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PETITIONER: NEW INDIA ASSURANCE COMPANY LTD.

       Vs.

RESPONDENT: SHRI KUSUMANCHI KAMESHWARA RAO & ANR.

DATE OF JUDGMENT:       28/11/1996

BENCH: N.P. SINGH, S.B. MAJMUDAR

ACT:

HEADNOTE:

JUDGMENT: Present                Hon’ble Mr. Justice N.P. Singh                Hon’ble Mr. Justice S.B. Majmudar      K.K. Jain,  Ajay K.  Jain, Shashi Bhusan, Pramod Dayal, Advs.,      R. Venugopala  Reddy, Sr.  Adv. and  B.Kanta Rao,  Adv. with him for the Respondents.                       J U D G M E N T      The following Judgment of the Court w-as delivered:      S.B. Majmudar, J.      This appeal  on the  grant of  special leave  to appeal under Article  136 of  the Constitution  of India  brings in challenge the  judgment and  decree passed by Division Bench of the  Andhra  Pradesh  High  Court  at  Hyderabad  whereby respondent no.  1’s  suit  against  the  appellant-insurance company, which  was defendant  no.1 in  the suit  came to be decreed.  In  order  to  appreciate  the  grievance  of  the appellant against the impugned decree a few background facts deserve to  be noted  at the  outset. We  shall refer to the appellant as defendant no.1 respondent no.1 as the plaintiff and respondent  no.2 as defendant no.2 in the latter part of this judgment.      The  plaintiff   filed  a  suit  for  recovery  of  Rs. 1,25,000/- against  both the  defendants  in  the  Court  of Subordinate Judge,  Kakinada, East  Godavari District in the State of  Andhra Pradesh.  The plaintiff’s case is that by a Deed dated  23rd April  1971  (Annexure  A-2)  entered  into between the  plaintiff and defendant no.2, the 2nd defendant agreed and  undertook to  pay to the plaintiff  a sum of Rs. 168,499.32 being  the  amount  settled  to  be  due  to  the plaintiff. The  2nd  defendant  also  agreed  to  furnish  a guarantee bond  from the 1st defendant-insurance company for the due  payment of  Rs.  1,68,499.32.  Accordingly  at  the request of  the 2nd  defendant the  1st defendant  agreed to execute a  guarantee bond in favour of the plaintiff for the said amount  of Rs. 1,25,000/-. The 1st defendant executed a guarantee bond dated 26th April 1971(Annexure A-1) in favour of the plaintiff by and under which the 1st defendant agreed and undertook  to pay  to the plaintiff at Kakinada the said sum of  Rs. 1,25,000/-  or such  lesser  amount  as  may  be

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demanded by the plaintiff on failure of the 2nd defendant to fulfil the  terms of  the agreement  dated 23rd  April  1971 (Annexure A-2). It is the further case of the plaintiff that the first  defendant also  unconditionally and   irrevocably agreed that  the payment  due under the guarantee bond, will be made  to the  plaintiff within ten days after the receipt of a written notice of demand from the plaintiff and without reference to the 2nd defendant. The plaintiff contended that the said guarantee bond provided that it will be valid for a period of  one year thereof. The plaintiff contended that as the 2nd  defendant  failed  to  perform  the  terms  of  the agreement  (Annexure   A-2)  the   plaintiff  demanded  that guarantee amount of Rs. 1,25,000- from  the 1st defendant by registered notice  dated 27th  March 1972.  As  it  was  not complied  with,  the  plaintiff  filed  the  aforesaid  suit against both the defendants.      The 2nd  defendant remained  ex parte  and did not file any written  statement.  But  the  1st  defendant  insurance company, appellant  herein, filed written insurance company, appellant herein, filed written statement contending that it was not  at any agreement dated 23rd April 19/1 (Annexure A- 2) said  to have been entered into between the plaintiff and 2nd defendant  under which  the  2nd  defendant  agreed  and undertook to  pay to  the plaintiff a sum of Rs. 1,88,499.32 as being  the amount settled to be due to the plaintiff. The plaintiff  and   the  2nd  defendant  represented  that  the plaintiff was  a wholesaler  for the  sale of nylon yarn and fishing requisite and that he appointed the 2nd defendant as dealer for  the sale of nylon yarn and the fishing requisite and that  in connection  with credit  facilities  that  were being   given by  the plaintiff to the 2nd defendant the 1st defendant might  give a  guarantee for  the said  sum of Rs. 1,25,000/- in  respect of  the faithful  performance of  the said dealership.  Based on  the said  representations of the said dealership.  Based on  the said  representations of the plaintiff and  the 2nd defendant, the 1st defendant executed a guarantee  bond in favour of the plaintiff in a sum of Rs. 1,25,000/- for  the sale of nylon yarn and fishing requisite etc. The 1st defendant never agreed to furnish any guarantee to the  plain in respect of any amount that had been settled to  be   due  to  the  plaintiff  on  dissolution  of  their partnership. The allegation that the 2nd defendant agreed to furnish an  insurance guarantee  bond for  the due amount of Rs. 1,25,000/-   from  out of  Rs. 1,68,489,32  from the 1st defendant and  at the  respect of  the 2nd defendant the 1st defendant agreed  to execute  a guarantee  bond in favour of the plaintiff  for the  sum of  Rs. 1,25,000/- was therefore not true.  The 1st  defendant executed  a guarantee  bond in favour of  the plaintiff  for a  sum of Rs. 25,000/- in case the 2nd  defendant does  not account  to  the  plaintiff  in respect of the sale of nylon yarn and the fishing requisites etc. that  have been entrusted to him by the plaintiff to be sold. The  allegation that  the  1st  defendant  executed  a guarantee bond  under which  it agreed to pay Rs. 1,25,000/- to the plaintiff at Kakinada or such lesser amount as may be demanded by  the plaintiff  on failure  of the 2nd defendant was not true.      In view  of the aforesaid stand taken by the appellant- defendant no.1  insurance company  the learned  Trial  Judge framed relevant  issued and  came to the conclusion that the plaintiff claim  could succeed  only against  defendant no.2 who had  not contested  the suit,  but so  far as  defendant no.1, the  appellant herein,  was concerned  as it  had  not executed  any  guarantee  in  favour  of  the  plaintiff  in connection with the agreement or Dissolution Deed dated 23rd

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April 1971  Annexure A-2,  the suit  was  liable  to    fail against defendant  no.1- insurance  company.  The  plaintiff carried the  matter in appeal and by the impugned judgment a Division Bench  of the  High Court  took the  view  that  in substance the   surety bond Annexure A-1 sought to cover the liability undertaken  by the  Dissolution  Deed  dated  23rd April 1971  and as  that liability  was  not  discharged  by defendant no.2  the plaintiff  was entitled  to decree  also against defendant  no.1 the  guarantor insurance company and accordingly decreed the suit also against defendant no.1. As noted above  the said  decree  against  defendant  no.1  has resulted in this appeal by the said defendant no.1 insurance company.      We have  heard learned counsel for the parties and have gone through the relevant evidence on record. The only short point for  the determination in this appeal is as to whether defendant no.1  insurance  company’s  predecessor  insurance company, namely,  Howrah Insurance  Company had entered into any agreement  of guarantee  for covering  the liability  of defendant no.2  arising out of the suit agreement dated 23rd April 1971  Annexure A-2.  For deciding  this point in issue the express  written terms  of the  surety bond Annexure A-1 will have  to be  a bank  guarantee is  given the bank which gives the  guarantee is  given  the  bank  which  gives  the guarantee would  be liable to fulfil its obligations flowing from the  terms of  the guarantee  and the  court would  not interfere with  such obligations  flowing    from  the  bank guarantee executed  by  the  concerned  guarantor.  In  this connection a  catena of  decision have been rendered by this Court. We  may  only  refer  to  a  few  of  them.  In  U.P. Cooperative  Federation   Ltd.  v.   Singh  Consultants  and Engineers (P)  Ltd. (1980)  1 SCC 174 Sabyasachi Mukharji, J speaking for  a two  member Bench of this Court has made the following pertinent observations in this connection :      "Commitments  of   banks  must   be      honored free  from interference  by      the    courts.    An    irrevocable      commitment either  in the  form  of      confirmed   bank    guarantee    or      irrevocable letter of credit cannot      be interfered  with.  IN  order  to      restrain letter  of  credit  or  of      confirmed letter  of credit  or  of      bank  guarantee,  there  should  be      serious dispute and there should be      good prima  facie case of fraud and      special equities  in  the  form  of      preventing irretrievable  injustice      purpose of bank guarantees would be      negatived and the fabric of trading      operation  will   get  jeopardised.      Upon bank  guarantee resolves  many      of   the    internal    trade    ad      transactions in  a country."      Similar view  is taken  by a three member Bench of this Court in the case of General Technical Services Company Inc. v. M/s  Puni Song  (P) Ltd.  AIR 1991  SC (994). We may also refer in this connection to recent decision of this Court in the case of Hindustan Ship Workers Construction Ltd. v. G.S. Atwal &  Co. (Engineers)  Pvt. Ltd.  (1995) 9 SCC 76 wherein Paripoornan, J.  speaking for  a two member of Bench of this Court has  observed that  in  the  case  of  confirmed  bank guarantees/irrevocable letter  of credit, the Court will not interfere with  the same unless there is fraud irretrievable damages are  involved in  the case  and fraud  has to  be an

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established fraud.      In the light of the aforesaid settled legal position we will have  to see  whether  defendant  no.1  had  given  any guarantee to  meet the  liability of  defendant no.2 qua the plaintiff arising  from the  Deed of  Dissolution dated 23rd April 1971  Annexure A-2.  If such a guarantee is called out from the express language of the guarantee bond Annexure A-1 then obviously  the plaintiff  can succeed in the absence of any fraud being alleged to have perpetrated on the insurance company by the plaintiff and/or defendant no. 2 qua the said guarantee bond.  No such fraud had been pleaded by defendant no. 1-insurance  company. But  its defence  is to the effect that the  insurance company-defendant  no.1 had never agreed to give any guarantee for meeting the liability of defendant no.2 qua  the plaintiff as flowing from the Dissolution Deed dated 23rd April 1971. That contention has to be appreciated in the  light of  the express language of the guarantee bond Annexure a-1.  It is  obvious that when such guarantee bonds are reduced  to writing  the express  terms of  this writing containing the guarantee bond would be the repository of the obligations of the guarantor flowing the surety bond. As per Sections 91 and 92 of the Indian Evidence Act no evidence de hors the  terms of  the agreement, to get out of the express terms thereof.  Whether the  express terms  of the guarantee bond give  rise to  the contract  of guarantee  sought to be enforced will  be the  only limited  enquiry which  could be gone into  by the  courts  while  deciding  the  rights  and obligations flowing from such contract of guarantee which is a tripartite contract between the creditor, principal debtor and  the   surety.  Once   such  suretyship   agreement   is established on the clear terms of the bond then as laid down by the  aforesaid decision  of this Court no latitude can be given to  the contracting  party, namely, the surety or even the principal  debtor to  enable them  to  get  out  of  the obligations of  the suretyship  agreement flowing  from such contract, except  in exceptional  circumstances as indicated in these decisions.      Keeping  this   settled  legal  position  in  view  we, therefore, have  to see  whether the guarantee bond Annexure A-1  covers  the  obligations  of  defendant  no.2  qua  the plaintiff as flowing from the Dissolution Deed Annexure a-2. The plaintiff  seeks to  rope  in  defendant  no.1-insurance company only  on the  basis of  such obligation of defendant no.2 flowing  from Annexure-2  does not cover such liability there will  be no contract of guarantee for covering such an obligation between  the parties  and hence  the  plaintiff’s suit would  be required  to be  dismissed as was done by the Trial Court.  On the  other hand  if  the    guarantee  bond Annexure A-1  on its  express  terms  creates  a  suretyship contract  on   the  part   of  the   insurance  company  and constitutes it  as guarantor  for discharging  liability  of defendant no.2 qua the plaintiff pursuant to the Dissolution Deed Annexure  A-2 then  obviously the  plaintiff  would  be entitled to  the decree on the basis of the said contract of guarantee even  against the  appellant-insurance company  as held by  the High  Court. In  this connection, therefore, we have to keep in juxtaposition the guarantee bond Annexure A- 1 with  the Deed  of Dissolution Annexure A-2 with a view to finding out whether there is any nexus or connection between the two as alleged by the plaintiff. Relevant recital of the guarantee bond  Annexure A-1  dated 26th  April 1971 read as under :      "WHEREAS SRI  GUARANTEE &  COMPANY,      KAKINADA,  hereinafter  called  the      Dealer   have   entered   into   an

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    agreement Dt.  23rd April 1971 with      Sri   KUSUMANCHI    KAMESWARA   RAO      KAKINADA, hereinafter  referred  to      as Sri  Kusumanchi  Kameshwara  Rao      for the  sale of  Nylon  &  Fishing      requisite etc.      AND WHEREAS  UNDER  the  terms  and      conditions   of    the    aforesaid      agreement the Dealer has  agreed to      furnish to Sri Kusumanchi Kameswara      Rao  Insurance  Guarantee  for  Rs.      1,25,000/- (RUPEES  ON LAKH  TWENTY      FIVE THOUSAND  ONLY)  for  faithful      performance  of the said Agreement.      AND WHEREAS THE DEALER HAS REQUIRED      THE   HOWARAH   INSURANCE   COMPANY      LIMITED to  execute a  guarantee as      above,  which   the   said   HOWRAH      INSURANCE  COMPANY   LIMITED,   has      agreed to  do on  certain terms and      conditions.      NOW, THEREFORE, in consideration of      the agreement  ad at the request of      Sri GUARANTEE  & COMPANY  KAKINADA,      (Dealer),  We,   HOWRAH   INSURANCE      COMPANY LIMITED do hereby agree and      undertake to  pay to Sri Kusumanchi      Kameshwara Rao at Kakinada a sum of      Rs.1,25,000/-  (Rupees   ONE   LAKH      TWENTY FIVE  THOUSAND only) or such      less amount  as may  be demanded by      Kusumanchi Kameswara  Rao, Kakinada      on the  failure of  the  Dealer  to      perform faithfully all or any terms      and   conditions    of    aforesaid      agreement.      WE ALSO  AGREE UNCONDITIONALLY  AND      irrevocably   that    payment   due      hereunder   will    be   made    to      Kusumanchi  Kameshwara  Rao  by  us      within Ten  days after receipt of a      Written  notice   of  demand   from      Kusumanchi      Kameswara       Rao      notwithstanding dispute or disputes      if    any,    between    Kusumanchi      Kameshwara  Rao   and  the  Dealer,      without  denur   and  without   any      reference to THE said Dealer.      THIS AGREEMENT  WILL BE VALID for a      period of  one year  from the  date      hereafter."      A mere look at the aforesaid surety bond shows that the predecessor-in-interest of  the appellant-insurance company, namely, Howrah  Insurance Company  Limited had guaranteed to pay on  behalf of  defendant no.2 an amount of Rs.1,25,000/- and towards the sale price of the said commodities agreed to be sold  on credit  the defendant  commodities agreed  to be sold  on   credit  the   defendant  no.2  as  purchaser  had undertaken a liability to pay to the extent of Rs. 1,25,00/- to the  plaintiff and  if that  liability was not discharged by defendant  no.2 the   guarantor  insurance company had to make good  the said liability on behalf of defendant no.2 in favour of  the plaintiff.  Thus on the express terms of this document the  contract of continuing guarantee undertaken by the insurance  company in  favour of  the plaintiff  was  in

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connection with  the goods,  namely, nylon yarn and  fishing requisites which  were to be sold on credit by the plaintiff to dealer  of those  goods, namely,  defendant no.2 and that guarantee was  continued up  to the  limited amount  of  Rs. 1,25,000/- and  it was to enure for one year meaning thereby that from  26th April 1971 for a period of one year if nylon yarn and  fishing requisites etc. were sold by the plaintiff to defendant  no.2  on  credit,  the  insurance  company  as guarantor was  to make good the liability of unpaid purchase price thereof  incurred by  defendant no.2  to the extent of Rs. 1,25,000/-  in favour of the plaintiff if the sale price to that  extent was  not made  good in the first instance by defendant no.2  On the  express terms  of this  surety bond, therefore, it  must be held that it was to operate in future for guaranteeing the payment of sale price of nylon yarn and fishing requisites  which might  be sold by THE plaintiff on credit to  defendant no.2  within that  period  and  to  the extent of Rs. 1,25,000/- of such unpaid and to the extent of insurance company  had agreed to stand as defendant no.2 the insurance   company had  agreed to stand as guarantor. It is no  doubt  true  that  this  guarantee  bond  refers  to  an agreement dated 23rd April 1971 but that agreement is stated to be  the agreement  between the  dealer-defendant no.2 and the plaintiff  in connection  with sale  of nylon  yarn  and fishing requisites  on credit.  It is  upon by the plaintiff for foisting  the  liability  on  defendant  no.1  insurance company pursuant to the said document. On the contrary it is the case  of the  plaintiff that  the insurance  company had agreed to  underwrite liability  of defendant  no.2  flowing from an  entirely different  agreement dated 23rd April 1971 regarding dissolution  of their  partnership,  Annexure  A-2 which is  purported to  be executed  on that day between the plaintiff on  the one  hand the defendant no.2 on the other. When we  turn to  Annexure A-2 we find that it is entirely a different document.  It is a Deed of Dissolution between the partners for  dissolution of  partnership. It  recites  that this Dissolution  Deed was  made on  23rd day  of April 1971 between plaintiff  and defendant no.2. The relevant recitals of this document deserve to be noted at this stage. The read as under :      "1. Whereas  the party  number one,      Gannavarapu  Subbarao   is      the      working  partner  and  whereas  the      party   number    two    Kusumanchi      Kameshwara  Rao  is  the  financing      partner  in  the  partnership  firm      called M/s  Sri Guarantee  and Co.,      Kakinada and  whereas  the  parties      hereto hereby declare that the said      partnership between them carried on      under the name and style of M/s Sri      Satyanrayana and  Company under the      deed of  partnership dt.  1.10.1968      be  dissolved   from  1.4.1971  and      whereas  the   party   number   two      Kusumanchi Kameshwara  Rao  has  to      get from  the firm  a  sum  of  Rs.      1,68,499.32 P6  (Rupees one    Lakh      Sixty Eight  Thousand Four  Hundred      and Ninety  Nine and  Paise  Thirty      Two only)  towards the  amount that      was invested by him and whereas the      party   number    one    Ganavarapu      Subbarao has agreed to pay the said      amount   and    retain   the   said

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    partnership firm  for  himself  and      whereas  the   party   number   two      Kusumanchi  Kameswara  Rao  on  the      other hand  is  willing  to  retire      from the   firm  after  taking  the      said amount of Rs. 1,68,499.32 from      the   party    number    one    Sri      Gannavarapu Subbarao  and the  said      partnership dated 1.10.1968 carried      on under  the name and style of Sri      Guarantee  and   Company  shall  be      deemed to  have been  dissolved  by      mutual consent as and from 1.4.1971      and   the   said   business   shall      henceforth be  carried  on  by  the      said party  number one  Gannavarapu      Subba Rao  under the  same name, as      Sri Guarantee  and Co.,  as a sole-      proprietor.      2.  The     said   amount  of   Rs.      1,68,499.32 ps.  agreed to  be paid      by  the   party  number   one   Sri      Ganaavarapu Subbarao  was  paid  by      the said  Gannavarapu  Subbarao  to      Sri  Kusumanch   Kameswara  Rao  by      furnishing Howrah Insurance Company      Guarantee Bond  for a  sum  of  Rs.      1,25,000/- (One  Lakh  Twenty  Five      Thousand Rupees)  and by  executing      two pronotes  one for  Rs. 25,000/-      (Twenty five  thousand rupees)  and      for another  Rs. 15,000/-  (fifteen      thousand  rupees)   with  different      sureties for  the said two pronotes      along him and by creating mortgages      on  the   properties  of  the  said      sureties according  to law  and  by      paying cash of Rs. 3,499.32 ps. The      said party  number one  Gannavarapu      Subbarao further  undertakes to pay      interest at  the rate  of  one  per      cent mensem  on  the said insurance      guarantee  bond   amount   of   Rs.      1,25,00/- or  the balance  that may      be outstanding  after deducting the      payments made  if any  on the first      every month to party number two the      said  Kusumanchi   Kameswara   Rao.      Whereas   the    said    Kusumanchi      Kameswara Rao  assigns to the party      number one Gannavarapu Subbarao all      that the  money and the interest of      the said party number two, the said      Sri Kusumanchi Kameswara Rao in the      said partnership firm Sri Guarantee      and  Company,   Kakinada  and   the      business,  the   goodwill  property      assets and  liabilities book  debts      and  the  outstanding  payable  and      the other  debts ad the partnership      outstanding against  other  persons      to hold  the same to the said party      number one Sri Gannavarapu Subbarao      absolutely. All  the moneys payable      to   the    said   Sri   Kusumanchi

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    Kameshwara Rao,  the  party  number      two by  the party  number  one  Sri      Gannavarapu   Subbarao   shall   be      supported by  receipts and payments      made without  receipts shall not be      valid    and     shall    not    be      countenanced."      [Emphasis supplied]      The aforesaid recitals in this Dissolution Deed make an interest in reading. As seen  from these recitals especially found in  paragraph 2  of  the  agreement  Annexure  A-2  it becomes clear  that on  23rd April  1971 defendant  no.2 was alleged to  have paid  to the  plaintiff towards the  sum of Rs. 1,68,499.32  an amount  of  Rs.  1,25,000/-  by  way  of guarantee bond  furnished by  Howrah Insurance Company. When we turn  to the  guarantee bond Annexure A-1 we find that it was executed  not on 23rd April 1971 but on 26th April 1971. It,  therefore,   becomes  highly   doubtful   whether   the Dissolution Deed  said to  the day  on 23rd April 1971 if at all there  was any  connection between  the  guarantee  bond Annexure A-1  and Deed of Dissolution Annexure A-2. Not only that  but  the  further  recitals  in  paragraph  2  of  the Dissolution Deed Annexure A-2 show that two promissory notes seem to  have been  got executed  from defendant no.2 by the plaintiff and mortgages were also executed on the properties of sureties  in  connection  with  those  promissory  notes. Neither  the   promissory  notes  are  on  record,  nor  the mortgages  are  on  record.  Therefore,  it  appears  highly doubtful whether the Deed of Dissolution Annexure A-2 was at all in  existence on  23rd April  1971. It  appears to  be a highly suspicious  and spurious  document. But leaving aside that aspect  of the  matter on  the express  language of the surety bond  Annexure A-1 no doubt is left in our minds that the appellant-insurance company or its predecessor had never entered into  any surety bond as per Annexure A-1 dated 26th April 1971  for bond  as per  Annexure A-1  dated 26th April 1971 for securing the payment of Rs. 1,25,000/- in favour of the plaintiff  in connection  with the amount found due from defendant no.2  at the foot of partnership account. There is no whisper  about  such  liability  in  the  guarantee  bond Annexure A-1. Therefore, the agreement dated 23rd April 1971 referred to  in the  surety bond necessarily has no nexus or connection with the Dissolution Deed Annexure A-2. It is not the case  of the  plaintiff that  any other document of 23rd April 1971  seen with a view to finding out whether any such guarantee was  ever given  by  appellant-defendant  no.1  in favour of  the  plaintiff.  On  the  express  terms  of  the guarantee bond  Annexure A-1  it must  be held  that it  had nothing to  do with  the liability  of defendant  no.2 under Dissolution Deed  Annexure A-2  and that  liability was  not secured and  no guarantee  was  given  by  Howrah  Insurance Company qua that liability of defendant no.2 pursuant to the said bond.  The learned  judges of the High Court had placed great  reliance  on  the  circumstance  that  the  insurance company had  not produced  any other  agreement  dated  23rd April 1971 if that was relied upon for giving the guarantee. it is  difficult to  appreciate this line of reasoning. When the guarantee  bond is reduced into writing the terms of the guarantee bond  will govern  the question  as to whether the surety had  given a  guarantee as  culled out  from the said document. If the plaintiff wanted to show that there was any other guarantee  given by defendant no.1 de hors this surety bond it  was for  the plaintiff  to produce  such a document which the  plaintiff failed  to do.  Even that apart such an effort on  the part  of the  plaintiff would  not have  been

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permissible in  law as the terms of the guarantee bond would govern the  rights obligations  of the  parties flowing from the   contract of  guarantee and  any  oral  or  documentary evidence would  not be  admissible to vary the terms of this written document  as seen  earlier. The  learned counsel for the appellant,  however, vehemently  submitted that  to  the suit notice  given by  the plaintiff  to defendant  no.1  no stand was  taken by  the appellant  in its reply that it had not entered  into any such agreement. Strictly speaking such notice  correspondence   would  not  be  much  relevant  for deciding the moot question whether there was any contract of guarantee between  the parties  for covering the transaction in question  when the  document itself  is available record. However even if we turn to the plaintiff’s advocate’s notice dated 27th March 1972 on which strong reliance was placed by learned counsel  for the plaintiff we find that all that was stated in  that notice  was to the effect that the appellant had executed an agreement dated 23rd April 1971 in favour of the plaintiff  whereby they  had undertook  to  pay  to  his client at  Kakinada a  sum or  Rs. 1,25,000/-  (One Lakh and Twenty Five  Thousand Rupees)  or such less amount as may be demanded by  his client  on the  failure of  the dealer, Sri Guarantee and Company, Kakinada to perform all or any of the terms  and  conditions  of  the  agreement  dated  23.4.1971 entered into  between his  client and  the said company. The reply of  the insurance  company dated  4th May 1972 advised the plaintiff  to exhaust  all means  of recovery  from no.2 according to  the agreement. However it is pertinent to note that even  in the  suit notice  given by  the  plaintiff  to defendant  no.1   the  emphasis   is  on  the  agreement  of dealership by  which defendant no.2 as a dealer was under an obligation to  perform  the  terms  and  conditions  of  the agreement. Nowhere  it is  stated  that  defendant  no.2  as retiring  partner   had  undertaken   liability  under   the Dissolution Deed  to pay  the  amount  falling  due  to  the plaintiff from  Deed to  pay the  amount falling  due    the plaintiff from  defendant no.2  when the firm was dissolved. As  by  Annexure  A-1  the  insurance  company  had  already undertaken liability  to pay  the unpaid  sale price  of the goods sold by the plaintiff to  the defendant no.2 dealer it is obvious  that  in reply to the notice the appellant would rely upon  the very same  terms and conditions of the surety bond Annexure A-1. Therefore,  it could not be said that the said reply  to the notice implied  any admission on the part of the  appellant that  it had given guarantee to pay up the dues of  defendant no.2 on the  guarantee to pay up the dues of defendant  no.2 on  the basis  of  the  Dissolution  Deed Annexure  A-2.  The  learned  counsel  for  the  respondent- plaintiff would  have been  on a firmer ground if the notice had recited  that the  insurance company  had undertaken the liability to  pay  Rs.  1,25,000/-  which  were  payable  on dissolution  of   partnership  between   the  plaintiff  and defendant no.2  and despite  such recitals in the notice the insurance company  had not  objected. Besides  such an tempt company had  not objected.  Besides such  an attempt  remain impermissible in  law as express terms of the bond could not be varied  by any  oral or documentary evidence could not be varied by  any oral or documentary evidence to the contrary. In any  case as there was no allegation in the notice itself connecting it  with the  liability of defendant no.2 flowing from the Dissolution Deed Annexure a-2 there was no occasion for the  appellant to deny its obligation as surety qua such a  liability.  Similarly  Annexure  B-1,  a  guarantee  bond executed by  defendant no.2  in favour  of defendant no.1 on which reliance  was  placed  by  learned  advocate  for  the

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plaintiff also is of no avail to enable the plaintiff to get out of  the express  terms of  surety bond  Annexure A-1. As discussed above it is found that appellant-insurance company or its predecessor had not given any guarantee  to cover the liability of  defendant no.2 to the extent of Rs. 1,25,000/- flowing from  Dissolution Deed  Annexure A-2.  The guarantee given was  for entirely a different transaction, that is for securing the  payment of unpaid price of goods to be sold on credit by  the plaintiff  to dealer  defendant no.2  over  a course of  period and the guarantee was to continue for such future period  upto one   year.  It is  not the  case of the plaintiff that  defendant no.2 had during that period failed to pay  purchase price  of the goods,  namely nylon yarn and fishing     requisites.  Nor   has  the   plaintiff  invoked suretyship  agreement   in  that   connection.  The  invoked suretyship agreement  in that  connection. The suit is based on entirely  a different alleged guarantee said to have been given by  the insurance  company to  cover the  liability of defendant no.2  flowing from  Dissolution Deed.  For such an obligation of defendant no.2 flowing from Annexure A-2 there is no  contract o  guarantee at all given by defendant no.1. In short  on guarantee  at all  given by  defendant no.1. In short on  the basis  of the  surety  bond  Annexure  A-1  no liability can  be foisted  on  the  appellant  to  meet  the obligation of  defendant no.2  flowing from  the Dissolution Deed Annexure  A-2. As  the saying goes i.e., if there is no root where  is the question of having branches. Consequently it is  not possible  to agree  with the  finding of the High Court as recorded at page 37 of the impugned judgment to the effect that the agreement mentioned in para 1 of Ex. A-1 has reference  to   Ex.  A-2   agreement  executed  between  2nd defendant and  the plaintiff and that the parties understood the Dissolution  Deed Ex.A-2  dated 23rd April 1971 as being in the  nature of  sale of nylon yarn and fishing requisites in favour  of defendant  no.2 represented by G. Subbara, the other partner.  This finding  flies in    the  face  of  the express terms  of the  guarantee bond  Annexure A-1 and with respect amounts  to re-writing  the guarantee  bond  itself. Such a  new guarantee  bond cannot  be culled  out from  the language of  Annexure  A-1.  Such  an  exercise  is  totally impermissible on  the facts and circumstances of the case.      For  all   these  reasons,  therefore,  the  appeal  is allowed. The  judgment and  decree passed  by  the  Division Bench of  the High  Court against  the appellant are quashed and set  aside and the suit of the plaintiff quashed and set aside and  the suit of the plaintiff against  the appellant- defendant no.1  is dismissed  and the decree of dismissal of the suit against defendant no.1 as passed by the Trial Court is restored.  Pending this  appeal by  an order  dated  23rd November 1984 this Court had ordered that the amount already deposited by  the appellant in the Trial Court shall be paid to the  First Respondent on security being  furnished by the said Respondent  to   the satisfaction   of  the Trial Court for repayment  of the   amount to the appellant in the event of the  appeal being allowed by this Court. As the appeal is allowed  it   is  directed  that  if  the  first  respondent plaintiff has  withdrawn the deposited amount from the Trial Court on   furnishing  security to  the satisfaction  of the Trial Court then first respondent-plaintiff shall refund the said amount  to  the  appellant-insurance  company  will  be entitled to  withdraw the  said amount along with the  total accrued interest  on such  invested amount. In the facts and circumstances of  the case  there will  be no  order  as  to costs. Orders accordingly.

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