Wulff and Billing v. Jay L.R. (1872) 7 Q.B.

756

Rees v. Barrington -2 White & Tudor's L.C., 4th Edn. at p.

1002

Craythorne v. Swinburne [1807] 14 Ves.160

To emphasise the rule equity that s.140 propounded

State of Madhya Pradesh v. Kaluram [1967]1SCR266

To explain the expression security in s.141 which includes

all the rights as that of the creditor.
 Respondents 3 to 6, as partners of Respondent 2
firm (R2), entered into an agreement with Bank of
Travancore to open a cash credit account to the
extent of Rs. 1,00,000 to be secured by goods to be
pledged with the Bank.
The agreement provided that the borrowers shall
be responsible for the quantity and quality of goods
pledged.
Borrowers were allowed to withdraw pledged goods
with the prior consent of the bank.
 10% margin was required to maintain b/w
market value of goods and amount due in bank.
Under a clause in contract, borrowers need to
make statements and returns of cost of pledged
goods which verifiable by bank.
Bank can verify the quality and quantity of the
goods pledged by weighing and calculating its
value.
The appellant (A) became surety for the
borrowers w.r.t the account upto Rs.100,000 and
allowed the Bank to recover, notwithstanding any
other security the Bank may hold.
 Also, appellant gave surety for bills of discount
for amount of Rs. 45000
The stock pledged was initially valued at about
Rs. 99,991 but after verification shortage of goods
to the value of Rs. 35,690 was found. It was
alleged that R2-R6 must have taken away the
goods.
Also, bank on default by R.2-6 of Rs. 40,933.58
asked appellant to pay the liability and when
appellant denied, bank filed suit against R.2-6
and A.
After sub court and high court gave decision in
favour of the bank, A moved to SC.
 There was a variation made in the terms of the
contract between the principal debtor and the
creditor and the appellant was not aware of
this change which discharges appellant from
any liability as given in sec 133.
The conduct of the bank in giving time to
principal debtor to make up the deficit
absolves appellant from liability according to
sec 135.
 Further it was contended by appellant that in
march 1957, weekly statement showed value at
Rs. 99,991 whereas, April's weekly statement
showed shortage of Rs. 35,690. The bank
agent didnt know how the shortage occurred
leaving a possibility that the respondents
might have withdrawn it. So the Appellant
contended that his liability should be reduced
under sec.141.
 For the first contention, according to the
court, as appellant pointed out that the
maximum limit of Rs. 1,00,000 was allowed as
a credit and later reduced to 50, 000 and again
raised back to 1,00,00. There is no evidence in
support of this contention except for some
entries in pages of account maintained by
bank. Since appellant was not able to produce
strong evidence and court held that the entries
may be of a nature of private instruction.
Therefore sec. 133 can not apply.
 For contention under sec 135, it was held that the
time given to the principal debtors was under the
reference of time given to correct statements and
returns of the good and the time was not given to
debtor to pay by signing new contract without the
consent of surety. And hence, it does not absolve
appellant from his liability.
In light of sec 141, court said, as the respondent
bank had no idea about the shortage occurred, and
as mentioned in cl. 5 notwithstanding any other
security. Any other security in this clause means
any security other than the pledged goods. As in
Indian law surety ship extends to the security during
the contract. Therefore, appellant should pay Rs.
5243.58 instead of Rs. 40,933.58. Because A is not
liable to pay Rs. 35690 which were misplaced due to
the negligence of bank.