Bhagvandas Rangildas Vani vs The Secretary of State for India

Norman Macleod, C.J.—Two questions arise before us in appeal. The first contention was that the agreement, Ex. 32, of April 8, 1918, constituted a "continuing guarantee" within the meaning of Section 129 of the Indian Contract Act; that it was competent" to the plaintiff to revoke it at any time; and that he revoked it on March 24, 1919, by his application, Ex. 40. I cannot agree with that contention. It is clear that the plaintiff guaranteed payment of eleven instalments. I think that, having regard to the transaction which was being guaranteed, the conditions of the license, and the terms of the security bond, the plaintiff was not entitled to put an end to his liability by arbitrarily revoking his guarantee.

The second point was whether the plaintiff was discharged from his suretyship in consequence of the declaration by the Revenue Authorities that the money which remained unpaid should not be recovered from the licensee Framji, because he would be ruined if it was; and that the balance should be recovered from the solvent surety who, in his turn, could, sue Framji, if he liked. I am of opinion that the inference to be drawn from the documents was that the Collector and the Commissioner decided not to enforce against Framji any of the coercive processes for recovering the arrears, which were available to them, u/s 150 of the Bombay Land Revenue Code, namely, by attachment and sale of his moveable or Immovable properties. They decided to adopt those measures against the surety. But Framji was expressly told that-Government had no intention of absolving him from his liability, and that the eventual remedy of the surety against him had been left unimpaired. In my opinion, therefore, the Government has not done, or omitted to do, any act, the legal consequence of which would be to discharge the principal debtor. The creditor having done nothing by his own act or omission to destroy the debt, or to impair the surety''s eventual remedy, the liability of the surety still subsists. The appeal will be dismissed with costs.

Koyajee, J.

This is an appeal from a decree of the District Judge of Dhulia, dated June 4, 1924, dismissing the plaintiff''s suit with costs. The main relief claimed by the plaintiff was a declaration that he was not liable, as a surety, to pay the amount which was due by the principal debtor, Framji Kawasji, to the defendant.

The facts of the case are these. In the year 1918, the Collector of Khandesh granted to Framji Kawasji a license to sell country-liquor in the village of Akalkuva during the term of three years, 1918-19 to 1920-21, subject to the provisions of the Bombay Abkari Act, 1878, and to the conditions set forth in the license. The material provisions of the Bombay Abkari Act are Sections 16 and 30 to 34. By the 34th section it is enacted that all duties, taxes, fines and fees leviable under any license issued under the said Act may be recovered from any person, liable to pay the same or from his surety as if they were arrears of land-revenue. The processes by which arrears of land revenue may be recovered are to be found in Chap. XI of the Bombay Land Revenue Code, 1879; they include a sale of. the defaulter''s Immovable property.

On April 8, 1918, the plaintiff and Girdhar Keshavsa executed a security-bond; Ex. 32, in these terms:

Framji Kawasji Variawa has taken a contract of liquor-shop at the village of Akalkuva in the taluka of Talode for three years, that is to say, for 191819, 1919-20 and 1920 21, at (agreeing to pay) Rs. (10,150) ten thousand one hundred and fifty every year. In respect thereof he has deposited only (�) one-fourth amount (Rs. 2,537-8) two thousand five hundred and thirty-seven rupees and eight annas only. And as to the remaining eleven instalments, Framji Kawasji Variawa will go on paying the same, not later than the last day of the month preceding the day on which the period of next instalment of three months commences. We are binding ourselves to the above effect.

Girdhar Keshavsa is now dead, and we are not concerned with his liability.

On March 24, 1919, the plaintiff applied to the Collector as follows (Ex. 40):

I have stood as a surety for the instalments of the liquor-shops, in the taluka of Talode, for three years which the licensees shown in the margin will goon paying. I am giving my rajinama (withdrawing from the surety-ship) in respect of the instalments of the said five shops mentioned in the margin for the two years. I, therefore, pray that Your Honour will be pleased to sanction my rajinama (relinquishment). From this day I am not responsible for the instalments of (payable by) those (licensees). May it be known to Your Honour. This is the application.

The five shops there mentioned included the Akalkuva shop. The mamlatdar of Talode communicated to the plaintiff, the Collector''s reply on April 7, 1919 (Ex. 34). He said:

Until the licensees produce other sureties and until they are accepted as sureties by the Collector, your surety-ship cannot be withdrawn. In this matter you should privately arrange with, the licensees.

It appears that in 1921, Framji Kawasji applied to the Collector with regard to the arrears of payment under his license. The application is not brought on the record, and we do not know the nature of his request. But the Collector informed him on July 5, 1921, as follows:

In accordance with Government order concession can only be given in cases where sale would result in complete ruin of the licensee. If he claims to come under that category, lie should immediately see the mamlatdar and submit his claims. Mamlatdars have been authorised to suspend sales in such cases (Ex. 37).

In this connection it is pertinent to refer to the 22nd clause in the the license (Ex. 44) which says:

This license may be suspended or cancelled by the Collector in accordance with the provisions of Sections 32 and 32A of the Bombay Abkari Act, 1878. Should this license be suspended or cancelled, the right of retail vend herein granted for the period of suspension or for the unexpired portion of the period for which this license is granted may be again disposed of or not'' as the Collector thinks fit. In either case when the license has been suspended or cancelled u/s 32, the licensee shall continue responsible for the instalments of the fee stipulated for in Clause 1 of this license.

On April 5, 1922, Framji made another application, which again is not produced in this case. The reply was as follows:

The Commissioner agrees with the Collector in holding: (1) that the licensee of the Akalkuva shop should not be called upon to pay any more because he will be ruined if he is; (2) that the balance should be recovered from the solvent surety. He can sue the licensee if he-likes Ex. 45, dated May 4, 1922).

On April 4, 1922, a notice of demand (Ex. 33) was served on the plaintiff in these terms:

You should arrange to pay immediately the amount of instalments being Rs. 14,980-2-11 and interest due by the previous licensee Framji Kawasji. If you fail to pay the amount immediately, your properly will be attached and sold and the amount will be recovered.

He was at the same time informed of the order made by the Collector on April 1, 1922, which was to this effect:

The amount should not be recovered from the licensee Framji Kawasji or the other surety Girdhar Keshavsa who is dead and from whom a considerable amount in respect of the liquor-shop of Talode is recoverable.

The Revenue Authorities thereafter at tached certain toupee belonging to the plaintiff.

On April 12, 1922, the plaintiff instituted this suit. The plaint alleged as follows:

(1) That, in March 1919, the plaintiff informed the Collector that he was not willing to continue to stand as surety for Framji thence forward; the Collector, thereupon, should have cancelled the plaintiff''s security-bond and ordered the licensee to furnish fresh security. But, instead of doing this, the Collector asked the plaintiff to settle the matter between him and the licensee; the plaintiff in return informed the Collector that it was not his business to approach the licensee and the security should be considered as cancelled from the date of the intimation given by him. (2) That the orders passed by the various Revenue Officers were illegal, and so was their action in attaching the Immovable property of the plaintiff.

The claim was resisted by the Secretary of State on grounds set out in his written statement, Ex. 16.

On the material issues, the learned trial Judge held as follows:

(1) The license grafted to Framji being one single and entire consideration for the security-bond, it was not competent to the plaintiff to revoke the guarantee.

(2) The bond could not be cancelled without the consent and permission of Government.

(3) The liabilities of the licensee and of the surety were joint and several so that the defendant could hold either of them liable to perform the whole of the promise.

(4) The defendant was justified in attaching the plaintiff''s property.

Two questions are raised before us on appeal.

The first contention, on behalf of the plaintiff, is that the agreement, Ex. 32, of April 8, 1918, constituted a "continuing guarantee" within the meaning of Section 129 of the Indian Contract Act; that it was competent to the plaintiff to revoke it at any time; and that he revoked it, on March 24, 1919, by his application, Ex. 40. Now, a "continuing guarantee" is defined ins. 129 as "a guarantee which extends to a series-of transactions". The question whether a guarantee is intended to be continuingus one which is to be decided upon the language of the instrument of security and also with regard to the surrounding circumstances. In this case there was no series of transactions. A license to sell liquor for a period of three years was granted to Framji on the faith of the guarantee given by the plaintiff. The license was granted as a single act done once for all. Pramji paid the amount due in respect of the first instalment. The security-bond then provides that:

As to the remaining eleven instalments Framji Kawasji will go on paying the same not later than the last day of the month preceding the day on which the period of next instalment of three months commences. We are binding ourselves to the above effect.

It is clear that the plaintiff guaranteed payment of eleven instalments. Having regard to the transaction which was being guaranteed, the conditions of the license, and the terms of the security-bond, the plaintiff, in-my opinion, was not entitled to put an end to his liability by arbitrarily revoking his guarantee.

It is next urged, on behalf of the plaintiff, that the Revenue Authorities had declared that the money, which remained unpaid, should not be recovered from the licensee, Framji; that the legal consequence of it was the discharge of the principal debtor; and that, therefore, the plaintiff was discharged from his suretyship. Reliance is placed on Sections 63 and 134 of the Indian Contract Act. The difficulty in the way of accepting this contention is that the plaintiff has failed to place before the Court the materials necessary for ascertaining the nature and extent of the concession, indulgence or forbearance, shown by the defendant to the licensee, Framji. As stated above, Framji''s applications to the Collector are not forthcoming. Framji himself is not examined as a witness. The facts bearing on the question have not been elicited from either of the two mamlatdars (Exs. 38 and 41) who gave evidence in the case. The available materials are those contained in Ex. 33 and Ex, 45 to which reference has already been made. By Ex. 45, Framji was informed that the Revenue Authorities would not call upon him to pay any more because he would be ruined if he was; and that the balance would be recovered from the solvent surety who, in his turn, could sue Framji if he liked. The inference-to be drawn from these documents is that the Collector and the Commissioner decided not to enforce against Framji any of the co-ercive processes for recovering the arrears, which were available to them, u/s 150 of the Bombay Land Revenue Code, namely, by attachment and gale, of his moveable or Immovable proparties. They decided to adopt-those misuses against the surety. But Framji was expressly told that Government had no intention of absolving him from his liability, and that the eventual remedy of the surety against him had been left unimpaired. In my opinion, therefore, Government has not done, or omitted to do, any act, the legal consequence of which would be to discharge the principal debtor. The creditor having done nothing by his own act or omission to destroy the debtor to impair the surety''s eventual remedy, the liability of the surety still subsists.

These being the only questions raised and discussed before us, I would, for the reasons stated above, dismiss the appeal and affirm; the decree with costs.