TMI Blog1965 (3) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... lakh under clean overdraft, for ₹ 4 lakhs under open loan and for ₹ 10 lakhs under out agency and key loans. On November 26. 1946 all the three defendants executed a promissory note, Ex. B in favour of 'the plaintiff-bank for a sum of ₹ 4 lakhs. The promissory note was sent to the plaintiff's-bank along with a letter--Ex. A styled letter of continuity dated November 26, 1946. Ex. A reads as follows: Alleppey. 26th November, 1946. The Agent. The Central Bank of India Limited, Alleppey. Dear Sir. We beg to enclose an on demand promote p. ₹ 4,00,000 (Rupees Four lacs only) signed by us which is given to you as security for the repayment of any overdraft which is at present outstanding in our name and also for the repayment of any overdraft to the extent of ₹ 4,00,000 (Rupees four lacs only) which we may avail of hereafter and the said Pro-Note is to be a security to you for the repayment of the ultimate balance of sum remaining unpaid on the overdraft and we are to remain liable to the Pro-Note notwithstanding the fact that by payments made into the account of the overdraft from time to time the overdraft may from time to time be redu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to time due to the Bank and also for the ultimate balance to become due to on the said Cash Credit Account and the said account is not to be considered to be closed for the purpose of this security and the security of hypothecated goods is not to be considered exhausted by reason of the said Cash Credit Account being brought to credit at any time or from time to time or of its being drawn upon to the full extent of said sum of ₹ 4,00,000 if afterwards reopened by a payment to credit. In witness whereof the Borrowers have hereto set, their hands this Twenty sixth day of November the Christian Year one thousand nine hundred and fortysix. For Cashew Products Corporation Ltd., For General Agencies Ltd; Sd/- Managing Director, Managing Agents Sd/- Schedule of goods referred to in the foregoing instrument, Stocks of cashewnuts, cashew kernels, tin plates, Hoop Iron and other packing materials stored and or to be stored in the factories at Kochuplamood, Chathanoor, Ithikara, Kythakuzhi, Paripalli, Palayamkunnu and anyother factories in which we may be storing from time to time and at Cochin awaiting shipment. For Cashew Products Corporation Ltd; For General Agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 5 of the Consolidated' Written Statement filed by him . Against the judgment and decree of learned Subordinate Judge, Alleppey defendant No. 3 presented an appeal in the High Court of Kerala under A.S. 561 of 1961. Defendants 1 and 2 did' not appeal. The appeal was dismissed by the High Court of Kerala on July 12, 1962. It was held by the High Court that defendant No. 3 was a co-obligant and not a surety. On July 16, 1962 defendant No. 3 filed C.M.P. No. 5032 of 1962 praying that the argument of the appellant with regard to his liability as co-obligant may be expressly dealt with in the judgment of the High Court and complaining that the appellant would be seriously prejudiced if the omission was allowed to remain. Thereupon the learned Judges of the High Court wrote a supplementary judgment on July 18, 1962 rejecting the further arguments addressed on behalf of the appellant. The first question presented for determination in this case is whether the status of the 3rd defendant in regard to the transaction of overdraft account is that of a surety or of a co-obligant. It was argued by Mr. Desai on behalf of the appellant that the High Court has misconstrued the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unpaid on the overdraft . In the hypothecation agreement--Ex. G it is stated that the plaintiff-bank has agreed to open a cash Credit account to the extent of ₹ 4 lakhs at the request of the Cashew Products Corporation Ltd., Quilon. According to para 15 of the hypothecation agreement it operates as a security for the balance due to the plaintiffbank on the Cash Credit account. Para 12 of the hypothecation agreement states that if the net sum realised be insufficient to cover the balance due to the plaintiff-bank, defendant No. 1 should pay the balance of the account on production of a statement of account made out from the books of the bank as provided in the 14th Clause. Under this Clause defendant No. 1 agreed to accept as conclusive proof of the correctness of any sum claimed to be due from it to the bank a statement of account made out from the books of the Bank and signed by the Accountant or other duly authorised officer of the Bank without the production of any other document. if the language of the promissory note---Ex. B is interpreted in the context of Exs. A G it is manifest that the status of the 3rd defendant with regard to the transaction was that of a surety ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the two) it ought to have been paid. It is pointed out by the learned Lord Chancellor that in all these kinds of cases the person who discharged the liability due to the creditor, would be entitled to the benefit of the security held by the creditor though a case of suretyship strictly speaking would fall only under class 1, as a contract guarantee is confined to agreements where the surety agrees with the creditor that he would discharge the liability of the principal debtor in case of his default. It is manifest that classes 2 and 3 are not cases of suretyship strictly so called. Lord Selbourne observed that the case before him did not fall within the first or the second class but it fell within the 3rd class in which strictly speaking there was no contract of suretyship. But the Lord Chancellor held in that case that even in the second and third class of cases the surety has some right to be placed in the shoes of the creditor where he paid the amount. The argument of Mr. Pathak was that the position in Indian Law is different and the principles relied upon by Lord Selbourne, L.C. in Duncan Fox Co. v. North South Wales Bank([1881] 6 A.C.I.) did not apply to the present case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this aspect of the case. It was also contended by Mr. Pathak on behalf of respondent No. 1 that the suit is based on the promissory note--Ex. B against all the three defendants and not on the overdraft account. We do not think there is any substance in this argument. In this connection Mr. Pathak took us through the various clauses of the plaint but there is no mention about the promissory note dated December 21, 1949 except in para 6 of the plaint which recites that the defendant executed a promissory note as security for the repayment of the balance outstanding under the overdraft . We are satisfied, on examination of the language of the plaint, that the suit is based not upon the promissory note but upon the balance of the overdraft account in the books of the plaintiff-bank. In para 11 of the plaint the plaintiff-bank asked' for a decree against the defendants jointly and severally for the recovery of ₹ 2,85,292/11/11 as per accounts annexed . In the plaint it is stated that the plaintiff had given two notices to the defendants--Ex. '0' dated January 1, 1950 and Ex. L dated April 26, 1950 but in neither of these notices has the plaintiff referred to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t account because of the alleged conduct of the plaintiff-bank. We consider it necessary that this case should go back on remand to the High Court of Kerala for deciding the issue and to give proper relief to the parties. In this connection, it is necessary to point out that after the High Court delivered its judgment on July 12, 1962, an application was made by the learned Advocate appearing for the appellant that some grounds which had been urged by him before the High Court had not been considered by it The High Court, therefore, adopted the somewhat unusual course of delivering a supplemental judgment. Mr. Desai contends that even the supplemental judgment has failed to consider the appellant's contention that he had been discharged by reason of the fact that adjustments were made by respondent No. 1 indiscriminately in respect of its dealings in three or four different accounts with respondent No. 2 to the prejudice of the appellant. We have broadly indicated the nature of the contention raised by Mr. Desai. Ordinarily. we do not permit parties to urge that points raised on their behalf in the High Court had not been considered, unless it is established to our satisfact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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