Sen, J.:— This is an appeal by three defendants in a suit instituted by the Secretary of State for India in Council for recovery of Rs. 3,016-4-5 under the following circumstances:
One Mutsaddi Lal was a cashier attached to the Thomason Engineering College at Roorkee. He went on leave on 3rd August 1917. Hira Lal, defendant 1, who was a store-keeper in the said college, was appointed to officiate for him from 7th August 1917. Hira Lal was required to find sureties for a sum of Rs. 2,000 to indemnify the Secretary of State for any loss arising either from defalcation or neglect during the period of his incumbency. On 7th August 1917, the defendants executed a security bond in favour of the plaintiff.
2. Mutsaddi Lal went on leave on 3rd August. The parties are agreed that the term of Hira Lal's incumbency during his officiating appointment lasted from 7th August 1917 to 12th October 1917, when Mutsaddi Lal returned and Hira Lal reverted to his substantive appointment as store-keeper. On 1st April 1919, Mutsaddi Lal went on leave for a second time, Hira Lal was again appointed to officiate in his place. Mutsaddi Lal appears to have submitted his resignation on or about the 15th July 1920, a date about the correctness of which we are by no means certain, and Hira Lal was confirmed in his place. Mo second security bond was executed by the defendants on the occasion of Hira Lal's appointment upon the retirement of Mutsaddi Lal.
3. No loss appears to have accrued to the Government by reason of any act or omission on the part of Hira Lal during his first incumbency. On or about the 18th October 1921, Rs. 3,016-4-5 appear to have mysteriously disappeared from the office safe which was in the charge and control of Hira Lal. The suit which has given rise to the present appeal was instituted on 31st March 1925, against Hira Lal and the present appellants for recovery of Rs. 3,016-4-5 on the allegation that the above loss accrued to the Government by reason of neglect on the part of Hira Lal and that defendants 2 to 4 were liable for the same under the terms of the surety bond executed by them in favour of the Secretary of State on 15th August 1917.
4. The suit was contested by Hira Lal and the other defendants upon different grounds. We are not concerned with the defence of Hira Lal for the purpose of this appeal. The Court of first instance passed a decree against him for the amount claimed. He appealed, and the decree of the trial Court was confirmed. Hira Lal has submitted to that decree. Defendants 2 to 4 contested the suit upon the ground that the surety bond was operative during the period of the first incumbency and did not operate for any subsequent period by reason of the reappointment of Hira Lal either as an officiating cashier or upon his confirmation to that office. Under the terms of the surety bond the liabitity of the defendants was limited to a sum of Rs. 2,000. The defendants contended inter alia that the claim of the Secretary of State could in no case extend beyond the aforesaid amount. This plea found favour with the trial Court which, while repelling the plea of the defendants-appellants, that they were not liable at all, passed a decree against them for Rs. 2,000. This decree has been affirmed in appeal by the lower appellate Court.
5. A contract of indemnity or a contract of guarantee may be created either by parol or by a written instrument. Ch. 8, Contract Act, is not exhaustive on the subject. A contract of guarantee need not necessarily be in writing; it may be express, by words of mouth, or it may be fact or implied and may be inferred from the course of conduct of the parties concerned. In this case the only contract which has been set up is the one evidenced by the document dated 15th August 1917.
6. Contrasts of guarantee have to be interpreted having due regard to the relative position of the contracting parties and to the circumstances surrounding the contract. It is important to note that conditions contained in general terms are subject to restrictions which follow from the nature and character of the principal's engagement. In Pearsall v. Summersett (1), it was held that the extent of the condition of an indemnity bond might be restrained by the recitals, though the words of the condition import a larger liability than the recitals contemplated.
7. The security bond has been executed on the model form prescribed by the Government of India by its Resolution No. 3857, dated 5th November 1885. Apparently, the said form was intended to be used in cases of a single appointment, presumably of a permanent character, and not to cases of successive appointments to the same office, as has happened in the present case. This fact appears to have been overlooked either by accident or by inadvertence when Hira Lal was appointed for the second time consequent upon the resignation of Mutsaddi Lal. It is not improbable that the authorities of the Thomason Engineering College at Roorkee might have thought that the security bond which had been executed on 15th August 1917, was of sufficient amplitude to safeguard and protect the interest of the Government against any loss as might accrue during the second or subsequent incumbency. The lower appellate Court was of opinion that the case before it was one of difficulty. It sloes not however appear that any subtle question of law or intricacies of facts were involved in the case. It has already been observed that the case hinged upon the construction of the document dated 15th August 1917, which was a vital document and was indeed the basis of the suit. The lower appellate Court does not appear to have considered the terms of the document. Indeed his findings proceed upon a number of assumptions. These assumptions are at variance with the pleadings. The lower appellate Court states as follows:
“The lower Court has thought that the deed of suretyship had concern even with those appointments that were given afterwards. What I see is that no farther deed of suretyship was taken. Certainly it was thought that the deed already executed related to these new appointments. There is no doubt that Hira Lal knew this he did not care to get the old deed renewed or furnish new sureties. The authorities at the College too appear to be under the same impression. The sureties did not come forward to notify that their suretyship had ended.”
8. It was no duty of Hira Lal to offer a fresh instrument embodying a contract of guarantee, when no such security was asked for from him. Similarly the sureties lay under no obligation to come forward and notify that their liability under the original contract had come to an end. It did not matter what the plaintiff thought or what any of the defendants considered to be the legal effect of the document dated 15th August 1917. It was not pleaded in this case that the reason for the non-execution of a fresh contract of guarantee was that the parties who were vitally concerned in the matter were agreed that the document, dated 15th August 1917, was to remain operative in connexion with the subsequent appointment of Hira Lal to the said office. This was neither pleaded nor proved. Lord Westbury has made the following pronouncement in Blest v. Brown (2) at p. 376:
“It must always be recollected in what manner a surety is bound. Ton bind him to the letter of his engagement. Beyond the proper interpretation of that engagement you have no hold upon him. He receives no benefit and no consideration. He is bound therefore merely according to the proper meaning and effect of the written engagement that he entered into.”
9. In order to determine the liability of the defendants-appellants, it is necessary to examine the nature and import of the recitals contained in the security bond. If the recitals are wide enough so as to continue the liability of the defendants-appellants in cases of successive appointments of Hira Lal to the same office, it may be possible to hold that the liability of the defendants-appellants did not end with the expiry of the first appointment which was temporary and short termed. But is there a covenant of that character to be found in the instrument? The instrument dated 15th August 1917, states that Hira Lal and the three sureties are bound to the Secretary of State for India in Council for a sum of Rs. 2,000 and provides:
“(1) Hira Lal was on 7th August, 1917 appointed to, and now holds and exercises the office of treasurer; (2) That Hira Lal “by virtue of such office” is in charge of and has control over funds belonging to the Government. (3) That if by reason of any act or omission, such as neglect, any property belonging to the Government in the charge of Hira Lal be “consumed, wasted, embezzled, stolen, misspent, lost, misapplied, etc.” Hira Lal and all the sureties are jointly and severally liable to the Government for any loss or losses—the liability of the sureties being limited to the extent of the sum secured by the security bond; (4) The liability is to continue “while the said Hira Lal has held or shall hold and enjoy the said office of treasurer as aforesaid” and the liabilities are to continue during the time that “the said Hira Lal has acted or shall” continue to act in the said office of treasurer as aforesaid.”
10. The security bond closes with the following paragraph:
“and it is lastly agreed and declared by and between the said (principal) and the said (one surety) and (other sureties) as his the said (principal) sureties and the said Secretary of State that on the vacation of the said (principal) of his said office of treasurer. Thomason College, the above-mentioned landed property for Rs. 2,000 or any notes that may be substituted therefor as aforesaid shall not be at once returned to him, but shall be and remain with the said (the authority with whom the notes are deposited) for the term of six months as security against any loss that may have been incurred by the Secretary of State owing to the neglect or default of the said (principal) or any other person or persons aforesaid and which may have not been discovered until after the vacation of his appointment by the said (principal); provided always that the return at any time of the said Government promissory notes shall not be deemed to affect the right of the said Secretary of State to take proceedings upon the said bond against the said (principal) and (sureties) in case any breach of the conditions of the said bond shall be discovered after the return of the said Government promissory notes.”
11. Hira Lal was originally appointed to the office of cashier for a short time. The said office referred to in the instrument, clearly indicates his appointment which commenced on the 7th August 1917. “The said office” terminated on 12th October 1917 when Mutsaddi Lal returned to his appointment and resumed his duties. Mutsaddi Lal continued to be the treasurer for about 17 months. Nobody knew on 7th August 1917, when Hira Lal was temporarily appointed, that Mutsaddi Lal may not return on the expiry of his leave. No undertaking appears to have been given to Hira Lal that if Mutsaddi Lal retired or resigned, Hira Lal was to be confirmed in that appointment. Under the circumstances one should not expect to find in the security bond a covenant of liability regarding subsequent contingencies if and when Hira Lal was again appointed as cashier either temporarily or as a permanent incumbent. The security bond does not contain such a covenant. The security bond was apparently intended to be operative during the time that Hira Lal held his office as cashier by virtue of his appointment Commencing from 7th August 1917. The security bond was, it is clear, to hold good during and for the consequence of this appointment in this office and not for any successive or subsequent appointment. Upon the expiry of the aforesaid appointment the security bond spent its force and no liability could attach to the defendants-appellants for any loss arising to the Government during the subsequent appointment of Hira Lal for which no engagement of security was given.
12. It is always unsafe to construe one document by referring to another document which is not pari materia in terms. It is, therefore, not necessary to refer to cases of construction of documents the terms of which are neither parallel nor identical. There are, however, cases where a security bond has been executed in favour of the Government or in favour of a public body in pursuance of a statutory regulation. In all such cases the office is created by statute and the preferment depends upon election. It has been held that if the same officer has been reelected or reappointed to the same office, the previously executed security bond does not hold so as to extend the liabilities of the sureties in case of loss arising in the course of the subsequent appointment; see Curling v. Chalklen (3) and Peppin v. Cooper (4). The rulings on this point do not proceed upon any artificial rules of construction; and the principle underlying those decisions appears to be applicable to the present case. I would, therefore, hold that on the true construction of the security bond, dated 15th August 1917, the defendants-appellants are not liable. I would therefore allow the appeal and modify the decrees of the Courts below by dismissing the plaintiff's suit as against the appellants.
Niamatullah, J.:— I concur.
S.N/R.K
13. Decrees modified.