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16. Since the arbitrator has in declining the claims against the respondents relied only on illustration (c) to Section 127 of the Contract Act, even though neither any law in that respect is mentioned in the award nor has any been cited, it was felt necessary to check the same.

i. Reference may first be made to the judgment of the Division Bench of Karnataka High Court in Jayakunvar Manilal Shah Vs. Syndicate Bank MANU/KA/0365/1991. It was held that the words "anything done....... for the benefit of the principal debtor" in Section 127 are wide enough to cover the past transaction also; it is not necessary that conferment of a benefit upon the principal debtor by the creditor must be contemporaneous with the execution of surety bond, in order to provide consideration for the agreement of guarantee. Reference was made to Halsbury's Laws of England 4th Edition at Para-117 inter-alia to the effect that the consideration for a promise of guarantee need not be contemporaneous with the agreement of guarantee and need not appear in writing. Reference was also made to Jagadindranath Roy v. Chandranath (1904) 31 Calcutta 242 where the surety bond was executed two years after the deed and it was held that the demand for fresh surety was made and the surety became a fresh surety in order to save the principal debtor from the results of failure to comply with the demand of the creditor and as such the execution of the surety resulted in advantage to the debtor and therefore was sufficient consideration for execution of the surety bond. With reference to illustration (c) to Section 127 (Supra) it was held, that the same cannot cut down the amplitude of Section 127 and though an illustration to a section could not be readily assumed to be repugnant thereto, reliance was placed on Shambhu Nath Mehra Vs. The State of Ajmer MANU/SC/0023/1956 holding that an illustration does not exhaust the full content of the section which it illustrates but equally it can neither curtail nor expand its ambit.

v. Another Division Bench of the Gujarat High Court in State Bank of India Vs. Premco Saw Mill AIR 1984 Gujarat 93 held that it is a settled legal position that if the document is stating some wrong consideration, oral evidence can be given to show that real consideration was other than what has been stated in the document. In that case also the guarantee deeds were executed as if the payments were to be made to the principal debtor in future when in fact the loans had already been advanced and they were not to be advanced afresh at the time of or subsequent to the agreement of guarantee. So ex facie the consideration mentioned in the guarantee deed was incorrect. However, the court found that consideration for which the guarantee was given was in the knowledge of the parties and the language of the guarantee bond was held to be immaterial.

vii. Recently another single judge of this court in Madan Lal Sobti Vs. Rajasthan State Industrial Development and Investment Corporation Limited MANU/DE/9636/2006 also had occasion to consider the said provision. In that case also, as in this case, the execution of the documents was not disputed. The plea was that the documents were got executed by misrepresenting and concealing material facts; it was the case that the mortgage in that case was created much after the date of sanction and disbursement of the loan in favour of the borrower, without any further facility being advanced at that stage; the mortgage was thus alleged to be null and void for lack of consideration. It was the plea that the consideration for a contract can be passed only once and thus the additional guarantee cannot be legally claimed and enforced in law unless fresh consideration is given and which was not so given in that case. Reliance was also placed on illustration (c) to Section 127 of the Act. This court found that the mortgage in that case came into being after the issuance of demand letters and failure of the borrower to clear the dues. It was held to be obviously a case of creation of mortgage arising from forbearance to sue and thus it was held that the mortgage could not be said to be without consideration. The court held that the mortgage in that case being to secure forbearance to sue against the borrower, the mortgagor could not be permitted to defeat the rights of the creditor and the courts ought not to permit the same. Thus it will be found that this court also laid emphasis on existence of consideration rather than on whether the deed of guarantee was executed contemporaneously or subsequent to the consideration. Thus the view of this court is not different from that of the various other High Courts as discussed above.

18. However, I would be failing in my duty if I do not refer to judgments taking a contrary view of Section 127 and/or illustration

(c) thereto.

19. Reference may first be made to Ram Narain Vs. Lt. Col. Hari Singh AIR 1964 Rajasthan 76 where a single judge held on the basis of illustration (c) to Section 127 that anything done or any promise made for the benefit of the principal debtor must be contemporaneous to the surety's contract of guarantee in order to constitute consideration therefor. It was further held that a contract of guarantee executed afterwards without any consideration is void. Reliance was placed upon Nanak Ram Vs. Mehin Lal (1875) ILR 1 All 487 and the judgment of the privy counsel in Kalicharan Vs. Abdul Rahman MANU/PR/0083/1919 and another judgment of the Allahabad High Court in Chakhan Lal Vs. Kanhaiya Lal AIR 1929 All 72 and yet another judgment of the Oudh High Court in M. Ghulam Husain Khan Vs. M. Faiyaz Ali Khan AIR 1940 Oudh 346 (taking the same view as judgments in para 16 above) distinguished.