SURESH NARAIN SINHA Vs. AKHAURI BALBHADRA PRASAD

JUDGEMENT

(1.) In the suit which is the subject-matter of this appeal the plaintiff claimed that he was induced by defendants 1 to 3 jointly to open accounts in the Jehanabad branch of the Modern Bank of India, Ltd., having its registered Head Office at Dacca. The plaintiff also alleged that defendants 1 to 3 gave personal undertaking that they would be personally liable for any loss that the plaintiff might sustain. On the 9th of September, 1946, the plaintiff made a fixed deposit with the Bank of a sum of Rs. 1,000/-for a term of three months. The due date of withdrawal was the 9th of December, 1946, but the Bank did not make Payment, though the plaintiff made demand on several occasions. On the 20th of May, 1947, the Bank ultimately refused to make any payment. Defendant No. 1 was the manager of the Gaya branch, defendant No. 2 was the Organizer and Inspector and defendant No. 3 was the local Director of the Jehanabad Branch. The plaintiff hence brought the suit for recovering a sum of Rs. 1,000/- which was placed in fixed deposit, together with Rs. 38/- claimed as interest. The plaintiff also claimed a sum of Rs. 23/- which amount was deposited in the Savings Bank, and a sum of Re. 1/- as interest for the amount. The total claim of the plaintiff was, therefore, for the grant of a money decree for a sum of Rs. 1,062/-. The Plaintiff also alleged that there was fraud and conspiracy between defendants 1 to 3 as a result of which the plaintiff sustained loss. Defendant No. 1 alone contested the suit. The other defendants did not appear or contest the suit though notices were served on them. Defendant No. 1 denied that there was any contract of guarantee between him and the plaintiff and there was no undertaking on his behalf to reimburse the plaintiff in case he suffered loss. It was alleged that the plaintiff opened the accounts of his own free will and there was no fraud practised by any of the defendants. The learned Munsif held that the branch of the Modern Bank of India Ltd. at Jehanabad was a bogus branch and the defendants 1 fro 3 had given a personal undertaking to the plaintiff for reimbursing him in case he suffered loss. The Munsif also found that the plaintiff had suffered loss of the amount claimed, and, therefore granted a decree in favour of the plaintiff for the recovery of the money from all defendants. Defendant No. 1 preferred an appeal to the learned Subordinate Judge of Gaya, but his appeal was dismissed and the learned Subordinate Judge affirmed the findings of the Munsif.

(2.) On behalf of the appellant Mr. Tarkeshwar Nath argued. In the first Place, that there was no privity of contract between the Bank, defendant No. 5 and the plaintiff and hence there could be no contract of guarantee within the meaning of Section 126 of the Indian Contract Act. In the present case there is no allegation in the plaint that the Bank was expressly a party to the contract of guarantee. But it was stated on behalf of the respondents that defendant No. 1 had the power of attorney from defendant No. 5. It is not necessary, in our opinion, that the principal debtor should as a matter of law be an express party to the contract of guarantee; it is sufficient that the principal debtor is a party by implication to the contract. It has been held by the Madras High Court in Muthu Raman Chetty v. Chinna Vellayan Chetty, ILR 1939 Mad 965 : (AIR 1917 Mad 83) (A), that a, person may become a surety without the 'knowledge and consent of the principal debtor, but the only rights which he acquires in that case are those given by Sections 140 and 141 of the Indian Contract Act and those given by Section 145. There is also a decision in Jagannath Baksh Singh v. Chandra Bhukhan Singh, ILR 12 Luck 484 : (AIR 1937 Oudh 19) (B), in which it was held that for a contract of suretyship there should be concurrence of the principal debtor, the creditor and the surety but that does not mean that there must be evidence showing that the surety undertook his obligation at the express request of the principal debtor. In paragraph 8 of the plaint it is alleged by the plaintiff as follows:

(3.) The next argument put forward by learned counsel on behalf of the appellant is that the contract of guarantee has been frustrated within the meaning of S, 56 of the Indian Contract Act and so the plaintiff cannot sue for enforcement of the contract of guarantee. It has been pointed out by learned counsel that the branch Office of the Modern Bank of India was closed at Jehanabad because of the Political partition of India & Pakistan which took place on the I5th August, 1947. The branch office at Jehanabad was actually closed in September, 1947, and payments were not made to the depositors at that branch from that date. The head office of the Bank was located at Dacca, within the boundaries of Pakistan, and communication between India and Pakistan was dangerous and difficult. It was argued that the partition of India and Pakistan was not an event in the contemplation of the parties at the time the contract of guarantee was entered into. It was contended, in these circumstances, that the contract of guarantee has became impossible of performance and Section 56 of the Indian Contract Act applied to the case. Counsel relied in this connection upon a decision of the Punjab High Court, Rama Nand Vijay Prakash v. Gokal Chand Gian Chand, AIR 1951 Simla 189 (C). We do not think that the principle of that decision has any application to the present case. Indeed, there is a later decision of the Punjab High Court, Parmeshwari Das Mehra and Song v. Firm Ram Chand Om Prakash, AIR 1952 Punj 34 (D), which is a decision of Full Bench of that Court, in which it was held that the doctrine of frustration of contract cannot be applied to circumstances which are highly similar to the circumstances of the present case. In the Punjab case a entered into a contract in 1946 with B by which A was to supply certain classes and quantities of American piecegoods. The contract was O.I.P. Karachi. The goods arrived at Karachi after some delay. B refused to accept delivery on the ground that both the quantities & qualities offered for delivery were not according to the particular contract. In September, 1947 A called upon B to refer the dispute arising consequent on B's refusal to take delivery, to arbitration in the manner provided by the arbitration clause in the contract and he nominated one C, a General Manager of a company at Karachi, as his arbitrator. It was held, in these circumstances (1) that the mere fact that Karachi had become part of foreign territory was not sufficient to frustrate tile contract, and (2) the mere fact that non-Muslims experienced difficulty in going to Karachi wag not by itself sufficient to avoid the contract. It was held, in the circumstances of the case, that there was no frustration of the contract. It has been pointed out by the Supreme Court in a recent case, Satyabrata Ghose v. Mugneeram Bangur and Co., AIR 1954 SC 44 (B), that the relief given by the Court on the ground of frustration of contract Is based upon the theory either of an implied term or upon the theory that the whole foundation of the contract has disappeared because of the occurrence of an unexpected event or of a change of circumstance which was beyond the contemplation of the parties at the time the contract was entered into. If such an event or changed circumstance occurs which is so fundamental as to be regarded by law as striking at the root of the contract as a whole, it is then that the Court can pronounce the contract to be frustrated and at an end. In. a recent English Case, British Movietonews Ltd. v. London and District Cinemas, Ltd., (1951) 1 K B 190 (F) the theoretical basis of the doctrine was put as follows by Dennmg, L. J. who pronounced the judgment of the Court of Appeal: