Patna High Court
Suresh Narain Sinha vs Akhauri Balbhadra Prasad And Ors. on 25 January, 1957
Equivalent citations: AIR1957PAT256, 1957(5)BLJR216, AIR 1957 PATNA 256
Author: Chief Justice
Bench: Chief Justice
JUDGMENT
1. In the suit which is the subject-matter of this appeal the plaintiff claimed that he was induced by defendants 1 to 3 jointly to open accounts in the Jehanabad branch of the Modern Bank of India, Ltd., having its registered Head Office at Dacca. The plaintiff also alleged that defendants 1 to 3 gave personal undertaking that they would be personally liable for any loss that the plaintiff might sustain. On the 9th of September, 1946, the plaintiff made a fixed deposit with the Bank of a sum of Rs. 1,000/-for a term of three months.
The due date of withdrawal was the 9th of December, 1946, but the Bank did not make Payment, though the plaintiff made demand on several occasions. On the 20th of May, 1947, the Bank ultimately refused to make any payment. Defendant No. 1 was the manager of the Gaya branch, defendant No. 2 was the Organizer and Inspector and defendant No. 3 was the local Director of the Jehanabad Branch. The plaintiff hence brought the suit for recovering a sum of Rs. 1,000/- which was placed in fixed deposit, together with Rs. 38/- claimed as interest.
The plaintiff also claimed a sum of Rs. 23/- which amount was deposited in the Savings Bank, and a sum of Re. 1/- as interest for the amount. The total claim of the plaintiff was, therefore, for the grant of a money decree for a sum of Rs. 1,062/-. The Plaintiff also alleged that there was fraud and conspiracy between defendants 1 to 3 as a result of which the plaintiff sustained loss. Defendant No. 1 alone contested the suit. The other defendants did not appear or contest the suit though notices were served on them. Defendant No. 1 denied that there was any contract of guarantee between him and the plaintiff and there was no undertaking on his behalf to reimburse the plaintiff in case he suffered loss.
It was alleged that the plaintiff opened the accounts of his own free will and there was no fraud practised by any of the defendants. The learned Munsif held that the branch of the Modern Bank of India Ltd. at Jehanabad was a bogus branch and the defendants 1 fro 3 had given a personal undertaking to the plaintiff for reimbursing him in case he suffered loss. The Munsif also found that the plaintiff had suffered loss of the amount claimed, and, therefore granted a decree in favour of the plaintiff for the recovery of the money from all defendants.
Defendant No. 1 preferred an appeal to the learned Subordinate Judge of Gaya, but his appeal was dismissed and the learned Subordinate Judge affirmed the findings of the Munsif.
2. On behalf of the appellant Mr. Tarkeshwar Nath argued. In the first Place, that there was no privity of contract between the Bank, defendant No. 5 and the plaintiff and hence there could be no contract of guarantee within the meaning of Section 126 of the Indian Contract Act. In the present case there is no allegation in the plaint that the Bank was expressly a party to the contract of guarantee. But it was stated on behalf of the respondents that defendant No. 1 had the power of attorney from defendant No. 5. It is not necessary, in our opinion, that the principal debtor should as a matter of law be an express party to the contract of guarantee; it is sufficient that the principal debtor is a party by implication to the contract.
It has been held by the Madras High Court in Muthu Raman Chetty v. Chinna Vellayan Chetty, ILR 1939 Mad 965 : (AIR 1917 Mad 83) (A), that a, person may become a surety without the 'knowledge and consent of the principal debtor, but the only rights which he acquires in that case are those given by Sections 140 and 141 of the Indian Contract Act and those given by Section 145. There is also a decision in Jagannath Baksh Singh v. Chandra Bhukhan Singh, ILR 12 Luck 484 : (AIR 1937 Oudh 19) (B), in which it was held that for a contract of suretyship there should be concurrence of the principal debtor, the creditor and the surety but that does not mean that there must be evidence showing that the surety undertook his obligation at the express request of the principal debtor. In paragraph 8 of the plaint it is alleged by the plaintiff as follows:
"8. That the defendants Nos. 1 to 3 repeatedly approached the plaintiff requesting him to open transactions, and when the plaintiff hesitated they induced the plaintiff to make deposits with the Bank on their personal security, with the said branch of the Bank, and so at last on 30-7-46 the plaintiff deposited Rs. 101/- with the said branch of the Bank, and a Savings Bank Account No. 168/23 was opened in his name with the said Bank, carrying interest at 21/2 per cent, per annum on the minimum monthly deposit".
Paragraphs 4, 11, 12 and 18 of the plaint are also relevant in this connection :
"4. That in the month of July, 1946, defendants Nos. 1 to 3 gave out to the people of Jehanabad, including the plaintiff, that there is a. Bank known as Modern Bank of India Ltd., having its Head Office at Dacca, defendant No. 5, and they were going to open and start its branch in the town of Jehanabad, and they also gave out that the defendant No. 4 was the Managing Director of the said Bank.
11. That in the meantime the defendants Nos. 1 to 3 in conspiracy with one another went on inducing the plaintiff to withdraw the amount in deposit with the Bharat Bank as well as those in deposit in the post office, and to deposit all the amounts with their Bank on a fixed deposit system which would carry a higher rate of interest at Rs. 3-8-0 per cent per annum
12. That at last on 9-9-46 the plaintiff withdrew Rs. 584/- from his Postal savings Bank, and also Rs. 336/- from the defendant's Bank and made a deposit of Rs. 1,000/- under Receipt No. 41227, folio No. 1, duly signed by defendant No. 1 and bearing the seal of the Modern Bank of India, Ltd., Jehanabad, as fixed deposit for 3 months only, carrying interest at 31/2 per cent per annum and the balance to the credit of the plaintiff on that date in the Savings Bank account after said withdrawal was left Rs. 65/-only.
18. That under the circumstances aforesaid it is abundantly clear and the plaintiff has a shrewd suspicion that either there is no such Bank as the Modern Bank of India, Ltd. at Dacca or that it is altogether a bogus Bank, and the defendants 1 to 4 in conspiracy with one other knowingly and wilfully defrauded the Plaintiff and induced him to part with his money and deposit the same in their bogus branch Bank, and they have misappropriated the said amounts and thus under the agreement entered into by the defendants that the amounts deposited by the plaintiff in the fixed deposit and Savings Bank account would be paid to this plaintiff on demand or on the due date of maturity, as the case may be and that they also themselves jointly & severally would be liable to, and shall, pay the same amounts with interest to the plaintiff.
They are liable personally also to reimburse the plaintiff to the extent of the amount that still lies in deposit with them in the name of the Bank. The defendant No. 5 is equally liable since it is responsible for the liabilities of all its branches."
On a perusal of these paragraphs of the plaint it is clear that there was a contract of guarantee entered into between the plaintiff and defendant No. 1 and the Bank, defendant No. 5 was by Implication a party to the contract. The plaintiff has alleged in the plaint that the personal guarantee was given by defendants 1 to 3. They repeatedly approached him and asked him to open transactions with the Bank and made deposits in the Bank on their personal security.
The case of the plaintiff has been accepted by the lower Courts, and upon the facts found we hold that there was a contract of guarantee between defendant No. 1 and the plaintiff within the meaning of Section 126 of the Indian Contract Act. It was also urged on behalf of the appellant that the terms of the contract were vague. We do not accept this argument as correct. As we have already said, the terms of the contract, though oral have been mentioned with sufficient precision in the plaint, and the contract of guarantee cannot be held to be uncertain or void within the meaning of Section 29 of the Indian Contract Act.
3. The next argument put forward by learned counsel on behalf of the appellant is that the contract of guarantee has been frustrated within the meaning of S, 56 of the Indian Contract Act and so the plaintiff cannot sue for enforcement of the contract of guarantee. It has been pointed out by learned counsel that the branch Office of the Modern Bank of India was closed at Jehanabad because of the Political partition of India & Pakistan which took place on the I5th August, 1947. The branch office at Jehanabad was actually closed in September, 1947, and payments were not made to the depositors at that branch from that date.
The head office of the Bank was located at Dacca, within the boundaries of Pakistan, and communication between India and Pakistan was dangerous and difficult. It was argued that the partition of India and Pakistan was not an event in the contemplation of the parties at the time the contract of guarantee was entered into. It was contended, in these circumstances, that the contract of guarantee has became impossible of performance and Section 56 of the Indian Contract Act applied to the case.
Counsel relied in this connection upon a decision of the Punjab High Court, Rama Nand Vijay Prakash v. Gokal Chand Gian Chand, AIR 1951 Simla 189 (C). We do not think that the principle of that decision has any application to the present case. Indeed, there is a later decision of the Punjab High Court, Parmeshwari Das Mehra and Song v. Firm Ram Chand Om Prakash, AIR 1952 Punj 34 (D), which is a decision of Full Bench of that Court, in which it was held that the doctrine of frustration of contract cannot be applied to circumstances which are highly similar to the circumstances of the present case.
In the Punjab case a entered into a contract in 1946 with B by which A was to supply certain classes and quantities of American piecegoods. The contract was O.I.P. Karachi. The goods arrived at Karachi after some delay. B refused to accept delivery on the ground that both the quantities & qualities offered for delivery were not according to the particular contract. In September, 1947 A called upon B to refer the dispute arising consequent on B's refusal to take delivery, to arbitration in the manner provided by the arbitration clause in the contract and he nominated one C, a General Manager of a company at Karachi, as his arbitrator.
It was held, in these circumstances (1) that the mere fact that Karachi had become part of foreign territory was not sufficient to frustrate tile contract, and (2) the mere fact that non-Muslims experienced difficulty in going to Karachi wag not by itself sufficient to avoid the contract. It was held, in the circumstances of the case, that there was no frustration of the contract.
It has been pointed out by the Supreme Court in a recent case, Satyabrata Ghose v. Mugneeram Bangur and Co., AIR 1954 SC 44 (B), that the relief given by the Court on the ground of frustration of contract Is based upon the theory either of an implied term or upon the theory that the whole foundation of the contract has disappeared because of the occurrence of an unexpected event or of a change of circumstance which was beyond the contemplation of the parties at the time the contract was entered into.
If such an event or changed circumstance occurs which is so fundamental as to be regarded by law as striking at the root of the contract as a whole, it is then that the Court can pronounce the contract to be frustrated and at an end. In. a recent English Case, British Movietonews Ltd. v. London and District Cinemas, Ltd., (1951) 1 K B 190 (F) the theoretical basis of the doctrine was put as follows by Dennmg, L. J. who pronounced the judgment of the Court of Appeal:
"The Court really exercises a qualifying power --a power to qualify the absolute, literal or wide terms of the contract--in order to do what is just and reasonable in the new situation. The day is gone when we can excuse an unforeseen injustice by saying to the sufferer 'it is your own folly, you ought not to have passed that form of words. You ought to have put in a clause to Protect yourself.' We no longer credit a party with the foresight of a Prophet or his lawyer with the draftsmanship of a Chalmers. We realise that they have their limitations ana make allowances accordingly. It is better thus.
The old maxim reminds us that he who clings to the letter clings to the dry and barren shell and misses the truth and substance of the matter. We have of late paid heed to this warning, and we must pay like heed now."
This decision of the Court of Appeal was reversed by the House of Lords, and Viscount Simon in course of his judgment did not approve of the way in which the doctrine was stated by Denning, L. J. it was held that there was no change in the law as a result of which the Courts could exercise a wider power in this regard than they used to do previously, and that there was no general qualifying power which could be exercised by the Courts in order to qualify the absolute, literal or the wide terms of the contract.
In the circumstances found in the present case we are satisfied that the doctrine of frustration does not apply and the defendant No. 1 cannot be absolved from performance under Section 56 of the Indian Contract Act on the ground that there has been frustration of the contract. The argument of learned counsel, therefore, on this point must fail.
4. It was then contended on behalf of the appellant that even if there was a contract of guarantee between the parties, the suit cannot succeed unless the plaintiff has exhausted his remedies against the principal debtor, namely, the Modern Bank of India, Ltd., defendant No. 5, with its registered Head Office at Dacca. We do not think there is any subtance in this argument. It is provided by Section 128 of the Indian Contract Act that the liability of the surety is coextensive with that, of the principal debtor, unless it is, otherwise provided by the contract, There is high authority in support of this view in Mahanth Singh v. U. Ba Yi, AIR 1939 P C 110 (G). It was held by the Privy Council in that case that failure to sue the principal debtor until recovery was barred by the statutes of limitation did not operate as discharge of the surety. At pp. 112-113 Lord Porter has stated as follows:
"Similarly, a failure to sue the principal debtor until recovery is barred by the statutes of limitation does not operate as a discharge of the surety in England: see Carter v. White, (.1883) 25 Oh D 666 (H). The same view prevails in most of the High Courts in India: See Sankana v. Virupakshapa, ILR 7 Bom 146 (I), Krishto Kishori Chowdrain v. Radha Romun Munshi, ILR 12 Cal 330 (J), Supramania Aiyar v. Gopala Aiyar, ILR 33 Mad 308 (K) and also Dil Muhammad v. Sain Das, AIR 1927 Lah 396 (L). It is true that the first two oases were decided in reliance upon the provisions of Section 137, Contract Act, which enacts that:
'Mere forbearance on the part of the creditor to sue the principal debtor or to enforce any other remedy against him does not in the absence of any provision in the guarantee to the contrary discharge the surety'.
But the two later cases base their reasoning also on the broader ground adopted by English law, and hold Section 137 to be merely declaratory of the law and to be enacted only to allay any doubts as to whether the same principles were applicable in India. With these decisions of the other High Courts in India may be contrasted the case in Ranjit Singh v. Navbat, ILB 24 All 504 (M), which decides that in spite of the provisions of Section 137, the creditor's right against the surety is not preserved unless he sues the principal debtor within the period of limitation. Such a decision is inconsistent with the views held by the Courts in England and the majority of the Courts in India.
In this conflict, their Lordships Prefer the reasoning of the majority in any case those decisions deal rather with the question whether the debt was absolutely released, than with the question whether an agreement not to sue or to give time with a reservation of right against the surety, operated as a discharge to him. The present case is in their Lordships' opinion an example of the latter type, and they entertain no doubt that the creditor's rights against the surety were preserved. The appellant's act in continuing to sue the surety though he withdrew his action against the principal debtors was in their view a clear reservation of his rights. Indian authority illustrating this proposition is to be found in Murugappa v. Munusami, 38 Mad LJ 131: (AIR 1920 Mad 216) (N) and in Nur Din v. Allah Ditta, ILR 13 Lah 817: (AIR 1932 Lah 419) (O)."
We, therefore, reject the contention of learned Counsel for the appellant on this point.
5. Lastly, a contention was put forward that the decree of the trial Court against defendant No. 5 was without jurisdiction. It was pointed out that defendant No, 5, the Modern Bank of India, Ltd., had its registered office at Dacca within the territory of Pakistan. It was argued that the claim of the plaintiff against defendant No. 5 was a claim in personam; and since defendant No. 5 was not a resident within the jurisdiction of the Jehanabad Court, no decree could be pronounced by that Court against defendant No. 5.
In support of this Proposition Counsel referred to the well known judgment of Lord Selborne in Sirdar Gurdyal Singh v. Rajah of Faridkote, 21 Ind App 171 (PC) (P). It was explained by Lord Selborne in that case that in all personal actions the courts of the country in which the defendant resides, and not the Courts of the country where cause of action arose, should be resorted to and that no territorial legislation could give jurisdiction which any foreign Court ought to recognise against absent foreigners who owe no allegiance or obedience to the sovereign power which so legislates.
At p. 185 Lord Selborne states as follows:
"Under these circumstances there was in their Lordships' opinion, nothing to take this case out of the general rule, that the plaintiff must sue in the Court to which the defendant is subject at the time of suit ('Actor sequitur forum rei') which is rightly' stated by Sir Robert Phillimore (International Law, Vol. 4, Section 891) to 'lie at the root of all international, and of most domestic, jurisprudence on this matter'. An jurisdiction is properly territorial, and 'extra territorium jus dicenti impune non paretur'. Territorial jurisdiction attaches (with special exceptions) upon all persons either permanently or temporarily resident within the territory while they are within it; but it does not follow them after they have withdrawn from it, and when they are living in another independent country.
It exists always as to land within the territory, and it may be exercised over movables with in the territory; and, in questions of status or succession governed by domicil, it may exist as to persons domiciled, or who when living were domiciled, within the territory. As between different provinces under one sovereignty (e. g. under the Roman Empire) the legislation of the sovereign may distribute and regulate jurisdiction ; but no territorial legislation can give jurisdiction which any foreign Court ought to recognise against foreigners, who owe no allegiance or obedience to the Power which so legislates.
In a personal action, to which none of these causes of jurisdiction apply, a decree pronounced in absentem by a foreign Court, to the jurisdiction of which the defendant has not in any way submitted himself, is by international law an absolute nullity. He is under no obligation of any kind to obey it; and it must be regarded as a mere nullity by the Courts of every nation except (when authorised by special local legislation) in the country of the forum by which it was pronounced."
But the principle of this case is not really in point. The question" is not whether the Pakistan Courts would recognise the decree of the Jehanabad Court against defendant No. 5 as a valid decree and executable against defendant No. 5 within the limits of Pakistan; the question, on the contrary, is whether the decree granted by the Jehanabad Court against defendant No. 5 is a decree pronounced with Jurisdiction so far as Jehanabad Court is concerned. In this connection Counsel for the respondents referred to Section 20, Code of Civil Procedure, which is to the following effect:
"20. Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction
(a) the defendant, or each, of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or
(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution ; or
(c) the cause of action, wholly or in part, arises.
Explanation I. -- Where a person has a permanent dwelling at one place and also a temporary residence at another place, he shall be deemed to reside at both places in respect of any cause of action arising at the place where he has such temporary residence.
Explanation II. -- A corporation shall be deemed to carry on business at its sole or Principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place."
It was argued by learned Counsel for the respondents that, the cause of action arose wholly with-in the territorial jurisdiction of the Jehanabad Court and, therefore, under the Municipal law of India, namely, the provisions of the Code of Civil Procedure, the Jehanabad Court had jurisdiction to grant a decree against defendant No. 5. This view is supported by a decision of the Allahabad High Court in Gaekwar Baroda State Railway v. Sheikh Habib Ullah, AIR 1934 All 740 (Q). It was held in that case that British Courts have got jurisdiction against non-resident foreigners with regard to whom the cause of action has arisen wholly or partly in British India.
It was true that according to the principles of international law a Court has jurisdiction to entertain a suit against a foreigner who did not permanently or temporarily reside within its jurisdiction and who had not submitted to its Jurisdiction. But if the legislature confers jurisdiction upon the Court situated in a particular territory to entertain suits against foreigners, where cause of action, wholly or partly arises within its jurisdiction, then such a Court undoubtedly has jurisdiction, if the conditions Provided by the law to which it Is subject exist.
The rule of private international law is, therefore, in this regard subject to the rules of Municipal law; and even in 21 Ind App 171 (PC) (P) Lord Selborne recognised this exception. We have already referred to a passage of this judgment on page 185 where Lord Selborne states:
"In a personal action, to which none of these causes of jurisdiction apply, a decree pronounced in absentem by a foreign Court, to the jurisdiction of which the defendant has not in any way submitted himself, is by international law an absolute nullity. He is under no obligation of any kind to obey it; and it must be regarded as a mere nullity by the Courts of every nation except (when authorized by special local legislation) in the country of the forum by which it was pronounced."
The same proposition has been enunciated in another case, Swaminathan Chettiar v. Somasundaram Chettiar, AIR 1938 Mad 731 (R) where it was held by Varadachariar and Horwill JJ., that even against non-resident foreigner the Courts in British -India had jurisdiction in personam in suits based upon a cause of action arising in British India. A similar view has been expressed by a Division Bench of the Bombay High Court in Chunilal Kasturchand Marwadi v Dundappa Damappa, ILK 1950 Bom 640: (AIR 1951 Born 190) (S). In view of the principles laid down by these authorities, We consider that the Court at Jehanabad had jurisdiction to grant a decree against defendant No. 5, namely, the Modem Bank of India, Ltd.
6. For the reasons we have expressed, we hold that there is no merit in this appeal and that the decree of the lower appellate Court is right and this appeal must be dismissed with costs.