Hasan Ali v. Wali Ullah

Sen and Niamat-Ullah, JJ.:— This is an appeal by the defendant and arises out of a suit for recovery of Rs. 2,569 from the defendant under the following circumstances. Syed Nabi-Ullah owned certain zamindari property in mauza Rampur in the province of Agra. Under an instrument, dated the 20th of March, 1921, he leased the said property to one Murtaza Husain for a period of five years certain. It was agreed that the lessee would pay the Government revenue, all expenses relating to the management of the property, and Rs. 900 a year to the lessor in two instalments. Murtaza Husain, the lessee, was not possessed of any property. The lessor insisted upon the lessee finding a surety for the due fulfilment of his engagements. On the 21st of May, 1921, Syed Hasan Ali, the defendant, executed a contract of guarantee in favour of Syed Nabi-ullah under which he ensured the due fulfilment of the engagements on the part of the lessee under the instrument dated the 20th of March, 1921.

The lease was to run from 1329F. to 1333F. The lessee having failed to pay rent from 1329F. to kharif 1331F., Syed Nabi-ullah sued him for the rent of that period and obtained a decree on the 17th of September, 1924. On the 28th of September, 1924, the defendant guarantor gave a notice to the lessor revoking his contract of guarantee. Syed Nabi-Ullah died on the 2nd of July, 1925.

The present suit was instituted by the heirs of the lessor for recovery of Rs. 2,569, being the rent due from rabi 1331F. up to 1333F. The suit was resisted inter alia on the ground that the guarantor having revoked his contract of guarantee by notice dated the 28th of September, 1924, he was not liable for the rent claimed. This plea substantially prevailed with the court of first instance, which gave the plaintiff a decree for Rs. 450 only, and dismissed the rest of the suit. The trial court was of opinion that the contract entered into by Syed Hasan Ali was in the nature of a continuing guarantee, which, under the law, he was competent to revoke. Reliance was placed upon illustration (a) of section 129 of the Indian Contract Act: “A, in consideration that B will employ C in collecting the rents of B's zamindari, promises B to be responsible, to the amount of Rs. 5,000, for the due collection and payment by C of these, rents. This is a continuing guarantee.” There was a contract of service which imposed a recurring obligation from day to day. We do not see what this illustration has to do with the facts of this case. Murtaza Husain was not engaged by Syed Nabi-ullah with the object of collecting rents on his behalf for five years. No guarantee was given by. Syed Hasan Ali for the due performance of an engagement of this character. We are therefore of opinion that the court of first instance clearly misdirected itself and the illustration referred to above was not pertinent to the case.

The lower appellate court, upon a due consideration of the terms of the contract, came to the conclusion that it was not one of continuing guarantee and that Syed Hasan Ali was not competent under section 129 of the Contract Act to revoke it. In this view it modified the decree of the trial court and decreed the plaintiff's claim in its entirety. The defendant impugns the correctness of this decision.

Whether or not the transaction is a continuing guarantee is to be determined by the terms of the instrument. It is mainly a question of construction. The document should be interpreted as a whole and is not to be confined merely to the operative part. If there be any ambiguity, it is permissible to press into consideration the nature and character of the business which necessitated the lease, the relative position of the parties and the surrounding circumstances.

There is no ambiguity in the document under review. The agreement to pay an ascertained sum of money every year partakes of the character of a debt. The consideration for the contract has flowed once for all and is confined to a single transaction and cannot be extended to a series of transactions. Whee the guarantee has been given for the performance of a definite engagement which has already come into existence and is not contingent, and the consideration for which is not variable as the result of future dealings between the parties, the contract is not one of continuing guarantee.

In the circumstances of the case the guarantee given by the defendant appellant did not extend to a series of transactions. The grant of lease by Syed Nabi-ullah to Murtaza Husain for a period of five years in consideration of the payment of a certain sum of money as rent was a single transaction. Equally, the guarantee was one transaction, ensuring the due performance of the engagement on the part of the lessee during the continuance of the lease. The successive payments of rent upon each instalment falling due cannot be treated as successive transactions; and the guarantee with reference to the same cannot be held to be “a continuing guarantee” under section 129 of the Indian Contract Act. The above view is supported in principle by the decision of this Court in Gopal Singh v. Bhawani Prasad(1), in which it was held that assuming that the guarantee sought to be construed was a continuing guarantee within the meaning of section 131 of the Indian Contract Act, “still, having regard to the object for which the two guarantees were given, it must be concluded that the parties intended in the one case that the lessor should be guaranteed for all rent which might become due during the currency of the lease”. A similar view was taken by Fry, J., in Lloyd's v. Harper(2), in which he observed:— “It appears to me that there are cashes which certainly go to show that, where a continuing relationship is constituted on the faith of a guarantee, there is a strong reason for holding that the guarantee cannot be annulled during the continuance of that relationship. This seems to me to be a sound principle of interpretation.” The learned Judge further held that a guarantee, the consideration of which is given once for all, could not be determined by the guarantor and did not cease at his death.

The lease was granted once for all for a definite period of five years. The stipulations for the several payments stipulated for were definite engagements constituting one transaction. The guarantee twas given by the defendant appellant for the due fulfilment of these engagements stipulated in the lease during the whole term of its continuance. It would be unduly straining the language of section 129 to call it a continuing guarantee.

We are therefore of opinion that the view taken by the lower appellate court was justified. We accordingly dismiss this appeal with costs.