S. CHATTANATHA KARAYALAR versus THE CENTRAL BANK OF INDIA AND OTHERS

Citation: [1965] 3 S.C.R. 318 · Decided: 09-03-1965 · Supreme Court of India · Bench: P.B. GAJENDRAGADKAR · Disposal: Appeal(s) allowed

Judgment (excerpt)

318 
S. CHATTANATHA KARAYALAR 
A 
v. 
THE CENTRAL BANK OF INDIA AND OTHERS 
March 9, 1965 
[P. B. GAJENDRAGADKAR, C. J., RAGHUBAR DAYAL AND 
V. RAMASWAMI, JJ.] 
B 
Promissory Note, Letter of continuity and Hypothecation Agree-
ment-Interpretation of-Liability if as surety of co-obligant. 
On the basis of a promissory note and a letter of continuity 
executed by the appellant and respondent Nos. 2 and 3 and a hypo-
thecation agreement executed by the respondent No. 2, the res-
pondent No. I-bank opened on overdraft account. in the name ·of 
respondent 2. In the promissory note, the appellant and respondent 
C 
Nos. 2 and 3 had "jointly and severally promised to pay" the bank 
or order; in the letter of continuity sent along with promissory note 
to the bank, the appellant, respondent Nos. 2 and 3 stated that "the 
said promissory note is to be a surety to you for the repayment of 
the ultimate balance or sum remaining unpaid on the over-
draft"; and in the hypothecation agreement the bank had agreed to 
open a cash credit account at the request of respondent No. 2. The 
D 
bank filed a suit against the appellant and re;;pondent Nos. 2 and 3 
for recovery of the amount due on the overdraft. The appellant and 
respondent No. 3 pleaded, inter alia, that they had executed the 
promissory note as a surety for respondent No. 2 and that ·they are 
not co-obligants. The Trial Court held the appellant and respondent 
No. 3. were not merely sureties but were co-obligants and decreed 
the suit, which was affirmed by the High Court. In appeal by certi-
E 
ficate; 
HELD: The finding of the High Court was not correct. [324 C-D]. 
Interpreting the language of the promissory note in the con-
text of the letter and the hypothecation agreement, the status of the 
apoellant with regard to the overdraft account was that of a surety 
and not of co-obligant. [324 A]. 
If the transaction is contained in more than one document bet-
F 
ween the same parties, they must be read and interpreted together 
and they have the same legal effect for all purposes as if they are 
one document. [323 C]. 
Manks v. Whiteley, (1912) I Ch. 735, applied; 
The pcovisions of Section 92 of the Evidence Act did not app])• 
in the present case, because the appellant was not attempting to 
furnish evidence of a·ny oral agreement in derogation of the pro-
missory note but relied on the existence of a collateral agreement 
in vvritirig the letter and the hypothecation agr~ment, \Vhich form-
ed parts of the .:;.ame transaction as the promissory note. r325 Hl 
Case law referred to. 
Crv1L APPELLATE JURISDICTION: Civil Appeal No. 405 of 
1964. 
. 
Appeal from the judgment and decree dated July 18. 1962 of 
the Kerala High Court in A. S. No. 561 of 1961. 
S. T. Desai. M. S. K. Sastri and M. S. Narasimhan for the 
appellant. 
. 
G. S. Pathak. B. Dutta, C. Chopra. J. B. Dadachanji, 0. C. 
l'vfathur and Ravindcr Narain for Respondent No. 1. 
G 
H 
A 
B 
0 
D 
E 
F 
G 
H 
s. c. KABAYALAR v. CENTRAL BANK (Ramaswami, J.) 
3l9 
The Judgment of the Court was delivered by 
Ramaswami, J. 
This appeal by certificate is brought on 
behalf of the 3rd defendant against the judgment and decree of 
the High Court of Kerala dated July 18, 1962 in A.S. No. 561 of 
1961 which affirmed the. judgment and decree of the Court of the 
Subord;nate Judge of Alleppey in 0.S. No. 114 of 1957 .. 
By a resolution Ex. BD dated November 25, 1946 the Board 
of Directors of the !st defendant Company authorised the 2nd 
defendant to obtain financial aocommodation from the plaintiff-
bank to the extent of Rs. 15 lakhs under different kinds of loans. 
Pursuant to this resolution the Company by its Jetter Ex. DE dated 
November 26, I 946 asked for accommodation for Rs. I Jakh under 
clean oy~rdraft, for Rs. 4 Jakhs under open loan and for Rs. 10 lakhs 
under out agency and key loans .. On November 26, 1946 all the 
three defendants executed a prom;ssory note Ex. B in favour of the 
plaintiff-bank for a sum of Rs. 4 lakhs. The promissory note was 
sent to the plaintiff-bank along with a letter-Ex .. A styled letter 
of continuity dated November 26, 1946. Ex. A reads as follows: 
"Alleppey, 26th November, 1946.. 
The Agent, 
The Central Bank of India Limited, 
Alleppey. 
Dear Sir, 
We beg to enclose an on demand pro-note p. 
Rs. 4,00,000 (Rupees Four lacs only) s;gned by us which 
is given to you as security for the repayment of any over-
draft which is at present outstanding in our name and 
also for the repa

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