SEETHARAMA REDDY, J.

( 1 ) FIRST defendant is the appellant. Union of India filed the suit O. S. No. 256 of 1971 on the file of City Civil Court, Hyderabad for recovery of rs. 46,644-75 being the balance of Bank guarantee payable by the first defendant to the plaintiff, against the first defendant and in the alternative, against defendants 1 and 2 and for subsequent interest from the date of the suit at 6% per annum till the date of recovery and for costs.

( 2 ) THE plaint averments are:the second defendant was appointed by the plaintiff as the sole advertising agent to procure advertisements in the Telephone Directories for a total of five issues commencing from July, 1965. An agreement was entered into between the plaintiff and the second defendent on 6-4-1965. As per clause 4 of the said agreement the second defendant gave Bank guarantee by the first defendant Bank on 30-4-1965 for the due performance by him of the terms of the agreement. As per the Bank guarantee, the Bank is liable for a sum not exceeding Rs. 47,325-75 if the second defendant failed to perform his part of the contract. The issues of the Directory were published during July, 1965, Jan. 1966, August, 1966, Febuary, 1967 and September, 1967. As per clause 5 of the agreement, the plaintiff will pay to the advertising agent a commission of twenty five per cent on Rs. 63, 101/-of the minimum gross revenue guaranteed by the sole advertising agent and in no case the minimum net share of the Government revenue should be less than Rs. 47,325-75, The plaintiff although has fixed the minimum rates chargeable by the second defendant, has not fixed the maximum rates that could be charged from the advertisers by him and so the second defendant is empowered to collect any higher rate than the minimum rates prescribed. In respect of collections over and above the gross minimum revenue of Rs. 63,101/-the second defendant is allowed an additional commission of Rs. 15/- per cent on such additional collections. The second defendant is also under an obligation to maintain proper accounts for these sums along with the concerned vouchers and to allow the Posts and Telegraphs Department to audit such accounts as per clause 12 of the agreement. The second defendant submitted his revenue state ments for all the issues as required in clause 7 of the agreement. The arithmetical discrepancies in the statements were pointed out by the District manager, Telephones relating to certain issues, which the second defendant duly corrected. The second defendant accepted and remitted the revenue as per the statements. In fact, in respect of the revenue statement for July, 1965 it was noticed that a sum of Rs. 681/- being the government s share was short-remitted. In spite of reminders the second defendant failed to remit the same which the Bank eventually paid.

( 3 ) THE District Manager, Telephones, Hyderabad addressed several letters to the second defendant directing him to submit his accounts to Posts and Telegraphs audit as per clause 12 of the agreement but he never responded. Ultimately a registered letter dated 12-3-1968 was sent. The second defendant instead of submitting the accounts, gave an evasive reply dated 19-3-1968 stating that he had submitted the statement of revenue and remitted the Government s share and so there remained nothing to be done by him. The District Manager concluded that it was no use in pursuing the matter with the second defendant, and issued a notice dated 6-7-1968 to the first defendant calling upon to remit the sum of Rs. 46,644-75 because of the breach committed by the second defendant. The second defendant was given an opportunity again on 4-9-1968 on which a letter was addressed by the District Manager to produce his accounts, to which he replied on 21-9-1968 that the accounts for the last one year in respect of Hyderabad branch were to be compiled in the ledgers in respect of the suit Directories. Thus, it is clear that the second defendant has not comp

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