Case: New India Assurance Company Limited Vs. Kusumanchi Kameshwara Rao &amp; Another

govern the rights and obligations of the parties flowing from the contract of guarantee and any oral or documentary evidence would not be admissible to vary the terms of this written document as seen earlier. The learned counsel for the appellant, however, vehemently submitted that to the suit notice given by the plaintiff to Defendant I no stand was taken by the appellant in its reply that it had not entered into any such agreement. Strictly speaking such notice correspondence would not be much relevant for deciding the moot question whether there was any contract of guarantee between the parties for covering the transaction in question when the document itself is available on record. However even if we turn to the plaintiffs advocates notice dated 27-3-1972 on which strong reliance was placed by the learned counsel for the plaintiff we find that all that was stated in that notice was to the effect that the a appellant had executed an agreement dated 23-4-1971 in favour of the plaintiff whereby they had undertook to pay to his client at Kakinada a sum of Rs. 1, 25, 000 (One lakh and twenty-five thousand rupees) or such less amount as may be demanded by his client on the failure of the dealer, Sri Satyanarayana and Company, Kakinada to perform all or any of the terms and conditions of the agreement dated 23-4-1971 entered into between his client and the said company. The reply of the insurance company dated 4-5-1972 advised the plaintiff to exhaust all means of recovery from Defendant 2 according to the agreement. However it is pertinent to note that even in the suit notice given by the plaintiff to Defendant 1 the emphasis is on the agreement of dealership by which Defendant 2 as a dealer was under an obligation to perform the terms and conditions of the agreement. Nowhere it is stated that Defendant 2 as retiring partner had undertaken liability under the Dissolution Deed to pay the amount falling due to the plaintiff from Defendant 2 when the firm was dissolved. As by Annexure A-1 the insurance company had already undertaken liability to pay the unpaid sale price of the goods sold by the plaintiff to Defendant 2 dealer it is obvious that in reply to the notice the appellant would rely upon the very same terms and conditions of the surety bond Annexure A 1. Therefore, it could not be said that the said reply to the notice implied any admission on the part of the appellant that it had given guarantee to pay up the dues of Defendant 2 on the basis of the Dissolution Deed Annexure A-2. The learned counsel for the respondent-plaintiff would have been on a firmer ground if the notice had recited that the insurance company had undertaken the liability to pay Rs. 1, 25, 000 which were payable on dissolution of partnership between the plaintiff and Defendant 2 and despite such recitals in the notice the insurance company had not objected. Besides such an attempt remain impermissible in law as express terms of the bond could not be varied by any oral or documentary evidence to the contrary. In any case as there was no allegation in the notice itself connecting it with the liability of Defendant 2 flowing from the Dissolution Deed Annexure A-2 there was no occasion for the appellant to deny its obligation as a surety qua such a liability. Similarly Annexure B-1, a guarantee bond executed by Defendant 2 in favour of Defendant 1 on which reliance was placed by the learned advocate for the plaintiff also is of no avail to enable the plaintiff to get out of the express terms of surety bond Annexure A-1. As discussed above it is found that the appellant-insurance company or its predecessor had not given any guarantee to cover the liability of Defendant 2 to the extent of Rs. 1, 25, 000 flowing from Dissolution Deed Annexure A-2. The guarantee given was for entirely a different transaction, that is for securing the payment of unpaid price of goods to be sold on credit by the plaintiff to dealer Defendant 2 over a course of period and the guarantee was to continue for such future period up to one year. It is not the case of the plaintiff that Defendant 2 had during that period failed to pay purchase price of the goods, namely, nylon yarn and fishing requisites. Nor has the plaintiff invoked suretyship agreement in that connection. The suit is based on entirely a different alleged guarantee said to have been given by the insurance company to cover the liability of Defendant 2 flowing from the Dissolution Deed. For such an obligation of a Defendant 2 flowing from Annexure A-2 there is no contract of guarantee at all given by Defendant 1. In short on the basis of the surety bond Annexure A-1 no liability can be foisted on the appellant to meet the obligation of Defendant 2 flowing from the Dissolution Deed Annexure A-2. As the saying goes mulo nasti kut shakha i.e., if there is no root where is the question of having branches. Consequently it is not possible to agree with the finding of the High Court as recorded at page 37 of the impugned judgment to the effect that the agreement mentioned in para 1 of Ex. A-1 has reference to Ex. A-2 agreement executed between the 2nd defendant and the plaintiff and that the parties understood the Dissolution Deed Ex. A-2 dated 23-4-1971 as being in the nature of sale of nylon yarn and fishing requisites in favour of Defendant 2 represented by G. Subbarao, the other partner. This finding flies in the face of theexpress terms of the guarantee bond Annexure A-1 and with respect amounts to rewriting the guarantee bond itself. Such a new guarantee bond cannot be culled out from the language of Annexure A-1. Such an exercise is totally impermissible on the facts and circumstances of the case. 9.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]In any case as there was no allegation in the notice itself connecting it with the liability of Defendant 2 flowing from the Dissolution Deed Annexure A-2 there was no occasion for the appellant to deny its obligation as a surety qua such a liability. Similarly Annexure B-1, a guarantee bond executed by Defendant 2 in favour of Defendant 1 on which reliance was placed by the learned advocate for the plaintiff also is of no avail to enable the plaintiff to get out of the express terms of surety bond Annexure A-1. As discussed above it is found that the appellant-insurance company or its predecessor had not given any guarantee to cover the liability of Defendant 2 to the extent of Rs. 1, 25, 000 flowing from Dissolution Deed Annexure A-2. The guarantee given was for entirely a different transaction, that is for securing the payment of unpaid price of goods to be sold on credit by the plaintiff to dealer Defendant 2 over a course of period and the guarantee was to continue for such future period up to one year. It is not the case of the plaintiff that Defendant 2 had during that period failed to pay purchase price of the goods, namely, nylon yarn and fishing requisites. Nor has the plaintiff invoked suretyship agreement in that connection. The suit is based on entirely a different alleged guarantee said to have been given by the insurance company to cover the liability of Defendant 2 flowing from the Dissolution Deed. For such an obligation of a Defendant 2 flowing from Annexure A-2 there is no contract of guarantee at all given by Defendant 1. In short on the basis of the surety bond Annexure A-1 no liability can be foisted on the appellant to meet the obligation of Defendant 2 flowing from the Dissolution Deed Annexure A-2. As the saying goes mulo nasti kut shakha i.e., if there is no root where is the question of having branches. Consequently it is not possible to agree with the finding of the High Court as recorded at page 37 of the impugned judgment to the effect that the agreement mentioned in para 1 of Ex. A-1 has reference to Ex. A-2 agreement executed between the 2nd defendant and the plaintiff and that the parties understood the Dissolution Deed Ex. A-2 dated 23-4-1971 as being in the nature of sale of nylon yarn and fishing requisites in favour of Defendant 2 represented by G. Subbarao, the other partner. This finding flies in the face of theexpress terms of the guarantee bond Annexure A-1 and with respect amounts to rewriting the guarantee bond itself. Such a new guarantee bond cannot be culled out from the language of Annexure A-1. Such an exercise is totally impermissible on the facts and circumstances of the case