1939 (9) TMI 10

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....t 98). The promissory note was renewed in 1931 and again in 1934 (exhibits 99 and 100). The plaintiffs filed this suit to recover Rs. 8,000 from defendant No. 1 by the sale of the mortgaged property and if there remained any deficit they asked for liberty to proceed against defendant No. 2's estate in the hands of his sons who appear as his legal representatives after his death during the pendency of the suit. It was contended on behalf of the sons of defendant No. 2 that defendant No. 2, Nimbaji, was not in any way liable to satisfy the mortgage and that the promissory note passed by him was intended to be merely an acknowledgment that the mortgage deed taken by him from defendant No. 1 belonged to plaintiffs. The trial Court disallowed that contention and passed the usual mortgage decree for Rs. 8,000 and future interest at six per cent. per annum against defendant No. 1 to be recovered by the sale of the mortgaged property, and it ordered that for deficit the estate of defendant No. 2 in the hands of his legal representatives should be proceeded against by the plaintiffs. The legal representatives of defendant No. 2 have presented this appeal. 2. The trial Court has inter....

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....or and the promise of the guarantor or surety is conditional on the default of that third party. Under Section 128 of the Indian Contract Act his liability is co-extensive with that of the principal debtor, and the cause of action accrues as soon as the latter commits a default, so that under the expln. to Order II, Rule 2, of the Civil Procedure Code, the obligation of the principal debtor and the collateral security offered by the surety for its performance are to be deemed to constitute but one cause of action. Whereas in a contract of indemnity the promisor engages to save the promisee from loss caused by the conduct of the promisor himself or by the conduct of any other person (s. 124 of the Indian Contract Act). The cause of action for a claim against the promisor accrues to the promisee when the latter is actually damnified, and his suit is governed by Article 83 of the Indian Limitation Act. Under a contract of indemnity the promisee can claim only damages as distinguished from the debt for the non-payment of which the promisor has agreed to indemnify him. 4. Bearing this distinction in mind we have to determine the nature of the liability arising under the promissory no....

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.... cannot blame you. Because there may be profit or there may be loss. If there-is profit you want to grab it; if there is a loss you want to hold me responsible for it. I have never made any such transaction before. You have reproached me for doing it. I have now learnt a lesson from a Guru. In case you do not get cash from Ana Patil, are you ready to take lands from him ? 6. After this letter there were some negotiations regarding the purchase of the lands of defendant No. 1 and when the negotiations fell through, defendant No. 2 wrote exhibit 91 to plaintiff No. 2 on October 9, 1926, in which he stated that he was sending him a promissory note of Rs. 5,000 bearing the date of the mortgage bond. It appears from the statement of plaintiff No. 2 (exhibit 101) that as the promissory note was insufficiently stamped it was sent back and subsequently another promissory note for Rs. 5,000 dated April 28, 1928, was sent. When it was about to be time-barred the promissory note (exhibit 99) was passed in 1931 and again a third promissory note (exhibit 100) was passed in 1934. It is alleged in the plaint that the plaintiffs' claim against defendant No. 2 is kept alive by this third pro....

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....recover only the deficit from the appellants and the lower Court also has passed a decree against them to the same effect. Had defendant No. 2 been a surety for defendant No. 1's debt, a joint decree for the entire amount would have been passed against the appellants. Hence the most favourable construction in favour of the plaintiffs which can be placed on the promissory notes is that they created a contract of indemnity whereby defendant No. 2 undertook to make good any loss that they might sustain. It was open to the plaintiffs to repudiate the mortgage transaction altogether and claim the whole of the amount from defendant No. 2, leaving him to file a suit against defendant No. 1 to recover the mortgage amount. But the plaintiffs chose to accept that mortgage transaction and to treat defendant No. 2 as their benamidar. It follows from this that they can hold the appellants responsible only for the loss suffered by them in consequence of that transaction, and in fact they have not claimed anything more from them in this suit. 10. Thus the contract being one of indemnity the plaintiffs' claim against defendant No. 2 must be held to be premature. It is clear from Section....