PARVATENENI BHUSHAYYA Vs. POTLURI SURYANARAYANA

JUDGEMENT

(1.) The suit out of which this appeal has arisen was instituted by a surety who has paid the principal debt and who therefore claims to be entitled to the benefit of the security held by the creditor at the time when the debt was discharged. The suit having been dismissed, the surety has preferred this appeal. In order to appreciate the questions which arise for consideration in the appeal, it is necessary to refer to a few facts. On 23 May 1930, Bhushayya the appellant executed an on-demand promissory note in favour of Potluri Suryanarayana and brothers, Chitta Venkateswarlu and Anne Veerayya promising to pay at the Imperial Bank of India, Bezwada, a sum of Rs. 6000 for value received. The payees endorsed the promissory note in favour of the Imperial Bank and received the sum of Rs. 6000 from the endorsee. It is now common ground that by this transaction, whatever its form, the Imperial Bank lent the sum of Rs. 6000 to the endorsers, the appellant Bushayya being merely the surety for them. Although strictly under Section 37, Negotiable Instruments Act, the maker would be the principal debtor and the endorsers the sureties yet it is clear that there was here a contract to the contrary within the meaning of the section. It may be mentioned that the transaction in question was in accordance with the method ordinarily adopted by the Imperial Bank whenever it advanced loans of this type. There were two other transactions similar in nature, the sureties however being different. The earlier of these is evidenced by a promissory note dated 26 April 1930 for Rs. 6000 executed by Hanumara Venkayya in favour of the same debtors, Potluri Suryanarayana brothers, Chitta Venkateswarlu and Anne Veerayya and by them endorsed in favour of the Imperial Bank. The later one is represented by a promissory note dated 19th May 1930 for Rs. 5000 executed by Koduri Janakiramayya and Uppalapati Janakiramayya in favour of the same individuals as in the other two promissory notes and similarly endorsed by them in favour of the bank. The business relationship between the several payees under the promissory notes is not disclosed in the promissory notes themselves, but it appears from a letter, Ex. F, executed and delivered by them to the Imperial Bank on 24 July 1928. In this letter they declared that they were trading in partnership under the style of "Potluri Suryanarayana brothers and Chitta Venkateswarlu, Anne Veerayya Dosapadu" and agreed that all transactions entered into by either or any of them whether under the signature of the firm or subscribed by the individual signature of the persons entering into the transaction might be regarded by the bank as entered into and on behalf of the firm. This admission of the existence of the relationship of partners between the endorsers has been sought to be got rid of as being untrue in fact and we shall revert to this point later.

(2.) To proceed with the narrative, when the Imperial Bank found that the monies advanced were not repaid within the stipulated time, it insisted upon the security of immovable property being furnished and accordingly Potluri Suryanarayana (defendant l) on behalf of himself and his minor sons (defendants 3 and 4) and his brother Potluri Venkataratnam (defendant 2) on behalf of himself and his minor son (defendant 5) executed in favour of the Imperial Bank a deed of simple mortgage to secure the repayment of the balance due on the three promissory notes which at the time amounted to Rupees 15,190-1-9. The deed contains the recital that the mortgagors were unable to pay the said amount of Rs. 15,190-1-9 and requested the bank to forbear from suing them and in consideration thereof they offered to execute the mortgage deed "to further secure the due repayment" of the said sum and interest due and payable under the promissory notes. The mortgagors covenanted to pay the bank the money due to it on 15 July 1931; but inasmuch as the moneys were not paid within the extended time the Imperial Bank instituted three suits on the three promissory notes, O.S. Nos. 43,44 and 45 of 1933, respectively in the Subordinate Judge's Court of Bezwada for the recovery of the amounts and in due course obtained decrees thereon against the makers and the endorsers of the several promissory notes and the members of their family. Bushayya, the surety in respect of the promissory note of 23 May 1930, was amongst others, impleaded in O.S. No. 43 of 1933 and became liable as a judgment-debtor for the decree passed therein. Between 4th August 1934 and 9 January 1935 Bushayya discharged the decree debt in full by payment in instalments of a total sum of Rs. 8878-3-0. Hanumara Venkayya, who was the surety in respect of the promissory note of 26 April 1930 and who was one of the judgment-debtors in O.S. NO. 44 of 1933 the suit instituted by the Imperial Bank to enforce it, similarly discharged the decree by payment of a sum of Rs. 5726-10-6 on several dates between 25th October 1934 and 25 June 1935. But the sureties in respect of the third promissory note dated 19 May 1930 of Rs. 5000 failed to discharge the decree passed against them in O.S. No. 45 of 1933. There were negotiations between the bank on the one hand and one Yemeni Satyanarayanamurthi, the brother-in-law of Potluri Suryanarayana on the other for the transfer of the decree in O.S. No. 45 of 1933 and the mortgage aforesaid in favour of the former and accordingly a sum of Rs. 500 was paid by him on 18 August 1936 and a further sum of Rs. 3250 was paid on 15 September 1936. On thus receiving a total sum of Rs. 3750 the bank assigned the decree in O.S. No. 45 of 1933 as well as the mortgaged deed dated 15 April 1931 to Hanumara Venkayya (defendant 10). The deed of assignment (ex. I) contains the recital that the sum of Rs. 3750 was received by the bank from Yemeni Satyanarayanamurthi on behalf of the assignee. This deed as well as the plaint in O.S. No. 43 of 1933 show that the mortgage deed had been taken as an additional security and without prejudice to the rights of the bank under the several promissory notes. The importance of this circumstance will appear later when we discuss the legal argument put forward on behalf of the respondents.

(3.) From this statement of facts, it would appear that the two sureties Bushayya and Hanumara Venkayya duly discharged the debts due to the Imperial Bank by payment of the respective amounts for which they had made themselves liable to the bank. As regards the third promissory note, the sureties failed and neglected to perform their obligations and the decree in O.S. No. 45 of 1933 and the rights of the mortgagee to recover the decree amount from out of the properties mortgaged under the mortgage of 15 April 1931, were assigned to Hanumara Venkayya for consideration paid by him. There was some faint argument that the consideration really came from the Potluri defendants (defendants 1 to 5), but when analysed, it rests on no better foundation than the suspicions arising out of the relationship between Potluri Suryanarayana and Hanumara Venkayya. This is too slender a basis for holding that the money came not from Hanumara Venkayya but from his brother-in-law Potluri Suryanarayana. We must accordingly negative the contention that it was Potluri Suryanarayana who really discharged the decree in O.S. NO. 45 of 1933.