on any date subsequent to 12th Mar., 1966. The said import demand loan having been purported to have been contracted between 30th June, 1966 and 22nd Nov., 1966 this defendant cannot be fixed up with any responsibility whatsoever of any of such loans or any part thereof on the basis of the letter of guarantee executed on 26th Aug., 1964, the life of which according to the original defendant 5 expired on 12th Mar., 1965.
23. On this written statement several issues were raised. The issues are the following :--
1. To what extent, if any are the transactions referred to in the plaint covered by the guarantee dt. 26th Aug., 1964?
2. Were the defendant 4 and the original defendant 5 discharged to any extent from the said guarantee by reason of the subsequent transactions of the plaintiff with the defendant 1 and/or the plaintiffs dealing with the securities?
3. To what extent, if any, is the claim against the original defendant 5 and defendant 4 barred by limitation?
4. Was a sum of Rs. 7,81,718.96 or any part of it due from the original defendant 5 and defendant 4 as alleged inter alia in Para 13 of the plaint?
5. To what reliefs, if any, is the plaintiff entitled as against these substituted defendants and also against the defendant 4.
24. Mr. J. N. Roy, counsel appearing for the heirs of the original defendant confines his main argument to Ext. 1 and Ext. XX and Ext. Z which are at pages 10, 16 and 73 of the brief of documents. Mr. Roy submits that indisputably it was a continuing guarantee but it covered and continued only those transactions which took place by and between the plaintiff bank and the defendant No. 1 from 12th of March, 1964 to 11th of March, 1966; (sic) in other words it continued only for one year and for that purpose he submits before the Court to construe and interpret those two documents namely, Ext. 1 and Ext. XX which according to him are the basis of any liability, if there is any against the guarantors.
25. His further argument is that a continuing guarantee does not mean that it will run throughout/ad infinitum for all the transactions which the bank might have had with the defendant 1 and it must be viewed and scrutinised with the attending circumstances keeping in view the relevant documents themselves.
26. Definition of 'continuing guarantee in Indian Contract Act is as follows : --
'A guarantee which extends to a series of transactions is called a continuing guarantee'. With that provision of law in view I have been called upon to construe Ext. 1 and Ext. XX along with the contemporaneous attending circumstances when they came into existence or had been executed. The notable feature of Ext. 1 which is dt 19th Mar., 1964 written by A. H. Norric, Manager of the Eastern Bank (bank) to defendant 1 that the directors in London had sanctioned the limits which have been set out in the said letter for a further period of one year w.e.f, 12th Mar., 1964. It was further stated that all facilities to be guaranteed by the directors namely, Saha, Wahi, Jately and D. N. Mukherjee would be in their individual capacity jointly as well as severally.
27. Mr. Roy contended that the said document Ext. 1 must be taken as a whole and if it is taken as a whole then it leaves no doubt (at least intention becomes clear) that the guarantors cannot have any liability for any amounts advanced for a period which would be more than one year. This letter is addressed to M/s. Parts Services India Ltd. and must be read with the letter of guarantee which had been signed by the directors. Mr. Roy referred to questions Nos. 364, 367, 381 and 396 of Sri Moitra who came to depose on behalf of the bank in order to substantiate his argument that the intention of the parties was that the guarantee would be for a period of one year. In question No. 364 Mr. H. K. Moitra admitted that the guarantee was executed pursuant to the letter which is Ext. 1 and he also admitted that the said guarantee could not go beyond Ext. 1 (Question No. 365) and in question No. 467 he admitted that the guarantee which was given was subject to Ext. 1. Mr. Roy also referred to a document page 73 of the brief Ext. 2 dt. 12th Nov., 1966 and by that letter I. D. Kipper, Manager of the bank was writing the letter to defendant 1. A new condition was inserted in the said letter. It was strongly contended on behalf of the guarantors that Mr. Kipper, Manager of the bank was intimating to the defendant 1 that directors in London had proposed the renewal of the guarantee for a further period of one year w.e.f. 17th Nov., 1966. Limits as sanctioned by the London directors had also been set out in the said letters : moreover a new feature was also inserted -- according to the London direction 'Under this limit bills drawn by their associate, United Provinces Commercial Corporation Pvt. Ltd. may be purchased on the responsibility of Parts Services India Ltd.' and in the penultimate paragraph it has been stated 'all facilities to be granted by all the directors would be in their individual capacity jointly and severally and it appears that apart from guarantee which was executed on 26-8-64 (Ext. XX) there had been no other guarantee executed by defendants Nos. 4 and 5 and for that Mr. Roy has drawn my attention to question No. 381. Question No. 381 read with question No. 382 makes it clear that this was the only guarantee that was executed by the guarantors (Ext. XX). No further guarantee was executed pursuant to Ext. 2 dated 22-11-1966. In order to implement the directions of London office a further guarantee in the nature of renewal had to be executed. It was not done; at least Sri Moitra conceded that bank did not disclose any other guarantees in the suit. In absence of any other guarantee, the defendants (4 and 5) had no further liability inasmuch as the guarantee that they executed came to an end from 12th Mar., 1965.
28. Mr. Roy contended that if these two letters Ext. 1 and 2 are read, it is clear that any guarantee that was to be executed by any of the parties would be for a period of one year and it cannot be continuing for more than one year as contended by the bank. The words are very significant in Ext. 2. One is 'that the directors in London have renewed the following limits for a further period of one year' and therefore it was a sort of renewal : besides a new term was sought to be incorporated that within the limit, bills drawn by United Provinces Commercial Corporation Pvt. Ltd. associate of the defendant 1 might be purchased on the responsibility of Parts Services India Ltd. the defendant 1. The second letter Ext. '2' was not confined only to the limit of sanction then in that case it might have been argued that the guarantee remained and the limits were only renewed but it also incorporated a new condition inserting the name of another concern whose bills may be purchased on the responsibility of the defendant No. 1. This makes it a new offer altogether leaving to the option of the guarantor whether to accept it or not. If it is reviewed, scrutinised and examined with the attendant circumstances I have no other alternative but to come to the conclusion that it was a new direction altogether and the guarantee Ext. XX could not but be for only one year. The attending circumstances were such as could lead the guarantors to believe even to take it for granted that it was only for one year and their liability could not be extended beyond that Mr. Roy referred to (1941) 3 All ER 338 Liversidge v. Anderson. Mr. Roy contended that the intention of the parties has to be ascertained not only from the documents themselves when they are not free from ambiguity but also from the attending circumstances and the documents should be scrutinised and viewed and considered in the background of the attending circumstances. In this case Mr. Roy contends that the advice from the London directors came first and the document of guarantee was executed, thereafter. Therefore, it cannot be said that the guarantee was completely dehors the advice from the London Directors. I agree with him and in my opinion the guarantee executed in August, 1964 was a sequel to and was connected with the advice of the London Directors which was referred to in Ext. 1 dated 19th March, 1964. It was contended by Mr. Chitta Dutta that the said documents are not contemporaneous but contemporaneousness is a question of fact : it depends upon each set of separate circumstances. It cannot be denied that when the deed of guarantee was executed the directors had in their mind the advice of the London Directors. It is not unlikely that they took it that it should be for one year and that deduction is strengthened by Ext 2 which I have referred before.
29. Now, if I read questions No. 396 to 401 (cross-examination of Sri Moitra) then it is quite clear that the bank is relying only upon one guarantee that was executed on 26th of Aug., 1964. It is evident as also admitted that the said sanction/directive/instruction of the London directors were known to the defendants 4 and 5 and as such the defendants 4 and 5 were apt to believe that their guarantee was limited only to a period of one year and not more than that. Mr. Roy argued by quoting a passage from A. C. Dutt's Contract, 5th Ed. page 556 which is as follows : 'Whether the guarantee is continuing one or not must be construed according to the intention of the parties as expressed by the language they have employed. This intention is best ascertained by looking to the relative position of the parties at the time the instrument is written. The question cannot be decided upon the mere construction of the document itself without looking at the surrounding circumstances to see what was the subject matter which the parties has in their contemplation when the guarantee was given and on this he relied upon the judgment reported in Law Reports (Vols. IV, XXII Victoria) p. 595 (Heffield v. Meadows) at page 599 where this passage occurs. He also referred to Chitty on Contract 24th Ed. Vol. 2 Para 4828. Chitty while dealing with the continuing guarantee expressed the opinion :--
'Continuing guarantees. It is often a difficult question whether a guarantee, for example, of the price of goods to be supplied, or money to be lent up to a specified amount, is intended to extend to a single or definite number of transactions, or whether it is intended to be continuous. In the former event, payment of the principal debtor for the goods sold, or repayment of money lent, brings the surety's liability to an end; in the latter event, the surety remains liable if further goods are supplied or money lent up to the limit of the guarantee. Whether the guarantee is continuing in any given case is a question of construction; no hard and fast rule can belaid down, and the construction of one document affords little or no guidance to the construction of another. Each case depends entirely on the language used and the document must be looked at with reference to the circumstances under which it was given.'
Even where the guarantee is a continuing one, a further question of construction may sometimes arise which may determine the running of time for the purpose of the Limitation Act, 1939.'
30. I want to take up Ext. XX once again which is the only guarantee letter signed by the guarantors contesting before me. This letter executed on 26th Aug., 1964 clearly shows that there was a previous transaction between the defendant 1 and the Calcutta branch of the Bank and the guarantors undertook to stand sureties for all moneys which shall or at any time thereafter during the continuance of the guarantee be due to the bank. Notable feature of this letter is that the guarantors undertook to stand as surety during the continuance of the guarantee which was expressly declared to be a continuing guarantee. Question would be how long it would continue? This guarantee is dt. 26th Aug., 1964 and indisputably this guarantee was a sequel to or a product of the letter dt. 19th Mar., 1964 written by the then Manager of the bank to defendant 1 intimating the purport of the advice of the directors in London in respect of the loan to be granted how, to whom, in what manner and under whose guarantee and what would be their nature of liability? It may be noted that this letter set a limit not only with regard to the amount to be advanced but also for the period for which the said limits would be operative would be in force. In the said letter of advice by the directors of the London Bank names of the defendant 4 and the original defendant No. 5 had been mentioned. It does not speak about any past facilities but it only speaks about future facilities to be guaranteed The language of the penultimate para of that said letter Ext. XX(I?) dated 19th March, 1964 is very clear and unambiguous. The letter said 'that facilities to be guaranteed by all the directors which include Sana and Mukherjee defendants 4 and 5 would be joint and several'. Therefore, it does not speak of the past but refers to future and that also for one year which has been specifically mentioned in the second line of the said letter. In any event, any person who would read the said letter cannot but think that this guarantee as contemplated in the said letter on the basis of which undoubtedly Ext. XX was executed was for one year and not beyond that.
31. Mr. C. Rule Dutt, Counsel for the plaintiff has argued that this was a continuing guarantee and if it is read with Ext. 2 then it leaves no doubt the guarantee was continuing even after 12th Mar., 1965. But in view the word 'continuing guarantee' in this case meant the series of transactions, true, but that only covered transactions for one year. Mr. Dutta contended that continuing guarantee meant series of transactions carried on by the principal debtor till it came to an end under the conditions mentioned in the Contract Act, but in my opinion that there could be a continuing guarantee for a fixed period. Continuing guarantee in accordance with Section 141 of the Contract Act, would only mean a guarantee which extends to a series of transactions. Therefore, continuing guarantee speaks of continuing transactions, not the period of such transactions. Therefore it is quite possible in my view as it appears from the facts of the present case that here in the present case guarantee was confined to a series of transactions which were restricted or limited to one year.
32. I may refer to the evidence of Sri H. K. Moitra, the plaintiffs witness. His whole evidence if analysed purports to indicate that the guarantee that was executed on 26th of Aug., 1964 was continuing but his evidence would further show that he was not very sure about the period -- that is to say how long it would continue. I can very well understand his predicament because he is coming to depose near about 18 years after the said transaction and I can quite see that he was not the best available witness of the bank. In the undefended suit one Mr. Seal came to the box to depose and he is now 80 -- it is said therefore it cannot be gainsaid that Sri Moitra was the second choice for the bank to give evidence in this case. But I examined the evidence of Sri Seal given before Justice Ajoy Kumar Bose. His age would be now 71/72 years. In any event I could quite see that he was obsessed with the idea that the guarantee was continuing but he had to admit that only one guarantee was disclosed in the suit and that was the guarantee dt. 26th Aug., 1964 Ext. XX. He said there were other guarantees previously and subsequently but those are not disclosed. Therefore, I cannot place any reliance upon his statement that there were other subsequent guarantees. Therefore I have to confine myself TO the guarantee which has been disclosed in the suit (Ext. XX).
33. Mr. Dutt argued that even that guarantee (meaning thereby the guarantee dt. 26-8-64) is sufficient to cover the transactions that came after 12th Mar., 1965 and he referred to Ext. 2 for that purpose; I am bound to say that Ext. 2 rather helps, on close scrutiny, the defendants 4 and original defendant 5 but not the bank. Manager of the Bank was writing that London Directors had renewed the limit (limits mentioned in the said letter Ext. 2) for a further period of one year. The word 'further' is important. That means that one (Ext. 1) has gone and the new one has come in for a further period of one year with new limits and with new terms and conditions. One of such new terms and conditions will appear from introduction of United Provinces Commercial Transaction an Associate of defendant 1 in the matter of business and it had been further mentioned that all facilities to be guaranteed by the directors would be in their individual capacities jointly and severally. Therefore, Ext. 2 supports the case of Mr. J. N. Roy that even if it were a continuing guarantee that continuing guarantee covered the series of transactions only for one year with the terms and conditions stated therein. The very fact that Ext. 2 contains new terms and also refers to future guarantees by using the word 'to be guaranteed' suggests that every year new guarantee was expected to be executed and in this case (it is also the case of Mr. Dutt) only one guarantee was executed and that was dt. 26th Aug., 1964 which would be effective from 12th Mar., 1964 as contained in the first paragraph of the said letter and it may be noted that was also for a period of one year. Mr. Moitra, the main witness of the bank wanted to say something in answer to question No. 396 which does not appear from any of the documents disclosed in the suit. The witness said in answer to question No. 381 that pursuant to Ext. 2 other guarantees were executed but he conceded such other letters of guarantees were not disclosed in the suit. Mr. Roy pointedly questioned him (question No. 400) 'you have said that no further guarantee after 26th Mar., 1964 was necessary according to you. If that is so, why you said a little while ago that further guarantee was executed and they are in the file' and he answered 'I said previously before the signing of the guarantee there may be other guarantees'. Surely the witness wanted to prevaricate and the reason is obvious. Because he could not reconcile his own stand according to his own evidence and the stand taken by the bank in its pleadings and documents disclosed. The witness in answer to question No. 401 admitted that no guarantee was executed after the letter of guarantee dt. 26th Aug., 1964.
34. In this connection I may mention (because some arguments were made before me) about manner of renewal. As I find on the documents disclosed Exts. 1, 2 and XX herein 'renewal' definitely meant termination of one and after termination of the same revival of the agreement with terms which might be altered might be new or even be the same but the renewal could not be in any event the continuation of the first one specially in the case of contract because one of the implied connotation of the word renewal is revival and revival suggests termination and creating of a new one. It can be revived only when it is terminated by any such renewal, facility of giving loan may be extended but not the liability of the guarantee. The liability of the guarantee cannot be in any event extended by such renewal unless the words are unequivocally clear. Mr. Roy rightly referred to me question No. 412 that all the guarantees were in 'standard forms' and similar to Ext. XX and all these guarantees were printed in bank's pro forma and Mr. Roy argued (and I must say that there is much force in his argument) that if such was the case what was the reason -- as the witness said there were previous guarantees -- for renewal of those guarantees if the same terms and conditions were there and why bank required the guarantee of 1964 was again to be executed or other such guarantees in future were to be executed year by year. Evidence of the witness intrinsically belies the plaintiffs own case. I have no doubt in my mind after considering the circumstances of evidence given in this case, that intention of the parties was that the guarantee was to be for one year and if that is so, the defendant 4 and original defendant 5 had no liability in respect of the said guarantee dated 26th August, 1964 which was in force from 12th Mar., 1964 to 11th Mar., 1965. In this connection I may refer to the plaint. The plaint refers to the transaction between the plaintiff and the defendant 1, all after March, 1965 and as such for those claims the guarantors are not liable. The claims have been made in three heads, that is, current overdraft account, under Inland bill purchase account and import demand loan account, and in any event the guarantors' liability ceased because the bank realised more than Rs. 60,000/- after the sale of the securities which would discharge the liabilities of the guarantors in any event regarding current overdraft account. The claim regarding Inland bill purchase account is concerned it relates to a period between 10th Nov., 1966 and 20th Nov., 1966 and that is beyond guaranteed period and as such guarantors would not be liable for those transactions and so far the claim with regard to the Import demand loans are concerned they also relate to a period between 13th July, 1966 and 22nd Nov., 1966 which also did not cover the period of guarantee. Therefore, on the first issue my answer is that the transactions referred to in the plaint are not covered by the guarantee dt. 26th Aug., 1964.
35. Mr. Dutta, Counsel for the Bank argues that the suit was decreed on evidence as against the defendants 2 and 3 on 21-4-75 who were also the guarantors along with the defendants 4 and 5 by Basu J. on the strength of same document which are Ext. 1 and Ext. XX. The contention of Mr. Dutt is, once a decree has been passed by a competent Court on a set of evidence both oral and documentary that will be binding upon the other guarantors as well. I do not subscribe to this argument and rule out this contention simply on the reason that it was an undefended suit and the other guarantors who are now contesting the suit had no opportunity to bring to the notice of the Court the facts which constitute their defence which might disprove the claim of the plaintiff. Moreover, in a case of contract of guarantee, the attending circumstances which led to execution of the contract of guarantee are material and conduct of the parties under the said guarantee is very relevant in that regard. The learned Judge who passed the undefended decree had no opportunity to go into those facts; as such contention of Mr. Dutt that as the decree was passed on the said documents namely, Ext. XX and Ext. 1 dt. 19th Mar., 1964 the said decree and the said documents cannot now be challenged being conclusive and final is untenable. The said decree passed in an undefended suit cannot stand in the way of defendants 4 and 5 (present contesting defendants) to establish before the Court by referring to other documents and also by cross examination that the said documents did not create any liability against them on the claim as made out in the plaint.
36. The other contention of Mr. Dutt is that the guarantors cannot succeed because they themselves, in particular defendant No. 4 did not come to the witness box to depose to establish their own defence. In my opinion that argument has little substance in the facts and circumstances of the present case. If the defendants think that the documents relied on by the bank or the oral evidence adduced by the bank does not create any liability against them and that oral evidence itself has little value in view of the fact that the deponent has got no independent recollection or knowledge about the said facts which has been established by cross-examination the defendants if they so choose may not depose if they think they have no case to answer. The object of cross-examination is two-fold to weaken, qualify or destroy the case of the opponent and to establish the party's own case by means of his opponent's witnesses (Phip. 8th Ed. page 467). The objects are to impeach the accuracy, credibility, and general value of the evidence given in chief to sift the facts already stated by the witness, to detect and expose discrepancies, or to elicit suppressed facts which will support the case of the cross-examining party.
37. The common principle of law is that if by cross-examination the opposing party can discredit the plaintiffs witness to show that there is no case to answer then in that case whether he himself deposes is not a ground on which the plaintiff can question the conduct of the defendant to establish his own case. In this respect Mr. Dutt's argument that the defendant No. 4 and the substituted heirs of defendant 5 will have to suffer a decree specially because the defendant 4 did come to the witness box to prove his defence. I may note here even where (as it is provided under the West Bengal Premises Tenancy Act) for certain default of the tenant as provided under Section 17(3) of the West Bengal Premises Tenancy Act, defence against delivery of possession is to be struck out, it has been held by this court that even in such case the defendant will be entitled to cross-examine the plaintiff's witness on all points. Dayamoyee v. Dal Singer, : AIR1979Cal332 and the purpose is only one, that is, the plaintiff has no case to be answered. Mr. Dutt referred to me certain questions both in examination in chief and cross-examination of the witness Sri Herammo Kr. Moitra who deposed on behalf of the plaintiff to prove the case of the bank by his oral evidence and also by the documentary evidence. First question he referred to is question No. 337. He specifically said 'on the basis of the guarantee dt. 26th Aug. 1964 signed by the guarantor D. N. Saha and D. N. Mukherjee the bank granted facilities to defendant 1 under three heads which are already mentioned Therefore this specific case of the bank that Saha and Mukherjee's responsibility as guarantors arises out of the guarantee dt. 26th Aug. 1964 but in this case as I said before both Ext. 1 and Ext. XX are read together the oral evidence of Sri Moitra does not help the bank because all the transactions on which the bank has based its case were after the expiry of the period of guarantee Ext. I. The witness sought to say that in spite of the fact that Ext. I was for a period of one year the local manager had the discretion to extend or to sanction it for a further period but that statement cannot be given much weight in view of the fact that none of the letters which have been disclosed by the bank give an idea that manager could exercise such a discretion. If such a discretion was there at least it is not manifest from the evidence. Rightly witness was cross-examined on this point on the letter dt. 22nd Nov. 1966 Ext. 2 and it appears that the manager himself was incorporating the main contents of the director's advice in London on the basis of which the facilities to be guaranteed by the directors would be allowed. Even if there was any such discretion that is not clear from the documents disclosed and as such I shall not be justified to decree the suit against the defendants 4 and 5 on such oral evidence of a person who as it appears to the Court does not remember the facts in this case and came before the Court to depose obsessed with a particular set of ideas. I do not say that he is deliberately making a false statement but he only gives his thought which he believes to be true but not supported by the documentary evidence. It will be very hazardous for the court to give credence to his oral evidence specially when documentary evidence is silent about it and moreover the circumstances show that the guarantors from time to time through the defendant 1 were made to know about the advice of the London directors. Therefore court cannot help thinking that the present guarantors who knew about such advice thought that their liability would be regulated by such advice and their rights and liabilities will be in accordance with such advice and not beyond that. It is rather important to note that London director's advice did not relate to the past transactions but about the future transactions to be guaranteed by the sureties leaving no scope in my opinion for the Calcutta manager to exercise his own discretion. At least the guarantors cannot be made liable when they knew about such advice while executing the letter of guarantee.
38. Mr. Dutt referred, to me question No. 471 in which the plaintiffs said that he had the personal knowledge of all the transactions made between the defendant 1 and the bank. 'I have checked their bills as an officer of bills department. I have checked their current account ledgers.......'. I have personal knowledge about all the transactions made between the defendant 1 and the bank'.
39. On this evidence Mr. Dutt asked for a decree against the defendant 1 as well as the other guarantors. From questions Nos. 771, 773 onwards the witness in cross-examination told about goods which were pledged and hypothecated and the sale of the same. By cross-examination the defendants tried to show that there were securities in the hands of the plaintiff bank which were allowed to be dissipated and frittered away by defendant 1 to the prejudice of the defendants 4 and 5. There were also questions regarding the collateral securities and execution of promissory notes which were sought to be proved by Monoranjan Ghosh the next witness of the plaintiff bank and the counsel for the defendant 5 Mr. J. N. Roy and Mr. Mullick for defendant sought to say that admittedly five of those promissory notes are barred by limitation when the suit was filed on 3rd Oct. 1969.
40. There were other cross-examinations on the point that the original contract between the defendant 1 and the plaintiff bank was varied and altered and as such the defendants were discharged from liabilities.
41. Mr. Dutt argued that the said facts on the basis of which the said guarantors are asking for discharge from their liabilities had not been pleaded in the written statement. In particular he points out to me that the argument advanced by the defendants that the securities had been frittered away by defendant No. 1 for the negligence of the bank cannot be agitated because negligence has not been pleaded in the respective written statement. Mr. Dutt also argued that the guarantors took upon themselves to pay the ultimate balance and limitation of three years will start from the date of the ultimate balance therefor. Therefore, as the ultimate balance was struck well within the period of three years when the suit was filed the said cannot be barred by the laws of limitation.
42. On the guarantee Ext. XX he argues that this covers all the transactions which would remain in force and he refers to me for that purpose page 18 of the brief of documents where it has been stated 'and we hereby expressly declare that this guarantee and the powers and provisions herein contained are in addition to and not by way of limitation of or substitution with any former or other guarantee or guarantees heretofore given to you by us (whether jointly with some other persons or alone) and now existing, uncancelled and that this guarantee is not intended to and shall not revoke or limit such other guarantee or guarantees'. But reading this it cannot be denied that it only refers to previous guarantees and not the future one and this must be read with Ext. 1 at page 10 which says that any guarantee to be made will be for a period of one year. The said document does only refer to past transaction which would remain in force subject of course however, if it is not barred by limitation according to law. But so far as future guarantee facilities are to be concerned it does not say anything. Therefore it must be construed that it would be for one year from 12th Mar. 1964. He also argued that the said Ext. XX says about 'ultimate liability', but that does not mean that this ultimate liability will be continuing ad infinitum. It must be restricted or limited or confined to one year and it may be in respect of the series of transactions within that period of one year.
43. In respect of limitation Mr. Dutt referred to Chitty's Law of Contract para 1706 page 1705. In the said para Chitty lays down the principle 'unless otherwise agreed in the contract of guarantee, the liability of the surety to the creditor arises on the principal debtor's default, so that time begins to run in favour of both of them at that moment'. But the case here is quite different. The bank and the principal debtor continued with the transactions even after the guaranteed period was over and guarantee was discharged and therefore that passage does not apply in this case as the guarantee ended on 11th of Mar. 1965 and as the claims as pleaded arise with regard to the transactions after the period of guarantee as such question of liability of defendants 4 and 5 does not come in at all. Mr. Dutt referred to me a judgment reported in AIR 1962 SC 1810(Khardah Co. Ltd. v. Raymon & Co.) and drew my attention to para 30 of the said judgment in support of his contention that 'when a contract has been reduced to writing for ascertaining the terms of the agreement between the parties but it does not follow from this that it is only what is set out expressly and in so many words in document that can constitute term of the contract between the parties. If on a reading of the document as a whole, it can fairly be deduced from the words actually used therein that the parties had agreed on a particular term, there is nothing in law which prevents them from setting up that term. The terms of a contract can be express or implied from what has been expressed. It is in the ultimate analysis a question of construction of the contract. And again it is well established that in construing a contract it would be legitimate to take into account surrounding circumstances'.
Mr. Dutt argues surrounding circumstances indicate that the guarantors were to be liable and their liability was not confined to one year but years to follow till the ultimate balance is struck. As a matter of fact in my view this case also could have been cited by the guarantors themselves. In this case under consideration surrounding circumstances do not indicate that guarantors liability will be for more than one year although Mr. Dutta tried to contend otherwise. Surrounding means 'environ' and surrounding circumstances means general environment with the combination of all the facts taken together attending with the matter in issue. In this case if I take all the facts namely, Ext. I, II and XX it cannot be said that in this case continuing guarantee purported to mean 'continuing' till it was terminated but in my opinion it meant 'continuing' only for the series of transactions for only one year. I might have accepted the contention of Mr. Dutt had I not found that only one guarantee paper was signed by the said defendants 4 and 5 (Ext. XX) and that was after the advice of the London directors was received wherein they had sanctioned the limits for a further period of one year with effect from 12th Mar. 1964 mentioning therein that all facilities to be guaranteed by the directors (Underlining is mine) would be joint and several. Therefore the said guarantee letter must be read together with the advice from the London directors and in that case the guarantee could not be in force for more than one year : besides such an advice came again in 1966 (Ext. 2) but the defendants did not sign it. It also indicates that the letter of guarantee came to an end on 11th Mar. 1965.
44. All the facts taken together with the attending circumstances and such construction, to my mind the guarantee was for one year and at least bank and the guarantors treated it as such as would appear from the surrounding/the attending circumstances relevant for the purpose particularly in view of the fact that no further guarantee deed has been executed by the defendants 4 and 5 in spite of Ext. 2 excepting the one which is at page 16 (Ext. XX). Therefore, all the facts taken together must be construed that the guarantee was for one year; besides such an advice came once again in 1966 (Ext. 2) but the defendants did not sign any further guarantee letter. This fact also indicates that the letter of guarantee of 1964 came to an end on 11th Mar, 1965 and at least bank and guarantors treated it as such as would appear from the surrounding circumstances particularly in view that no further guarantee deed has been executed by the defendants 4 and 5 excepting the one which is at page 16 of the brief of documents dt. 26-8-64 although the witness at one stage indicated (although retracted afterwards) that some other letters of guarantee after one executed in 1964 were signed by the defendants 4 and 5. Mr. Dutt also argued that even assuming that London directors sanctioned such a guarantee for one year it cannot be said that sanction itself is a contract and the sanction cannot contain all the terms. I have no dispute with this contention. What I want to say is that by execution of one document and not executing any further deed of guarantee after 1964 and after having full knowledge of the sanction by the London directors, the directors are apt to think that it was for one year only. The fact that they did not sign any further guarantee although their names were mentioned in Ext. 2 dt. 22nd Nov. 1966 further strengthens the fact that they did not want to make themselves liable for a period for one year further, that is to say, beyond one year from 11th Mar. 1965. A new term was incorporated in the subsequent document marked Ext. 2 dt. 22nd Nov. 1966 and that very well could be the reason why the guarantor did not execute any further letter of guarantee.
45. Mr. Bankim Dutt, in the concluding stage took up the argument from Mr. C. R. Dutt and he argued on the evidence, the decree against the defendant 1 has been proved. The defendant 1 has not come forward to challenge any of the transactions and against him the suit should be decreed ex parte. I accept his contention that so far the defendant 1 the claim under three heads as made out in the plaint has been proved.
46. He further contends that the letter of 19th Mar. 1964 Ext. 1 written by A. Norris, Manager informing about the advice of the London directors was written long before the letter of guarantee dt. 26th Aug. 1964 Ext. XX. Therefore I should not allow myself to link the one with the other. But it cannot be denied that the said Ext. XX must be subject to and dependent upon the Ext. 1, this guarantee could not have been executed without any reference to Ext. I. The guarantors could reasonably think that the letter of guarantee that they were signing was with reference to the letter of the London directors and the letter was executed five months thereafter. There is no escape from the fact that the Ext. XX was subject to Ext 1 and guarantee was to be for one year only unless extended.
47. Mr. Dutt refers to me Chap. III, 5th Ed., on Odgers' The Construction of Deeds and Statute and referred to me seven rules of interpretation as enunciated by Odgers in his said treatise but those rules do not rule out consideration of attending circumstances for interpretation of a document. Odgers writes under the heading 'Transaction contained in more than one document' that in such cases all the deeds relevant to the transaction are to be read together. In my view the purport of the letter of guarantee is to be gathered from several deeds which are relevant to the transaction. In this case all these deeds are to be read together to know the real intention of the parties. On such interpretation I can only hold that the letter of guarantee of 1964 Ext. XX was only for one year. Issue No. 1. After due consideration of the argument and the relevant exhibits in this regard I am of the view that none of the transactions referred to in the plaint were covered by the Guarantee dt. 26th Aug. 1964. The plaint and the annexures refer to the transactions under three heads namely, current account with overdraft facilities, Inland bill purchase account and import demand loan account by and between the defendant No. 1 and the plaintiff bank. The dates of such transactions that have been given in the plaint were much later than the letter of guarantee of 1964, as will appear from the pleading, in particular paras 7, 8 and 9 of the plaint along with the corresponding annexures. The part payment pleaded in para 12 of the plaint does not save the limitation against the said guarantors because the guarantee could not be beyond 11th Mar. 1965 and the part payment as pleaded in para 12 does not save any limitation against the defendant 4 and the substituted heirs of the defendant 5. Therefore, this issue must be answered accordingly against the plaintiff.
Issues Nos. 2 and 4. In view of my finding with regard to issue No. 1, issues Nos. 2 and 4 need not be answered. But I make it clear that as the suit is liable to be dismissed on my finding of issue No. 1 I do not think it necessary to make any finding on issues Nos. 2 and 4.
Issue No. 3. So far as Issue No. 3 is concerned as I have said before that the claim against the defendant 4 and the original defendant 5 are barred by limitation in view of what has been stated in issue No. 1, and in the body of the judgment. Moreover, question of limitation cannot arise against the defendants (4 and substituted heirs of the defendant 5) as there had been no effective guarantee on which they could be made liable as pleaded in the plaint.
Issue No. 5. The plaintiff is entitled to no relief against the defendant 4 and the original defendants in view of what has been found by me, reasons whereof have been given in the body of the judgment hereof.
48. I must make it clear that on the evidence oral and more particularly documentary (although I have dismissed the case of guarantee) I hold that the case has been proved against the principal debtor the defendant 1, The plaintiff has proved the annexures and proved its claim under the head of overdraft. Inland bill purchase and import demand loan. Only because the case of guarantee could not be proved and only because guarantors could not be made liable because they did not execute any letter of guarantee after 1964 the principal debtor cannot escape its liability. The evidence on record and the documents that have been proved entitle the bank to have the decree as prayed for against the principal debtor defendant 1. So I pass a decree for sum of Rs. 7,51,718.96p. against the defendant No. 1. Out of the said sum credit should be given for the said sum of Rs. 62,337.78p. There will be interim interest at the rate of 6% from the date of institution of the suit till today on the said sum which would be found due after giving credit of Rs. 62,337.78p. Interest on judgment on the said balance sum also @ 6%. The plaintiff will get costs against the defendant 1 as of an undefended suit. The suit, however is dismissed against the defendant No. 4 and the substituted heirs of defendant 5. So far as the costs against the defendant 4 and the substituted heirs of the defendant No. 5 are concerned on the facts and circumstances of the case, I do not make any order for costs. Each party to pay and bear their own costs.
49. The suit is disposed of accordingly.