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BEFORE THE HON’BLE CIVIL COURT OF XYZ

CIVIL SUIT No.............../2017

(Under sec.9 of the Code of Civil Procedure,1908)

Prakash Plaintiff

Versus

Dinesh Defendant

Written Submission On Behalf Of Plaintiff

Drawn and filed by counsel on the behalf of Plaintiff

Priya Sinha

Semester II

Roll No. 722


TABLE OF CONTENTS

TABLE OF CONTENTS..........................................................................................2

TABLE OF ABBREVIATIONS................................................................................3

TABLE OF AUTHORITIES.....................................................................................4

List of Cases......................................................................................................4

Books and Commentaries...................................................................................4

Acts, statutes......................................................................................................4

Research Databases...........................................................................................4

STATEMENT OF JURISDICTION..........................................................................5

STATEMENT OF FACTS............................................................................6

ISSUES RAISED...................................................................................................8

SUMMARY OF ARGUMENTS.............................................................................9

ARGUMENTS ADVANCED...............................................................................10

PRAYER.............................................................................................................15

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TABLE OF ABBREVIATIONS

&..........................................................................................................................And

AIR................................................................................................All India Reporter

Bom...............................................................................................................Bombay

Co. Ltd. ......................................................................................Corporation Limited

ILR............................................................................................. Indian Law Review

SC...................................................................................................... Supreme Court

SCC.......................................................................................... Supreme Court Cases

Sec................................................................................................................ Section

v....................................................................................................................... versus

Vol................................................................................................................. Volume

BOMLR.....................................................................................Bombay Law Report

Hon’ble.......................................................................................................Honorable

SEBI………............….………………….Securities And Exchange Board of India

ICA.............................................................................................Indian Contract Act

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TABLE OF AUTHORITIES

LIST OF CASES:
1. Ramachandra B. Loyolka v. Shapurji N Bhownagree ;(1940) 42 BOMLR
55O
2. SBI v Kusum Vallabhdas Thakkar; (1994) 1 GLH 62: (1994) 1 Guj LR 655

3. Bonar v Macdonald; (1850) 3 HL Cas 226: 10 ER 87

BOOKS AND COMMENTARIES:

a) Avatar Singh, Contract and specific relief, 11th Edn, 2013, Eastern
Book Company, Lucknow
b) Pollock &Mulla, “Indian Contract and Specific Relief Acts”,14th
Edition, 2012, Vol II., Editor- Nilima Bhadbhade
ACTS, STATUTES, TREATIES AND CONVENTION:
a) Indian Contract Act, 1872
b) Securities and Exchange Board of India Act, 1992

RESEARCH DATABASE:
a) www.manupatra.com
b) www.lexisnexis.com/in/legal
c) www.westlawindia.com
d) www.scconline.com

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STATEMENT OF JURISDICTION

The counsel for the plaintifft most humbly approach the learned Civil Court to
exercise its jurisdiction under Section 91 of The Code of Civil Procedure, 1908 and
most humbly submits himself to the jurisdiction of this learned Court to hear the
present matter and adjudge accordingly.

1
SECTION 9- Courts to try all civil suits unless barred- Courts shall have jurisdiction to try all suits of a civil nature
excepting suits of which their cognizance is either expressly or impliedly barred.

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STATEMENT OF FACTS

BACKGROUND:

The plaintiff (Prakash) is a sub-broker employed by the defendant broker (Dinesh)

Plaintiff introduced three clients and became answerable to defendant for them.

FACTS THAT AROSE THE ISSUE:

The clients defaulted which resulted in loss of Rs. 50,000.

Defendant thereafter, sued the clients and compromised his claim against some of
them.

Plaintiff sued to take account of dealings between himself and defendant, and as to
the compromises arrived at by defendant with some of the clients, alleging
defendant had settled the claims as against those clients for lesser amounts with
Plaintiff’s consent.

The contract which is in the form of a letter dated March 12, 2013, the plaintiff
addresses the defendant and says that; He shall be answerable and responsible for
all business secured and for due payment by clients and agrees to make good any
default on part of the clients and also to pay all damages, costs, charges and
expenses that the defendant may incur by reason of such default. He also demands
that he shall be entitled to get 50% return of brokerage for business secured by him

On June 29, 2013, the plaintiff wrote another letter to the defendant in which he
says that, a total of Rs. 50,000 is due and payable to the defendant from some of

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the clients and then agrees to pay the said balance. Then there is aprovision for
making good his liability out of half the fifty percent brokerage payable to the
plaintiff.

The plaintiff contends that he was a guarantor and the defendant making a
settlement without his consent discharged him and by the compromise made by
defendant with the clients without plaintiff’s consent, his remedies against those
three parties are lost.

The defendant contends that it was a contract of indemnity because there was no
fixed amount which the plaintiff had stood surety for, and it was not a contract of
guarantee as no three parties are involved. Also, the defendant was within his
rights to negotiate and recover best amounts he could and there was no mala-fide
or wrong-doing in arriving at the settlements by the defendant.

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ISSUES RAISED

1.WHETHER THERE WAS A CONTRACT OF GUARANTEE?

2. WHETHER THERE WAS A BREACH OF CONTRACT?

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SUMMARY OF PLEADINGS

ISSUE NO.1- Whether there was contract of guarantee?

It is humbly submitted before the learned Court that here, the contract were not
only between the broker and the sub-broker but also with the clients, thus they
were a party to the contract. There was involvement of third party in the present
contract in question. There is a need of three parties in contract of guarantee, thus
in this case there is existence of three parties, hence, the present contract is a
contract of guarantee and not of indemnity.

ISSUE NO.2- Whether there was a breach of contract?

It is humbly submitted before the learned Court that there is breach of contract
since the Defendant sued the clients and compromised his claim as against some of
them by receiving amounts much smaller than what was due from them and
claimed the unrecovered amount without taking the Plaintiff’s consent.

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ARGUMENTS ADVANCED

1. There is contract of guarantee between the parties.

1.1. Section 126 of the Indian Contract Act talks about contract of indemnity:

"Contract of guarantee", "surety", "principal debtor" and "creditor" - A "contract


of guarantee" is a contract to perform the promise, or discharge the liability, of a
third person in case of his default. The person who gives the guarantee is called the
"surety", the person in respect of whose default the guarantee is given is called the
"principal debtor", and the person to whom the guarantee is given is called the
"creditor". A guarantee may be either oral or written.2

Section 126 in terms states that the contract of guarantee is a contract to perform the
promise, or discharge the liability, of a third person in case of his default. That
presupposes the existence of a named promisee, or the existence of the liability of a third
party when the guarantee is offered. It does not contemplate an arrangement between
two parties under which, in consideration of an amount to be paid by the promisee, the
promisor agrees to indemnify him in respect of the promise of someone or the action of
someone else as mentioned in section 126.

POLLOCK & MULLA –“The Indian Contract and Specific Relief Acts”, 14th
2

Edition 2012, editor- Nilima

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ESSENTIALS OF CONTRACT OF GUARANTEE

(a) TRIPARTITE AGREEMENT

A contract of guarantee is a tripartite agreement between the principle debtor,


creditor and surety. There are three contracts as under.

(i) Contract between creditor and the principle debtor out of which the
guaranteed debt arises,

(ii) Contract between surety and the principle debtor by which the principle
debtor undertakes to indemnity surety if surety is required to pay.

(iii) Contract between surety and the creditor by which the surety guarantees
to pay the principle debtor’s debt of the principle debtor fails to pay.

As mentioned above there was a tripartite agreement in the present case.

The facts of the given case are very similar to the facts of Ramachandra B
Loyolka v. Shapurji N Bhownagre3 in which it was argued by the defendants that-
It is clear from Section 126 that a contract of guarantee involves three parties- the
creditor, the surety and the principal debtor.

(b) CONSENT OF THREE PARTIES:

There must be consent of all the three parties.

In the present case there was the consent of Principal debtor, Surety and the Creditor.
Following is the line written by the surety i.e. the Plaintiff in the letter to the principal
debtor i.e. the Defendant that shows his consent : “That I shall be answerable and
responsible to you for all business secured by me from my clients and to be answerable
and responsible for the due payments by the said clients for all moneys due in respect
of such business as you may from time to time transact at my request and I agree on
demand to make good any default on part of my said clients and also to pay all

3
(1940) 42 BOMLR 550

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damages, costs, charges and expenses that may be incurred by you or due to you by
reason of such default.”

(c) EXISTENCE OF LIABILITY

There must be an existing liability or a promise whose performance is guaranteed. Such


liability or promise must be enforceable by law. Hence, guarantee can be given only for
liability or promise, which is enforceable, by law. But there is an exception to this rule.
The exception is a guarantee given for minor’s debt. Though minor debt is not
enforceable by law, yet the guarantee given for minor’s debt valid.

In the present case the creditor has the liability to not default on his part.

(d) GUARANTEE NOT TO BE OBTAINED BY MISREPRESENTATION [SEC 142]

Any guarantee, which, has been obtained by means of misrepresentation made by the
creditor, or with his knowledge and assent, concerning a material part of the
transaction, is invalid.

In the present case the guarantee was not obtained by misrepresentation.

(e) GUARANTEE NOT TO BE OBTAINED BY CONCEALMENT [SECTION 143]

Any guarantee with the creditor has obtained by means of keeping silence as to material
circumstances is invalid.

In the present case the guarantee was not obtained by concealment.

Since all the criterions of guarantee are being fulfilled, therefore, there was a
contract of guarantee.

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1.2. Section 127 of the Indian Contract Act talks about consideration:

Consideration for guarantee – Anything done, or any promise made, for the
benefit of the principal debtor, may be a sufficient consideration to the surety for
giving the guarantee.

In SBI v Kusum Vallabhdas Thakkar4, a loan was given or goods sold on credit
on the basis of a guarantee was considered to be a sufficient consideration.
Furthermore forbearance on the part of the creditor in filing a suit against one of
the debtors was held to be a good consideration for the guarantee.

In the letter given by plaintiff to the defendant, the plaintiff clearly says: “I
agree on demand to make good any default on part of my said clients and
also to pay all damages, costs, charges and expenses that may be incurred by
you or due to you by reason of such default”.

Thus the Plaintiff has made a promise to benefit the Defendant and this
should be considered a sufficient condition to establish the contract of
guarantee.

2- There was a breach of contract

Section 133 in The Indian Contract Act, 1872 states that :

Discharge of surety by variance in terms of contract.—Any variance,


made without the surety’s consent, in the terms of the contract between
the principal [debtor] and the creditor, discharges the surety as to
transactions subsequent to the variance. —Any variance, made without
the surety’s consent, in the terms of the contract between the principal
4
(1994) 1 GLH 62: (1994) 1 Guj LR 655

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[debtor] and the creditor, discharges the surety as to transactions
subsequent to the variance.

In Bonar v Macdonald 5 , the Defendant guaranteed the conduct of a


manager of a bank. Th bank afterwards raised his salary on the condition
that he would be liable for one-fourth of the losses on discounts allowed
by him. No communication of this new arrangement was made to the
surety. The manager allowed a customer to overdraw his account and the
bank lost a sum of money.

It was held that the surety could not be called on to make good the loss as
thefresh agreement was a substitution of a new agreement for the former
which discharged the surety.

In the present case the Defendant sued the clients and compromised his
claim as against some of them by receiving amounts much smaller than
what was due from them and claimed the unrecovered amount without
taking the Plaintiff’s consent.

Furthermore the Plaintiff has clearly mentioned in his letter that he wrote to the
Plaintiff that “That I shall be answerable and responsible to you for all business
secured by me from my clients and to be answerable and responsible for the due
payments by the said clients for all moneys due in respect of such business as you may
from time to time transact at my request and I agree on demand to make good any
default on part of my said clients and also to pay all damages, costs, charges and
expenses that may be incurred by you or due to you by reason of such default.”

Since the Defendant compromised with the clients without taking the consent of the
Plaintiff there was a breach of contract and hence the surety is free from his liability

5
(1850) 3 HL Cas 226: 10 ER 87

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PRAYER

Wherefore in the light of the issues raised, arguments advanced and authorities
cited, it is humbly requested that this Hon’ble Court may graciously be pleased
to adjudge and declare:
I. There was a contract of guarantee between the parties.
II. The defendant is not entitled to get indemnification.

And pass any order or relief in favour of the Plaintiff which is in larger interest of
Justice.

All of which is respectfully submitted

S/d
Counsel for the Plaintiff

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