The appellant was the managing director of the Deccan Chemicals Limited, a company registered, under the Indian Companies Act, 1913. The company had borrowed from the first respondent a sum of Rs. 10,000 on pledge of certain goods. Interest was agreed to be paid at six per cent per annum on the amount due. The company defaulted in the due repayment of the debt. After giving the statutory notice demanding payment of money due the first respondent filed on 8th February, 1955, O.P. No. 68 of 1955, for the winding up of the company on the ground that it was unable to pay its debts. The managing director who was anxious to avoid the winding up proceedings negotiated a settlement with the first respondent under which the latter agreed to withdraw the winding up proceedings initiated by it, if he were to guarantee the payment. To this the managing director agreed. Accordingly he executed on 6th August, 1955, a letter in favour of the first-respondent in the following terms:

“In consideration of your having agreed at my request to give time to the Deccan-Chemicals, Ltd., for payment of the debt due by them and for settling the O.P. No. 68 of 1955, filed by you fo