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TMI Blog1931 (2) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... 922, an interview took place in Calcutta between the witness, defendant No. 1, Sarda and the plaintiffs, at which interview there was a discussion, putting it no higher, as to whether the plaintiffs would advance money to Sarda on the security of the defendants' immoveable property. Having regard to the evidence of Krishnalal Qokuldas and to the subsequent correspondence I think that the defendants' case that negotiations broke down and that no business resulted is a false one. I think it quite clear that the plaintiffs did, as a result of negotiations, of which this interview formed part, advance moneys to Sarda, and I think that they did so on the security of the defendants' property. It may well be that the defendants themselves got part of the advance, but whether that is so or not, it is, I think, perfectly plain that the advance was made to Sarda Sons as the principal debtors and that the defendants have never been treated as being personally liable for the debt. They are not so treated in the plaint and they are referred to as sureties in letters written by the plaintiffs' solicitors. It appears that at the date of that interview in May 1922, Sarda Sons w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Messrs. King, King Co., Bombay. We shall also be obliged if you will have the lease prepared as quickly as possible as it is urgently required. Acting upon that authority from the defendants the Improvement Trust did, on July 26, 1923, forward to the plaintiffs the lease of the property which had been previously granted, and they wrote a letter to the defendants' solicitors pointing out that that had been done. The only other fact which, I think, it is material to mention is that in 1925 the plaintiffs sued Sarda Sons in the High Court at Calcutta for the amount due, which was then ₹ 68,530-14, and a consent order was made in that action on June 12, 1925, decreeing payment of the amount due on the terms of an adjustment arrived at between the parties, that adjustment providing for payment of the amount due by instalments--₹ 15,000 to be paid within two months from March 12, 1925, and the balance by instalments of ₹ 2,000 per month commencing from March 1925. 2. Now on these facts the appellants take two points. They say, first of all, that the only facts which the Court has before it from which an equitable charge can be inferred are, first, that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nary law was to release the surety, there being no evidence that the surety was in any way consulted and there being nothing in the consent order to keep the rights of the surety alive. Mr. Desai's answer to that is that the defendants here were not sureties. He relies on Section 126 of the Indian Contract Act which provides that a contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default, and the person who gives the guarantee is called the 'surety'. Mr. Desai says that here there was no personal obligation on the defendants to pay anything: they merely handed over their property as security, and that being so, there was no contract to perform the promise or discharge the liability of a third person. Then he says that in Section 135, which provides that a contract between the creditor and the principal debtor by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor discharges the surety unless the surety assents to such contract, the word 'surety' must have the same meaning as in Section 126, and therefore a person who merely deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e v. Brunskill [1891] 2 Ch. 48, 54, which in itself followed the rule stated by Lord Loughborough in Rees v. Berrington (1795) 2 Ves. Jun. 540, 643. The rule stated by Lord Loughborough was: ' It is the clearest and most evident equity not to carry on any transaction without the privity of him [the surety], who must necessarily have a concern in every transaction with the principal debtor. You cannot keep him bound and transact his affairs (for they are as much his as your own) without consulting him.' In Bollon v. Salmon Chitty J. applied the rule by holding not only that the surety was discharged from personal liability, but also that the security which had been put up by him was discharged. Shortly after quoting from Lord Loughborough's judgment, he says in his judgment: 'This reasoning applies with the same force to a security given by the surety as it does to ft personal obligation entered into by him.' If, therefore, a difference is sought to be drawn between the present case and the other cases to which I have referred, in the sense that what is contributed here are securities and not a personal liability, it appears upon the statement of Chitty J. that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsonal liability had gone and only the documents remained, as indeed in the present case, where there is no personal liability and only the deposit of the deeds. Therefore I have come to the conclusion, for the reasons that my Lord has given and for the reasons that I have endeavoured to give, that this appeal should be dismissed. So that, the Court there based their decision on a general principle and I can see no reason why that principle should not apply as much in India as in England. The general principle is that the rights of a surety are not to be interfered with without his consent, and it has always been held that giving time to the principal, debtor does prejudice the rights of the surety by preventing him from paying off the creditor and then enforcing the creditor's original rights against the principal debtor. Mr. Justice Baker in the trial Court disposes of this point quite shortly by holding as a fact that the defendants were partners with Sardaj and therefore were principals and not sureties. But, I think, the learned Judge overlooked two facts. The first is that there is no suggestion that anyone except defendant No. 1 was a partner with Sarda and the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e holding was in the nature of a collateral security for the repayment of the moneys advanced from time to time by the plaintiffs to Sarda Sons in their account with the plaintiffs. The deposit of the title-deed, it appears, was not followed by any writing and no contemporaneous oral agreement has been proved in respect of the deposit. The plaintiffs rely upon certain previous negotiations between thorn on the one hand and the defendants and Sarda Sons on the other to prove that the deposit was in pursuance of an agreement arrived at between the parties whereby the plaintiffs agreed to allow Sarda Sons to draw moneys in their overdraft account and the defendants agreed that the property in suit should be security for such overdraft. The plaintiffs also rely upon the terms of a writing (part of Exhibit A2 in the case), which is a letter dated May 26, 1922, addressed by the defendants to the plaintiffs. The letter is in this form:-- We have instructed our solicitors Messrs. Pandia Co. of Bombay to make over the title-deeds of our property at Dadar-Matunga Estate, Bombay, Plot No 21, value ₹ 100,000, monthly rent ₹ 730, to Messrs. King, King Co., Bombay, to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffs to allow Sarda and Sons to draw on the plaintiffs in their over-draft account, the defendants agreeing to give security of their property in Bombay for such over-draft. At the date when these negotiations were started there already subsisted an over-draft account between the plaintiffs and Sarda Sons. On April 6, 1922, the debit balance against Sarda Sons in this account was ₹ 19,284 and on May 19 it was ₹ 27,100-9-9. There is no oral evidence to show that the negotiations between the parties matured into an agreement or that the further moneys advanced by the plaintiffs to Sarda Sons were advanced on the faith of the representations made to them by the defendants. On May 26, 1922, which is the date of the letter to which I have alluded, a further sum of ₹ 10,000 was advanced by the plaintiffs to Sarda Sons, but in the absence of oral evidence to that effect it would not, in my opinion, be proper to infer that this was done on the faith of representations made by the defendants in this letter. The over-draft account continued till November 1, 1922, after which date no further sums were advanced by the plaintiffs to Sarda Sons. It is clear from the ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 13. In my opinion, with great respect, it should be held that the respondents have failed to prove that the title-deed deposited with them by the appellants is by way of equitable mortgage of their immoveble property to secure the debt due to the respondents by Sarda Sons. 14. With regard to the second point it is clear from the pleading, the correspondence and the issues, that the plaintiffs are suing the defendants not as debtors but as sureties. It is also clear that they arrived at an adjustment of their claim with Sarda Sons in the suit they filed in Calcutta against Sarda Sons to which the defendants were not parties. By the adjustment they agreed to give time to Sarda Sons for payment of the debt. The terms of the adjustment were recorded and a consent decree was taken in terms of the adjustment. The defendants were not consulted nor were they consenting parties to the giving of time to Sarda Sons, It is clear that a surety would be ab solved from liability as surety if time is given to the principal debtor without the surety's consent or acquiescence. The appellants, in my opinion, have succeeded in showing that they never consented to or acquiesced in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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