Andhra HC (Pre-Telangana)
Md. Nazeer Ahmed And Anr. vs Economic Transport Organisation on 25 February, 2005
Equivalent citations: 2005(3)ALD527
ORDER V.V.S. Rao, J.
1. The Defendants 1 and 2 in O.S. No. 131 of 1979 on the file of the Court of Subordinate Judge (Senior Civil Judge), Vijayawada are in appeal before this Court. By impugned judgment the Trial Court decreed the suit of the sole respondent-plaintiff directing the appellants herein to pay a sum of Rs. 24,768,98 ps with subsequent interest on Rs. 23,168.75 ps at 12% per annum from 25-4-1979 and costs of Rs. 3,170.50 ps A Full Bench of five learned Judges of this Court in Vallabhamni Lakshmana Swamy v. Valluru Basavaiah (LB)), considered the question as to whether A.P. Civil Courts (Amendment) Act, 30 of 1989 is retrospective or prospective in operation. Be it noted that by the said amendment, the pecuniary jurisdiction to entertain the appeal, inter alia, the District Courts/Chief Judge, City Civil Court, Hyderabad, was raised from Rs. 30,000/- to Rs. 1,00,000/- and by a further amendment, the pecuniary limits to entertain appeal was raised to Rs. 3,00,000/-with effect from 1-11-2000. In view of this, the question was raised before the Full Bench whether the Appeal Suits/CCCAs filed before this Court during the interregnum are to be sent back to lower Courts. The Full Bench of this Court unanimously held that the A.P. Civil Courts (Amendment) Act, 30 of 1989 is applicable prospectively from 1-12-1989, that the suits in which decrees were passed prior to 1-12-1989 will be dealt with in accordance with pre-amended procedure and that the appeals already admitted by this Court shall be deemed to have been transferred to this Court for disposal in accordance with law. By reason of this judgment, though the value of this appeal is only Rs. 53,784.98 ps, the matter was heard by this Court as per the dicta of the Full Bench. The parties are referred to herein as per their status in the suit.
2. The plaintiff filed the suit for recovery of the suit amount from the Defendants 1 to 3. The events, which lead to filing of the suit, as narrated in the plaint are as follows. The plaintiff is a firm engaged in the business of goods by road, having its regional office at Vijayawada. The plaintiff appointed the first defendant as an Agent at Nidadavolu and entered into contract of Agency dated 7-6-1976. The second defendant, who is the father of first defendant, executed a guarantee bond dated 15-9-1977 to a tune of Rs. 50,000/- and the third defendant undertook to indemnify any loss or damage that may be occasioned to plaintiff. The first defendant is entitled to commission whenever he undertakes booking, delivering and transportation of the consignments on behalf of the plaintiff.
3. During the period from 7-6-1976 to 16-9-1978, the first defendant was paid his commission and he gave a letter dated 14-10-1978 agreeing to make good any loss that may be caused to the plaintiff subject to final verification of the accounts and final discharge of the first defendant as the agent. Subsequently it came to light that the plaintiff mentioned certain Bank Demand Drafts amounting to Rs. 23,168.75 ps in the account of first defendant and on verification it was found that the first defendant did not purchase any such drafts and he only gave those drafts to show that there were no dues. The first defendant misappropriated the said amount and he is liable to pay the amount. The Defendants 2 and 3 being the guarantors are also equally liable to pay the amount. A registered notice dated 29-3-1979 was issued to the defendants without any result. Therefore the suit is filed.
4. The third defendant remained ex parte and the Defendants 1 and 3 filed separate written statements denying their liability. They also disputed the locus standi of the plaintiff to file the suit and the territorial jurisdiction of the Court. It was also contended by the second defendant that there is no valid and enforceable agreement between the plaintiff and second defendant and therefore the second defendant is not liable to pay the amount. The Trial Court framed as many as seven issues. The plaintiff examined its Regional Manager Govindram Rathi as PW1 and Sri Muralilal Sharma as PW2 and marked Exs.A1 to A3. In rebuttal, the defendant examined the second defendant as DW1 and Defendant No. 1 as DW2. They also marked Exs.B1 and B2. On consideration of the evidence, the learned Trial Judge held all the issues against the defendants and decreed the suit directing the Defendants 1 and 2 to pay the suit amount with interest.
5. In this appeal, the only submission made by the learned Counsel for the appellants, Sri A.P. Rao, is with reference to Ground Nos. 7 and 8. Ground No. 7 in the memorandum of grounds deals with the question whether the agent is liable to pay the dues to the principal after cancellation of agency even though such alleged liability with reference to the period when the agency was in force. The learned Counsel does not seriously press this ground. Indeed it is settled law that subject to law of limitation, the principal is entitled to be indemnified by the agent in any of the loss sustained by the principal for acts of the agent not authorized to act in a particular manner. A reference to Section 211 of the Indian Contract Act, 1872 (the Act, for brevity) would be suffice to conclude that when an agent acts not in accordance with directions of the principal and the principal sustains loss, the agent has to make good such loss. Therefore the Ground No. 7 has not been rightly pursued.
6. Secondly, the learned Counsel for the appellants submits (with reference to Ground No. 8) the guarantee bond executed by second defendant, which is marked as Ex.A2, does not give any cause of action to the plaintiff as against the second defendant after the termination of the agency.
7. Sri J. Bhaskara Rao, representing Sri V.S.R. Anjaneyulu, learned Counsel for the sole respondent, relies on Sections 126, 128 and 129 of the Act in support of the submission that when the surety executes a continuing guarantee the termination of agency is of any consequence and even after cancellation of such agency the creditor can enforce the liability against the surety which is co-extensive with that of principal borrower. He also places reliance on the decision in Larsen and Toubro Ltd. v. M.S.E.B., .
8. The only point that arises for consideration is whether the second defendant/appellant is also liable to pay the suit amount to the plaintiff.
9. Ex.A2 which is a guarantee bond executed by the second defendant - none other than the father of the first defendant reads as under:
Guarantee Bond F. Dis. 157/77.
I, Md. Ishaq, son of Md. Saheb, of 8-6-33, Lakshmaiah Street, Wynchipet, Vijayawada-1 do hereby declare that I stand as a Guarantor to Md. Nazid Ahmed, the Agent of Parcel Office of M/s. Economic Transport Organisation, Nidadavole with a tune of Solvency Certificate of Rs. 50,000/-(Rupees Fifty Thousand only) to make good of loss, if there be any, due to activities of above agent as long as his agency will be continued under above organisation.
10. A plain reading of the above would show that the second defendant agreed to guarantee to the agency given to the first defendant to a tune of Rs. 50,000/- "due to activities of the agent as long as the agency continues with the plaintiff organization". After reading Ex.A2 it is not possible to accept the submission of the learned Counsel for the respondent-plaintiff that it is a continuing guarantee. It is no doubt true that when a guarantee extends to series of transactions, it becomes a continuing guarantee and as long as the employer is in force as such the guarantor is liable for the acts of the debtor. However whether the guarantee executed is a continuing guarantee or a guarantee simplicitor depends on a document. Illustration (c) under Section 129 of the Act reads as under:
(c) A guarantees payments to B of the price of five sacks of flour to be delivered by B to C and to be paid for in a month. B delivers five sacks to C. C pays for them. Afterwards B delivers four sacks to C, which C does not pay for. The guarantee given by A was not a continuing guarantee, and accordingly he is not liable for the price of the four sacks.
11. Applying the above illustration to the facts of this case, it becomes clear that second defendant stood as a guarantor to the due performance of the agency by the first defendant as long as the agency continued. The use of the term "continued" does not mean that it is a continued guarantee and it only means that as long as the agency given by the plaintiff to the first defendant till Ex.A2 is in force. Even according to the plaintiff the contract was terminated on 16-9-1978 and therefore except Ex.A2 cannot be pressed into service. In Larsen and Toubro's case (supra) it was held that when the Bank guarantee is given to be valid till successful completion of the work, after completion of such work, the Bank guarantee cannot be enforced by the employer. Therefore this Court countenances the submission of the learned Counsel for the appellants.
12. Accordingly, the appeal is partly allowed holding that the suit is decreed to the extent of liability of first defendant alone and further declaring that the plaintiff cannot enforce Ex.A2 guarantee bond given by second defendant as against him and the suit against the second defendant is dismissed. There shall be no order as to costs.