Jagadindra Nath (Sic) v. Chandra Nath Pod(Sic)

1. The suit, out of which this appeal arises, was brought to recover the sum of Rs. 10,000 with costs and interest from Shasti Charan Chakravarti (defendant No. 1) as ijaradar, and from Chandra Nath Tai Poddar (defendant No. 2), as his surety, on account of arrears of rent due on a temporary ijara, settlement of the sunkar and bankar (grass and forest produce), &c., of certain ghats included in Gar Jayenshahy, &c., perganah Jayenshahy, and perganah Pukharia, in the district of Mymensingh. The ijara lease bears date the 16th Bhadra 1301, and is for a term of four years, 1301 to 1304 B.S. at a yearly rental of Rs. 14,597. The suit was brought for the balance of rents outstanding after termination of the lease with interest. On the 20th Bhadra 1301, Madan Mohan Tai Poddar executed a bond in the sum of Rs. 5,000 as surety on behalf of the ijaradar for the, due fulfillment the covenants in the lease. Madan Mohan died in 1303, leaving as heirs his daughters. After his death the husband of one of the daughters went to the plaintiff and asked to be discharged from the surety bond, and that the plaintiff would take some other surety. Thereupon, the plaintiff called on the defendant No. 1, the ijaradar, to furnish a fresh surety, and at the request of defendant No. 1 the defendant No. 2, Chandra Nath Tai Poddar executed in favour of the plaintiff on the 17th Kartio 1303 a surety bond in the sum of Rs. 5,000 for the due fulfilment by defended No. 1 of the covenants ill the lease.

2. The suit was brought by the plaintiff against defendants Nos. 1 and 2 on the ijara lease of the 16th Bhadra 1301, and on the surety bond of the 17th Kartic 1303. Both of these are registered documents.

3. The suit was not contested by defendant No. 1. Defendant No. 2, however disputed his liability and pleaded that the surety bond executed by him was inoperative for want of consideration; and apparently that if any one was liable as surety on behalf of defendant No. 1, it was the heirs of Madan Mohan Tai Poddar under the surety bond first executed on the 20th Bhadra 1301.

4. The Subordinate Judge decreed the suit against defendant, No. 1, but accepted the plea of defendant No. 2 and dismissed, that claim against him. He held that the guarantee under the surety, bond executed by Madan Mohan Tai Poddar was not a continuing guarantee, and following the authority of the case of Lloyd's v. Harper (1880) L.R. 16 Ch. D. 290, decided by tike Court of Chancery in England he held that the guarantee could not be put an end to by his death. He further held that the death of Madan Mohan did not operate as a revocation of the guarantee, because in the bond there was an express stipulation that the heirs and representatives of Madan Mohan, the property hypothecated, and his other assets would be liable to the plaintiff for the breach of any covenant in the lease. Then having decided this point in favour of defendant No. 2, he further held that the guarantee given by defendant No. 2 was a fresh guarantee, that defendant No. 1 did not in any way benefit thereby, and that the guarantee was void as feeing given without consideration. It therefore held that - defendant No. 2 was not liable to the plaintiff under the bond of the 17th Kartick 1303. The plaintiff has appealed against the judgment and decree of the Subordinate Judge so far as it dismissed his claim against defendant No. 2.

5. The appeal has been valued at 10,000, but it has been pointed out on behalf of defendant No. 2 that, as the bond of the 17th Kartic 1303 was for Rs. 5,000 only, the plaintiff (appellant) cannot succeed in his claim against defendant No. 2 beyond that amount. This is admitted on behalf of the appellant, and so far as Rs. 5,000 is concerned, the appeal must fail.

6. As regards the remaining Rs. 5,000, it is argued on behalf of the appellant that the appeal should succeed. It is contended that the finding of the Subordinate Judge, that the guarantee of Madan Mohan was not a continuing guarantee, cannot be supported under the law in force in India, and that his finding that there was no consideration for the bond executed by defendant No. 2 on the 17th Kartic 1303 is wrong, and contrary to the evidence and circumstances of the case.

7. On the first point the following argument has been pressed. In determining whether the guarantee given by Madan Mohan Tai Poddar was a continuing guarantee, or not, the Subordinate Judge has relied on the law in England and not on the law as laid down in Section 129 of the Contract Act and its illustrations, The law as laid down by Lash, L.J., in the case of Lloyd's v. Harper (1880) L.R. 16 Ch. D. 290, which the Subordinate Judge has quoted in his judgment, was followed in 1902 in the case of Balfour v. Crace [1902] 1 Ch. 733. The latter was the case of a surety who had given a bond for the integrity of a person in consideration of that person being appointed to an office by the obligee of the bond, and it was held that the liability of the surety will not, unless expressly so stipulated in the bond, be determined by his death. In fact under the English law such a guarantee was held not to be a continuing guarantee. Illustration (a) of Section 129 gives the following as an example of a continuing guarantee:

"A, in consideration that B will employ C in collecting the rent of B's zemindari, promises to B to be responsible, to the amount of Rs. 6,000, for the due collection and payment by C of those rents."

This, it is contended, is directly contrary to the rule of English law in the two cases rioted above, and indicates that in this country the Legislature intended to lay down the law differently from the law in England on the subject.

8. It is further suggested that in this case the guarantee was not for the payment of the full rental due on the lease, but for the regular payment of the instalments; that the lease provided that on default of payment by the lessee of any of the kists or instalments, the lessor might take the mahals into his khas collection and settle them with other parties; and that therefore the guarantee extended to a series of transactions, and so fell within the definition of a continuing guarantee given in Section 129 of the Contract Act.

9. In opposition it is urged that as in illustration (a) to Section 129 of the Contract Act no period for C's employment is specified, it is distinguishable from the cases in the Chancery Courts in England to which we have referred. In the case of Balfour v. Crace [1902] 1 Ch. 733, however, no period is stated, and on that ground it does not seem possible to distinguish the case in, the illustration. It has further been contended that under the terms of the bond of the 20th Bhadra 1801, it is clear that the surety intended to bind his heirs and representatives as well as himself, and that it was acknowledged that his liability under the guarantee was to extend for the full period of the lease, viz., four years. As he could not determine his guarantee by notice it could not be revoked by his death. Moreover, it is suggested that his heirs did not deny liability, but only asked to be allowed to withdraw, and the case of Raj Narain Mookerjee v. Ful Kumari Debi (1901) 1 L.R. 29 Calc. 68 is relied on to show that some sound reason and not caprice only would be necessary to enable them to obtain a discharge. That case followed the principle laid down in Burgess v. Eve (1872) L.R. 13 Eq. 450. As in this instance there was no sound reason for the" heirs of Madan Mohan to withdraw from their liability, under the first bond, the second bond was for the benefit of the lessor, and not for the advantage of the lessee under the ijaiea lease.

10. We are not prepared to say that the decision, of the' Subordinate Judge on this point is beyond question, but for the purposes of this case we think it unnecessary to determine whether the guarantee given by Madan Mohan Tai Poddar was a continuing guarantee or not, as in our opinion on other grounds the judgment of the Subordinate Judge cannot be supported.

11. It is perfectly dear on the facts of the case, as stated, that on the death of Madan Mohan his heirs entertained the belief that it was optional with them to continue or not the guarantee given by him. That view too seems to have been accepted by the lessor the plaintiff. In the lease it is recited that the bid offered by the defendant No. 1 had been, accepted, and the; lease granted on the condition that security for the sum of Rs. 5,000 was given by Madan Mohan Tai Poddar for the due fulfilment by the lessee of its terms, and under that condition it was obligatory on the lessee to furnish a fresh security when that given by Madan Mohan was held by the parties to have determined. Failure on the part of the lessee to comply with that condition would seem to have been regarded as a ground for determining the lease. Whether or not the lessor and lessee were correct in the view which they seem to have taken of their legal rights and duties under the lease, the recitals in the bond given by defendant No. 2 leave as doubt that he executed the bond of the 17th Kartig 1303; in which he stood security in the sum of Rs. 5,000 for the lessee, at the solicitation of the lessee, who had been called on by the lessor to furnish fresh security after Madan Mohan's death. The object of the lessee in obtaining a fresh surety was dearly either to save his lease from being rescinded or induce the lessor to forbear from entering into litigation to compel him to furnish fress security. In the case of Callisher v. Bischoffsheim (1870) L.R. 5 Q.B. 449, Cockburn C.J. remarked: "The authorities clearly establish that if an agreement is made to compromise a disputed claim, forbearance to sue in respect of that claim is a good consideration; and whether proceedings to enforce the disputed claim have or have not been instituted makes no difference." In the judgment of Blackburn J. in the same case the following passage occurs: "If we are to infer that the plaintiff believed that some money was due to him his claim was honest and the compromise of that would be binding and would form a good consideration, although the plaintiff, if he had prosecuted his original claim, would have been defeated." In Crears v. Hunter (1870) L.R. 19 Q.B. 341 Lord Esher, M.R., laid down the law as follows: "I take it to be undoubted law that the mere foot of forbearance would not be a consideration for a person's becoming surety for a debt. It is quite dear on the other hand that a binding promise to forbear would be a good consideration for a guarantee." It was held in that case that the plaintiff having forborne from suing defendant's father at the defendant's request, there was a good consideration for the defendant's liability on the note, although there was no contract by the plaintiff to forbear from suing. It has been argued for the respondent that there is no proof in this case that any litigation was avoided, or that there was any compromise. The surety-deed, however, itself shows that the demand for fresh security was made by the, lessor, and it is clear that defendant No. 2 was asked to become, and became, surety for defendant No. 1 in order to save him from the results of a failure to comply with the demand of the lessor, which would have been either forfeiture of his lease, or the institution of legal proceedings. This resulted in an advantage to the lessee and we therefore hold, disagreeing with the Subordinate fudge, that there was sufficient consideration for the bond executed, on the 17th Kartic 1303 by the defendant No. 2.

12. Further, it is clear that defendant No. 2 executed the bond in question with the intention of binding himself to pay Rs. 5,000 in the event of default on the part of the lessee to fulfil the terms of the lease, and that lie did so with full knowledge of all the circumstances. There is no suggestion of my pressure or deceit in the matter. Such being the case and the bond having been executed for consideration, we hold that defendant No. 2 is liable to the plaintiff to the extent of Rs. 5,000, the amount stated in the bond, and that the plaintiff is entitled to a decree against him for that amount. To this extent, therefore, we decree the appeal, and, in modification of the judgment and decree of the lower Court, direct that plaintiff's him to the extent of Rs. 5,000 against respondent No. 2 be decreed.

13. Appellant will recover his costs in this appeal on the value only to which it has been decreed. Respondent will pay his own costs.