# S. CHATTANATHA KARAYALAR v. THE CENTRAL BANK OF INDIA AND OTHERS

- **Citation:** [1965] 3 S.C.R. 318
- **Court:** Supreme Court of India
- **Decided:** 1965-03-09
- **Case number:** Civil Appeal No. 405 of 1964
- **Bench:** P. B. Gajendragadkar, Raghubar Dayal, V. Ramaswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/s-chattanatha-karayalar-v-the-central-bank-of-india-and-others-3489
- **Pages:** 11

## Headnote

B
Promissory Note, Letter of continuity and Hypothecation Agreement-Interpretation of-Liability if as surety of co-obligant.
On the basis of a promissory note and a letter of continuity
executed by the appellant and respondent Nos. 2 and 3 and a hypothecation agreement executed by the respondent No. 2, the respondent No. I-bank opened on overdraft account. in the name ·of
respondent 2. In the promissory note, the appellant and respondent
C
Nos. 2 and 3 had "jointly and severally promised to pay" the bank
or order; in the letter of continuity sent along with promissory note
to the bank, the appellant, respondent Nos. 2 and 3 stated that "the
said promissory note is to be a surety to you for the repayment of
the ultimate balance or sum remaining unpaid on the overdraft"; and in the hypothecation agreement the bank had agreed to
open a cash credit account at the request of respondent No. 2. The
D
bank filed a suit against the appellant and re;;pondent Nos. 2 and 3
for recovery of the amount due on the overdraft. The appellant and
respondent No. 3 pleaded, inter alia, that they had executed the
promissory note as a surety for respondent No. 2 and that ·they are
not co-obligants. The Trial Court held the appellant and respondent
No. 3. were not merely sureties but were co-obligants and decreed
the suit, which was affirmed by the High Court. In appeal by certiE
ficate;
HELD: The finding of the High Court was not correct. [324 C-D].
Interpreting the language of the promissory note in the context of the letter and the hypothecation agreement, the status of the
apoellant with regard to the overdraft account was that of a surety
and not of co-obligant. [324 A].
If the transaction is contained in more than one document betF
ween the same parties, they must be read and interpreted together
and they have the same legal effect for all purposes as if they are
one document. [323 C].
Manks v. Whiteley, (1912) I Ch. 735, applied;
The pcovisions of Section 92 of the Evidence Act did not app])•
in the present case, because the appellant was not attempting to
furnish evidence of a·ny oral agreement in derogation of the promissory note but relied on the existence of a collateral agreement
in vvritirig the letter and the hypothecation agr~ment, \Vhich formed parts of the .:;.ame transaction as the promissory note. r325 Hl

## Text

318
S. CHATTANATHA KARAYALAR
A
v.
THE CENTRAL BANK OF INDIA AND OTHERS
March 9, 1965
[P. B. GAJENDRAGADKAR, C. J., RAGHUBAR DAYAL AND
V. RAMASWAMI, JJ.]
B
Promissory Note, Letter of continuity and Hypothecation Agreement-Interpretation of-Liability if as surety of co-obligant.
On the basis of a promissory note and a letter of continuity
executed by the appellant and respondent Nos. 2 and 3 and a hypothecation agreement executed by the respondent No. 2, the respondent No. I-bank opened on overdraft account. in the name ·of
respondent 2. In the promissory note, the appellant and respondent
C
Nos. 2 and 3 had "jointly and severally promised to pay" the bank
or order; in the letter of continuity sent along with promissory note
to the bank, the appellant, respondent Nos. 2 and 3 stated that "the
said promissory note is to be a surety to you for the repayment of
the ultimate balance or sum remaining unpaid on the overdraft"; and in the hypothecation agreement the bank had agreed to
open a cash credit account at the request of respondent No. 2. The
D
bank filed a suit against the appellant and re;;pondent Nos. 2 and 3
for recovery of the amount due on the overdraft. The appellant and
respondent No. 3 pleaded, inter alia, that they had executed the
promissory note as a surety for respondent No. 2 and that ·they are
not co-obligants. The Trial Court held the appellant and respondent
No. 3. were not merely sureties but were co-obligants and decreed
the suit, which was affirmed by the High Court. In appeal by certiE
ficate;
HELD: The finding of the High Court was not correct. [324 C-D].
Interpreting the language of the promissory note in the context of the letter and the hypothecation agreement, the status of the
apoellant with regard to the overdraft account was that of a surety
and not of co-obligant. [324 A].
If the transaction is contained in more than one document betF
ween the same parties, they must be read and interpreted together
and they have the same legal effect for all purposes as if they are
one document. [323 C].
Manks v. Whiteley, (1912) I Ch. 735, applied;
The pcovisions of Section 92 of the Evidence Act did not app])•
in the present case, because the appellant was not attempting to
furnish evidence of a·ny oral agreement in derogation of the promissory note but relied on the existence of a collateral agreement
in vvritirig the letter and the hypothecation agr~ment, \Vhich formed parts of the .:;.ame transaction as the promissory note. r325 Hl
Case law referred to.
Crv1L APPELLATE JURISDICTION: Civil Appeal No. 405 of
1964.
.
Appeal from the judgment and decree dated July 18. 1962 of
the Kerala High Court in A. S. No. 561 of 1961.
S. T. Desai. M. S. K. Sastri and M. S. Narasimhan for the
appellant.
.
G. S. Pathak. B. Dutta, C. Chopra. J. B. Dadachanji, 0. C.
l'vfathur and Ravindcr Narain for Respondent No. 1.
G
H
A
B
0
D
E
F
G
H
s. c. KABAYALAR v. CENTRAL BANK (Ramaswami, J.)
3l9
The Judgment of the Court was delivered by
Ramaswami, J.
This appeal by certificate is brought on
behalf of the 3rd defendant against the judgment and decree of
the High Court of Kerala dated July 18, 1962 in A.S. No. 561 of
1961 which affirmed the. judgment and decree of the Court of the
Subord;nate Judge of Alleppey in 0.S. No. 114 of 1957 ..
By a resolution Ex. BD dated November 25, 1946 the Board
of Directors of the !st defendant Company authorised the 2nd
defendant to obtain financial aocommodation from the plaintiffbank to the extent of Rs. 15 lakhs under different kinds of loans.
Pursuant to this resolution the Company by its Jetter Ex. DE dated
November 26, I 946 asked for accommodation for Rs. I Jakh under
clean oy~rdraft, for Rs. 4 Jakhs under open loan and for Rs. 10 lakhs
under out agency and key loans .. On November 26, 1946 all the
three defendants executed a prom;ssory note Ex. B in favour of the
plaintiff-bank for a sum of Rs. 4 lakhs. The promissory note was
sent to the plaintiff-bank along with a letter-Ex .. A styled letter
of continuity dated November 26, 1946. Ex. A reads as follows:
"Alleppey, 26th November, 1946..
The Agent,
The Central Bank of India Limited,
Alleppey.
Dear Sir,
We beg to enclose an on demand pro-note p.
Rs. 4,00,000 (Rupees Four lacs only) s;gned by us which
is given to you as security for the repayment of any overdraft which is at present outstanding in our name and
also for the repayment of any overdraft to the extent of
Rs. 4,00,000 (Rupees four lacs only) which we may avail
of hereafter and the said Pro-Note is to be a security to
you for the repayment of the ultimate balance of sum
remaining unpaid on the overdraft and we are to remain
liable to the Pro-Note notwithstanding the fact that by
payments made into the account of the overdraft from
time to time the overdraft may from time to time be reduced O( extinguished or even that the balance of the
said accounts may be at credit.
Yours faithfully,
for CASHEW Products Corporation Ltd.
For General Agencies Ltd. (Respondent 2)
Sd/- P. S. George
Sd/- P. S. George
(Respondent 3)
Managing Director,
Sd/- S. Cbattanatha Karayalar
(Appellant).
Exhibit B states:
"Br. Rs. 4,00,000
Managing Agents.
"
Alleppy, 26th November 1:946.
320
SUPREME COURT REPORTS
[1965] 3 s.c.11.
On Demand we, the Cashew Products Corporation
A
Ltd., S. Chattanatha Karayalar and P. S. George jointly
and severally proinise to pay The Central Bank of India
Limited or order the sum of British Rs. Four Lacs only
together with interest on such sum from this date at the
rate of Two per cent over the Reserve Bank of India rate
with a minimum of Five per cent per annum with quarB
terly rests for value received.
For Cashew Products Corporation Ltil.
For General Agencies Ltd.
Sd/- P. S. George (Respondent 2)
Managing Director,
O
. . . . . ... . . . . . . . . . . . . . . . . . . . . . . . . . . Managing Agents.
Sd/-P. S. George (Respondent No. 3).
Sd/- S. Chattanatha Karayalar
(Appellant).
"
On the same day, defendant No. 1 as "Borrower" executed
D
m favour of the plaintiff-bank Ex. G, a cjeed of hypothecation of
its stocks of goods for securing the Demand Cash credit. Ex. G is
to the following effect:
"Hypothecat!on of goods to secure a Demand cash
Credit.
E
No.
Amount No. 4,00,000.
Name. The Cashew Products Corporation, Limited,
Quilon.
The Central Bank of India, Limited (hereinafter
called 'the Bank') having at the request of the Cashew
Products Corporation Ltd., Quilon, (hereinafter called
'the Borrowers' opened or agreed to open in the Books
of the Bank at Alleppey a Cash Credit account to the
extent of Rs. Four lacs only with the Borrowers to remain
in force until closed by the Bank and to be secured by
goods to be hypothecated with the Bank it is hereby agreed
between the Bank and the Borrowers (the Borrowers
agreeing jointly and severally) as follows:-
•
*
•
•
•
14. The Borrowers agree to accept as conclusive
proof of the correctness of any sum claimed to be due
from them to the Bank under this agreemrnt a statement
of account made out from the books of the Banks of the
Bank and signed by the Accountant or other duly authorised officer of the Bank without the production of any
other voucher, document or paper.
F
G
H
s. c. KARAYAI.AR v. CENTRAL BANK (Rnmaswami, J.)
321
A
15. That this Agreement is to operate as a security
for the balance from time to time due to the Bank and
also for the ultimate balance to become due to on· the
said Cash Credit Account and the said account is not to
be considered to be closed for the purpose of this security
and tlie security ofhypothecated goods is not to be conB
sidered exhausted by reason of the said Cash Credit Account being brought to credit at any time or from time
to time or of its being drawn upon to the full extent of
said sum of Rs. 4,00,000 if afterwards reopened by a
payment to credit.
c
D
*
*
•
•
*
In witness whereof the Borrowers have hereto set,
thelr hands this Twenty sixth day of November the
Christian Year one thousand· nine hundred and fortysix.
For Cashew Products Corporation Ltd.,
For General Agencies Ltd;
Sd/-
Managing Director,
Managing Agents
E
Sd/-
Schedule of goods referred to in the foregoing instrument, Stocks of cashewnuts, cashew kernels, tin plates,
Hoop Iron and other packing materials stored and or to
be stored in the factories at Kochuplamood, Chathanoor,
Ithikara, Kythakuzhi, Paripalli, Palayamkunnu and anyother factories in which we may. be storing from time to
time and at Cochin awaiting shipment.
For Cashew Products Corporation Ltd;
For General Agencies Ltd;
Sd/-
Managing Director,
Managing Agents."
On the basis of those documents the plaintiff-bank opened an
H
overdraft account in the name of defendant No. I. On December 21,
1949, the three documents-Ex. A, B and G were renewed in
identical terms by Exs. C, D and F. On January 1, 1950 a sum of
Rs. 3,24,645/12/2 became due to the plaintiff-bank and on that
date a demand notice-Ex. 'O' was sent by the plaintiff-bank for
repayment of the amount. A second notice-Ex. L was sent by the
plaintiff-bank on April 26. 1950. On September 8, 1950 the plaintiff.
bank brought a suit for the recovery of Rs. 2,86,292/11I11 from
322
SUPREME COURT REPORTS
[1965) 3 s.c.R.
all the three defendants. The suit was contested by all the defendA
ants. The case of defendant No. 1 was that it had sustained Joss on
account of sudden termination of credit facilities by the plaintiff-bank
and the amount of Joss sustained should be set off against the claim
of the plaintiff-bank. Defendants Nos. 2 and 3 pleaded that they had
executed the promissory notes only as a surety for the 1st defendant
and that they are not co-obligants. It was· further alleged that the
B
plaintiff-bank had granted Joan to the 1st defendant in other forms
such as Out Agency loans against goods which were security for the
open loan. It was said that the plaintiff-bank had made adjustments
in the open loan account and in. the clean over-draft account by
debiting and correspondingly crediting in other accounts without
the consent of defendants 2 and 3. The plaintiff-hank had also allowC
ed defendant No. 1 to over-draw freely in the clean overdraft and
open loan accounts far beyond the limits agreed upon. It was alleged
that the plaintiff-bank had converted secured loans into simple loans
by releasing goods covered by Bills of Lading against trust .receipts
and had thereby deliberately frittered away such securities. They
contended that they were discharged from obligation as sureties to
D
the contract for these reasons. Upon these rival contentions the.
learned Subordinate Judge of Alleppey took the view that defendants 2 and 3 were not merely sureties but they were co-obligants,
because they had executed the promissory notes-Exs. B & D. In
view of this finding the learned Subordinate Judge considered it
unnecessary to go into the question whether. defendant No. 3 was
E
absolved from his· liability "for all or any reasons set forth in para
5 of the Consolidated Written Statement filed by him". Agaihst the
judgment and decree of learned Subordinate Judge, Alleppey defendant No. 3 presented an appeal in the High Court of Kerala
under A. S. 561 of 1961. Defendants 1 and 2 did not appeal. The
appeal was dismissed by the High Court of Kerala on July 12, 1962.
F
It was held by the High Court that defendant No. 3 was a co-obligant
and not a surety. On July 16, 1962 defendant No. 3 filed C.M.P. No.
5032 of 1962 praying that the argument of the appellant with regard
to his liability as co-obligant may be expressly dealt with in the
judgment of the High Court and complaining that the appellant
would be seriously prejudiced if the omission was allowed to remain.
G
Thereupon the learned Judges of the High Court wrote a supplementary judgment on July 18, 1962 rejecting the further arguments
addressed on behalf of the appellant.
The first question presented for determination in this case is
whether the status of the 3rd defendant in regard to the transaction
of overdraft account is that of a surety or of a co-obligant. It was
H
argued by Mr. Desai on behalf of the appellant that the High Court
has misconstrued the contents of Exs. A and B in holding that the
3rd defendant has undertaken the liability as a co-obligant. It was
submitted that there was an integrated transaction constituted by
the various documents-Bxs. A, B and G executed between the
parties on the same day and the legal effect of the documents was
to confer on the 3rd defendant the status of a surety and not of a
A
B
c
D
E
F
G
H
s. c. XAMYALARV. C1'NTltAL BANK (Ramaswami, J.)
323
co·obligant. In our opinion, the argument put forward on behalf
of the appellant is well-founded and must be accepted as correct.
It is true that in the promissory note-Ex. B all the three defen·
dants have "jointly and severally promised to pay the Central Bank
of India Ltd. or order a sum of Rs. 4 lakhs only together with inter·
est on such sum from this date", but the transaction between the
parties is contained not merely in the promissory note-Ex. B-but
also in the letter of continuity dated November 26, 1946--Ex. A
which was seilt by the defendants to the plaintiff-bank along with
promissory note-Ex. B on the same date. There is another document executed by defendant No. I on November 26, 1946-Ex. GHypothecation agreement. The principle is well-established that if
the transaction is contained in more than one document between the
same parties they must be read and interpreted together and they
have the same legal effect for all purposes as if they are one document. In Manks v. Whiteley,(') Moulton, L. J. stated:
"Where several qeeds form part of one transaction and
are contemporaneously executed they have the same effect
for all purposes such as are relevant to this case as if they
were one deed. Each is executed on the faith of all the
others being executed also and is intended to speak only as
part of the one transaction, and if one is seeking to make
equities apply to the parties they must be equities arising
out of the transaction as a whole."
It should be noted in the present case that the promissory
note-Ex. B-was enclosed by the defendants along with the letter
of continuity-Ex. A before send;ng it to the plaintiff-bank. In the
letter-Ex. A i, is clearly stated that the promissory note Ex. B was
given to the plaintiff-bank "as security for the repayment of any
overdraft to the extent of Rs. 4,00,000". It is further stated in Ex. A
that "the said promissory note is to be a security to you for the
repayment of the ultimate balance or sum remaining unpaid on the
overdraft". In the hypothecat;on agreement-Ex. G it is stated that
the plaintiff-bank has agreed to open a cash Credit account to the
extent of Rs. 4 lakhs at the request of the Cashew Products Corporation Ltd., Quilon. According to para 15 of the hypothecation
agreement it operates as a security for the balance due to the plaintiff.
bank on the Cash Credit account. Para 12 of the hypothecation
agreement states that if the net sum realised be insufficient to cover
the balance due to the plaintiff-bank, defendant No. 1 should pay
the balance of the ac.count on product;on of a statement of account
made out from the books of the bank as provided in the 14th Clause.
Under this Clause defendant No. 1 agreed to accept as conclusive
· proof of the correctness of any sum claimed to be due from it to
the bank a statement of account made out from the books of the
Bank and signed by the Accountant or other duly authorised officer
(') [1912] 1 Ch. 735.
L/B(N)3SCI-8
324
SUPBEKE COURT llEl'ORTS
[1965] 3. s.o.n.
of the Bank without the production of any other document. If the
language of the promissory note-Ex. B is interpreted in the context of Exs. A & G it is manifest that the status of the 3rd defendant
with regard to the transaction was that of a surety and not of a cir
obligant. This conclusion is supported by letters-Exs. AF dated
November 27, 1947, AM dated December 17, 1947 in which the
Chief Agent of the plaintiff-bank has addressed defendant No. 3 as
the "guarantor". There are similar letters of the plaintiff-bank,
namely, Exs. CE dated December 28, 1947, CG dated January 13,
1948, AS dated February 23, 1949, V dated October 21, 1949, III
dated December 16, 1949, IV dated January 12, 1950 and 'O' dated
March 29, 1950 in which defendant No. 3 is referred to either as a
"guarantor" or as having furnished a guarantee for the loan. Our
concluded opinion, therefore, is that the status of the 3rd defendant
with regard to the overdraft account was that of a surety and not of
CCK>bligant and the finding of the High Court on this issue is not
correct.
On behalf of respondent No. 1 Mr. Pathak stressed the argument that there is no contract of suretyship in the present case in
terms of s. 126 of the Contract Act and the plaintiff-bank is not,
legally bound to treat the 3rd defendant merely in the character of
a surety. Mr. Pathak relied upon the decision of the Madras High
Court in Vyravan Chettiar v. Official Assignee of Madras(') in which
it is pointed out that persons who are jointly and severally liable on
promissory notes are not sureties under s. 126 of the Contract Aci,
nor do such persons occupy a position analogous to that of a surety
strictly so called to attract the provisions of s. 141 of the Contract
Act. Reference was made, in this connection, to the deciSion of the
House of Lords in Duncan Fox & Co. v. North & South Wales
Bank(') in which Lord Selbourne, L. C. distinguished between three
kinds of cases; ( l) those in which there is an agreement to constitute,
for a particular purpose, the relation of principal and surety, to which
agreement the creditor thereby secured is a party; (2) those in which
there is a similar agreement between the principal and surety only,
to which the creditor, is a stranger, and (3) those in which, without
any such contract of suretyship, there is a primary and a secondary
liability of two persons for one and the same debt, the debt being as
between the two that of one of those persons only, and not equally
of both, so that the other if he should be compelled to pay it, would
be entitled to reimbursement from the persons by whom (as between
the two) it ought to have been pa!d. It is pointed out by the learned
Lord Ch,ancellor that in all these kinds of cases the person who discharged the liability due to the creditor, would be entitled to the
benefit of the security held by the creditor though a case of surety·
ship strictly speaking would. fall only under cl<iss 1, as a contract of
guarantee is confined to agreemellts where the surety agrees with
the creditor that he would discharge the liability of the principal
(') A.l.R. 1933 Ma<l, 39.
(1) (1881] 6 A.C.I.
A
B
0
D
E
.,
Cl
H
A
B
c
D
B
r
G
B
s. c. KARAYALARV. CENTl.<AL BANk (Rama.sWami, J.)
325
debtor in case of his default. It is manifest that classes 2 and 3 are
not cases of suretyship strictly so called. Lord Selbourne observed
that the case before him did not fall within the first or the second
class but it fell within the 3rd class in which strictly speaking there
was no contract of suretyship. But the Lord Chancellor held in
that case that even in the second and third class of cases the surety
has some right to be placed in the shoes of the creditor where· he
paid the amount. The argument of Mr. Pathak was that the position
in Indian Law is different and the principles relied upon by Lord
Selbourne, L. C. in Duncan Fox & Co. v. North &·South Wales
Bank(') did not apply to the present case. Mr. Pathak referred, in
this connection, to the illustration to s. 132 of the Contract Act in
support of his argument. We consider that the legal proposition for
which Mr. Pathak is contending is correct, but the argument has
not much relevance in the present case. It is true that s. 126 of the
Contract Act requires that the creditor must be a party to the con·
tract of guarantee. It is also true that under s. 132 of the Contract
Act the creditor is not bound by any contract between· the co, •
debtors that one of them shall be liable only on the default .of ~he
other even though the .creditor may have been aware of the existence
of the contract between the two co-debtors. In the present ~ase,
however, the legal position is different, because the plaintiff-bank
was a party to the· contract of guarantee-Ex. A which is contemporaneous with the promissory note-Ex. B. The plaintiff-bank
was also a party to the contract of hypothecation executed by defendant No. 1 in which it is stated that the plaintiff-bank had agreed
r.o open a Cash Credit Account to the extent of Rs. 4 lakhs in
favour of defendant No. I. It is manifest, therefore, in the present
case that the requirements of s. 126 of the Contract Act are satisfied
and defendant No. 3 has the status of a surety and not .of a coobligant in the transaction of overdraft account opened in the mme
of defendant No. I by the plaintiff-bank. On behalf of respondent
No. I Mr. Pathak also referred to the decision in Venkata Krishnayya
v. Karnedan Kothari(') and submitted that defendant No. 3 cannot
be permitted to give evidence in regard to a collateral transaction
in view of the bar imposed by s. 92 of the Evidence Act and his
position is as a co-obligant and that the terms of the promissory
note cannot be altered by any other transaction. We are unable to
accept this argument as correct. The provisions of s. 92 of the Evidence Act do not apply in the present case, because defendant No. 3
is not attempting to fl~rnish evidence of any oral agreement in
derogation of the promissory note but relying on the existence of
a collateral agreement in writing-Exs. A & G which form parts of
the same transaction as the promissory note-Ex. B. The decision
of the Madras High Court in Venkata Krishnayya v. Karnedan
Kothari(') is, therefore, not applicable and Mr. Pathak is not able
to make good his submission on this aspect of the case.
(') [1881) 6 A.C.I.
(1) A.J.R. 1935 Had. 643.
326
SUPREME COURT REPO~TS
tl965J 3 s.c.1\,
It was also contended by Mr. Pathak on behalf of respondent A
No. 1 that the suit is based on the promissory note-Ex. B against
all the three defendants and not on the overdraft account. We <io
not think there is any substance in this argument. In this connection Mr. Pathak took us through the various clauses of the plaint
but there is no mention about the promissory note. dated December
21, 1949 except in para 6 of the plaint which recites that the defendant executed a promissory note "as security for the repayment
of the balance outstanding under the overdraft". We are satisfied,
on exam;nation of the language of the plaint, that the suit is based
not upon the promissory note but upon the balance of the overdraft
account in the books of the plaintiff-bank. In para 11 of the plaint
the plaintiff-bank asked for a decree against the defendants jointly
and severally "for the recovery of Rs. 2,86,292 / ll / II as per accounts annexed". In the plaint it is stated that the plaintiff had
given two notices to the defendants-Ex. 'O' dated January 1, 1950
and Ex. L dated April 26, 1950 but in neither of these not\ces has
the plaintiff referred to the promissory' note executed by the defendants or that the suit was based upon the promissory note. On the
contrary, the plaintiff-bank referred in Ex. 'O' to the open loan
accounts and asked the defendants to pay the amounts due to the
bank under these accounts. It is, therefore, not possible for us to
accept the contention of Mr. Pathak that the suit is based upon
the promissory note and not upon the amount due on the overdraft account. In this connection, we may incidentally refer to the
fact that in its statement of the case before this Court, respondent
No. 1 has clearly stated that the claim on the overdraft account
against the appellant was valid "because the overdraft was treated
as in favour of all the tlefendants (appellant and respondents 2 and
3 herein) and that respondent No. 2 was only authorised to operate
independently on that account and that the limit under the overdraft was placed at the disposal of respondent No. 2 by an express
authority given by all the defendants (the appellant and respondents 2 and 3)". This shows thatTespondent No. l's case is that the
suit is based on an overdraft, and since the overdraft was treated
as in favour of all the defendants, the appellant is liable for the
balance due on it.
We shall then consider the quest;on whether defendant No. 3
B
c
D
E
F
G
is discharged of his liability as a surety by reason of the alleged
conduct of the plaintiff-bank in violating the terms of the agreement-Ex. G or by the alleged fraudulent or negligent conduct of
H
the plaintiff-bank in other ways. It was submitted on behalf of the
appellant that the plaintiff-bank had made adjustments in the open
loan account and in the clean overdraft account with the 1st defendant by debiting and correspondingly crediting in other accounts
without the consent of the appellant. It was further alleged that
the plaintiff-bank had granted loans to the 1st defendant against
goods covered by open loan agreement and that it had converted
A
B
c
D
E
F
G
H
S, o. KARAYALAR i·. CENTRAL l3AN!t (Ilamaswmn.i, J.)
32 7
secured Joans into simple loans by releasing goods covered by the
Bills of Lading against trust receipts and had thereby deliberately
frittered away such securit'es. The question at issue is a mixed
question of law and fact and it is unfortunate that the High Court
has not properly dealt with this question or given a finding whether
the appellant would be discharged from the liability as a surety for
the overdraft account because of the alleged conduct of the plain·
tiff-bank. We consider it necessary that this case should go back on
remand to the High Court of Kerala for deciding the issue and to
give proper relief to the parties. In this connection, it is necessary
to point out that after the High Court delivered its judgment on
July 12, 1962, an application was made by the learned Advocate
appearing for the appellant that some grounds which had been
urged by him before the High Court had not been considered by it
The High Court, th~refore, adopted the somewhat unusual course
of del'vering a supplemental judgment. Mr. Desai contends that
even the supplemental judgment has failed to consider the ap·
pellant's contention that he had been discharged by reason of the
fact that adjustments were made by respondent No. 1 indiscrimi·
nately in respect of its dealings in three or four different accounts
with respondent No. 2 to the prejudice of the appellant. We have
broadly indicated the nature of the contention raised by Mr. Desai.
Ordinarily, we do not permit parties to urge that points raised
on their behalf in the High Court had not been considered, unless
it is estabfohed to our satisfaction that t~ points in question had
in fact been urged before the High Court and the High Court,
through inadvertence, has failed to consider them. In the present
case, we are not prepared to take the view that the grievance made
by Mr. Des:1 i is not well-founded. It does appear that after the first
judgment was delivered. an application was made by the learned
Advocate who argued the appeal himself before the High Court in
which he set out his complaint that some of the points which he
had argued before the High Court had not been considered by it.
That is why the High Court delivered a supplemental judgment.
Aggrieved by the said judgment. the appellant filed an application
for cer\ificate before the High Court, and in this application again
he has taken specific grounds, e.g., under paragraph 6(k) and para·
graph 8 that even the supplemental judgment has failed to consider
some of the points urged by him. While granting the certificate, the
High Court has made no comment on these grounds. It is to be
regretted that when these grounds appear to have been urged before
the High Court, the High Court should have failed to deal with
them even in its supplemental judgment. That is the reason why
we think it is necessary that the matter must go back to the Higl!
Court for disposal of the appeal in the light of this judgment.
Mr. Pathak. no doubt, seriously contested the validity of Mr.
Desai's argument. He urged that the adjustments on which Mr.
Desai has founded his claim for discharge do not really support
328
SUPREME COURT l\EPORTB
[1965] 3 B.C.R,
his case. We. proposed to express no opinion on this point. As we
A
have just observed, the contention thus raised amounts to a mixed
question of fact and law and we do not think it would be expedient
for us to deal with it ourselves when the High Court has omitted to
conslder it.
·
·
For these reasons we allow this appeal, set aside the judgment
B
and decree of the High Court of Kerala dated July 18, 1962 in A.S.
561 of J 961 and order that the case should go back for being reheard and redetermined by the High Court in accordance with the
observations made in our judgment. The parties will bear their own
costs upto this stage.
Appeal Allowed.