JUDGMENT The Judgment of the court was as follows :–– Basak, J.: This appeal arises out of a judgment and decree passed by learned Single Judge of this Court in favour of the plaintiff against the defendants for Rs. 16,17,833.17 P. interest on the said sum at the rate of 9% per annum from 8.7.65 to the date of the suit, interim interest on the principal sum adjudged at the rate of 6% per annum, interest on judgment at the sale of 6% per annum until recovery. The plaintiff was awarded only half cost of the suit. 2. The learned Judge in his judgment has dealt with the facts of the case, the oral and documentary evidence tendered before him and also questions of law raised before him in detail. We shall deal with the same in short. 3. In the year 1966 this suit was filed by Kalinga Tubes Ltd. against General Trading Co. and its partners and one Sikenderlal Kapur for recovery of Rs. 16,17,833.17 P. on the allegation as follows :–– Kalinga Tubes Ltd. carried on business as manufacturer of pipes and also used to sell pipes and various other goods. Since the middle of 1958, the defendant No.2 Kapur was in charge of all the indents of purchase and sales of Kalinga Tubes and become one of its directors in June, 1961. The defendant No. 1 was a partnership firm and the defendant Nos. 3, 4 and 5 were its partners. It was alleged by Kalinga Tubes that the defendant No.1 actually belonged to Kapur who used to carryon the said business in the benami names of the defendant Nos. 3, 4 and 5. According to the Kalinga Tubes, Kapur introduced the defendant No.1 in 1959 and started supplying goods to them on credit although the usual practice of Kalinga Tubes was to sell against cash payments or bank documents. Kalinga Tubes, at the request of the deferdant No. 1 agreed to sell the goods on credit as Kapur gave oral guarantee to Kalinga Tubes that he would pay in case of default on the part of the defendant No.1. The transactions started from 1959 and a mutual open current account was kept in respect of the same. The defendant No.1 used to make part payments in the said account and after adjustment of the said payments, a sum of Rs. The transactions started from 1959 and a mutual open current account was kept in respect of the same. The defendant No.1 used to make part payments in the said account and after adjustment of the said payments, a sum of Rs. 16,17,833.17 P. was found due in the said account which sum or any portion thereof the defendants failed and neglected to pay inspite of demands. It was alleged that at the Board's meeting of Kalinga Tubes dated 29.9.65 Kapur assured and guaranteed that he would see that the balance amount would be paid before the ensuing Annual General Meeting of Kalinga Tubes to be held on 27-10-65, but nothing happened. Thereafter in the Board meeting of 27-10-65 Kapur again gave personal guarantee for the due payment of the said sum which was recorded in the minutes of the meetings of 27-10-65. It was further alleged that the conduct of Kapur as a Director of Kalinga Tubes amounted to breach of trust and/or breach of his fiduciary duties towards Kalinga Tubes and as such he was liable to account for the loss suffered by the Company. No part of Kalinga Tubes claim was barred by limitation as the account was mutual open and current and that the defendants acknowledged their said liabilities in writing within the period of limitation. Interest at the rate of 9% was claimed on the said amount. 4. The defendant Nos. 1, 3, 4 and 5 filed a joint written settlement. The defendant No. 1 Kapur filed his written statement separately. He admitted that he joined Kalinga Tubes in middle of 1958, became a Director in June, 1961 and continued as such upto 11-10-66 but denied that he was in charge of all indents or of sale. Kapur specifically denied that defendant No.1 was his benami business or that the defendant Nos. 3, 4, and 5 were his benamdars but admitted that he knew them. Save as aforesaid all allegations against him in the plaint were denied and disputed. He emphatically denied that he had given any guarantee at any point of time either on 29-9-65 or on 27-10-65 or earlier for due repayment of the alleged dues of Kalinga Tubes against the defendant No. 1. He craved reference to the minutes of 27-10-65 for ascertaining the terms and scope thereof. He emphatically denied that he had given any guarantee at any point of time either on 29-9-65 or on 27-10-65 or earlier for due repayment of the alleged dues of Kalinga Tubes against the defendant No. 1. He craved reference to the minutes of 27-10-65 for ascertaining the terms and scope thereof. According to Kapur, Kalinga Tubes did not have any cause of action against him and the suit was liable to be dismissed with cost. 5. By an order dated 17-12-81 passed by the Cuttack Court, the properties, rights and powers estates and interests of the Kalinga Tubes Ltd. including the claim and subject-matter in the present suit were transferred in and vested in Indian Metals & Ferro Alloys Ltd. pursuant to section 394(2) of the Companies Act, 1956. The said order further provided that on the scheme being finally operative and taking effect the Kalinga Tubes Ltd. shall be dissolved without winding up. 6. Thereafter an application was made by the present plaintiff for its substitution in place and stead of the original plaintiff Kalinga Tubes Ltd. on the allegation that the scheme mentioned in the order dated 17-12-81 became operative and had taken effect. By an order dated 6-6-82 the present plaintiff was substituted in place of Kalinga Tubes and necessary amendments were duly carried out. 7. During bearing the following issues were settled : 1(a) Was the defendant No. 2 in charge of all indents of purchase as well as of sale of the plaintiff from the middle of 1958 ? (b) Did the defendant No. 2 become a Director of the plaintiff company since 1961 ? 2(a) Was the business of the defendant No.1 a benami concern of the defendant No.2 ? (b) Were Hansraj Kakkar, Wazir Chand Khanna and Gorakh Nath Pandey the name lenders or benamdars of the defendant No.2 ? 3(a) Did the defendant No.2 request the plaintiff to sell and deliver goods to the defendant No.1 on credit by the end of 1969 ? (b) Was the usual practice of the plaintiff to deliver goods to the purchase against payment of price or against bank documents securing payment of such price? (c) Did the defendant No.2 give guarantee to the plaintiff for due payment of the goods by the defendant No.1 ? 4(a) Was there any account between the plaintiff and the defendant Nos. 1, 3 and 4 ? (c) Did the defendant No.2 give guarantee to the plaintiff for due payment of the goods by the defendant No.1 ? 4(a) Was there any account between the plaintiff and the defendant Nos. 1, 3 and 4 ? (b) If so was the account mutual, open and current? (c) Is the suit barred by limitation? 5(a) Did the defendant No.2 commit breach of trust by entering into the transaction with the defendant No.1 by keeping secret that he was interested in the defendant No.1 ? (b) If so, is the defendant No.2 liable for causing loss to the plaintiff ? 6. Did the defendants acknowledge their liabilition to the plaintiff and made part-payment in the said account as pleaded in paragraphs 15(c) & (d) of the plaint? 7. Is the plaintiff entitled to interest @ 9% per annum on the amount alleged to be due as alleged in paragraph 16 of the plaint? 8. Did the plaintiff supply defective goods to the defendant No.1 as alleged in paragraph 6(a) of the written statement of the defendant Nos. 1, 4 and 5 ? 9. Was there any agreement by and between the parties in December, 1965 as alleged in paragraphs 6(b) and (c) of the written statement of the defendant Nos. 1, 4 and 5 ? 10. To what relief, if any, is the plaintiff entitled ? 8. The plaintiff's witness Mrs. Gyan Patnayak was examined on commission. The other witness of the plaintiff, Iyyar gave evidence in Court. The defendant No.3 died during the pendency of the suit. No oral evidence was adduced on behalf of the defendant Nos. 1, 4 and 5 but the suit was contested by them and Mr. Sinha appeared for these defendants. Kapur himself gave evidence but he was not present during the examination of Mrs. Patnayak on commission. 9. As pointed out by the learned Trial Judge the plaintiff’s counsel submitted that be would not press the Issue Nos. 2(a) and 2(b), 5(a) and 5(b). Issue Nos. 8 and 9 were not pressed by the defendants Issue Nos. 1(a) and 1(b) were admitted by the Counsel for the defendant No.2 and the parties ultimately contested on Issues 3(a), (b), (c), 4(a) (b) and (c), 6, 7 and 10. 2(a) and 2(b), 5(a) and 5(b). Issue Nos. 8 and 9 were not pressed by the defendants Issue Nos. 1(a) and 1(b) were admitted by the Counsel for the defendant No.2 and the parties ultimately contested on Issues 3(a), (b), (c), 4(a) (b) and (c), 6, 7 and 10. The issues were ultimately answered by the learned Trial Judge as follows :–– Issue No. 1(a) - Yes 1(b) - Yes Issue No. 2(a) & (b) - Not pressed Issue No. 3(a) - No. The defendant No.2 himself gave credit to the defendant Nos. 1, 4 and 5 at their request. 3(b) - Yes 3(c) - Yes Issue No.4(a) - Yes 4(b) - Yes 4(c) - No Issue No.5(a) & (b) - Not pressed. Issue No.6 - Yes Issue No.7 - Yes, from 8-7-65 Issue No.8 - Not pressed. Issue No.9 - Not pressed. 10. On the question of Issue No. 3(c), that is whether Kapur gave guarantee to Kalinga Tubes Ltd. for due payment of the balance prices of goods sold and delivered in case of default on the part of the defendant Nos. 1, 4 and 5, on behalf of the plaintiff it was conceded that the plaintiff had failed to prove the case of oral guarantee alleged to have been given in 1959 and submitted that the plaintiff would rely on the written guarantee. The written guarantee was pleaded in paragraphs 10 and 11 of the plaint which are set out hereinbelow : "10. On or about the 29th September, 1965 at the request and guarantee of the defendant No. 2, that he will see that the arrears thus due from the defendant No. 1 was realised and received by Kalinga Tubes Ltd. before the then ensuing general meeting which was held on 27th October, 1965), Kalinga Tubes Ltd. gave further time and agreed to forbear from suing until such meeting was held. But such payment was not received till such date or afterwards. The plaintiff craves reference to the minutes of the meeting of the Directors held on the 29th September, 1965 in this behalf. 11. But such payment was not received till such date or afterwards. The plaintiff craves reference to the minutes of the meeting of the Directors held on the 29th September, 1965 in this behalf. 11. Thereafter on 27th October, 1965 the said defendant No. 2 stated as the fact is to the Board of Directors of Kalinga Tubes Ltd., inter alia, as follows : "Shri S. L. Kapur stated that he was doing his best to see that moneys were received by the Company, be assured the Chairman that payment will be made as early as possible and further pointed out that the dues from the said concerns are secured by his personal guarantee." 11. The relevant portion of the Secretary's note, the minutes of the Board meeting of Kalinga Tubes held on 29th of September, 1965 and 27-10-65 being Exhibits "B", "C" and "D" respectively in the suit read as follows : EXT-B NOTE Re: SUNDRY DEBTORS Money are due from the undermentioned four concerns as on 31-3-65 : (1) General Trading Co. Rs.16,17,833.17 (2) Ramesh Kumar & Co. Rs. 30,204.10 (3) United Industrial Corporation Rs. 4,79,863.62 (4) Surendra Overseas Ltd. Rs. 2,25,818.01 12. These parties were introduced by Shri S. L. Kapur, and all transactions were in his charge. Shri S. L. Kapur gave certain assurances regarding payment. 13. As the amounts were not paid, letters of demand were issued through Solicitors on the 8th July, 1965, to the first three parties and a letter was also issued to Shri S. K. Kapur at the same time. No reply has been received to those letters. (R. Venkateswaran) SECRETARY EXT. C. P. D. No. 13 Extracts from the proceedings of the Meetings of the Board of Directors of Kalinga Tubes Limited, held at 33, Chittaranjan Avenue, Calcutta, on Wednesday the 29th September, 1985 at 10 a. m. "Sunday Debtors : Note of the Secretary dated 9-8-65 concerning the, heavy amounts due from Messrs General Trading Co., Ramesh Kumar & Co., United Industrial Corporation and Surendra Overseas Ltd., Calcutta, was placed before the Board and considered and approved. The Chairman enquired of Mr. S. L. Kapur about these matters. Mr. S. L. Kapur guaranteed to the Board that be will see that all these appears are realised and received by the Company before the ensuring Annual General Meeting. EXT. The Chairman enquired of Mr. S. L. Kapur about these matters. Mr. S. L. Kapur guaranteed to the Board that be will see that all these appears are realised and received by the Company before the ensuring Annual General Meeting. EXT. D. P. D. No. 13 Extracts from the proceedings of the Meeting of the Board of Directors of Kalinga Tubes Limited; held at the Registered office, Choudwar, Cuttack, on Wednesday, the, 27th October, 1965 at 2.30 P.M. "(2) ANY OTHER BUSINESS : (a) Shri Prem Patnaik pointed out that no payment whatever had been received from any of the four firms viz. Messrs General Trading Co., Ramesh Kumar & Co., United Industrial Corporation and Surendra Overseas Ltd. as assured by Mr. S. L. Kapur at the last Board Meeting. Shri S. L. Kapur stated, that he was doing his best to see that moneys were received by the company; he assured the Chairman that payment will be made as early as possible and further pointed out that the dues from the said concerns are secured by his personal guarantee." These paragraphs were, dealt with by Kapur in paragraphs 10 and 11 of his written statement in the manner as follows : "10. With regard to paragraph 10 of the plaint, the said defendant denies that on 29th September, 1965 the said defendant requested or guaranteed that he would see that the arrears due from the defendant No. 1 was realised or received by the plaintiff as alleged. Save as above, the said defendant has no knowledge of the other allegations and does not admit the same. 11. With regard to paragraph 11 of the plaint, the said defendant craves leave to refer to the minutes dated October 27, 1965 and save as appears therefrom this defendant makes no admission thereto." 14. The learned Judge pointed out that in the written statement Kapur did not dispute or deny the existence genuineness or validity of the minutes. In spite of the same upon instruction of Kapur, his lawyer cross-examined the plaintiff's witness Mr. Iyyar on this point. However, the learned Judge allowed such point to be raised on the ground that the parties went to the trial fully understanding the new case, adduced evidence and made their respective submissions. After considering the relevant documents and findings, the learned Judge held that Exts. Iyyar on this point. However, the learned Judge allowed such point to be raised on the ground that the parties went to the trial fully understanding the new case, adduced evidence and made their respective submissions. After considering the relevant documents and findings, the learned Judge held that Exts. C and D, i.e. minutes of the meeting, are genuine and the entire evidence of Kapur on alleged fabrication sought to be made out was rejected. It is to be pointed out that Kapur did not attend the said commission at all though he was present in both the Board meetings held on 29th September, 1965 and 27th October, 1965. However, we need not go into the details of the same inasmuch as before us this point was not pressed and the question of genuineness of such minutes was not raised. On the question as to whether the alleged guarantee recorded in the minutes of 29-9-65 and 27-10-65 is valid guarantee in law, upon due consideration of the submissions of the learned Advocates, the evidence before the Court and the different cases cited, the learned Judge held that in accordance with Kapur's request Kalinga Tubes allowed time and did not take any legal step against the defendant No.1. The learned Judge also held that there was sufficient consideration for Kapur's guarantee recorded in the minutes of 29-9-65 and 27-10-66 and that in the case of guarantee principal debtor must be a party, but held chat the request of the principal debtor may be expressed or implied. The learned Judge held that Kapur had given guarantee to Kalinga Tubes at the implied request of the defendant Nos. 1, 4 and 5. The learned Judge recorded that the respondent Nos. 4, 5 avoided the witness box and did not give any evidence. The learned Judge held that assuming that the defendant No. 1 did not concur in the guarantee agreement, in such a case the minutes dated 29-9-65 and 27-10-65 recorded an agreement of indemnity by Kapur within the meaning of section 129 of the Contract Act. The learned Judge further held that although the indemnity has not been specifically pleaded, both the parties have advanced arguments on indemnity as well. The learned Judge pointed out the distinction between a contract of indemnity and a contract of guarantee. The learned Judge further held that although the indemnity has not been specifically pleaded, both the parties have advanced arguments on indemnity as well. The learned Judge pointed out the distinction between a contract of indemnity and a contract of guarantee. So far as the question of limitation is concerned, we need not deal with the findings of the learned Judge on such points as the same was not pressed before us. 15. This appeal has been preferred by the defendant No.2 alone. It has been submitted before us by Mr. Sen, appearing for the appellant that admittedly the case of oral guarantee was not pressed. So far as the guarantee in writing is concerned, there are three documents, referred to above. By a letter dated 8th July, 1965 the Solicitor of the plaintiff wrote to the defendant No. 1, referring that as a result of transactions between the parties a sum of Rs. 16,17,833.17 P. became due and payable by them to the plaintiff. A statement was stated to have been handed over to the defendant No.2 on behalf of the defendant No.1. It was specifically mentioned therein that at the request of the defendant No.1 and at the request of the guarantor, the defendant No.2, the plaintiff had repeatedly given the defendant No.1 time for payment of the said amount, but the same had not yet been paid inspite of repeated promises by the company and assurances by Mr. Kapur. By another letter dated 8/9th July, 1965, a copy of the letter addressed to the defendant No. 1, was sent to the defendant No. 2. It was, inter alia, stated therein as follows :–– "Our clients state that the above parties were introduced by you and sales to them subsequent to August, 1958 when you took charge of the entire sales and purchase of our clients were made by you and/or as per your instructions. Our clients were assured by you that the said parties were your parties and you personally would be responsible for the payment of their dues and in fact various cheques in part payment were handed over by you personally to our clients. In view of the facts stated above and also having regard to the facts stated in our said letters to Messrs General Trading Co. In view of the facts stated above and also having regard to the facts stated in our said letters to Messrs General Trading Co. and others our clients state that you are responsible for payment of the amounts due to them." 16. Surprisingly enough six months expired before any reply was given of the same by a letter dated 6/13th January, 1966 whereby the plaintiff's Advocates were requested by the defendant No. 2 to send a copy of the said letter as the said letter was "misplaced." It is to be pointed out that not only the date but also the letter number was correctly quoted therein inspite of the alleged misplacement. Similar letter was written by the defendant No. 1, to the plaintiff's Advocates on 10th January, 1966. The plaintiff's Advocates replied to the same sending another copy stating that they did not admit that the said original letter was misplaced. Such copies were sent to the defendant Nos. 1 and 2 both. On the 14th February, 1986, the defendant Solicitors replied to the said demand letter. Two separate letters were given, one was by B. K. Sen & Co. on behalf of the defendant No. 1 and another was by H. N. Sen of the same firm on behalf of the defendant No.2. The guarantee was denied. There is a reply to the same by the plaintiff by a letter dated 19th February, 1986. 17. Mr. Sen argued that his client Mr. Kapur merely gave an assurance and not guarantee. The expression 'guarantee' was used in the meeting merely to express that all these arrears would be realised. On the question as to whether it amounts to a guarantee in law he has submitted that there was no consideration; that the principal debtor was not a party to such a guarantee; that it was not at the request of the principal debtor. So far as the question of indemnity is concerned, it was submitted that there was no pleading, no issue, no admission in the written statement and, accordingly, the learned Judge could not have gone into such question. In any event, he has submitted that these minutes cannot be interpreted as contracts of indemnity. 18. Mr. Sen relied on various decisions cited before the Trial Court which were referred to in the judgment of the Trial Court. In any event, he has submitted that these minutes cannot be interpreted as contracts of indemnity. 18. Mr. Sen relied on various decisions cited before the Trial Court which were referred to in the judgment of the Trial Court. He particularly relied on (1) Punjab National Bank Ltd. v. Sri Bikram Cotton Mills Ltd. and Another, AIR 1970 SC 1973 at page 1976, (2) H. Mohamed Khan (deceased) by L. Rs. and Others v. Andhra Bank Ltd. and Others, AIR 1983 Karnataka 73 and (3) Shankar Nimbaji Shintie and Others v. Laxman Supda Sheike and Ors., AIR 1940 Bombay 161 at pages 162 and 163. Mr. Sen relied on the Bombay judgment for his submission that in order to file a suit on a contract of indemnity, actual loss is to be pleaded and proved. Mr. Sen also relied on (4) V. M. Rv. Ramaswami Chettier and Another v. R. Muthukrishna Aiyar and Others; AIR 1967 SC 359 (para 4) at page 360. 19. Mr. Das appearing on behalf of the respondents has argued that no one appeared for the defendant No.2, to cross-examine Mrs. Patnaik, who was examined in commission. The question of guarantee was not challenged by Kapur by cross-examining Mrs. Patnaik as he dared not to face her. He has also relied on the questions and answers of Iyer being question Nos. 38 to 52 (pp. 83 to 86), 129 to 141 (pp. 100 to 102), 176 to 218 (pp. 108 to 115) which are set out hereinbelow : 38. Did the defendant No. 2, Sikenderlal Kapur have anything to do with the defendant No. 1, General Trading Co. ? Yes, that is a firm introduced by Mrs. Kapur to the Company. 39. In what connection did Mr. Kapur introduce, General Trading Co. to Kalinga Tubes Ltd. ? He wanted to sell goods to that firm in order that the sales could be increased. Perhaps he wanted to extend the credit facility to this party and he had a discussion with the Chairman of the Company that his proposal to extend credit facilities to this firm be approved for increasing the sales of the company because this is a company introduced by him. He also informed the Chairman of the company Mr. Perhaps he wanted to extend the credit facility to this party and he had a discussion with the Chairman of the Company that his proposal to extend credit facilities to this firm be approved for increasing the sales of the company because this is a company introduced by him. He also informed the Chairman of the company Mr. C. S. Lokhanathan that he would be responsible for the payments, that is, in case the firm does not make payment for the goods received by them within a reasonable time, he guaranteed that such payment would be made by him. 49. Who is Mr. Lokanathan ? Mr. Lokanathan was the Chairman of the company at that time. 41. Where is Mr. Lokanathan now? He is dead now. 42. You have spoken of a guarantee given by Sikenderlal Kapur in respect of payments outstanding from General Trading Co. How do you know of this guarantee? Because I used to come to Calcutta office very often for checking up the accounts and while reviewing the sales accounts. I happened to be with the Chairman when, Mr. Kapur who was. in charge of sales was also present and this proposal for extending credit to this firm and his assurance to make payment in the event of any delay or default on the part of the firm to make the payment, these were made when I happened to be there. 43. Do you know from which year Mr. S. L. Kapur was in charge of the intends of purchases and of sales of the plaintiff company? That was from August, 1958-18th August, 1958. 44. What was the position of Mr. Kapur in the company Kalinga Tubes Ltd. in 1961 ? In June he joined the Board of the company as a Director. 45. Do you know when transactions between General Trading Co. and Kalinga Tubes Ltd. started? The transactions with General Trading Co. started on 24th December, 1959 as per the company's book. 46. Do you know what is the usual practice of the plaintiff company regarding the sales of its products? The usual practice of the company is to sell goods on cash basis, i.e. payment against delivery or payments could be sent through a bank which would secure payments to the company. 47. Was this usual practice followed in the case of transaction between Kalinga Tubes Ltd. and General Trading Co. ? The usual practice of the company is to sell goods on cash basis, i.e. payment against delivery or payments could be sent through a bank which would secure payments to the company. 47. Was this usual practice followed in the case of transaction between Kalinga Tubes Ltd. and General Trading Co. ? Although the first one or two transactions with General Trading Co. were strictly on this cash basis, subsequent transactions were on credit terms. 48. Who gave credit to whom? Kalinga Tubes Ltd. gave credit to General Trading Co. on the assurance of Mr. Kapur that the payments would be forthcoming in the event of any delay or default and virtually since the sales were being looked after by Mr. Kapur, he was selling the goods on behalf of the company also. 49. What was the reason for giving this assurance by Mr. Kapur? Because Mr. Kapur had introduced the firm and be had his own people put in charge of this firm. 50. When you say Mr. Kapur introduced the firm which firm are you referring to ? I am referring to General Trading Co. 51. When you say that Mr. Kapur had own people put in charge whom are you referring to? I refer to the partners Mr. Hansraj Kakkar, Mr. Wazir Chand Khanna and Mr. Gorakh Nath Pandey. 52. Why do you say that they are the own people of Mr. Kapur? Because Mr. Kapur by virtue of his position as the incharge of purchase and sales used to sit in the office of the Kalinga Tubes and these partners used to come to Kalinga Tubes and take instructions from him with regard to the purchase and sales and Mr. Kapur had also informed Mr. Lokanathan, Chairman, earlier that this is a firm in which he is interested and credits should be extended to this firm and he would guarantee payment and even certain payments were made by him––when there were some outstanding amounts recoverable from this firm, we used to request Mr. Kapur that the outstanding is going heavy and payment should be made to the company. He actually used to make payment from cheque books which were pre-signed and kept in his drawers and he used to fill up these and give them to the company towards payment of the dues of General Trading Co. 129. You have told My Lord that Mr. He actually used to make payment from cheque books which were pre-signed and kept in his drawers and he used to fill up these and give them to the company towards payment of the dues of General Trading Co. 129. You have told My Lord that Mr. Sikenderlal Kapur, the defendant No.2 became the Director of Kalinga Tubes Ltd. in 1961 ? Yes. 130. Do you know how long did he continue to be such Director? He continued to be the Director till October, 1960. 131. Do you know a lady by the name of Shrimati Gyan Patnaik ? Yes, I know Shrimati Gyan Patnaik. 132. Was she in any way interested in Kalinga Tubes Ltd. ? She was a Director of Kalinga Tubes Ltd. for a long time. 133. Can you tell My Lord the period, if you know, roughly when she was a Director of Kalinga Tubes Ltd. ? She was a Director of Kalinga Tubes Ltd. from the inception of the Company upto 1977. 134. When you say from the inception of the company which year are you referring to ? The company, was incorporated in 1950. May be from 1955 from the inception of the company she had been a Director. 135. You have just now told My Lord that on the account being annexure to the plaint filed in this suit which is now marked Ext. B, a sum of Rs. 16.17,833.17 became due and payable by General Trading Co. to Kalinga Tubes Ltd. Do you remember that? Yes. 136. Did the Director of the company at that time, S. L. Kapur the defendant No.2 have anything to do with the payment of the sum of Rs. 16 lakhs and odd by General Trading Co. ? Yes, If General Trading Co. does not give, be would be bound to pay by virtue of guarantee. 137. When you say by virtue of guarantee, what guarantee are you referred to? I am referring to the guarantee that was initially given when the people were introduced and when the proposal to give materials on credit was given to the Board as well as guarantee given later on before the Board of Directors by Mr. Kapur. 138. When you are referring to the guarantee later on given can you specify the approximate time? It was given in a Board meeting in September, 1966. 139. Kapur. 138. When you are referring to the guarantee later on given can you specify the approximate time? It was given in a Board meeting in September, 1966. 139. How do you know of this? I have seen the Minutes Book. 140. Did you have ever occasion to talk to Mr. Kapur with regard to this guarantee given by him? He has mentioned that he has given guarantee for which credit sales were going on to firm. 141. In what connection was this subsequent guarantee given? This subsequent guarantee was given by Mr. Kapur in a Board Meeting of which he was also a member because outstanding dues from General Trading Co. amounted over Rs. 16 lakhs and when, the company did not get any response after giving reminders to them, the Secretary placed a Note before the Board of Directors for their information. This note was discussed in the Board Meeting when Mr. Kapur was also present as a Director and when this point was discussed. Mr. Kapur assured the Board that he would try to collect them immediately and he would see that the payment is received by the company because his guarantee was already there within a month time. 176. You said on the last occasion that subsequent to the oral guarantee of 1950. Mr. Kapur had occasion to give a further guarantee later on, when was that guarantee given ? That guarantee was given by Mr. Kapur in the Board Meeting during September, 1965. Mr. Kapur was also a Member of the Board and he has this guarantee to the Board at the meeting. 177. What was the reason for giving that guarantee ? The Secretary of the company had submitted a note to the Board indicating large amounts due from various firms in which Mr. Kapur was either directly or indirectly connected. While this statement in the Board meeting Mr. Kapur gave the guarantee to the Board. 178. Did the Company Kalinga Tubes Ltd. accept the guarantee ? That guarantee was accepted because Mr. Kapur has mentioned in the September meeting that be would take steps to collect the dues or pay the amount before the ensuing general body meeting which would take place one month hence. 179. You spoke of a note given by Mr. Venkateshwaran of the company. Have you seen that note ? Yes. 180. I am showing you Ext. Kapur has mentioned in the September meeting that be would take steps to collect the dues or pay the amount before the ensuing general body meeting which would take place one month hence. 179. You spoke of a note given by Mr. Venkateshwaran of the company. Have you seen that note ? Yes. 180. I am showing you Ext. B which bas been marked in the Commission for the examination of one of the witnesses of the plaintiff Company. Look at this document (shown). What is this ? This is the note dated 9-8-65 which was submitted by the Secretary Mr. R. Venkateshwaran to the Board. 181. Who has signed this note ? Mr. R. Venkateshwaran. 182. Do you know his signature ? Yes. 183. Do you have any independent knowledge about this note of the then Secretary who is now dead ? Yes, because these were the balances due from this party General Trading Co. In the review of the accounts I have also seen these amounts being due to the company and I had also suggested at that time to Mr. R. Venketeshwaran that this is the thing further steps are to be taken for collecting these amounts. 184. When you say 'in the review of the accounts' who reviewed the accounts? I reviewed the accounts in the normal course of my duties. 185. From what documents did you review the accounts ? I reviewed the accounts from the ledger as well as the other connected accounting records. 186. Does this note show any fact relating to General Trading Co. ? Yes, it shows Rs. 16,17,833.17 P. as due to the company from General Trading Co. 187. Apart from General Trading Co. you find certain other concerns are mentioned. Do you know these other concerns? Yes. 188. Has the defendant S. L. Kapur got any interest in any of the other concern ? Yes. He is interested in the other concerns directly or indirectly. 189. Which ones? United Industrial Corporation from which Rs. 4,79,863.62 P. was due to the company. It is a firm of Mr. S. L. Kapur's family, the partners being his wife, his sons and daughter-in-law. There is another firm-Ramesh Kumar & Co. from whom Rs. 13,204.10 P. is due to the company. It is a firm of Mr. Kapur's son. Then there is another firm-Surendra Overseas Ltd. from whom Rs. 2,25,818.01 P. is due. It is a firm of Mr. S. L. Kapur's family, the partners being his wife, his sons and daughter-in-law. There is another firm-Ramesh Kumar & Co. from whom Rs. 13,204.10 P. is due to the company. It is a firm of Mr. Kapur's son. Then there is another firm-Surendra Overseas Ltd. from whom Rs. 2,25,818.01 P. is due. At the relevant time one Union Commercial Corporation a firm connected with Mr. S. L. Kapur was acting as clearing agents of the company and they were to deliver the goods to Surendra Overseas, on behalf of Kalinga Tubes Ltd. So, since the amount has not been received from Surendra Overseas, Mr. Kapur's indirect connection with this Company comes through Union Commercial Corporation. 190. To your knowledge are the statements continued in this note correct? Yes, contents are correct. 191. You find there is reference to the letter of demand issued through the Solicitors on the 8th July, 1963 ? Yes. 192. Have you seen this letter of demand? Yes. (By consent of the parties formal proof of the following documents is dispensed with : 1. P.D.1 dated 8th July, 1963 at 31 page of the Judge's brief. 2. P.D.2 dated 8th July, 1965 at page 33. 3. P.D.3 dated 10th January, 1966 at page 43. 4. Further disclosure made on 24-12-76 at page 52. 5. P.D.3 dated 10th January, 1966 at page 53. 6. P.D.6 dated 29th January, 1966 at page 54. 7. P D.7 dated 29th January, 1966 at page 55. 8. P.D.8 dated 14th February, 1966 at page 56. 9. P.D.9 dated 19th February, 1966 at page 58. 10. P.D.10 dated 19th February, 1966 at page 59. 11. P.D.11 dated 19th March, 1966 at page 60. 12. P.D.12 dated 19th March, 1966 at page 61. 13. P.D.6 dated 8th June, 1966 at page 63. 14. P.D.4 dated 9th August, 1966 at page 65. 15. P.D.5 dated 9th August, 1966 at page 66. 16. Two further letters dated 24th December, 1976 and 26th November, 1977 respectively at pages 68 and 69. The above documents are marked collectively as Ext. "D") 193. I am showing your letter dated 8th July, 1965, which is the letter referred to in the note (shown). Who gave instructions for writing this letter? Kalinga Tubes Ltd. 194. Are the contents of this letter correct? Yes. 195. The above documents are marked collectively as Ext. "D") 193. I am showing your letter dated 8th July, 1965, which is the letter referred to in the note (shown). Who gave instructions for writing this letter? Kalinga Tubes Ltd. 194. Are the contents of this letter correct? Yes. 195. I am showing you the letter dated 8/9th July, 1965 being P.D. No.2 at page 33 (shown). Who gave instructions for sending this letter to Fox & Mondal ? Kalinga Tubes Ltd. give instructions to write this letter. 196. Are the contents of this letter correct? Yes, they are correct. 197. I am showing you a letter dated 19th February, 1966, at page 58 being P. D. 9 (shown). Who gave instructions for writing this letter? Kalinga Tubes Ltd. 198. Are the contents of the letter correct? Yes. 199. I am showing you another letter dated 19th February at page 59 (shown). Who gave instructions to write this letter? Kalinga Tubes Ltd. 200. Are the contents of this letter correct ? Yes. 201. Please back to the evidence given on commission I am showing you a document which has been marked as Ext. C in the commission (shown). Do you know what this document is ? This is the minutes of the meeting of the Board of Directors of Kalinga Tubes Ltd. held on 29th September, 1965. 202. Have you seen this minutes before ? Yes, I have seen this minutes before. 203. On 29th September, 1965 what post you were holding in Kalinga Tubes Ltd. ? I was the Cost Accountant at that point of time. 204. You know the subject-matter of the minutes? Yes. 205. Did you have any talk or any discussion with Mr. Loknathan with regard to the subject-matter of the minutes dated 19th September, 1965 so far as General Trading Co. is concerned (question repeated)? I had discussion with Mr. C. S. Lokanathan regarding the outstanding dues from General Trading Co. and Kalinga Tubes Ltd. given by Mr. Kapur. 206. I am drawing your attention to the paragraph beaded 'sundry debtors' (shown)? Yes. 207. What is that record? That is a note of Shri R. Venkateshwaran attention. 208. I am drawing your attention to page 58 of this minute book at paragraph 2. Kindly look at this paragraph 2 and tell My Lord whether the contents of these things are correct to your knowledge? Yes. 207. What is that record? That is a note of Shri R. Venkateshwaran attention. 208. I am drawing your attention to page 58 of this minute book at paragraph 2. Kindly look at this paragraph 2 and tell My Lord whether the contents of these things are correct to your knowledge? Yes, these are correct. 209. I am showing you a signature appearing at the very end of this Ext. C at page 68 of this book (shown). Do you know whose signature is this? This is the signature of Mr. C. S. Lokanathan. 210. You know this signature? Yes, I know. 211. Please encircle the said signature (Witness encircles the same in red). 212. I am showing you a document marked Ext. B in the commission which is the minutes of the Board meeting held on 27th October, 1965. Have you seen this Minutes before ? Yes, I have seen this Minutes before. 213. I am drawing your attention to a portion of that Exhibit appearing in sub-paragraph (s) of page 70––please go through the contents of that sub-paragraph and tell My Lord whether the statements made therein are correct to your knowledge or not? The statements made there are correct. 214. Please come to the end of that document. Do you find any signature appearing there? Who has signed the document ? Mr. C. S. Lokanathan. 215. Do you know his signature? Yes. 216. Please encircle the signature in red pencil (witness has encircled in red pencil). 217. Who were the Chairman of these two Board meetings to which I have just drawn your attention? C. S. Lokanathan was the Chairman. 218. Was Mr. S. L. Kapur present at those Board Meetings? Yes, he was present in both Board Meetings. 20. Mr. Das also relied on the judgments referred to by the learned Judge in his judgment. Apart from that he referred to two few cases (5) Nagpur Nagarik Sahakari Bank Ltd. v. Union of India & Anr., reported in 55 Company cases 667, (head note first paragraph) and (6) (Raja) Jagannath Bakhsh Singh v. Chandra Bukhan Singh & Anr. 20. Mr. Das also relied on the judgments referred to by the learned Judge in his judgment. Apart from that he referred to two few cases (5) Nagpur Nagarik Sahakari Bank Ltd. v. Union of India & Anr., reported in 55 Company cases 667, (head note first paragraph) and (6) (Raja) Jagannath Bakhsh Singh v. Chandra Bukhan Singh & Anr. reported in AIR 1937 Oudh 19 wherein it was held that though for a contract of suretyship there should be concurrence of the principal debtor, the creditor and the surety, yet this does not mean that there must be evidence to show that the surety undertook his obligation at the express requests of the principal debtor. An implied request will be quite sufficient to satisfy this requirement. He referred to the decision in the case of Shankar Nimbaji Shintre & Ors. v. Laxman Supdu Sheike & Ors. reported in AIR 1940 Bombay 161 which was strongly relied upon on behalf of the appellant and wherein it was held that in a contract of indemnity the promisor engages to save the promises from loss caused by conduct of the promisor himself or by the conduct of any other person. It was further held therein that the cause of action for a claim against promisor accrues to the promisee when the latter is actually damified. Such a suit is governed by Article 83 of the Limitation Act. It was further held therein that under sections 124 and 125 of the Contract Act and under a contract of indemnity, if the suit is filed before the actual loss is accrued, then it must be thrown out as is would be premature. Mr. Das submitted that this is not good law and the correct position has been specified by two judgments, one of which was a subsequent Bombay High Court decision. It is a judgment by Chagla, J. as he then was in the case of (7) Gajaman Moreshwar Parolkar v Moreshwar Madan Mantri, reported in AIR 1942 Bombay 302. In that judgment the learned Judge held: "If the whole law of indemnity was embodied in sections 124 and 125, Contract Act, there would be considerable force in the contention of Mr. Tendolkar; but that is obviously not so. In that judgment the learned Judge held: "If the whole law of indemnity was embodied in sections 124 and 125, Contract Act, there would be considerable force in the contention of Mr. Tendolkar; but that is obviously not so. The Contract Act is both an amending and a consolidating Act and it is not exhaustive of the law of contract to be applied by the Courts in India. Section 124 deals only with one particular kind of indemnity which arises from a promise made by the indemnifier to save the indemnified from the caused to him by the conduct of the indemnifier himself or by the conduct of any other person, but does not deal with those classes of cases were the indemnity arises from loss causes by events or accidents which do not or may not depend upon the conduct of the indemnifier or any other person, or by reason or liability incurred by something done by the indemnified at the request of the indemnifier. In the present suit the indemnity arises because the plaintiff has become liable owing to something which he has done at the request of the defendant and therefore, in my opinion, section 124 does not apply at all to the facts of this case. Further section 125 as the marginal note indicates only dealt with the rights of the indemnity holder in the event of his being sued Section 125 is by no means exhaustive of the rights of the indemnity holder I shall presently point out. The indemnity holder has other right besides those mentioned in section 125." Regarding the earlier Bombay judgment in Shankar Nimbaji Shintre & Ors. (supra), Chagla, J. observed that the decision of the earlier case did not require enunciation of law in those very extensive terms and he held that he was not prepared to extend the principle of that case beyond the facts proved there and for the decision of which it was necessary. The learned Judge observed that on the peculiar facts of the earlier case it was necessary that the plaintiffs should suffer actual less before they could maintain their action in indemnity. The learned Judge was not prepared to accept the earlier judgment to mean that in no case can an indemnity holder maintain an action against the indemnifier unless he has suffered actual loss. The learned Judge was not prepared to accept the earlier judgment to mean that in no case can an indemnity holder maintain an action against the indemnifier unless he has suffered actual loss. In that context the learned Judge observed as follows: "It is true that under the English common law no action could be maintained until actual loss had been incurred. It was very soon realised that an indemnity might be worth very little indeed if the indemnifier could not enforce his indemnity till he had actually paid the loss. If a suit was filled against him, he had actually to wait till a judgment was pronounced and it was only after he had satisfied the judgment that he could sue on his indemnity. It is clear that this might under certain circumstances throw an intolerable burden upon the indemnity-holder. He might not be in a position to satisfy the judgment and yet he could not avail himself of his indemnity till he had done so. Therefore, the Court of equity stepped in and mitigated the rigour of the common law. The Court of equity held that if his liability had become absolute then he was entitled either to get the indemnifier to pay off the claim or to pay into Court sufficient money which would constitute a fund for paying off the claim whenever it was made. As a matter of fact, it has been conceded at the Bar by Mr. Tendolkar that in England the plaintiff could have maintained a suit of the nature which he has filed here but, as I have pointed out, Mr. Tendolkar contends that the law in this country is different. I have already held that sections 124 and 125, Contract Act, are not exhaustive of the law of indemnity and that the Courts here would apply the same equitable principles that the Courts in England do. Therefore, if the indemnified has incurred a liability and that liability is absolute, he is entitled to call upon the indemnifier to save him from that liability and to pay it off." The other case relied on is the case of (8) Municipal Committee, Buldana v. Vishnu Damodhar Bhalerao & Anr. reported in AIR 1949, Nagpur 48 : "The first question is as regard the nature of the document Ext. P. 1 whether it is a contract of guarantee or a contract of indemnity. reported in AIR 1949, Nagpur 48 : "The first question is as regard the nature of the document Ext. P. 1 whether it is a contract of guarantee or a contract of indemnity. A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person is called a contract of indemnity' : Section 124, Contract Act. A 'contract of guarantee' is a contract to perform the promise, or discharge the liability of a third person in case of his default : Section 126, Contract Act. Under the 'signature of Vishnu Damodhar Bhalerao in the document there is a subscription 'signature of surety'. Notwithstanding the description it is clear from the terms that it is a contract of indemnity rather than a contract of guarantee. Under the document, Vishnu agreed to reimburse the Municipal Committee to the extent of Rs. 200 in case of loss caused to it by the conduct of its bill-collector, Sakharam Ramkrishna. In a contract of indemnity, there are two parties; while in a contract of guarantee there are three parties to the contract. The document is signed by Vishnu and executed in favour of the Municipal Committee. It has not been signed by Sakharam. There was no liability of Sakharam to the Municipal Committee. The document was executed in order to ensure a faithful discharge of duties by Sakharam, and to compensate the Municipal Committee to the extent of Rs. 200 in case of loss caused to it by the conduct of its bill-collector Sakharam. I hold that the document dated 31st August, 1929 is a contract of indemnity, notwithstanding the description of Vishnu as a surety at the toot of the document." …………………………………………………………………………….. "The Article applicable to the case is Art. 83 which provides that 'upon any other contract to indemnify' the suit has to be brought within three years from the date 'when the plaintiff is actually damnified'. The Municipal Committee was damnified when the embezzlement took place which was prior to 20th April, 1937. The claim of the plaintiff against Vishnu Damodhar Bhalerao was barred by limitation because it was filed on 26th April, 1940, more than three years after the Municipal Committee had knowledge of the embezzlement by Sakharam." 21. The Municipal Committee was damnified when the embezzlement took place which was prior to 20th April, 1937. The claim of the plaintiff against Vishnu Damodhar Bhalerao was barred by limitation because it was filed on 26th April, 1940, more than three years after the Municipal Committee had knowledge of the embezzlement by Sakharam." 21. On the question of entertaining the case of indemnity, though it was not specifically pleaded in the plaint, Mr. Das relied on a Supreme Court decision in (9) Bhim Singh v. Kan Singh., reported in AIR 1980 SC 727 , wherein the Supreme Court held that from the evidence led by the parties it is clear that they knew during the trial of the suit that the question whether transaction effected under Patta was a benami transaction or not arose for consideration in the case. It was pointed out that merely because the plaintiffs attempted to prove in the trial Court that the money paid for purchasing the house came out of their fund, it cannot in the circumstances of the case prevent them from claiming title to the property on the basis that even though Bharat Singh had paid the consideration therefore, plaintiff No.2 alone was entitled to the suit house. In this connection reference was made to the decision in the case of (10) Bhagawata Prasad v. Chandramani, AIR (1966) SC 735. 22. On the question of contract of guarantee and indemnity, Mr. Das also relied on certain passages from Anson on Contract 26th Edn. Pp. 57 to 71 and Cheshire & Fifoot on Contract, 10th Edn. P. 179 which are set out hereinbelow. "Contract of Guarantee" 23. The actual words of the Statute read: No action shall be brought.........whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriage of another person............unless the agreement upon which such action shall be brought or some memorandum or note thereof shall be in written, and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised. 24. A promise 'to answer for the debt, default or miscarriage of another person' is a contract of guarantee or suretyship. It is usually reducible to this form : 'Deal with X and if he does not meet his obligations, I will be answerable'. 25. This promise must be distinguished from a contract of indemnity. 24. A promise 'to answer for the debt, default or miscarriage of another person' is a contract of guarantee or suretyship. It is usually reducible to this form : 'Deal with X and if he does not meet his obligations, I will be answerable'. 25. This promise must be distinguished from a contract of indemnity. The distinction is of practical importance because the Statute of Frauds does not require a contract of indemnity, unlike that of guarantee, to be evidenced by writing of any sort. In a contract of guarantee there must always be three parties in contemplation : a principal debtor (whose liability may be actual or prospective), a creditor, and a guarantor who, in consideration of some act or promise on the part of the creditor, promise to discharge the debtor's liability if the debtor should fail to do so. The guarantor's liability is therefore secondary to that of the principal debtor. In a contract of indemnity, however, the promisor makes himself primarily liable, either alone or jointly with the principal debtor and undertakes to discharge the liability in any event. 26. The case of Guild & Co. v. Conrad, (1894) 2 QB 885 affords an illustration both of a guarantee and of an indemnity : 27. The plaintiff, at the request of the defendant, accepted bills of exchange drawn on a firm of Demerara merchant receiving a promise from the defendant that he would, if necessary, meet the bills of maturity. Later the firm got into difficulties and the defendant promised the plaintiff that if he would accept a further batch of bills the funds should in any event be provided : It was held that the first promise was a guarantee, second an indemnity. Devey, L. J. said: 28. 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, it 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. 29. In a contract of guarantee there must, in fact, be an expectation that another person will perform the obligation for which the promisor makes himself liable. 29. In a contract of guarantee there must, in fact, be an expectation that another person will perform the obligation for which the promisor makes himself liable. If the promisor makes himself primarily liable the promise is not within the Statute, and need not be in writing : 30 If two come to a shop, and one buys and the other, to gain him credit, promises the seller 'if he does not pay you I will', this is a collateral undertaking, 'and void without writing, by the Statute of Frauds : but if he says, 'Let him have the goods I will be your paymaster', or 'I will see you paid' this is an undertaking as for himself, and he shall be intended to be the very buyer, and the other to act but as his servant. 31. Nevertheless, the question whether the undertaking is primary or secondary is determined, not merely from the particular words of the promise, but from the general circumstances of the transaction. In the result, the borderline is often very artificial and the subject 'has raised many hair-splitting distinctions of exactly that kind which brings the law into hatred, ridicule and contempt by the public.' 32. The liability guaranteed may arise out of tort as well as out of contract. It may also be prospective at the time the promise is made, as for example, in consideration of a future advance of money or it may be past, provided some new consideration is given. Yet there must be a principal debtor at some time; else there is no contract of guarantee, and the premise though not in writing will nevertheless be actionable. This is illustrated by (11) Lakeman v. Mountstephen, (1874) LR 7 HL 17. 33. The appellant was the Chairman of a Local Board of Health, and the respondent was a builder. It was proposed that the respondent should construct certain drains. When asked if he had any objection to doing the work, the respondent replied that he had none, provided that the appellant or the Board would become responsible for payment. Whereupon the appellant said, 'Go on, Mountstephen, and do the work, and I will see you paid.' The Board repudiated liability on the ground that they had never entered into any agreement with the respondent. Whereupon the appellant said, 'Go on, Mountstephen, and do the work, and I will see you paid.' The Board repudiated liability on the ground that they had never entered into any agreement with the respondent. When sued, the appellant pleaded that his statement was promise to be answerable for the debt of another within the Statute of Frauds and, not being in writing, was unenforceable. 34. The House of Lords held that the respondent was entitled to succeed. The Board had incurred no liability which could be guaranteed, and there could be no contract of guarantee unless there was a principal debtor. The words of the appellant, when properly construed, indicated that he would therefore be liable, not as guarantor but as sale debtor, by reason of his oral promise to the respondent. 35. The promise must also not effect a release of the Original debtor, his liability must be a continuing liability. If there is an existing debt for which a third party is liable to the promisee, and if the promisor undertakes to be answerable for it, still there is no guarantee if the terms of the agreement are such as to extinguish the original liability. If A says to B, 'Give a receipt in full for his debt to you, and I will pay the amount', this promise would not fall within the Statute; for there is no suretyship, but a substitution of one debtor for another. 36. There are, however, two exceptional situations where a contract of guarantee has been held to fall outside the Statute, even though it is a promise to answer for the debt, default or miscarriage of another. 37. The first is where the guarantee is merely incidental to a larger contract and not the sole object of the parties to the transaction. So in (12) Sutton & Co. v. Grey, (1894) 1 QB 285, where the defendants entered into an oral agreement with a stockbroker to introduce business to him on the terms that they were to receive half the commissions earned and to pay half the losses in the event of a client introduced by them failing to say, it was held that their promise to answer for the debt of such a client did not fall within the Statute. It was incidental to a wider transaction and did not have to be evidenced by writing. It was incidental to a wider transaction and did not have to be evidenced by writing. The same is true of a del credere agency, where the agent, in return for extra remuneration, also becomes responsible to his principal for due performance of the contract. 38. The second relates to the protection of property. Where the main purpose of the guarantor is to acquire or retain property, and the guarantee is given to relieve the property from some charge or encumbrance in favour of a third party, it is not within the Statute. Thus if A buys goods from B which are subject to a lien in favour of C, and in order to discharge the lien A promises C to pay B's debt if B does not do so, this promise need not be evidenced by writing. But the interest to be acquired or retained must be substantial and proprietary. An oral promise by a share-holder in a company to guarantee the company's debts in order to prevent an execution being levied on its assets does not come within this exception'. The interest which a share-holder has in a purely personal one he has no proprietary interest in the company's assets. 39. These legal niceties have, however, little to commend them. The administration of justice is not a game and it is a matter for regret that, if special protection was to be afforded by the law to guarantors, it should not have been embodied in a statute requiring the terms of all contracts of guarantee or indemnity to be set out in a written document, instead of perpetuating subtle distinction", Cheshire & Fifoot "By a more comprehensive process of interpretation it has also been ruled that the use of the words 'of another person' assumes the continued existence of some primary liability owed by a third party to the plaintiff, to which the defendant's guarantee is subsidiary and collateral. A distinction has thus been taken between an arrangement whereby the original debtor' continues liable and one in which he is discharged. In other words, a contract is not a guarantee within the statute unless there are three parties, the creditor, the principal debtor and the secondary debtor or guarantor. A distinction has thus been taken between an arrangement whereby the original debtor' continues liable and one in which he is discharged. In other words, a contract is not a guarantee within the statute unless there are three parties, the creditor, the principal debtor and the secondary debtor or guarantor. The essence of the contract is that the guarantor agrees, not to discharge the liability in any event, but to do so only if the principal debtor fails in his duty. There are thus two cases in which a contract is excluded from the statute on the ground that the promisor is not in fact answering 'for another person'. 40. The first case is where the result of a contract is to eliminate a former debtor and to substitute a new debtor in his place. Here it is idle to speak of guaranteeing the debt of another since that other has been released from all liability. As was said in an early case, if two come to shop and one buys, and the other says to the seller : 'Let him have the goods. I will be your paymaster', or 'I will see you paid', this is an undertaking as for himself, and he shall be intended to be the very buyer and the other to act but as his servant. These words, though striking and often quoted, must be taken, not as an infallible test for the operation of the statute, but as an indication of the parties' intention. Whatever the language used, the question must be whether they intended that the promisor should assume sole or subsidiary liability. Even the stark phrase, 'Let him have the goods, I will see you paid', when thus read in the light of the context, may mean no more than, 'if he does not pay, I will'. 41. Again, suppose that a seller is unwilling to accept further orders from a buyer unless payment is made or security given for goods already supplied. If there is an oral agreement by which the creditor agrees to supply further goods to the debtor in consideration that X will assume sale responsibility for the existing debt, the statute does not apply. X's undertaking releases the original debtor from the liabilities so far incurred, and it is thus absolute and not in any way conditional upon non-payment by a third party. 42. X's undertaking releases the original debtor from the liabilities so far incurred, and it is thus absolute and not in any way conditional upon non-payment by a third party. 42. Secondly, a contact is not within the statute if there has never at any time been another person who can properly be described as the principal debtor. This is well-illustrated by Mountstephen v. Lakeman, (1871) LR 7 QB 196 affd (1874) LR 7 HL 17. The defendant was Chairman of the Brixham Local Board of Health. The surveyor to the board proposed to the plaintiff, a builder, that be should construct the connections between the drains of certain houses and the main sewer. The plaintiff desired to know how he was to he paid, and the following conversation took place : Defendant : 'What objection have you to making the connections ?' Plaintiff : 'I have none, if you or the Board will order the work or become responsible for the payment.' Defendant : 'Go on, Mountstephen, and do the work, and I will see you paid.' The plaintiff did the work and debited the board, which disclaimed liability on the ground that they had never directly or indirectly made any agreement with him. The plaintiff then sued the defendant, who pleaded the statute. 43. The Court had to consider the purpose and effect of the conversation between the parties. Did it mean that the defendant guaranteed a liability that primarily rested upon the board, or that he himself assumed an original and sale liability ? Only in the former case could there be a contract to answer for the debt 'of another person'. Since the Board had not ordered the work to be done and therefore was not a debtor in any sense of the word, it was held that the defendant was himself the only debtor and that his promise was outside the statute. 44. The Court in this case sought to emphasise the distinction by suggesting appropriate nomenclature. If the undertaking was collateral and within the statute, it was to be described as a 'guarantee', if original and outside it, as an 'indemnity'. Such terminology is doubtless of service in clarifying the issues to be faced. 44. The Court in this case sought to emphasise the distinction by suggesting appropriate nomenclature. If the undertaking was collateral and within the statute, it was to be described as a 'guarantee', if original and outside it, as an 'indemnity'. Such terminology is doubtless of service in clarifying the issues to be faced. But contracting parties cannot be expected to use words as legal terms of art, and it remains for the court to interpret the sense of their agreement rather than to accept their language at its face value. If its purpose is to support the primary liability of a third party, it is caught by the statute, whether the words by which this intention is expressed. If there is no third party primarily liable, the statute does not apply. 45. These variations upon the theme 'of another person' if some what artificial, may he allowed to rest upon the inherent ambiguity of the language. A further distinction can be regarded only as a deliberate evasion of the statute. Even though the defendant's promise is undoubtedly a 'guarantee' and not an 'indemnity', it will still be outside the statute, if it is merely an incident in a larger transaction. To come within the statute the guarantee must be the main object of the transaction of which it forms a pint. The Courts have adopted this argument in two types of cases. 46. The first is where the defendant has given a guarantee in his capacity as a del credere agent. A del credere agent is one who, for an extra commission, undertakes responsibility for the due performance of their contract by persons whom he introduces to his principal. * * * * * 47. The second type of case is where the defendant enjoys legal rights over property which is subject to an outstanding liability due to a third party. If, in order to relieve the property from the encumbrance he guarantees the discharge of the liability, his promise is excluded from the statute and is binding even though made orally." 48. He also relied on Chitty on Contract, 24th Edn. Vol. 2 P. 1012 paragraphs 4801, 4802 and 4803. He submitted that this is a case of guarantee. However, if it is held that there has no request of the principal debtor then those documents amount to contract of indemnity. Mr. He also relied on Chitty on Contract, 24th Edn. Vol. 2 P. 1012 paragraphs 4801, 4802 and 4803. He submitted that this is a case of guarantee. However, if it is held that there has no request of the principal debtor then those documents amount to contract of indemnity. Mr. Das also relied on the decision in Mount Stephen v. Lake, Law Reports 7 English & Irish Case 17 at p. 20. 49. In our opinion the finding of facts and principles of law have been correctly arrived at by the learned Judge. In this case, the note given by the Secretary shows the circumstances under which minutes were made on 29th September, 1965 and 27th October, 1965. All along the defendant No.2 had been representing the case of the defendant company and looking after their interest. At the behest of the defendant No. 2 credit facilities were given to the defendant No. 1 and the defendant No.2 was responsible for the same, as one of their directors or the company. The company stayed their hands for a long time because of the intervention of the defendant No.2 after which they decided to take legal action in the matter. At long last a Solicitor's letter was written on the 8/9th of July, 1965 to the Company and the defendant No.2 who was described as the guarantor. No reply was given to the same. We are not willing to accept the case sought to be made that this letter was misplaced. It is interesting to note that they did not deny the receipt on this letter but merely sought to contend, after expiry on 6 months, that the letter was misplaced. When it was misplaced is not stated. Why it was not answered before it was misplaced has not been stated. After 6 months, they woke up to meet the claim of the plaintiff through the solicitor. Some explanation has to be given as to why no such case was made out earlier and no reply was given for 6 months. That is why the story of 'misplacement' was connected. It is peculiar to note that though they are supposed to have misplaced the letter, not only the correct date of the letter but also the correct number of the letter was given. That is why the story of 'misplacement' was connected. It is peculiar to note that though they are supposed to have misplaced the letter, not only the correct date of the letter but also the correct number of the letter was given. The same solicitor wrote these two letters––one on behalf of the company and another on behalf of the defendant No. 2, the alleged guarantor. When in reply to the same, further copies were sent and the story of alleged misplacement was denied and disputed by the plaintiff's solicitor, no reply was given to the same and no explanation was sought to be given regarding such 'misplacement'. Accordingly, in our opinion this letter was received and not replied to for 6 months because there was nothing to deny and dispute and the contents of the letter were correct. For these reasons they did not dispute the correctness of this letter by officially writing a letter. In this letter of the plaintiff's solicitor dated 8/9th of July, 1965 a specific case was made out regarding guarantee. However, defendant No. 2 sought another opportunity and that is again to persuade the Company not to take any action. In the note given by the Secretary dated 9th August, 1965, which was given in connection with the meeting of the Board of Directors held on 29th September, 1965, it was stated that Mr. Kapur had given certain assurances regarding payment. This was not denied. The minutes of 29th September, 1965 clearly shows that Mr. Kapur guaranteed to the Board that he will see that all the arrears are realised and received by the Company before the ensuing Annual General Meeting. 50. The Minutes of the Meeting of the Board of Directors of the plaintiff company dated 27th October, 1965 shows confirmation of the Proceedings of the last Meeting of the Board of Directors of the Company held on 29th September, 1965. Mr. Kapur was present in both the Meetings. Mr. Kapur did not challenge the correctness of the minutes of the Meeting held on 29th September, 1965. On the contrary, he was a party to such confirmation. In the Meeting of 27th October, again it was pointed out that no payment was received from the defendant No. 1 and three other Firms inspite of such assurance of the defendant No.2, Mr. Kapur. Accordingly, Mr. On the contrary, he was a party to such confirmation. In the Meeting of 27th October, again it was pointed out that no payment was received from the defendant No. 1 and three other Firms inspite of such assurance of the defendant No.2, Mr. Kapur. Accordingly, Mr. Kapur stated that he was doing his best to see that the moneys were received by the company. He gave assurance that "payment will be made as early as possible" find further pointed out that the dues from the said concern are secured by his personal guarantee. After this there cannot be any question or doubt that such guarantee was given by Mr. Kapur. The question undoubtedly remains is whether there was any guarantee in the eye of law. The admitted position is that the contract of guarantee must involve three parties, i.e., principal debtor, creditor and the surety. Such guarantee is to be given at the express or implied request of the principal debtor and that there must be a consideration. In the facts and circumstances of this case there is no doubt that this guarantee was given by Mr. Kapur at the behest and at the instance of the principal debtor. They have received the letter of demand. They were going to face a litigation. Mr. Kapur was their contact in the company. In our opinion it was at the request express or implied, of the company that Mr. Kapur gave such guarantee. The same call be inferred from the course of conduct of the parties. The principal debtor was a party to such contract of guarantee. At their behest such guarantee was given. The question of lack of consideration cannot and does not arise. A huge sum was outstanding. Mr. Kapur was interested in the same. He was the person responsible. If the litigation takes place, he may suffer. He wanted the matter to be stalled. He did not want any suit to be filed to enforce the claim of the company. For this reason he gave that guarantee at first assuring that it would be paid before the Annual General Meeting and then making it quite clear that the claim of the company was secured because it was covered by his personal guarantee. He did not want any suit to be filed to enforce the claim of the company. For this reason he gave that guarantee at first assuring that it would be paid before the Annual General Meeting and then making it quite clear that the claim of the company was secured because it was covered by his personal guarantee. Realising the implications of the proceedings of the Meetings a false case was sought to be set up to the extent that the Minutes were not genuine documents though no such pleading was taken specifically, cross-examination took place. Realising implications of the same, Mr. Sen appearing in support of this appeal, in his usual fairness, rightly gave on this point and did not argue it. The position in law has been rightly set out by the learned Judge. In the contract of guarantee there must be three parties, i.e. the principal debtor, creditor and the surety and there must be three contracts. A contract of guarantee involves three parties, the creditor, the surety and the principal debtor and a contract to which those parties are privy. There must be a contract first of all between the principal debtor and the creditor. Then there must be a contract between the surety and the creditor by which the surety guarantee the debt. No doubt the consideration for the contract may move either from the creditor or from the principal debtor or both. In order to constitute a contact of guarantee there must be a third contract by which the principal debtor expressly or impliedly requests the surety to act as surety. Unless that element is present, it is impossible to work cut the rights and liabilities of the surety under the Contract Act. 51. The learned Judge clearly pointed out that the said Minutes of the Meeting clearly established that Mr. Kapur wanted the company to give the time to the defendant No.1 and it impliedly amounts to ask in the company not to sue until that time. Assurance was also given about due payment. In our opinion that shows not only that there was consideration but also it was done at the request of the defendant No. 1. Similar thing took place in the Minutes the Meeting of 27th October, 1965. Assurance was also given about due payment. In our opinion that shows not only that there was consideration but also it was done at the request of the defendant No. 1. Similar thing took place in the Minutes the Meeting of 27th October, 1965. The learned Judge rightly quoted Illustration (b) of section 127 of the Contract Act which is as follows :–– "A sells and delivers goods to B. C afterwards requests A to forbear to sue. B for the debt for a year and promises that, if be does so, C will pay for them in default of payment of B. A agrees to forbear as requested. This is a sufficient consideration for C's promise". In our opinion the learned Judge correctly held that in accordance with Kapur's requests the plaintiff allowed time and did not take any legal steps against the defendant No. 1. This amounted to sufficient consideration for Kapur's guarantee recorded in the Minutes of 29th September, 1965 and 27th October, 1965. On the question that in all agreements of guarantee the principal debtor must be a party, the learned Judge has rightly held that this principle has been complied with in the present case. The learned Judge rightly held that the presence of the principal debtor may be express or implied. The learned Judge rightly held that in the present case, though no express, request on behalf of the defend ant Nos. 1, 4 and 5 was made out, it was a case of implied request. There could be an implied request also to uphold such contract of guarantee as held in the case of Punjab National Bank Ltd. v. Sri Bikram Cotton Mills Ltd & Ors., AIR 1970 SC 1973 . The learned Judge rightly relied on the decision in the case of (13) Prasenjit Mehta v. The United Commercial Bank Ltd., AIR 1979 Patna 161 wherein it was held that it would be sufficient if the principal debtor would be a party to the agreement of guarantee by implication. As rightly pointed out in the case of (14) Carr Lazarus Phillips & Ors. v. Alfred Earnest Mitchell & Ors., AIR 1940 Calcutta 17, a guarantee like every other contract, must be construed reasonably. It must be construed by the circumstances. As rightly pointed out in the case of (14) Carr Lazarus Phillips & Ors. v. Alfred Earnest Mitchell & Ors., AIR 1940 Calcutta 17, a guarantee like every other contract, must be construed reasonably. It must be construed by the circumstances. It is pointed out that in construing a guarantee the Court must look at and is entitled to look into the evidence regarding all the surrounding circumstances so as to know what the parties meant. The learned Judge also rightly relied on the decision in the case of (15) Mathura Das & Ors. v. Secy. of State & Anr. reported in AIR 1930 Allahabad 849 which held that a contract of guarantee need not necessarily be in writing : it may be express, by word of mouth or it may be tacit or implied and it may be inferred from the course of conduct of the parties concerned. In that case it was also held that the contract of guarantee has to be interpreted having regard to the relative position of the contracting parties and to the circumstances surrounding the contract. The implied concurrence can only be inferred from the conduct of the parties, the surrounding circumstances as well as from the relative position of the contracting parties. The learned Judge has found correctly that Kapur and the defendant Nos. 4 and 5 were known to each other before Kapur joined the Kalinga Tubes. The admitted position is that Kapur took charge of the sales and purchase from the middle of 1958. Previously the usual practice of the Kalinga Tubes was to sell against cash payment of bank guarantee. It was Kapur who started to give facilities to the defendant No.1 who came into the picture by the end of 1950. Kapur became a director of Kalinga Tubes in June, 1961 and remained as such upto 11th October, 1966. During this long period unusual credit facilities were given to the defendant No. 1 by Kapur resulting in huge accumulation of the company's dues to the extent of Rs. 16,17,833.17 Paise. This was possible because Kapur was at the helm of the sale department of Kalinga Tubes. Kalinga Tubes became anxious and served notices of demand on Kapur and the defendant Nos. 1, 4 and 5 in July, 1965 but none of the defendants denies the correctness of the same until January, 1966. 16,17,833.17 Paise. This was possible because Kapur was at the helm of the sale department of Kalinga Tubes. Kalinga Tubes became anxious and served notices of demand on Kapur and the defendant Nos. 1, 4 and 5 in July, 1965 but none of the defendants denies the correctness of the same until January, 1966. The learned Judge rightly points out that under the circumstances it could not have been possible for the defendant Nos. 1, 3, 4 and 5 to remain silent for six months without making any arrangement for preventing Kalinga Tubes from taking immediate legal action against them. The learned Judge further correctly pointed out that Kapur must have been requested to find out some ways and means to secure the debts. Kapur, being a director-in-charge of sale, was himself in a very embarrassing position. He also tried to find out a solution to protect himself and his protege. It was quite natural for Kapur to ask the company to give some time to the defendant No. 1 for payment of its dues. The learned Judge with pointed out that Kapur knew that Kalinga Tubes would not have agreed to the same unless some security was given and as such gave the personal guarantee for payment in case of default on the part of the defendant No. 1 which was recorded in the Minutes of the Board Meetings held on 29.9.65––27.10.65. This was given at the implied request of the defendant Nos. 1, 4 & 5 & that is the reason why they did not give any reply to the letter of demand for six months. The company was approached on their behalf and such guarantee was given by Kapur at their instance and at their request. The motive was to forestall any action to be taken by the company and it succeeded. When it was found out that nothing could be done about it any further and the inevitable legal action would follow, they replied to the same in January, 1966 and sought to make out a case of "misplacement" of the letter of demand. From the facts and circumstances of this case it is clear that such personal guarantee was given by the defendant No.2 at the instance and implied request of the defendant Nos. 1, 3, 4 and 5. The learned Judge was also right on observing that the defendant Nos. From the facts and circumstances of this case it is clear that such personal guarantee was given by the defendant No.2 at the instance and implied request of the defendant Nos. 1, 3, 4 and 5. The learned Judge was also right on observing that the defendant Nos. 4 and 5 avoided the witness box and remained from giving evidence for the sale reason of avoiding being cross-examined on the question of guarantee. They have not bothered to appear before the Court to give evidence disputing such implied request. The poor explanation sought to be given regarding such absence was rightly rejected by the learned trial Judge. The learned Judge was right in drawing an adverse presumption against these defendants to the effect that if they had given evidence, they would not have been able to deny the plaintiff's case of the guarantee and the concurrence of the defendant Nos. 1, 4 and 5 in the said agreement. 52. For the aforesaid reasons we hold that there was a contract of guarantee and such guarantee was given by the defendant No.2 as recorded in the Minutes dated 29th September, 1965 and 27th October, 1965. It was also a valid guarantee in law. All the ingredients of a guarantee in law have been satisfied in the present case. Accordingly, we reject the contention of the appellant on this point. In this connection we may also refer to the relevant passages cited from Chitty, Anson and Cheshire & Fifoot which also support the view we have taken. 53. Having regard to the conclusion which we have arrived at, it is not strictly necessary for us to go into the question as to whether the said Minute can be treated as recording a contract of indemnity. However, as lengthy arguments were made both before the learned trial Judge and before us on this point, we shall deal with the same briefly. The principle as to what is a contract of indemnity and what is ail contract of guarantee has been well-settled by various decisions cited before the learned Trial Judge and referred to before us. The sheet anchor of the plaintiff's case was Shankar Nimbaji Shintre & Ors. v. Laxman Supadu Sheike & Ors., AIR 1940 Bombay 161 where the question of "actual loss" first cropped up. The sheet anchor of the plaintiff's case was Shankar Nimbaji Shintre & Ors. v. Laxman Supadu Sheike & Ors., AIR 1940 Bombay 161 where the question of "actual loss" first cropped up. In our opinion the said judgment has been correctly interpreted by Chagla, J. In Gajaman Moreshwar Parolkar v. Moreshwar Madan Mantri, AIR 1942 Bombay 302. In our opinion, Shankar Nimbaji Shintre & Ors. v. Laxman Supadu Sheike & Ors., AIR 1940 Bombay 161 was decided in the facts of that case and no general principle was decided as it was not necessary to be decided. We respectfully agree with Chagla, J. that if any general principle of law was decided, that was not correct. 54. In our opinion, though no specific pleading was made regarding the indemnity, the parties knew the case sought to be made out and arguments were made on that basis and under these circumstances the learned Judge was right in going into this question and giving his decision on the basis of indemnity also. That it is open to the Court to do so, is made clear on the case reported in Bhim Singh (dead) by L.Rs. and Another v. Kan Singh, AIR 1980 SC 727 and Municipal Committee Buldana v. Vishnu Damodhar Bhareras and Another, AIR 1949 Nagpur 48. In our opinion the Minutes of the Meetings dated 29th September, 1965, and 27th October, 1965 satisfy the test of a contract of indemnity. As rightly pointed out, section 124 of the contract Act is not exhaustive by itself. There could be a contract of indemnity outside 124 also. In our opinion, these minutes can be treated as recording a contract of indemnity also. Moreso, if in this case it is held that there was no express or implied request of the principal debtor and if the principal debtor is not taken to be a party to such guarantee, then it is beyond argument that these documents assume the character of indemnity. If there is no request by the principal debtor, express or implied, and if there is no such contract with the principal debtor, then by these documents the defendant No.2 was himself seeking to damnify the principal creditor, that is, Kalinga Tubes. Whether it is a contract of guarantee or a contract of indemnity, the use of any expression by itself is not conclusive. Whether it is a contract of guarantee or a contract of indemnity, the use of any expression by itself is not conclusive. We have to ascertain of the in substance any guarantee and/or indemnity may be ascertained from the facts and circumstances of this case. The question is whether Kapur made himself liable for payment of dues of the defendant No. 1 either on the basis or a guarantee or indemnity or otherwise. On that basis the learned Judge's finding was right. 53. No other point was raised before us. For the aforesaid reasons, we confirm the judgment and decree of the learned trial Judge. This appeal is dismissed with costs. All interim orders are vacated. 56. However, having regard to the fact that the learned counsel for the appellant argued this case before us in a very fair manner, we direct that the appellant shall pay 3/4th costs of the appeal to the respondents. Certified for two counsels. Prayer for stay of the operation of this order is rejected. Hazari, J.: I agree.