TMI Blog1958 (2) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... out the nature of the reliefs sought against them. One Munia Servai was a constituent of the bank having overdraft facilities and in connection with his overdraft he executed a deed of security on 2-1-1945 for a sum of ₹ 20,000. Munia Servai was in need of further moneys and wanted further credit from the bank and the bank therefore, demanded proper security of Immovable properties for affording further monetary facilities. Srinivasa Thangirayan the first respondent was requested to offer such security by Munia Servai, and the former executed a document styled as a deed of security (Jamin Pattarom) dated 23rd September 1945 in favour of the bank for a sum of ₹ 25,000. Munia Servai failed to pay the moneys that he owed to the bank and on 3rd March 1949 the appellant obtained a preliminary mortgage decree against him for a sum of Over ₹ 4,00,000, the final decree followed on 24th July 1951. In the meantime the application out of which this appeal arises., viz. Appln. No. 3639 of 1951, was filed by the appellant against the respondents for the reliefs set out above. When this application was pending there were applications by Munia Servai regarding reduction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest thereon as per the terms of this deed and the rules of the bank the wet and dry lands set out in schedule A here-under.......... as well as the properties set out in schedule B hereunder . A covenant of title in regard to the properties and an undertaking to reimburse in case there was loss on account of any defect in title followed. The bond then proceeded thus: I also agree to pay the bank all its dues without raising any question of any pro tanto discharge or liability. My heirs, executors, and administrators shall also be bound to pay the amount due to the bank on the charge of the properties aforesaid, I shall not let or lease the charged properties for a period of more than a year, shall not subject the properties further by way of security, charge or mortgage unless after intimating the bank I had obtained the prior consent of the bank in writing. All the moneys which I may receive in respect of any such transfer by way of advances of lease amounts, rent or any Other sum skill be paid by me towards the discharge of this debt. If I commit default and fail to pay any amount as aforesaid, such shall not operate against the provisions of this deed..., ......I shall ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. There is no joint promise made by Munia Servai and Srinivasa to the bank. The advance of money was to be made to Munia Servai alone and he was the person principally liable, and security was demanded only with respect to his liability. It is, therefore, clear that the liability of Srinivasa was only secondary arising on the default of Munia Servai who was primarily liable to the bank, Learned counsel for the appellants sought to rely on the decision reported in Vynivan Chettiar v. Official Assignee, Madras, ILR (1938) Mad 949: 63 Mad L J 6J5: AIR 1938 Mad 39. In that case two persons Vyravan Chettiar and Ramanathan Chettiar borrowed from a bank on joint promissory notes certain sums of money. They divided the amounts thus borrowed equally between themselves. Ramanathan Chettiar was adjudged an insolvent with the result that Vyravan Chettiar had to pay the entire debt due to the bank. The claim of Vyravan Chettiar was that he was subrogated to the benefit of the lien which the creditor bank had in respect of the liabilities of Ramanatha. The Official Assignee, who represented the creditors in the insolvency of Ramanatha contested this claim. On the facts it was found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had executed the security bond should be treated only as a joint debtor and not as a surety, as there is neither an unconditional nor a joint promise to the creditor. 6. Mr. Swamminathan next urged that for a contract of guarantee or suretyship there must he a tripartite arrangement between the creditor the principal debtor and the surety. This is, of course, obvious. He went further and suggested that there should be a definite agreement between the principal debtor and the surety regulating their rights-inter se, and in the absence of such an agreement or arrangement the document should be construed as one importing1 a joint liability and not a mere contract of guarantee. In support of this argument he relied on the decision in Kamachandra v. Shapurji, AIR 1940 Bom 315 .. In that case a broker, who was the defendant in the action, employed a sub-broker to introduce constituents to him. The sub-broker, who was the plaintiff in the action, executed an agreement under which he held himself liable to the broker for the performance of the obligations by, the constituents introduced by him. In an action by the sub-broker fur an account of the commission payable to him by the brok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties by which the principal debtor agrees to satisfy the claim of the surety. The next case cited was the one in Periyamianna Marakkayar and Sons v. Banians and Co. AIR1926Mad544 . where the distinction between a contract of indemnity and that of a suretyship is set out. Kumaraswami Sastri J. at page 172 (of ILR Mad): (at p. 549 of AIR) observes : Reading Ss., 126 and 145 together it seems to me that there can no contract of guarantee as distinguished from a contract of indemnity unless there is privity between the principal debtor and the surety as it is difficult to speak of an implied promise between persons between whom there is no privity of contract. Section 126 refers to a contract of guarantee and speaks of three persons with reference to that contract, namely, the persons who gives the guarantee. The person in respect of whoso default the guarantee and the person to whom the guarantee is given. Section 127 refers to consideration for the guarantee which is sufficient to support the guarantee. Nanak Ram v. Mehinlal, ILR All 487 is authority for the view that, privity is necessary in all cases of suretyship between the three parties. Ss. 140 and 141 only prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he surety says : I shall abide by the terms aforesaid and in the event of the bank closing the accounts of the said Munia Servai and determining the amounts payable by him under the accounts of the bank either for the reason that his transactions are not satisfactory to the bank or for any other reason. We do not think that by this clause Srinivasa has undertaken to guarantee the liability even in the event of the hank adjusting or compromising its claim with the principal debtor without reference to him. In that view it is unnecessary to pursue the matter and consider the decision in Perry v. National Provincial Bank of England 1910 1 Ch 464 cited by the learned counsel for the appellant as an authority for the position, that where the bond expressly provides that the creditor may enter into a composition with the debtor the right of the creditor would subsist against the surety, even if he entered into a composition with the debtor without reference to the surety. The clause in question relates only to the ascertainment of the amounts due on the accounts by the bank, and it does not envisage a composition, with the debtor by the bank. 8. It was next contended for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor and with notice to the surety. We therefore hold that there is no validity in any of the submissions made by the learned counsel for the appellant. 11. Learned counsel for the respondents wanted to support the judgment of the learned Judge even on the footing; that Srinivasa was a joint debtor with Munia Servai., He argued that by reason of the fact that the entire money advanced by the bank was taken by Munia Servai, Srinivasa was only in the position of a surety as contemplated in the judgment of Lord Selborne in Duncan, Fox and Co. v. North and South Wales Bank (1880) 6 AC 1. He referred to the third class of liabilities mentioned in that case and referred to in ILR (1933) Mad 949 : AIR 1933 Mad 39 and contended that the first respondent would be a surety mentioned in the second and third categories enumerated therein. According to him even if Srinivasa was not a surety within the meaning of Section 126 of the Contract Act he would only be a surety loosely described as such and on certain equitable principles he would be discharged from his liabilities by the principle of Section 135 of the Contract Act. He was not however, able to cite any authority in support of hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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