CARR LAZARUS PHILLIPS Vs. ALFRED ERNEST MITCHELL

JUDGEMENT

(1.) In my opinion this appeal should be allowed and I will state my reasons. The facts involved in this appeal, shortly stated, are as follows : One J.C. Galstaun, who is-the owner of very considerable house and landed properties in and outside Calcutta, was in financial difficulties in the early part of 1927. There were several decrees against Galstaun and ho was unable to satisfy the same. He applied to one Arrathoon Stephen for a loan of Rs. 40,00,000 to enable him" to pay off the amounts of the said decrees as well as certain other liabilities. Stephen borrowed from the Imperial Bank of India a sum of Rs. 40,00,000 for the accommodation of Galstaun and the latter on receipt of the amount executed n mortgage on 14 February 1927 in favour of Stephen for the purpose of securing the loan of Rs. 40,00,000 undertaking to pay interest at the rate of six per cent per annum by equal monthly instalments with quarterly rests until payment. Stephen it appears, agreed to obtain the said loan of Rs. 40,00,000 from the Imperial Bank of India at the request of the appellants and the latter guaranteed to Stephen the payment by the said J.C. Galstaun, of the said sum of Rs. 40,00,000 to the limit of their aggregate liability to the extent of Rs. 18,00,000 and" of their individual liability of Rs. 6,00,000. It was also agreed between Stephen and the appellants that should the common liability be less than the said maximum aggregate sum of Rs. 18,00,000, the share due from each one of them in respect thereof should be in strict proportion to the individual liability of each of the appellants as referred to above. The guarantee was as follows: To Arrathoon Stephen, 2, Camac Street,Calcutta. In consideration of your having at our request agreed to obtain a loan of Rupees forty lakhs Soaring interest at six per -cent par annum from the Imperial Bank of India for the sole benefit of Jahan Garapiet Galstaun for the purpose of satisfying certain decrees and paying certain pressing debts such sum of Rupees forty lakhs to bear interest at the rate aforesaid and the repayment thereof to be secured by a mortgage to be executed by the said John Carapiet Galstaun in your favour of the properties included in the mortgages hold by Framroz Edulji Dinshaw and a second mortgage of the properties included in the mortgage executed by the said John Carapiet Galstaun in favour of the Prudential Assurance Co. Ltd. We, the undersigned Care Lazarus Phillips of No. 33, Alipore Park Road, Alipore, Arathoon Mackertoom Arathoon of No. 3, Rawdon Street, in Calcutta, and Arathoon Theodre Creet of Ghusick Colliery in the District of Raneegunge, hereby guarantee to you the payment by the said John Carapiet Galstaun of the said sum of Rupees forty lakhs to the limit of our aggregate and individual liability hereinafter proscribed. This guarantee shall be a continuing guarantee, but our aggregate liability thereunder shall not under any circumstances exceed the sum of Rupees eighteen lakhs and the liability of each of us individually in respect of the said sum shall not exceed the sum of Rupees six lakhs, being the sum placed opposite our respective signatures at the foot hereof and should the common liability be loss than the said maximum aggregate sum, the share duo from each one of us in respect thereof shall be in strict proportion to his individual liability hereunder and not otherwise. Within the aforesaid limit of liability this guarantee shall extend to and be applicable to the whole debt that shall ultimately be duo to you from the said John Carapiet Galstaun in respect of such advance as aforesaid and not merely to so much thereof as shall be co-extensive with our aforesaid maximum liability hereunder. You shall be at liberty without discharging us from liability hereunder to grant time or other indulgences to the said Carapiet Galstaun and to accept payment from him in cash or by moans of negotiable intruments or otherwise. Dated at Calcutta this ninth day of February one thousand nine hundred and twenty seven. Signature of Sureties. (Sd.) C.L. Philips. Amount guaranteed. - Rupees six lakhs. (Sd.) A.T. Creet. Amount guaranteed. - Rupees six lakhs. (Sd.) A.M. Arathoon. Amount guaranteed - Rupees six lakhs.

(2.) Stephen died on 14 May 1927 and the present plaintiffs are the executors and trustees under his will. On 12 October 1927, the plaintiffs as such executors demanded from Galstaun immediate payment of the said sum of Rupees forty lakhs and of the interest due thereon. Galstaun having failed to pay, the plaintiffs gave notice on 15 October 1927 to each of the present appellants of the fact of their having made the said demand on Galstaun. Thereafter on 8 June 1928, the plaintiffs demanded payment from each of the present appellants of the sum of Rupees six lakhs due under and by virtue of the said instrument of guarantee. The present appellants having failed to pay, the plaintiffs instituted the present suit.

(3.) The defendants filed three separate written statements; but the main contention on their behalf was that upon a true construction of the said instrument of guarantee it should be held that each of the defendants was liable to the plaintiffs for such sum only as might ultimately be due from Galstaun after realisation of the securities mentioned in the mortgage by Galstaun in favour of Stephen, such liability of each of the defendants in no event to exceed the sum of rupees six lakhs, and that the realization of the securities mentioned in the mortgage executed by Galstaun in favour of Stephen was a condition precedent to the arising of any obligation or liability under the instrument of guarantee. There was another contention raised at the hearing before Buckland, J. being the second issue, but Mr. Pugh, who appeared for the appellants before us, did not press the same.