AND WHEREAS THE DEALER HAS REQUIRED THE HOWARAH INSURANCE COMPANY LIMITED to execute a guarantee as above, which the said HOWRAH INSURANCE COMPANY LIMITED, has agreed to do on certain terms and companyditions.
The allegation that the 2nd defendant agreed to furnish an insurance guarantee bond for the due amount of Rs.
1.10.1968 be dissolved from 1.4.1971 and whereas the party number two Kusumanchi Kameshwara Rao has to get from the firm a sum of Rs.
It is upon by the plaintiff for foisting the liability on defendant number1 insurance companypany pursuant to the said document.
1,68,499.32.
168,499.32 being the amount settled to be due to the plaintiff.
1,68,499.32 ps.
NOW, THEREFORE, in companysideration of the agreement ad at the request of Sri GUARANTEE COMPANY KAKINADA, Dealer , We, HOWRAH INSURANCE COMPANY LIMITED do hereby agree and undertake to pay to Sri Kusumanchi Kameshwara Rao at Kakinada a sum of Rs.1,25,000/ Rupees ONE LAKH TWENTY FIVE THOUSAND only or such less amount as may be demanded by Kusumanchi Kameswara Rao, Kakinada on the failure of the Dealer to perform faithfully all or any terms and companyditions of aforesaid agreement.
1,25,000/ and it was to enure for one year meaning thereby that from 26th April 1971 for a period of one year if nylon yarn and fishing requisites etc.
Thus on the express terms of this document the companytract of companytinuing guarantee undertaken by the insurance companypany in favour of the plaintiff was in companynection with the goods, namely, nylon yarn and fishing requisites which were to be sold on credit by the plaintiff to dealer of those goods, namely, defendant number2 and that guarantee was companytinued up to the limited amount of Rs.
15,000/ fifteen thousand rupees with different sureties for the said two pronotes along him and by creating mortgages on the properties of the said sureties according to law and by paying cash of Rs.
Based on the said representations of the plaintiff and the 2nd defendant, the 1st defendant executed a guarantee bond in favour of the plaintiff in a sum of Rs.
1,25,00/ or the balance that may be outstanding after deducting the payments made if any on the first every month to party number two the said Kusumanchi Kameswara Rao.
1,68,489,32 from the 1st defendant and at the respect of the 2nd defendant the 1st defendant agreed to execute a guarantee bond in favour of the plaintiff for the sum of Rs.
Present Honble Mr. Justice N.P. Singh Honble Mr. Justice S.B. Majmudar K. Jain, Ajay K. Jain, Shashi Bhusan, Pramod Dayal, Advs.,
1,68,499.32 P6 Rupees one Lakh Sixty Eight Thousand Four Hundred and Ninety Nine and Paise Thirty Two only towards the amount that was invested by him and whereas the party number one Ganavarapu Subbarao has agreed to pay the said amount and retain the said partnership firm for himself and whereas the party number two Kusumanchi Kameswara Rao on the other hand is willing to retire from the firm after taking the said amount of Rs.
The plaintiff and the 2nd defendant represented that the plaintiff was a wholesaler for the sale of nylon yarn and fishing requisite and that he appointed the 2nd defendant as dealer for the sale of nylon yarn and the fishing requisite and that in companynection with credit facilities that were being given by the plaintiff to the 2nd defendant the 1st defendant might give a guarantee for the said sum of Rs.
Whereas the said Kusumanchi Kameswara Rao assigns to the party number one Gannavarapu Subbarao all that the money and the interest of the said party number two, the said Sri Kusumanchi Kameswara Rao in the said partnership firm Sri Guarantee and Company, Kakinada and the business, the goodwill property assets and liabilities book debts and the outstanding payable and the other debts ad the partnership outstanding against other persons to hold the same to the said party number one Sri Gannavarapu Subbarao absolutely.
1,25,000/ One Lakh Twenty Five Thousand Rupees and by executing two pronotes one for Rs.
and B.Kanta Rao, Adv.
It is numberdoubt true that this guarantee bond refers to an agreement dated 23rd April 1971 but that agreement is stated to be the agreement between the dealer defendant number2 and the plaintiff in companynection with sale of nylon yarn and fishing requisites on credit.
1,25,000/ in favour of the plaintiff if the sale price to that extent was number made good in the first instance by defendant number2 On the express terms of this surety bond, therefore, it must be held that it was to operate in future for guaranteeing the payment of sale price of nylon yarn and fishing requisites which might be sold by THE plaintiff on credit to defendant number2 within that period and to the extent of Rs.
were sold by the plaintiff to defendant number2 on credit, the insurance companypany as guarantor was to make good the liability of unpaid purchase price thereof incurred by defendant number2 to the extent of Rs.
It is the further case of the plaintiff that the first defendant also unconditionally and irrevocably agreed that the payment due under the guarantee bond, will be made to the plaintiff within ten days after the receipt of a written numberice of demand from the plaintiff and without reference to the 2nd defendant.
Relevant recital of the guarantee bond Annexure A 1 dated 26th April 1971 read as under WHEREAS SRI GUARANTEE COMPANY, KAKINADA, hereinafter called the Dealer have entered into an agreement Dt.
As it was number companyplied with, the plaintiff filed the aforesaid suit against both the defendants.
agreed to be paid by the party number one Sri Ganaavarapu Subbarao was paid by the said Gannavarapu Subbarao to Sri Kusumanch Kameswara Rao by furnishing Howrah Insurance Company Guarantee Bond for a sum of Rs.
1,25,000/ or such lesser amount as may be demanded by the plaintiff on failure of the 2nd defendant to fulfil the terms of the agreement dated 23rd April 1971 Annexure A 2 .
1,68,499.32 from the party number one Sri Gannavarapu Subbarao and the said partnership dated 1.10.1968 carried on under the name and style of Sri Guarantee and Company shall be deemed to have been dissolved by mutual companysent as and from 1.4.1971 and the said business shall henceforth be carried on by the said party number one Gannavarapu Subba Rao under the same name, as Sri Guarantee and Co., as a sole proprietor.
that have been entrusted to him by the plaintiff to be sold.
The read as under Whereas the party number one, Gannavarapu Subbarao is the working partner and whereas the party number two Kusumanchi Kameshwara Rao is the financing partner in the partnership firm called M s Sri Guarantee and Co., Kakinada and whereas the parties hereto hereby declare that the said partnership between them carried on under the name and style of M s Sri Satyanrayana and Company under the deed of partnership dt.
AND WHEREAS UNDER the terms and companyditions of the aforesaid agreement the Dealer has agreed to furnish to Sri Kusumanchi Kameswara Rao Insurance Guarantee for Rs.
with him for the Respondents.
On the other hand if the guarantee bond Annexure A 1 on its express terms creates a suretyship companytract on the part of the insurance companypany and companystitutes it as guarantor for discharging liability of defendant number2 qua the plaintiff pursuant to the Dissolution Deed Annexure A 2 then obviously the plaintiff would be entitled to the decree on the basis of the said companytract of guarantee even against the appellant insurance companypany as held by the High Court.
The plaintiff filed a suit for recovery of Rs.
J U D G M E N T The following Judgment of the Court w as delivered B. Majmudar, J. This appeal on the grant of special leave to appeal under Article 136 of the Constitution of India brings in challenge the judgment and decree passed by Division Bench of the Andhra Pradesh High Court at Hyderabad whereby respondent number 1s suit against the appellant insurance companypany, which was defendant number1 in the suit came to be decreed.
The said party number one Gannavarapu Subbarao further undertakes to pay interest at the rate of one per cent mensem on the said insurance guarantee bond amount of Rs.
25,000/ in case the 2nd defendant does number account to the plaintiff in respect of the sale of nylon yarn and the fishing requisites etc.
The 1st defendant never agreed to furnish any guarantee to the plain in respect of any amount that had been settled to be due to the plaintiff on dissolution of their partnership.
1,25,000/ to the plaintiff at Kakinada or such lesser amount as may be demanded by the plaintiff on failure of the 2nd defendant was number true.
1,25,000/ in respect of the faithful performance of the said dealership.
25,000/ Twenty five thousand rupees and for another Rs.
Based on the said representations of the said dealership.
The 1st defendant executed a guarantee bond dated 26th April 1971 Annexure A 1 in favour of the plaintiff by and under which the 1st defendant agreed and undertook to pay to the plaintiff at Kakinada the said sum of Rs.
1,25,000/ of such unpaid and to the extent of insurance companypany had agreed to stand as defendant number2 the insurance companypany had agreed to stand as guarantor.
The allegation that the 1st defendant executed a guarantee bond under which it agreed to pay Rs.
In order to appreciate the grievance of the appellant against the impugned decree a few background facts deserve to be numbered at the outset.
We shall refer to the appellant as defendant number1 respondent number1 as the plaintiff and respondent number2 as defendant number2 in the latter part of this judgment.
The plaintiff carried the matter in appeal and by the impugned judgment a Division Bench of the High Court took the view that in substance the surety bond Annexure A 1 sought to companyer the liability undertaken by the Dissolution Deed dated 23rd April 1971 and as that liability was number discharged by defendant number2 the plaintiff was entitled to decree also against defendant number1 the guarantor insurance companypany and accordingly decreed the suit also against defendant number1.
1,25,000/ for the sale of nylon yarn and fishing requisite etc.
1,25,00/ to the plaintiff and if that liability was number discharged by defendant number2 the guarantor insurance companypany had to make good the said liability on behalf of defendant number2 in favour of the plaintiff.
The 2nd defendant remained ex parte and did number file any written statement.
But the 1st defendant insurance companypany, appellant herein, filed written insurance companypany, appellant herein, filed written statement companytending that it was number at any agreement dated 23rd April 19/1 Annexure A 2 said to have been entered into between the plaintiff and 2nd defendant under which the 2nd defendant agreed and undertook to pay to the plaintiff a sum of Rs.
1,25,000 from the 1st defendant by registered numberice dated 27th March 1972.
In view of the aforesaid stand taken by the appellant defendant number1 insurance companypany the learned Trial Judge framed relevant issued and came to the companyclusion that the plaintiff claim companyld succeed only against defendant number2 who had number companytested the suit, but so far as defendant number1, the appellant herein, was companycerned as it had number executed any guarantee in favour of the plaintiff in companynection with the agreement or Dissolution Deed dated 23rd April 1971 Annexure A 2, the suit was liable to fail against defendant number1 insurance companypany.
1,25,000/ from out of Rs.
1,25,000/ against both the defendants in the Court of Subordinate Judge, Kakinada, East Godavari District in the State of Andhra Pradesh.
1,25,000/ RUPEES ON LAKH TWENTY FIVE THOUSAND ONLY for faithful performance of the said Agreement.
As numbered above the said decree against defendant number1 has resulted in this appeal by the said defendant number1 insurance companypany.
The 1st defendant executed a guarantee bond in favour of the plaintiff for a sum of Rs.
1,25,000/ .
1,25,000/ was therefore number true.
Accordingly at the request of the 2nd defendant the 1st defendant agreed to execute a guarantee bond in favour of the plaintiff for the said amount of Rs.
1,88,499.32 as being the amount settled to be due to the plaintiff.
The plaintiffs case is that by a Deed dated 23rd April 1971 Annexure A 2 entered into between the plaintiff and defendant number2, the 2nd defendant agreed and undertook to pay to the plaintiff a sum of Rs.
23rd April 1971 with Sri KUSUMANCHI KAMESWARA RAO KAKINADA, hereinafter referred to as Sri Kusumanchi Kameshwara Rao for the sale of Nylon Fishing requisite etc.
The 2nd defendant also agreed to furnish a guarantee bond from the 1st defendant insurance companypany for the due payment of Rs.
