SHANKAR NIMBAJI SHINTRE Vs. LAXMAN SUPDU SHELKE

JUDGEMENT

(1.) THE facts out of which this appeal arises are mostly undisputed. THE plaintiff's father Supdu was a Police Sub-Inspector. Defendant No.2, who died during the pendency of the suit, was his maternal uncle's son and was serving as a munim in the shop of Jamnadas Mayaram at Ranala. Supdu used to send monies to the deceased, defendant No.2, for being credited in the shop of Jamnadas Mayaram. He died in 1919 and thereafter defendant No.2 withdrew Rs. 5,000 from Supdu's khata in Jamnadas's shop and lent it to defendant No.1 on a mortgage bond in his own favour, dated July 31, 1925. THE plaintiffs protested against this and after some correspondence between defendant No.2 and plaintiff No.2, defendant No.2 passed a promissory note for Rs. 5,000 and future interest at nine per cent, per annum in favour of plaintiff No.2 on April 28, 1928 (exhibit 98 ). THE promissory note was renewed in 1931 and again in 1934 (exhibits 99 and 100 ). THE plaintiffs filed this suit to recover Rs. 8,000 from defendant No.1 by the sale of the mortgaged property and if there remained any deficit they asked for liberty to proceed against defendant No.2's estate in the hands of his sons who appear as his legal representatives after his death during the pendency of the suit. It was contended on behalf of the sons of defendant No.2 that defendant No.2, Nimbaji, was not in any way liable to satisfy the mortgage and that the promissory note passed by him was intended to be merely an acknowledgment that the mortgage deed taken by him from defendant No.1 belonged to plaintiffs. THE trial Court disallowed that contention and passed the usual mortgage decree for Rs. 8,000 and future interest at six per cent. per annum against defendant No.1 to be recovered by the sale of the mortgaged property, and it ordered that for deficit the estate of defendant No.2 in the hands of his legal representatives should be proceeded against by the plaintiffs. THE legal representatives of defendant No.2 have presented this appeal.

(2.) THE trial Court has interpreted the promissory notes passed by defendant No.2 as a collateral security, the consideration for such security being the acceptance of the mortgage deed taken by defendant No.2 in his own name, and it held that as the promissory notes expressly recited a promise to pay, defendant No.2 must be deemed to have undertaken the liability under the mortgage deed. It is not clear from the judgment whether the undertaking was regarded as a guarantee or a contract of indemnity, but the decretal order shows that it was treated as an agreement to make good any loss that might be caused to the plaintiffs if the sale proceeds of the mortgaged property be found to be insufficient to satisfy the mortgage debt. Yet in paragraph 26 of the judgment there are certain observations which go to indicate that under the promissory notes defendant No.2 was regarded as having undertaken to pay the mortgage debt itself. Mr. Ramnath on behalf of the appellants contends that in fact defendant No.2 did not guarantee the payment of the debt of defendant No.1 and that as defendant No.1 was not a party to the promissory note or to any promise which defendant No.2 may have given to the plaintiffs there was no contract of guarantee as denned in Section 126 of the Indian Contract Act. He relied upon the ruling in Periammm Mamkkayar v. Banians & Co. (1925) I. L. R. 49 Mad. 156 in support of his contention that a contract of guarantee requires three parties, the creditor, the principal debtor, and the surety, and that there can be no contract of guarantee if the principal debtor is not a party to it. On the other hand, Mr. Adarkar for the plantiffs relies upon the ruling in Muthu Raman v. Chhma Vellayan (1916) I. L. R. 39 Mad. 965 and on ill. (b) to Section 127 of the Indian Contract Act, and contends that a contract of guarantee may be bilateral though in that case the surety may not be entitled to the benefit of Section 145 of the Indian Contract Act as against the principal debtor if the latter is not a party to that contract. I do not think it necessary to go into this question in this case since on the construction of the promissory notes sued upon I hold the contract to be one of idemnity and not guarantee or suretyship.

(3.) THE first of these three promissory notes was passed by defendant No.2 after a good deal of correspondence between him and plaintiff No.2. Defendant No.2 had apparently not taken the consent of any of the plaintiffs to withdraw the amount from the shop of Jamnadas Mayaram and advance it to' defendant No.1 on a mortgage bond in his own name. Plaintff No.2 appears to have sent a strong protest in a language which was apparently not liked by defendant No.2. THE letters written by plaintiff No.2 to defendant No.2 have not been produced, but the replies sent by defendant No.2" are produced at exhibits Nos. 89 to 92, 94 and 96. In exhibit 89, dated April 6, 1926, defendant No.2 wrote, I cannot reply to your letters, but I shall personally tell you. I cannot use the same language which you have used owing to my age. You are after all young. I cannot compete with you. . . I have been demanding monies from Ana Patil. (defendant No.1 ). I shall let you know what he says. I have done a thing without taking your permission. It is my mistake. Henceforth I will take care. I cannot blame you. Because there may be profit or there may be loss. If there-is profit you want to grab it; if there is a loss you want to hold me responsible for it. I have never made any such transaction before. You have reproached me for doing it. I have now learnt a lesson from a Guru. In case you do not get cash from Ana Patil, are you ready to take lands from him ?