FACTS : - On 26-5-1947, the Ambica Air Lines, Ltd., wrote to the Bank of India, Ltd., (plaintiffs) requesting the latter to allow the air line company to open a cash-credit overdraft account for the sum of Rs.5,00,000 in order to enable it to cope with the expansion of its air services and stated in that letter that Rustom Fakirji Cowasjee, (defendant) who was a director of the air line company had agreed to stand surety for the amount. This application for cash-credit facility was sanctioned by the plaintiffs. On 5-6-1947, the board of directors of the air line company passed the following resolution :

"RESOLVED that the company do borrow from the Bank of India Ltd. from time to time by way of demand cash-credit to the extent of Rs.5,00,000 on the following terms :

Limit: 5,00,000.

Term : Demand- not exceeding one year.

Rate of interest : 1/2 per cent. over B.R. Min. 3 1/2 per cent per annum.

Security : 1. Demand promissory note for Rs.5 lacs signed by Mr. Rustom Fakirji Cowasjee in favour of the company and endorsed by the company in favour of the Bank.

2. Negative lien on all fixed and liquid assets of the company.

The necessary documents in connection with this advance be exe