IMPERIAL BANK OF INDIA Vs. VPAVANASI CHETTIAR

JUDGEMENT

(1.) The plaintiff is the appellant. This appeal arises out of a suit filed by the plaintiff to recover Rs. 10,053-1-0 with further interest and costs claimed to be due in respect of a guarantee by the defendant guaranteeing payment of the sums that may be due by a firm which carried on business in the name of N. Nanchappa Chettiar. It is stated in the plaint that one N. Nanchappa Chettiar and two others, N. Krishnappa Chettiar and T. N. Krishnappa Chettiar, were carrying on business in partnership under the name and style of N. Nanchappa Chettiar at Olavakkod, that this firm required an overdraft to the extent of Rs. 10,000 and that this transaction was put through by the Bank on the guarantee of the defendant. The form that the guarantee took was the execution of a promissory note in favour of the firm by the defendant for Rs. 10,000 on the 15 March, 1923, the endorsement of the note to the Bank and the passing of a letter on the same date in which the terms of the guarantee are set out. [Their Lordships set out the contentions of the parties, discussed the evidence and continued.]

(2.) The first question is whether in respect of these three promissory notes the Bank was entitled to make an entry jn the current account debiting the amount when the bills were dishonoured. There can be little doubt that these notes were endorsed over to the Bank in order that credit may be given in the account for the amount of the bills and the Bank took them upon the expectation that the monies would be paid by Govindan Nair. When they were not paid the Bank had a right to make the entries. It is not suggested that the Bank treated them as complete discharge. The general presumption is that a promissory note given for reducing a liability only operates as a conditional discharge for the liability. We need only refer to Palaniappa Chetty V/s. Arunachellam Chetty and the judgment of Bhashyam Aiyangar J., in Jambu Chetty V/s. Palaniappa Chettiar. (1902) I.L.R. 26 M. 526 : 13 M.L.J. 252 As regards the right to re-appropriate it is clear in this case that no intimation was given to the surety of the first appropriation and therefore the Bank, when they sent a letter through their vakil, had a right to re-appropriate the amount. This is clear from the decision in The Mecca (1897) A.C. 286 and Chegganmull Sowcar V/s. Manicka Mudaliar (1925) 50 M.L.J. 242 where it was observed that so long as notice had not been given as to the appropriation of any amount to any particular account, it is open to the creditor to alter it and make re-appropriation. If the defendant is liable, he is liable also for the amount of the promissory notes accepted as conditional payment by the Bank and which were dis-honoured and on being dishonoured corresponding debits were made by the Bank in the account.

(3.) Then the last question is as regards the guarantee not being enforceable owing to concealment of facts. In this connection reference is made to Section 143 of the Contract Act which runs as follows : Any guarantee which the creditor has obtained by means of keeping silence as to material circumstances is invalid.