Madras High Court

Jagadeesh Chandra S.Davey vs V.Velu on 23 September, 2021

                                                                                      A.S.No.367 of 2017


                            IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                   DATED: 23.09.2021

                                                       CORAM:

                                 THE HONOURABLE MS.JUSTICE P.T.ASHA

                                              A.S.No.367 of 2017 and
                                              C.M.P.No.13821 of 2017

                      Jagadeesh Chandra S.Davey                                      ...Appellant

                                                           Vs

                      1.V.Velu
                      2.K.Venkatesan
                      ...Respondents

                      PRAYER Appeal Suit filed under Section 96 r/w Order 41 Rule 1 of the
                      Code of Civil Procedure to set aside the decree and judgment dated
                      05.08.2016 passed in O.S.No.3487 of 2015 by the learned III Additional
                      Judge, City Civil Court, Chennai.


                                   For appellant       : Mr.V.Balasubramanian

                                   For respondents     : No appearance


                                                      JUDGMENT

The unsuccessful plaintiff has filed this appeal, challenging the

dismissal of the suit for recovering of money in O.S.No.3487 of 2015 on

the file of the learned III Additional Judge, City Civil Court, Chennai. http://www.judis.nic.in

A.S.No.367 of 2017

2.Plaintiff Case:-

It is the case of the plaintiff that the first defendant, who was

engaged in real estate business had approached the plaintiff along with

the second defendant who is none else than his father-in-law to provide

financial assistance. Accordingly, the plaintiff had agreed to provide

financial assistance subject to the second defendant standing guarantee/

surety for the repayment of the said sum.

3.On the aforesaid agreement, between the periods 18.06.2012 to

22.02.2014 the first defendant had in all borrowed a sum of

Rs.10,04,000/- on various dates and had executed a promissory note for

each of those loans and the said promissory note was counter signed by

the second defendant in his capacity as a surety. The interest payable

under each of the demand promissory notes varied from 36% to 60%

depending upon the profits made by the first defendant in his business.

4.The plaintiff would submit that till the month of September 2014,

the first defendant was servicing the interest without default. Thereafter,

the payment of interest was stopped. The defendants assured that they

would pay a sum of Rs.10,04,000/- together with interest on or before http://www.judis.nic.in

A.S.No.367 of 2017

31.12.2014. However, the promise was observed in breach. The plaintiff's

legal notice dated 30.04.2015 also did not evoke any reply or payment

from either of the defendants. Therefore, left with no other alternative, the

plaintiff has come forward with the suit in question.

5.Defendants set ex-parte:

Though both the respondents/defendants were served through

Court as well as privately on 06.09.2017 and 23.08.2017 respectively,

they did not take steps to appear in person or to be represented by the

learned counsels. A perusal of the decree of the lower Court indicates that

though the defendants had originally entered appearance through a

learned counsel, they have not filed their written statements and they

were set ex-parte and an ex-parte order came to be passed.

6.Trial Court:

The appeal has been filed challenging the exoneration of the second

defendant from his liability. The learned trial Judge after holding that the

first defendant was liable to repay the amount due under all the

promissory notes, has dismissed the claim against the second defendant.

The learned Judge held that the second defendant has signed as a surety http://www.judis.nic.in

A.S.No.367 of 2017

in Exs.A1 to A14, A17 to A18/Promissory notes and he has signed below

the word surety. However, in Exs.A15 and A16 the word surety is

missing. The learned Judge has held that the second defendant cannot be

mulcted with the liability since the documents does not reflect that the

second defendant has undertaken to pay the plaintiff in the event of the

first defendant failing to repay the amounts. The learned Judge would

submit that just the use of the word surety was contrary to the Provisions

of Section 126 of Indian Contract Act. On this ground, the suit against

the second defendant has been dismissed.

7.Point for consideration:

The only point for consideration that arises in the appeal is

“whether the second defendant can be held jointly and severally liable to

repay the amounts due under the decree to the plaintiff, in his capacity as

a surety?”

8.Discussion:

The trial Court has dismissed the suit against the second defendant

only on the ground that the signature of the second defendant in Exs.A1

to A14, A17 and A18 was simply as a surety without there being express http://www.judis.nic.in

A.S.No.367 of 2017

words that the second defendant was binding himself to the liability of

the first defendant. The learned Judge has held that this is contrary to the

provisions of Section 126 of Indian Contract Act. A reading of Section

126 would indicate that the contract of the guarantee, surety etc., can

either be oral or written. In the instant case, the second defendant has

counter signed the promissory notes which has been given by his son-in-

law/the first defendant to the plaintiff. He has signed the said document

fully comprehending the fact that he was standing guarantee for the dues

of the first defendant. Further, despite receiving the legal notice that was

issued by the plaintiff dated 30.04.2015 on 11.05.2015, the second

defendant has not come forward to deny the plaintiff's case. This assume

significances as in the said notice, a post-script had been added to the

notice addressed to the second defendant which reads as follows:

“The above notice is self explanatory. In respect of

the borrowings under pronotes from SI.No.1 to 18 you

have stood as surety for your son-in-law who is the

addressee of the notice. Since you have stood as surety

you are also equally liable to pay to my client so far as

outstanding due under pronotes under SI.No.1 to 18 are http://www.judis.nic.in

A.S.No.367 of 2017

concerned with interest amounting to Rs.13,16,064/-.

Take notice that if you failed to pay the said sum

within 14 days to my client and if my client is forced to

proceed legally then in that case my client will be

compelled to initiate legal proceedings against your son-

in-law Mr.Velu and in that case my client will be forced to

initiate legal proceedings against you also holding you

responsible for all costs and consequences thereto in your

capacity as surety.”

9.The above details would clearly shows that the plaintiff had

called the second defendant as a guarantor/surety for the loan borrowed

by the first defendant and had also held that he would be liable to make

good the payments, in case, the first defendant has failed to make the

payments. Despite receiving the said notice the second defendant has not

sent a reply denying this claim of the plaintiff. Therefore, the learned

Judge has totally misdirected himself in coming to the conclusion that the

second defendant cannot be held liable and thereby, dismissing the suit