P L D 1960 Dacca 983 (PLP)

AKBAR, J.‑This appeal by defendant No. 4 Probodh Chandra Barman arises out of a suit filed by the plaintiffs for recovery of a sum of Rs. 29,196‑7‑9.

2. The plaintiffs' case is as follows: Defendant No. 1, The Chittagong Suppliers Corporation (hereinafter referred to as the Corporation), contracted to purchase jaggery and mustard oil from the plaintiffs, M/s. Abdul Rahman Abdul Gani (here inafter referred to as Firm). On 9th January 1949, defendant No. 3 Kshirendra Lal Das Gupta and defendant No. 4 Probodh Barman executed an indemnity bond guaranteeing payment for the goods to be supplied to the defendant Corporation. There after, the plaintiff-Firm supplied goods worth Rs. 77,522‑10‑3 to the Corporation on credit. The Corporation, on 17th Septem ber 1949, returned goods worth Rs. 52,776‑5‑6 and took time for payment of the balance of Rs. 24,746‑4‑

9. The Firm was, however, unable to realise the aforesaid amount from the Cor poration or from the guarantors. They then started a criminal case against the guarantors, namely, defendant No. 3 Kshirendra Lal Das Gupta and defendant No. 4 Probodh Chandra Barman, under section 420, P. P. C. On Probodh Chandra Barman's executing a liability bond, they withdrew the criminal case. On 16th September 1952, they filed this suit for recovery of the said sum of Rs. 24,746‑7‑9 with interest at 6% per annum from 17th September 1949 to 17th September 1952. Thus, they laid their claim at Rs. 29,196‑7‑9.

3. They made the Corporation defendant No. 1, three alleged partners of the Corporation defendants l(a), 2 and 3, and the guarantors defendants 3 and 4 in the suit. Later, they added defendants 5 to 9 as partners of the Corporation.

4. Defendants Nos. 1 to 4 and 8 filed separate written statements contesting the claim of the plaintiff Firm.

5. The learned Subordinate Judge, who tried the suit, found: (1) that defendants Nos. 1(a) and 2 had no connection with the defendant‑Corporation and that defendant No. 3 was merely an employee of the said Corporation. (2) that the claim as against the Corporation and defendant No. 3 was hopelessly barred under Article 52 of the Limitation Act ; ' (3) that the claim was also barred as against defendants Nos. 5 to 8 who were added at a late stage as partners of the defendant‑Corporation ; (4) that the document, Exhibit 4, executed by defendant No. 4, Probodh Chandra Barman, was bit by section 23 of the Contract Act ; (5) that defendant No. 4 was liable for the amount claimed under the indemnity bond ; (6) that the said claim as against defendant No. 4 was not barred by limitation.

6. In this view of the matter, he decreed the suit as against defendant No. 4, Probodh Chandra Barman, and dismissed it as against the rest.

7. Hence defendant No. 4 has filed this appeal against the judgment and decree of the learned Subordinate Judge.

8. Mr. Asrarul Hossain, the learned counsel for the appel lant, has raised three points in this appeal. He has contended that the indemnity bond, Exhibit 5, is really a contract of surety ; that the indemnity bond was to remain effective for 20 days from the date of its execution; and that, in any event, the indemnity bond was barred by limitation.

9. On the other hand, Mr. S. C Bose, the learned Advocate for the respondent‑Firm, has contended that the contract was one of indemnity and that the suit was filed within the period of limitation.

10. Hence the first question is: Whether the Bond of in demnity, Exhibit 5, was really a contract of surety ? The said bond is in these terms: "In consideration of your selling merchandise or any other thing, sin which you deal, to Messrs. Chittagong Suppliers Corporation, on credit, during the whole year of nineteen hundred and forty‑nine, I do hereby agree to keep you jointly and severally indemnified against all consequences for your so selling to Messrs Chittagong Suppliers Corporation, on credit, and I hereby further undertake and guarantee (1) to pay you all dues on demand payable in connection with any goods and merchandise which you have sold to Messrs Chittagong Suppliers Corporation, should Messrs Chittagong Suppliers Corporation fail to settle their dues within the time faxed by you ; (2) In case of our inability to pay you your dues on receipt of your advice to the effect, you would be further entitled to an interest of 121 per cent per month on your total dues on Messrs Chittagong Suppliers Corporation."

11. Mr. Asrarul Hossain has argued that by this document defendant Probodh Chandra Barman made himself answerable for the debt of the Corporation and hence it amounted to a contract of surety. In support of his argument, he has relied on the decision in the case of Harburg India Rubber Comb Com pany v. Martin. ((1902) 1 K B 778)

12. In the above case the facts, were as follows : The plaintiffs supplied goods to a Company called the Crowdus Accumulator Syndicate, Limited. The said Syndicate having failed to pay their dues, the plaintiffs obtained a judgment against them and placed a writ of fi.fa. In the hands of the Sheriff to realise the amount. Mr. Winter, an agent of the plaintiffs, then approached Mr. Martin, a Director of the Syndicate, who was the. largest share‑bolder of the Syndicate and also financed the Syndicate, in connection with the decree obtained by the plaintiffs against the Syndicate and Mr. Martin promised that he would endorse some bills for the amount of the judgment‑debt. On the above facts, the Court of Appeal came to the conclusion "that the transaction in contemplation was to give time to the Syndicate in the expectation that in the interval they would be placed in funds by which they would be enabled to pay all their debts." In other words, Mr. Martin, with the object of obtaining the forbearance of the creditors in respect of the debt, agreed to endorse some bills which were to secure the payment of the judgment‑debt. They were, therefore, of opinion that this amounted to an oral promise to give a guarantee of the judgment debt owing by the Syndicate to the plaintiffs. Hence they held that it was a promise of guarantee and not of indemnity.

13. In the above case, while pointing out the difference between a contract of guarantee and a contract of indemnity, Vaughan Williams, L. J., relied on the following observations of Davey, L. J., in Guild & Co. v. Conrad ((1894) 2 Q B D 885). "In my opinion, there is a plain distinction between a promise to pay the creditor if the principal debtor makes default in payment, and a promise to keep a person who has entered, or is about to enter, into a contract of liability indemnified against that liability, independently of the question whether a third person makes default or not." His Lordship then observed: "In my judgment, the circumstances of the present case show plainly that there was a guarantee of payment of a debt for which the Syndicate was primarily liable, and not an original promise by the defendant to keep the plaintiffs indemnified." In other words, according to his Lordship, the case of Harburg India Rubber Comb Company fell under the first part of the above‑quoted observations of Davey, L. J. In the instant case, the indemnity bond, however, clearly shows that it was not a promise to answer for the debt or default of another person but an original contract between the parties that the plaintiffs should be indemnified against the bond. In other words, the indemnity bond falls under the latter part of the observations of Davey, L. J., in Guild & Co. v. Conrad. I am, therefore, of opinion that this contract is a contract of indemnity. I may further observe that the present case is clearly distinguishable from the case of Harburg India Rubber Comb Company on which the learned counsel has relied.

14. On the other hand, the facts in the present case are somewhat similar to those in the case of Guild & Co. v. Conrad. There the defendant had orally promised the plaintiff that if he would accept certain bills for a firm in which the defendant's son was a partner the defendant would provide the plaintiff with funds to meet the bills and it was held that "This was a promise of indemnity and not of guarantee." The above decision, we think, applies to this case.

15. Our attention has also been drawn to the following Indian decisions in which identical question, namely, whether a contract was a contract of guarantee or a contract of indemnity, came up for consideration of the Courts: K. V. Periyamianna Marakkayar & Sons v. Banians & Co. (A I R 1926 Mad. 544), Ramchandra B. Loyalka v. Shapurji N. Bhownagree (A I R 1940 Born. 315), Municipal Committee, Buldana v. Vishnu‑Damodhar Bhalerao and another (A I R 1949 Nag. 48), Mst. Radha Kunwar v. Ram Narain and others (A I R 1952 All. 587) Janwatraj v. Jethmal (A I R 1958 Raj. 343) and Messrs Brahmayya & Co., Official Liquidators v. K. Srinivasan Thangirayar and others (A I R 1959 Mad. 122).

16. Now section 124 of the Contract Act defines "Contract of Indemnity". Section 126 defines "Contract of Guarantee". In all the above cases, the Courts, while dealing with the above sections, pointed out the difference between a contract of guarantee and a contract of indemnity as follows:‑ For a contract of guarantee or surety-ship, there must be tripartite agreement between the creditor, the principal debtor and the surety. In the case of a contract of indemnity, it is not necessary for the indemnifier to act at the request of the debtor, whereas, in the case of a contract of guarantee or surety, it is necessary that the surety, or guarantor should give the guarantee at the request of the debtor. In the for mer case, it is a direct agreement between the two parties thereto whereas, in the latter, there are three parties, the creditor the debtor and the surety, who undertakes at the request of the debtor to answer the default or miscarriage of the debtor.

17. In the present case, there is no evidence that Probodh Chandra Barman gave the guarantee at the request of the debtor, the Chittagong Suppliers Corporation. On the other hand, Probodh Chandra Barman, in his evidence, has clearly stated: "I countersigned bond at the request of defendant No. 3." In cross‑examination, he says: "I guaranteed the transactions of defendant No. 3 as my constituent". Defendant No: 3 is another guarantor in this case and he says: "On my own account, I executed the indemnity bond." Thus it is clear that Probodh Chandra Barman did not sign the bond at the request of the debtor‑Corporation. In the light of the above‑mentioned Indian decisions, it is also, clear that the contract in this case was a contract of indemnity and not a contract of surety.

18. Mr. Asrarul Hossain has next contended that under the terms of the bond Prododh Chandra Barman was absolved from all liability after 20 days. This defendant Probodh countersigned the indemnity bond in these terms: "We hereby countersign the guarantee of Mr. Khirendra Lal Das Gupta of Chittagong Suppliers Corporation, Chittagong, and unconditionally accept all the liabilities expressed therein upto Rs. 100,000 (one lac) within limit of time for 20 (twenty) days." The above clearly shows that Probodh signed the bond subject to the condition that he would guarantee the liability that was incurred within 20 days from its execution. It does not say that the guarantor will be absolved from all liability under the bond after 20 days. In this case, the goods were supplied on the very next day of the execution of the bond. Hence the liability was incurred within the time mentioned in the bond and thus the guarantor was liable to make good the loss.

19. Mr. Asrarul Hossain has next argued that the contract being a contract of surety, Article 52 of the Limitation Act will govern this case. It is true that if this was a contract of surety the suit which has been filed after three years of the contract would be barred by limitation. In view of our decision that this is a contract of indemnity, we hold that the above Article 52 has no application here.

20. Mr. Asrarul Hossain concedes that Article 83 of the Limitation Act applies to indemnity cases. He has, however, argued that time will begin to run from the date the bond was executed i.e., 9‑1‑49 and hence this suit, which was filed on 16‑9‑52, was clearly barred by limitation. Mr. Bose, the learned Advocate for the respondents, has argued (1) that if the date of execution be taken as the starting point even then the claim was not barred because the bond was renewed on 18‑8‑52 ; (2) that in any event the time will run from the date of damnification i.e., when the demand was made and refused.

21. Before dealing with the question when a cause of action for a claim against the promissor himself under Article 8; arises, I shall consider the effect of the renewed bond, Exhibit 4, dated 18‑8‑

52. The trial Court held that the bond is hit by section 23 of the Contract Act.

22. Mr. Bose has rightly contended that, in view of the provisions of Order 41, rule 22 of the Civil Procedure Code, the plaintiffs are entitled to support the decree in their favour also on grounds found against them. Mr. Bose has accordingly attempted to support the decree not only by asserting that the indemnity bond, Exhibit 5, is not barred by limitation but also by challenging the learned Judge's adverse finding against his client on the question of admissibility of the renewed bond, Exhibit

4. He has argued that the said Bond was admissible in law and hence time should really run from the date of execution of the renewed bond i.e., from 18‑8‑

52. Probodh Chandra Barman in his evidence has stated "Plaintiffs brought a Cr. case under section 420, P. P. C., against myself and defendant No.

3. Warrant of arrest was issued against me. The plaintiffs told me that I would be let off in the Cr. case if I executed a liability bond like Exh. 4 and I agreed to do that. That is how Exh. 4 was written in the S. D. O's Court. I wrote it according to the dictation of plaintiffs' pleader Rai Bahadur J. R. Das Gupta. My Muktear Maulvi Saleh Ahmed was present. Plaintiffs were represented by P. W. 1 and their Manager. The plaintiffs withdrew the criminal case after I wrote and signed Exh. 4. 1 would not have executed this document had it not been for the Cr. case."

23. In view of the fact that the criminal case was withdraw on the very day the renewed bond was executed, we are inclined to accept the evidence of Probodh Chandra Barman that he executed the document because be was told that the criminal case' against him would be dropped. Thus the consideration for the renewed bond was unlawful. The following observations of the Privy Council in Kamini Kumar Basu Thakur and others v. Birendra Nath Basu Thakur and another (34 C W N 489 (P C)) are fully applicable to this case: "If it was an implied term of the reference or the ekrarnama that the complaint would not be further proceeded with, then in their Lordships' opinion the consideration of the reference or the ekrarnama, as the case may be, is unlawful [See Jones v. Merionethshire Permanent Benefit Building Society ((1892) 1 Ch. 173 C A)] and the award of the ekrarnama was invalid, quite irrespective of the fact whether any prosecution in law had been started." We are, therefore, unable to accept the contention of Mr. Bose that this renewed bond will give a fresh start for limitation.

24. Hence, the question for consideration is if the claim under the indemnity bond, dated 9‑1‑59, was barred by limitation. It is not disputed that, if this is an indemnity bond, Article 83 will govern the case. As. already held, the suit contract was a contract of indemnity and hence the plain language of Article 83 seems to apply to it. Article 83 is as follows "

83. Upon any other Three years When the plaintiff is contract to actually damnified." indemnify

25. Mr. Asrarul Hossain has contended that the time from which the period prescribed to run under this Article is the date when the contract was executed i.e., from 9‑1‑

49. In support of his contention, be has relied on a decision of a Single Bench of the Lahore High Court in the case of Abdul Qadir and another v. Imam Din (A I R 1927 Lah. 231 ). In the above case, it was held that the contract was a contract to indemnify and, therefore, Article 83 was appli cable. On the facts of the case, the Court, however, came to the conclusion that the claim was barred. In coming to the said conclusion, the learned Judge observed: "On his own statement of the case, the suit was time‑barred and for that reason alone should have been dismissed". It is thus clear that, in view of the statement of the plaintiff, the learned Judge had no occasion to decide as to when really damnification took place. Hence this decision is not of much assistance to us in this case.

26. Now, under a contract of indemnity, the promisee ca claim only damages as distinguished from the debt for the non- payment of which the promissor has agreed to indemnify him. It is thus clear that the cause of action for a claim against the promissor accrues to the promisee when the latter is damnified. Article 83 also says so. Therefore, a Division Bench of the Bombay High Court has rightly observed in the case of Shanker Nimbaji Shintre and others v. Laxman Supdu Shelke and others (A I R 1940 Bom. 161): . . . that under a contract of indemnity the cause of action arises when the damage which the indemnity is intended to cover is suffered, and a suit brought before the actual loss had accrued must be thrown out as premature." We are, therefore, unable to accept Mr. Asrarul Hossain's argu ment that the promissor would be liable for damages from the date the indemnity bond was executed. Acceptance of his argu ment will mean that the promisee in such cases can sue the promissor in anticipation that the debtor will make default in paying the price of the merchandise. This is, however, never the object of the indemnity bond. As already stated, the indemnity is intended to cover the loss suffered by the promisee. If a promisee files a suit before default, his suit will be thrown out as premature: In this case, the indemnity bond says: "I do hereby agree to keep you jointly and severally indemni fied against all consequences for your so selling to Messrs. Chittagong Suppliers Corporation on credit and hereby further undertake and guarantee (1) to pay you all dues on demand payable in connection with any goods and merchandise, which you have sold to Messrs Chittagong Suppliers Corporation, should Messrs Chittagong Suppliers Corporation fail to settle their dues within the time fixed by you ; (2) in case of our inability to pay you your dues on receipt of your advice to the effect, you would be further entitled to an interest of 121 per cent. per month on your total dues on Messrs Chittagong Suppliers Corporation." The words "consequences" and "failure to pay" clearly indicate that the right to sue will accrue only when default is made by the Corporation to pay for the merchandise and not till then and the promisee will have three years thereafter within which they can sue the promissor, for the price. Here the plaintiffs' case is that after the execution of the indemnity bond, they supplied 100 drums of mustard oil and 560 bags of jaggery to the Corporation. Thereafter, when they demanded Rs. 77,522‑10‑3, being the price of the goods sold and delivered, the Corporation suggested part payment in kind and part payment in cash. On the plaintiffs' agreeing to the proposal, the defendant‑Corporation gave them 119 bags of masur dal and 124 drums of mustard oil and admitted liability for the balance of Rs. 24,746‑7‑9 on 17‑9‑49 and took time for payment of the aid amount.

27. The contention of the defendant‑Corporation was that they returned 100 drums of mustard oil‑because it was of inferior quality and the price of jaggery was paid by delivery of 24 drums of mustard oil and 119 bags of masur dal. They, however, aid not file their books of account. Hence we are unable to attach much importance to the evidence of the employees of the Cor poration. On the other hand, the plaintiffs' case being supported by satisfactory oral and documentary evidence, we have no hesitation in accepting their version that on 17‑9‑49 the Cor poration admitted liability for the amount claimed in the suit and took time for payment of that amount. It is, therefore, evident that in this case damnification must have taken place after 17‑9‑49 and thus the suit, which was filed on 16‑9‑52, must be held to be within time from the date of damnification. In this view of the matter, we hold that the plaintiffs' claim as against this appellant was not barred by limitation.

28. In the result, we affirm the judgment and decree of the trial Court and dismiss this appeal with costs. SIDDIKY, J.‑I agree. K. B. A. Appeal dismissed.