' SYED SAJJAD HASSAN SHAH, J.---This revision petition is directed against the judgment and decree dated 3-8-2001 passed by the learned Zilla Qazi/District Judge, Chitral, whereby, the appeal filed by respondent No,1 was accepted and judgment and decree passed by the learned Civil Judge/Illaqa Qazi, Chitral was set aside.
1. Brief facts of the case are that the petitioner Haji Sikandar Wali had obtained the loan amounting to Rs,35,000 from the respondent No,2 in the year, 1981. The respondent No,1 stood as guarantor to the repayment of said loan. In this respect, "executed the letter of lien and authority for advances to third parties against deposits/call deposits/special deposits or marginal deposits" available on file as Exh.P.W.1/ 1, Exh.D.W.1 /9 and Exh.D.W.1/ 10 respectively. According to said documents, the respondent No,1 undertaken to repay the loan with interest accrued thereto, and also authorized the respondent No,2, to appropriate from his account, any amount that may be necessary to adjust the loan/overdraft/credit account of the Principal Borrower(s) with all interest accrued thereon without any reference to the respondent No,1, besides, the other terms and conditions mentioned in the said documents. In this connection, the petitioner has executed the documents in favour of Bank/respondent No,2, placed on file as Exh.P.W.1/11 and Exh.P.W.1/12, bearing titled as "ReLoan/Overdraft Cash Credit Limit" executed by the petitioner in favour of the bank for Rs,35,000 duly signed by the petitioner, agreed that besides, the acknowledgment of right to cancel the facility at any time, without any intimation to the petitioner, in the event of the facility being cancelled by bank, the petitioner had undertaken to make the payment on demand of entire dues together with other charges. The letter of payment of instalments was brought on record as Exh.D.W.1/2 duly signed by the petitioner, promissory note bearing signature, admitted in evidence as Exh.D.W.1/13, receipt of payment produced as Exh.D.W.1/14, the recovery process was set in motion on the request of respondent No,2, the petitioner agreed to pay the said loan within three months vide Exh.P.W.1/5, whereof, executed an undertaking for the payment of Rs,49,000 within a period of two months and in case of default put himself on the mercy of Government vide Exh.P.W.1/5. After failing to recover the Recovered from the account of respondent No,1, i.e. Rs, 91, 248 on 31-12-1995, the respondent No,1 was constrained to file the suit for recovery of said amount against the petitioner.
' The defendant contested the suit by filing their written statement, issues framed, evidence recorded, the learned trial Court seized of the matter dismissed the suit of the respondent No, 1 with special cost of Rs,10,000. Feeling aggrieved filed an appeal, same was accepted by learned appellate court, passed the decree for the recovery of said amount in favour of respondent No, 1.
The petitioner has filed the present civil revision for setting aside the impugned judgment and decree passed by the learned appellate court.
2. The learned counsel for defendant/petitioner contended that the defendant/petitioner had obtained an amount of Rs,35,000 as loan, whereas, an amount of Rs,38,026 was returned. He argued that the defendant/ petitioner returned more than the principal amount, as was received by him. He agitated that suit of the plaintiff/ respondent No,1 was barred by law. He further contended that the plaintiff/respondent No,1 has no cause of action to file the suit against the defendant/ petitioner, as the matter was between the defendant/respondent No,2 and plaintiff/ respondent No, 1 . The defendant/petitioner absolved from payment of any amount to the plaintiff/respondent No,2, therefore, the learned trial Court rightly dismissed the suit and the learned appellate court illegally accepted the appeal and decreed the suit, thus, committed gross illegality and irregularity adversely effecting the rights of the defendant/ petitioner.
3. The learned counsel appearing on behalf of respondents contended that the defendant/petitioner obtained the loan after completion of all the legally prescribed formalities had executed all the relevant documents before obtaining the loan. Plaintiff/respondent. No,1 had undertaken that the Bank in case of default, recovery of disputed amount authorized to adjust from the account maintained by the plaintiff/ respondent. He urged that the decree passed by the learned appellate court not suffering from any legal defect, muchless, the jurisdictional error, therefore, the petition is liable to be dismissed.
4. Arguments of learned counsel for the parties heard, record carefully perused.
5. Perusal of the record reveals that the plaintiff/ respondent No,1 at the instance of defendant/petitioner stood guarantor for the repayment of loan. In this respect, he had agreed and duly executed the relevant documents as the reference made in the earlier part of the judgment.
That he was agreed to the adjustment of loan from his account C without notice to him with all interest accrued as a result of default in payment of loan by the petitioner. In this respect, the notice was issued to plaintiff/respondent No,1 for recovery of said amount, however, the defendant/petitioner had also executed documents for return of loan with all interest and other due liabilities.
6.It is on the record that the defendant/petitioner, when was compelled by the defendant/respondent No,2 to return - the disputed amount, he again acknowledged his liability to return the disputed amount to the respondent/bank. Notwithstanding, that the defendant/ petitioner has returned a sum of Rs,38,000, more than the actual amount and he further agreed to pay a sum of Rs,49,000 within a period of two months but failed to perform his assurance of payment of loan to the respondent No,2. The plaintiff/respondent No,1 stood as surety guarantor regarding the payment of the disputed amount as was received by the defendant/ petitioner.
Since, the defendant/petitioner failed to return the disputed amount, therefore, the respondent No,2, as per terms and conditions mentioned in Letter of Lien and Authority for advances produced as Exh.P.W.1/1, adjusted the disputed amount from the account maintained by the respondent No,1 in the same bank without any notice, as it was agreed by both the parties at the time of furnishing guarantee. The recovery of amount made, in the light of the terms and conditions of said Letter of Lien, the proceedings between the Bank/respondent No,2 and the plaintiff/ respondent No,1 blessed with the statutory sanction as provided under section 126 of The Contract Act of 1872, reproduced as under:-- ' S.126.---A "Contract of Guarantee" is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the "surety", the person in respect of whose default the guarantee is given is called the "principal debtor", and the person to whom the guarantee is given is called the "creditor". A guarantee may be either oral or written.
7. The consideration for guarantee is defined in section 127 of the Act ibid, reproduced as under:-- S.127.---Anything done, or any promise made, for the benefit of the principal debtor may be a sufficient consideration to the surety for giving the guarantee.
8. Likewise, the liability of surety has also been specified in section 128 of the Act ibid, reproduced as under:- S.128.---The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.
9. In view of the above provision of law, the respondent was liable to pay the amount outstanding towards the petitioner, as stood guarantor at the time of payment of loan to the petitioner.
However, the petitioner being the principal debtor impliedly admitted his liability to return the loan as he received from the respondent No,2, paid by respondent No,1 have the legal right to demand the return of amount which was adjusted towards the payment of loan obtained by the petitioner, on his failure to pay, the respondent No,1 entitled for its return and have every right to demand the disputed amount as it is proved on the record that the disputed amount was adjusted against the loan obtained by the petitioner. In order to substantiate the above mentioned aspect of the case, the reference made of section 145 of the Contract Act, 1872, which says:-- "S.145.---In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety : and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but not sums which he has paid wrongfully".
10. The provision vividly speaks of that the principal debtor to indemnify the surety and the surety is entitled to recover from the principal debtor the amount which has been paid by the surety.
Notwithstanding, that no agreement executed in between the parties, however, the implied promise has been considered as sufficient to satisfy the requirement of law. The principal debtor/petitioner when asked the respondent No,1 to make the payment on behalf of the Bank/respondent No,2, it is sufficient to determine that the petitioner impliedly promised for the return of the amount. The other requirement of law enunciated in section 145 (ibid) is that the surety has rightfully paid the amount to the creditor. The same has also been satisfied by the respondent No,1, therefore, he is bound to return the amount.
11. The contention of respondent No, 1 also supported by the provision of section 127 of the Act (ibid), which provides "Anything done, or any promise made, for the benefit of the principal debtor may be a sufficient consideration to the surety for giving the guarantee". As per illustration 'c' to section 127 of the Act (ibid), as follows:--
(c) A sells and delivers goods to B. C afterward, without consideration, agrees to pay for them in default of B. The agreement is void.
12. Reference in this connection may also be made to section 2(d) of the Contract Act which defines "consideration", as follows:-- ' S.2(d).--"When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or promises to do or abstain from doing, something, such act or abstinence is called a consideration for the promise".
13. The rights of respondent No,1 sufficiently protected under the law, reliance placed upon a case title UBL v. Shahryar Textile Mills and others reported as 1996 CLC 106, wherein, it was held that:-- "I must confess that I am unable to understand the argument, Section 145 of the Contract Act provides that in every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee; and section 318 of the Companies Ordinance provides that an order for winding up of a company operates in favour of all the creditors and contributories of the company. If, therefore, the defendant becomes liable to pay by virtue of his guarantee, surely, he would be entitled to claim payment from the liquidator of the company".
14. Since the surety was given to the Bank/respondent No,2 by respondent No,1 for the adjustment of loan payable by the petitioner as he requested for the same and in the presence of petitioner all the relevant documents were signed and filed with bank/respondent No,2. This is rather more than the requirement prescribed under the law.
15. Similarly, the liabilities laid down in sections 126 and 124 of the Contract Act, the said sections of law considered in a case titled (Raja) Jagannath Bakhsh Singh v. Chandra Bhukhan Singh and another, reported as AIR 1937 Oudh 19, wherein, it was held:-- "Section 126 of the same Act defines a contract of guarantee as a contract to perform the promise, or discharge the liability, of a third person in case of his default.
' The person who gives a guarantee is called 'surety' the person in respect of whose default the guarantee is given is called the 'principal debtor', and the person to whom the guarantee is given is called the 'creditor'. Reference has been made to 49 Mad 156, wherein, it was laid down that in all cases of suretyship privity is necessary between the three parties, namely, the creditor, the principal debtor and the surety. The importance of this lies in the result which follows, namely, that the surety, having undertaken the obligation at the request of the debtor, becomes entitled to recover from him whatever sums he has rightfully paid under the guarantee, as is provided in S.145, Contract Act; whereas in the contract of indemnity the indemnifier cannot on the performance of the obligations of the debtor, in the absence of an assignment from the creditor, sue in his own name the debtor, as there is no privity of contract between them and there is no subrogation to the creditor rights. Reliance was also placed on the following observations of Davey, L.J. In (1894) 2 Q B 885, as quoted in 3 Pat L J 396, at p.400. These observations are as follow:-- ' 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 contract of liability indemnified against that liability independently of the question whether a third person makes default or not.
' It is also important to note that the appellant made himself responsible in case there was any trouble in the 'payment' of the money which must necessarily mean payment by the principal debtor, and not in case there was any difficulty in the realization of the money by the creditor. We are therefore of opinion that all the necessary requirements of a contract of guarantee are satisfied in the case, and have no hesitation in agreeing with the court below that the appellant is liable as a surely".
16. In this regard, another case tilled Muthu Raman Chetty v. Chinna Vellayan Chetty, reported as AIR 1917 Madras 83, wherein, it was held that:- "The language of 5.145 raises a difficulty. The section carries the rights of the surety against the principal debtor a little further than S.140. The latter section gives the surety the rights of the creditor. Section 145 makes the principal debtor liable "on an implied promise" for any sum above the amount due on the note which he has rightfully paid. Illustration (a) is a case where the surety defends a suit by the creditor, having reasonable grounds for doing so, but is compelled to pay the amount of the debt with costs. He can recover from the principal debtor the amount paid by him with costs. The importance of this section is that it speaks of an implied promise in the contract of guarantee. The statute does not say that every guarantor shall have a right to recover sums rightfully paid, only; but it seems to base that right on the implied promise of indemnity given by the principal debtor. If the section had contained the latter words only, there would have been nothing in the Act to require the principal debtor to be a party to the contract, but it seems very difficult to hold that a term can be implied in a contract when the party so liable is not necessarily a party and so, if this section is carried to its logical conclusion, it would follow that there must be more than a consent by the principal debtor; he must be a party to the contract between the surety and the creditor to get the full benefit of the section. It is unfortunate that the legislature has not used the clear and unambiguous language to be found in the Mercantile Law Amendment Act 19 and 20, Vic., c. 97, S.5, where the right is given to every person, who is surety for "a debt or is liable with another for any debt, to recover from the principal debtor or any co-debtor indemnification for the advances made and loss sustained".
16-A. (sic). The petitioner was bound to indemnify the respondent-bank against the disputed amount as the same was duly paid to the respondent-bank by the respondent/surety, thus, there is no ambiguity left that the respondent was entitled for the amount paid to the bank as surety of the petitioner, thus, the petitioner is bound to pay the disputed amount to the respondent No, 1 .
17. In view of the above discussion, the judgment and decree passed by the learned appellate court lawfully and not suffering from any illegality or irregularity, muchless jurisdictional error, therefore, maintained.
18. This petition is being without any substance, hence dismissed with no order as to costs.