The liability of a Chief Cashier for past and future acts of his subordinates under an indemnity bond is determined by the interpretation of the bond, considering both the recitals and the operative part, and taking into account the surrounding circumstances and the conduct of the parties.

( 1 ) SUMMARILY stated, the circumstances within a small compass, necessary for the decision of this First Appeal are: The plaintiff Respondent, whom I would hereafter refer to as Sarkara, joined the Bengal Nagpur Railway in June, 1928 then, a Company-managed Railway, in its "cash and Pay Branch", which was taken over by the Government of India in or about the year 1944 On July 24. 1948. Sarkara was promoted to the post of Chief Cashier. The Railway changed its name to Eastern Railway-in or about the year 1952, which was again changed to South Eastern Railway in or about the year 1955, which is still current.

( 2 ) MANI Pramanik, one of the pay clerks in the Cash and Pay Section was in charge of making payments of provident fund to the retired Railway servants and compensation monies to the creditors of the Railways by money orders, prior to and during the relevant period. In December, 1948 Sarkara as Chief Cashier, received the complaint of delay in payment to an outside creditor by the said pay clerk Mani Pramanik, on which an enquiry was directed fo be made by the Chief Inspector Sukumar Mukherjee. On or about December 22. 1948 Sukumar reported that he checked and verified Mani's account which was found to be correct. Towards the latter part of January, 1949 there was another complainl against Mani. This time. Sarkara deputed two Inspectors to check Mani's accounts On March 10, 1949 it was detected that the said pay clerk Mani, bad defalcated a sum of Rs. 51,000/-, in course of several years, covering also a period prior to Sat-kara's appointment as Chief Cashier. The Financial Adviser and Chief Accounts Officer of the defendant Railways (referred to hereafter as F. A. and C. A. O.) was reported by Sarkara about the said defalcation. An enquiry was started. The matter was then referred to the police. A criminal case followed Mani was convicted and sentenced to rigorous imprisonment of one year and a fine of Rs 1000/-, in default, to suffer (sic) for 6 months.

( 3 ) THE plaintiff Sarkara stated in his plaint that after the discovery of the said embezzlement in March 1949, he was called upon to furnish a bond for the purpose of indemnifying the Railway for any loss which it might sustain, by reason of Sarkara's neglect of duty. The plaintiff's case was that as directed by F. A. and C. A. O. , he had to sign a bond on March 18, 1949 and furnished security to the extent of Rs. 30,000/ -. The bond was not executed by the plaintiff out of his free will. The defendant Railway illegally and wrongzully i'oreited a sum of Rs. 10,000/- on March 29, 1954 out of his said security deposit in spite of the letter's protest. This suit is filed for a declaration that the said forfeiture by the defendant Railway is illegal and void.

( 4 ) THE Railways' defence is that the Chief Cashier is responsible for all the liabilities of his pay clerks and for all the monies that are handed over to the Cash Department, until he can show satisfactory disbursement of the sum and get an acquittance in that respect. It is asserted that it is a gross negligence on the part of the plaintiff to fail to detect the defalcation of such a heavy amount. If the plaintiff would have been a little more careful and vigilant and would have discharged his duty properly, the entire sum could have been saved and the Railway would not have had to suffer the loss. The security furnished by Mani, the pay clerk, to the extent of Rupees 5,000/- and odd had been forfeited and realised but as the Railway bad suffered much more loss and as the plaintiff was also liable for the same, the Railway had forfeited only a sum of Rs. 10,000/- in part satisfaction of the entire loss, though as a matter of right the Railways were entitled even to forfeit the plaintiff's entire security money of Rs. 30,000/ -. As a matter of fact, the whole of the security of Rs. 30,000/- was initially forfeited but on consi-deralion of several representations made by the plaintiff including tha