(1.) THIS is a first appeal filed in civil suit No.47 of 1934 against a judgment of the First Class Subordinate Judge at Jalgaon. The short facts leading to the litigation are that the Bhagirath Mill, Limited, had borrowed money from various depositors. Originally Bhagirath, the father of the defendants, was the managing agent, and we are told that the managing agency agreement was made out between him, and the mills. The agency agreement is not put in as exhibit, and the only materials before the Court which give some indication of some of the terms consist of stray statements in the evidence of defendant No.1. He stated that there was a kararnama by which the agency should be perpetuated from generation to generation. At another place he stated that it was the managing agent's sole business to borrow sums and pay them for the company without consulting the directors. Bhagirath died and defendant No.1 was substituted in his place as the managing agent. The mill company came into financial difficulties. On January 17, 1931, defendant No.1 in the name of the managing agency firm passed a writing in favour of the plaintiff by which in substance he stood guarantee for the debt due by the mill company to the plaintiff. The plaintiff was one of the directors. Defendant No.1 stated in his evidence that he had passed similar letters in favour of some other creditors also. The company got a little extension of life. Ultimately a petition was presented to wind up the company, and acting under Section 153 of the Indian Companies Act meetings of the creditors and shareholders of the company were held to consider a scheme of reconstruction which was suggested. The scheme was approved at the meetings However, before it was presented to the Court for sanction on August 29, 1931, the plaintiff wrote to the agents informing them that he did not agree to the proposal of the mill to give preference shares. The scheme was sanctioned by the Court on January 11, 1932. Even thereafter by his letter dated June 28, 1932, the plaintiff gave notice, to the defendants putting on record that his rights against the defendants remained unaffected. Under the scheme every creditor (except preferential creditors) was to receive half the sum in cash and the other half in the shape of preference shares. In accordance with the scheme the plaintiff received Rs. 12,000 and odd and a temporary receipt in respect of the preference shares which came to his lot. Thereafter he filed the suit against the three members of the managing agency firm, which is a joint family firm, claiming that they were bound to pay the deficit. In the plaint he has offered to return the preference shares which came to him under the scheme. He has stated that he has not dealt with them and that he holds them intact. He has not yet received the share certificates from the company.
(2.) DEFENDANT No.1 who signed the letter of January 27, 1931, had raised numerous defences which have been dealt with in detail by the learned trial Judge. The defence failed on all points except one. DEFENDANT No.1 contended that as the plaintiff had received half the amount in) cash and the shares of the mill company, he was discharged from his debt and that no obligation of the surety survived. This contention found favour with the trial Court. All the other contentions of defendant No.1 were rejected and they were evidently considered to be bad. Although the plaintiff lost his suit, defendant No.1 was ordered to bear half the costs. As regards defendants Nos. 2 and 3, the claim in the plaint is to proceed against the joint family estate in their hands. In paragraph 3 of the plaint it is alleged the defendant No.1 is and was the karta and manager and agent and managing partner. He has given the writing in suit for self and for the said firm. . . The agency of the mill is a great source (of profits) to the undivided family and business of the defendants. And their responsibility to pay the debts borrowed by them for the mill is falling on them in pursuance of that also. The defendant and his undivided family arid the two firms have derived benefit from the writing. . . Therefore the defendants and their property are responsible for the plaintiff's suit. " In the written statement of defendants Nos. 2 and 3 it was denied that the transaction was binding on the joint family, and that there was any legal necessity. Issue No.6 which was raised in the trial Court was " whether the managing agency was the ancestral business of the defendants, and, if so, whether the writing was passed for the legal necessities of that business ?
(3.) THE present case is not of co-debtors but of a debtor and a surety. THE reasoning however clearly applies to their case also. This point does not appear to have been argued before the trial Court, but having regard to these decisions defendant No.1 has no answer. It was argued on behalf of respondent No.1 that if the debt is considered alternative, satisfaction having been received from one party, the debt did not survive. But the basis of this contention is unsound. THE liability of a surety is co-extensive, but is not in the alternative. Both the principal debtor and the surety are liable at the same time to the creditors. THE discussion on this line is therefore not profitable. As the sole defence of defendant No.1 fails, the appeal must be allowed as against him. As I have pointed out, on all other facts the trial Court had found against defendant No.1 and we see no reason to differ from the conclusion arrived at on those points.