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TMI Blog1932 (3) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... an Bank, the bank had a lien on the shares. After the insolvency of Ramanadhan Chetty, the bank demanded the appellant for payment and he paid the whole debt. In respect of the moiety of the insolvent's debt he now claims to be subrogated to the benefit of the lien which the Indian Bank had over the shares, and this is claimed under Section 141 of the Contract Act. The Official Assignee representing the insolvent claims that the shares had vested in him free of any such lien. The matter came on before our brother Waller, J., and he found that no specific agreement as was alleged by the appellant to the effect that each debtor was to be surety for the other,' in respect of his moiety of the debt was made out. He therefore dismissed the application. This appeal is filed against his order. 2. We entirely agree with the learned Judge that the evidence does not make out any specific agreement between the parties to the effect that, though as between the Indian Bank and the debtors they were jointly and severally liable, as between themselves each should be regarded as a surety for the other in respect of his moiety of the debt. Under the Indian Contract Act, the contract of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract of guarantee in the strictest sense of the term. So also the cases reported in Yonge v. Reynell (1852) 9 Hare. 809 : 68 E.R. 744 : 89 R.R. 689 and Wythes v. Labouchere (1859) 3 De G. J. 593 : 44 E.R. 1397 : 121 R.R. 238. Mr. Krishnaswami Aiyangar relied on Sheldon on Subrogation, Section 169. But that section does not very much help the appellant. The opening sentence shows that even in some States in America (Georgia, Albana and Vermont.) right of subrogation among the parties jointly bound as principals is denied, though in other States such right of subrogation seems to have been recognised. There is no case in England where the Courts have gone to this length. On the other hand, the statement of the law in Duncan, Fox Co. v. North and South Wales Bank (1880) 6 A.C. 1 makes it subject to the limitation that the debt should not be equally of both. The case Goverdhandas Goculdas Tejpal v. The Bank of Bengal I.L.R. (1890) 15 Bom. 48 is also a case of contract of suretyship strictly so called. The only point held there was that unless the surety pays down the whole money he is not entitled to the transfer of the security. We are not prepared to extend the legal position a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor the rights of a surety who performs or otherwise discharges the liabilities of the principal debtor. These sections are as follows: Section 140. - Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor. Section 141. - A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and, if the creditor loses or, without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security. 6. Section 140 lays down a general principle of which the most important practical application is to be found in Section 141 (see Pollock and Mulla, page 479). Under Section 141 a surety is entitled to the benefit of every security which the creditor has against the principal debtor. This was the section relied on by the appellant before Waller, J. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to discount the bill without the indorsement of D. Co. but said that he believed D. Co. would incur no more than a nominal liability by making the endorsement, placing the amount to the credit of D. Co. R. Sons later on stopped payment of the bill when it became due and the bill was dishonoured. D. Co. then became acquainted with the fact that securities had been deposited with the bankers by R. Sons to cover advances on their Kills and brought an action against the bank to have the benefit, so far as they would go, of the securities deposited with them, claiming to be sureties to the bankers for what was due upon the bill. It was held that D. Co. were sureties on their bill and that as such they were entitled to the benefit of these securities. (See the headnote.) In examining the principles and authorities applicable to the question to be decided the Lord Chancellor distinguished between three kinds of cases: (1) Those in which there is an agreement to constitute, for a particular purpose, the relation of principal and surety, to which agreement the creditor thereby secured is a party; (2) Those in which there is a similar agreement between the principal and sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liability of the insolvent to the Bank. The question is whether he occupies this position. If he does, then he is, by extension of the principle applicable to the case of sureties strictly so called, entitled to the benefit of the security held by the Indian Bank. To fall within class III mentioned above and to assimilate his position with that of a surety strictly so called, a person who discharges the liability to the creditor should be only secondarily but not primarily liable to the creditor. This was the position of D. Co. in Duncan, Fox Co. v. North and South Wales Bank (1880) 6 A.C. 1. Having regard to the facts of the present case, it cannot be said that this is the position of the appellant with respect to his liability on the promissory notes. As already pointed out, the liability on the promissory notes of the appellant and the insolvent is joint and several. There is only one debt in the present case, a debt which is equally a debt of both the parties. The Indian Bank can recover the entire amount either from the appellant or from the insolvent. Thus there is no question of one person being primarily liable for the debt and the other only secondarily liable. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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