CASE BRIEFRamchandra B. Loyalka vs Shapurji N. Bhownargee, 1940
Facts:
1. The case involves an appeal from Mr. Justice Somjee's decision in the Bombay High Court.
2. Ramchandra B. Loyalka, the plaintiff, served as a sub-broker for Shapurji N. Bhownagree, the defendant, who is a broker.
3. The dispute centers around a contract (exhibit A) between the plaintiff and the defendant, later modified by exhibit B.
4. The primary concern is the plaintiff's liability for defaults made by clients introduced by him.
5. Exhibit A outlines the plaintiff's responsibility for business secured from his constituents and his commitment to ensuring due payments from them.
6. A subsequent letter, exhibit B, details a balance due from certain clients and outlines an agreement between the parties regarding the settlement of this balance.
Issues:
1. The key issue is the liability of the plaintiff for defaults made by clients introduced by him.
Arguments:
1. The primary argument centers around whether exhibit A is a contract of guarantee or indemnity.
2. Exhibit A outlines the plaintiff's responsibility for business secured from his constituents and his obligation to ensure due payments from them.
3. The plaintiff contends that compromises made by the defendant with certain constituents without his consent discharge him from liability.
4. The court considers the distinction between a contract of guarantee and indemnity under Sections 124 and 126 of the Indian Contract Act.
Judgment:
1. The court disagrees with the lower court's view that exhibit A is a contract of guarantee and holds it to be a contract of indemnity.
2. It emphasizes that a contract of guarantee involves three parties: the creditor, the surety, and the principal debtor, and the principal debtor must expressly or impliedly request the surety to act.
3. The court rules that the compromise made by the defendant with some constituents does not discharge the plaintiff's liability.
4. Exhibit B, a subsequent agreement, is considered neither a contract of guarantee nor indemnity but a contract to pay an agreed sum, which the plaintiff is liable to pay.
5. The court allows the defendant to claim the amount specified in exhibit B against the plaintiff, less the sums received in respect of the named clients.
6. The judgment varies the lower court's order, striking out the first declaration and declaring the defendant's entitlement to recover from the plaintiff as specified in exhibit B.
7. The respondent (plaintiff) is ordered to pay the costs of the appeal.
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