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The Bank of Bengal Vs. M. Pogose (Window and Representative of J.G. Pogose) - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKolkata
Decided On
Judge
Reported in(1878)ILR3Cal175
AppellantThe Bank of Bengal
RespondentM. Pogose (Window and Representative of J.G. Pogose)
Cases ReferredRees v. Berrington
Excerpt:
principal and surely - accommodation acceptor--discharge of surety--equitable mortgage--trust deed for benefit of creditors--eventual remedy of surety--contract act (ix of 1872), sections 132, 134, 135, 139--evidence act (i of 1872), section 92. - .....accommodation acceptor without consideration; and3rdly.--that the consent to the execution of the trust deed by the plaintiff's did not operate to discharge the defendant from his liability.5. upon the first of these points, the judge in the court below has decided the case in favour of the plaintiffs. he considers that the liability which the drawer and acceptor of these bills have undertaken is a joint liability, and that as the 132nd section of the contract act provides that, under such circumstances, the plaintiffs are not to be affected by any relation of principal and surety which may exist as between the drawer and acceptor of the bills, the acceptor cannot set up that relation for the purpose of discharging himself from liability; more especially as by law the acceptor is the.....
Judgment:

Richard Garth, C.J.

1. This suit was brought by the plaintiffs, the Bank of Bengal, to recover from Mr. Joachim Gregory Nicholas Pogose, a sum of Rs. 1,10,687-10-2, being the aggregate amount of principal and interest due upon nineteen bills of exchange, each drawn by Mr. Nicholas Peter Pogose upon and accepted by his cousin Mr. J.G.N. Pogose, payable to the drawer's order, and endorsed by the drawer to the plaintiffs' Bank.

2. The Court below have decided in the plaintiffs' favour; and as the defendant died pending the proceedings, the present defendant, Mrs. Mary Pogose, his widow and representative, became defendant in his stead, and is prosecuting this appeal.

3. The defence is, that Mr. J.C.N. Pogose accepted the bills merely for the accommodation of his cousin and without any consideration; that the plaintiffs were aware of that fact; and that by consenting to and signing a deed of trust, which Mr. N.P. Pogose made of all his property for the benefit of his creditors, the Bank have discharged the defendant from his liability. An attempt was also made to show that the plaintiffs had also discharged the defendant by giving time to the drawer of the bills; but we expressed an, opinion during the argument that there was really no ground for this contention, and it was accordingly given up.

4. The plaintiffs' answer to this defence is threefold. They say:

1st.--That by Section 132 of the Indian Contract Act, the defendant is precluded from showing that he was merely surety for his cousin upon the bills, and that his liability to the plaintiff's cannot be affected by that circumstance; and further that, by Section 92 of the Indian Evidence Act, he is also precluded from showing that his legal position and liability is different from what it purports to be on the face of the bills.

2ndly.--That, in point of fact, the defendant was not a mere surety or accommodation acceptor without consideration; and

3rdly.--That the consent to the execution of the trust deed by the plaintiff's did not operate to discharge the defendant from his liability.

5. Upon the first of these points, the Judge in the Court below has decided the case in favour of the plaintiffs. He considers that the liability which the drawer and acceptor of these bills have undertaken is a joint liability, and that as the 132nd section of the Contract Act provides that, under such circumstances, the plaintiffs are not to be affected by any relation of principal and surety which may exist as between the drawer and acceptor of the bills, the acceptor cannot set up that relation for the purpose of discharging himself from liability; more especially as by law the acceptor is the principal debtor, or party primarily liable upon the bills, and the drawer only liable as his surety.

6. There certainly seems some difficulty in ascertaining the true meaning of Section 132; but whatever its meaning may be, we are of opinion, that it is not applicable to the present case. The liability which is undertaken by the acceptor and the drawer of a bill is in no sense a joint liability. It is true that they each contract to pay the same sum of money, but they contract severally in different ways, and subject to different conditions; and it is not because the law of this country allows several persons who have undertaken different liabilities to be joined as defendants in the same suit, that they are to be considered in any sense as having undertaken a joint liability. Upon this point therefore, we hold that the Judge in the Court below was wrong.

7. Nor does Section 92 of the Evidence Act present any difficulty in this case. The acceptor of a bill is, no doubt, the party primarily liable upon it; but by the proviso to Section 92 it may be shown that the acceptor never had any consideration for the bill, and that he accepted it for the accommodation of the drawer or some other party. If this were not so, there could be no such thing in India as an accommodation acceptance, because a bill prima facie imports consideration, and the acceptor is the party primarily liable; and if any party to a bill were precluded by this section from proving in a Court of law what his real position was as against the other parties, not only would great injustice be the result, but the commercial and negotiable character of bills of exchange in this country would be very materially changed.

8. We think, therefore, that the defendant was not precluded in this case from raising his defence upon the merits.

9. But then comes the next question, was the defendant in the proper sense of the term an accommodation acceptor without consideration? We agree with the learned Judge in the Court below in thinking it sufficiently proved, that, in the first instance, Mr. J.G.N. Pogose accepted these bills, or others of which these bills were renewals, for the accommodation of his cousin; and we think it also pretty clear upon the evidence that the plaintiffs' Bank had knowledge of that fact. But then it appears that, on the 19th of May, 1876, at the time when these bills or the renewed bills were maturing, Mr. N.P. Pogose gave the defendant Mr. J.G.N. Pogose a security for the payment of those and a number of other bills amounting in all to Rs. 2,39,500, in these words: (Reads letter set out, ante, p. 175).

10. The 5 annas 12 1/2 gandas share in the Privy Council decree, which was the subject of this agreement, appears from the evidence to have been valued at upwards of five lacs of rupees; but allowing for a considerable depreciation of that value on account of the difficulties of sale and the unfortunate circumstances' in which the Pogose family have been placed, the property might still be sufficient to meet the whole amount of the bills.

11. It seems impossible to say that, under these circumstances, the defendant was an accommodation acceptor of these bills without consideration. He has received a very substantial consideration for the acceptances in having these large properties pledged to him to meet his liabilities upon these and other bills to a very large amount. 'We are of opinion, therefore that the defendant, although in the first inception of the bills he may have put his name to them for his cousin's accommodation, has since received such a substantial consideration for them as to be no longer in the position of a mere surety, nor entitled as against the plaintiffs, who have advanced their money in good faith upon the security of the bills, to the equitable rights of a surety.

12. Assuming, however, that the defendant was a mere surety, the last question which we should have to determine would be, whether the acquiescence of the Bank in the trust deed of the 9th of August, 1876, would operate as a discharge to the defendant. By that deed Mr. N.P. Pogose conveyed to certain trustees the whole of his property, which was not previously mortgaged or disposed of, upon certain trusts for the benefit of his creditors. The trusts declared were of the usual character. The trustees had general powers to manage the property, to enforce and compound debts, &c.;, due from or to his estate, and to employ at their discretion Mr. N.P. Pogose himself or any other persons for that purpose. The deed did not contain any release by the creditors, or covenant not to sue, and some of the creditors refused to have anything to do with it; but the plaintiffs' Bank, the Agra Bank, and Mr. T. Christian, acquiesced in the arrangement before the deed was executed by Mr. N.P. Pogose; and the plaintiffs' Bank duly executed it afterwards.

13. In this state of things it seems clear from the authorities, and in fact it was hardly disputed in argument, that the deed operated to convey Mr. Pogose's available property to the trustees in such sort as to protect it from being sold under any execution against himself; and, under these circumstances, the question arises, whether the acquiescence by the plaintiffs' Bank in such a deed had the effect of discharging the defendant from his liability upon the bills in question. The Judge in the Court below held that it did, on the ground that, by consenting to it, the plaintiffs had disabled themselves from suing Mr. Pogose and taking his person in execution; and that as the defendant had the right to compel the plaintiffs to take proceedings to enforce their claim against Mr. N.P. Pogose upon the bills, the deed had the effect of depriving the surety of one means of enforcing that claim. The Judge considered that the plaintiffs would be prevented from taking Mr. Pogose in execution, because as the trustees were empowered to employ Mr. Pogose in the business of the trust, their powers in that respect would be frustrated by his being taken in execution. But this we think very doubtful. The trustees had a right to employ any other person they pleased besides Mr. Pogose in the business of the trust; and, therefore, his being taken in execution would not really prevent the trusts being carried out effectually.

14. But there is another ground upon which it seems to us that the rights of the defendant might very materially be effected by this trust deed. It seems clear that, as against the plaintiffs who were parties to it, the property which it conveyed could not be taken in execution under a decree against Mr. Pogose at the plaintiffs' suit. Assuming then, that Mr. J.G.N. Pogose was in the position of a surety, the deed would as effectually deprive him of the power of enforcing payment of the debt as against that property, as if the plaintiffs had covenanted with Mr. N.P. Pogose not to take it in execution. Such an act on the part of the creditor would, by the law of England, discharge the surety, because, whether the surety was really injured or benefited by it, or was likely to be injured or benefited, would not signify. The mere fact of the surety's position being altered by an act of the creditor, without the consent of the surety, would suffice to discharge the surety.

15. But here the law, as laid down by the Contract Act, places the surety in a different position. By Section 134 the surety is discharged by any contract between the creditor and the principal debtor, by which the debt is discharged or released. By Section 135 any contract between the creditor and the principal debtor, by which the creditor compounds with, or gives time to, or undertakes not to sue, the principal debtor, is a discharge to the surety, unless the surety assents to such contract. And, lastly, by Section 139, any act which is inconsistent with the rights of the surety, is a discharge to the surety, if the eventual remedy of the surety against the principal debtor is thereby impaired. Now, it appears to us that the trust deed, which has been executed in this case by Mr. N.P. Pogose, and assented to by the plaintiffs, cannot be considered either as giving of time, or a composition, or a covenant not to sue within the meaning of Section 135. If it did, we think there would be ample evidence of Mr. J.G.N. Pogose's subsequent assent to prevent the deed from operating as a discharge. The enactment which applies to the present case is, in our opinion, Section 139. The execution of the trust deed by the Banks, having regard to its effect upon the plaintiffs' remedies against Mr. N.P. Pogose, was an act inconsistent with the rights of the surety, which by the law of England would have discharged him: See Calvert v. The London Dock Co. 2 Keen's Rep. 638; The General Steam Navigation Co. v. Rolt 6 C.B.N.S. 550 and other cases to the same effect in the notes to Rees v. Berrington 2 Wh. & Tudor's L.C. 5th ed. 992. But, under this section, before the act of the creditor can operate as a discharge, it is necessary to look further and see whether by that act the eventual remedy of the surety against the principal is impaired.

16. For the purpose of solving the question, let us see what the financial position of Mr. N. P. Pogose was at the time when the trust deed was executed. The evidence in the case does not disclose, and perhaps it would be impossible to ascertain with anything like certainty, the amount of his assets and liabilities at that time; but, as far as we can judge, there appeared to be a very fair prospect, if his property were carefully managed, and proper steps were taken to protect it from the cupidity and imprudence of particular creditors, that it would prove sufficient to discharge his debts in full. There is no doubt that his creditors generally had become very much alarmed, and he was being pressed or threatened with legal proceedings from several quarters. His assets consisted mainly of the Privy Council decree which he had purchased; and the whole of his property was of such a nature as not to be readily available for payment of his debts. In order to realize anything like its value, it was absolutely necessary that it should be protected against executions, and that a reasonable time should be allowed for disposing of it in the best market. Several creditors had already sued, and were on the point of obtaining decrees, under which the property might have been put up to forced sale; and as the plaintiffs were by far the principal creditors, and it was of the utmost importance to them that the property should be well guarded and sold to the best advantage, it appears to us that the very best thing which they could have done for their own benefit, and that of Mr. J.G.N. Pogose's, was to consent to the trust deed. That deed, in our opinion, so far from its impairing the defendant's eventual remedies against Mr. J.G.N. Pogose and his property, tended to improve them most materially; and for this reason we consider that, even assuming the defendant to have been in the position of a surety, the execution of the trust deed did not operate to discharge him.

17. Upon these grounds we are of opinion that there is no valid defence to this suit, and that the decree of the Court below, although it proceeded upon wrong grounds, should be confirmed.

18. The appeal is dismissed with costs.


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