The judgment established the principles of surety liability under the Indian Contract Act and clarified the application of Section 135 in relation to promissory notes and surety contracts.

King, J.

1. This suit was brought in 1938 by the Union Bank, Limited, Kumbakonam, against a number of defendants of whom the case of the 1st defendant only need now be considered. It was based upon a promissory note signed by one V. E. Srinivasan on the 21st August, 1935, and signed also by the 1st defendant V. M. Mahalinga Aiyar. That promissory note is for Rs. 8,500 and both the executants bind themselves jointly and severally to pay the bank that sum with interest. The figure Rs. 8,500 is found at the top left hand corner of the promissory note and above it are the words in English, the whole of the promissory note being also in English, "security for overdraft". It is the case of the bank that at that time V. R. Srinivasan who was the managing director of the bank had an overdraft account. It was necessary for all persons having overdraft accounts to have a coobligant. The previous coobligant, Swaminatha Aiyar, had virtually become insolvent, and it was therefore necessary for V. R. Srinivasan to find some one else. He accordingly induced the 1st defendant to join with him as co-obligant in the signing of this promissory note. In 1937, V. R. Srinivasan fell upon evil days and on the 7th February executed a trust deed putting all his property in the hands of trustees for the purpose of satisfying his creditors. As V. R. Srinivasan thus failed, the bank is proceeding against the 1st defendant in this suit. There is no dispute that the amount of the claim is correctly calculated, and is due on the state of V. R. Srinivasans overdraft account. The 1st defendant raised many defences all of which have been rejected by the learned Subordinate Judge and the suit has been decreed. As a result the 1st defendant has filed this appeal.

2. The first question which arises is a question of fact. The 1st defendant denies that he executed any promissory note for Rs. 8,500 and denies that he executed any document as security for any overdraft. *****

3. [After discussing the evidence his Lordship concluded : ]

4. There can be no doubt, we think, that the 1st defendant did sign this document, Ex. A, knowing that he was signing a document for Rs. 8,500 and knowing that he was doing so as security for V. R. Srinivasans overdraft.

5. All possible doubt on this matter is removed by Ex. E (1) the letter which the 1st defendant sent to the bank when the bank first made its demand upon him for the settlement of the overdraft account. That letter was dated the 20th March, 1937. No doubt the 1st defendant repudiates the letter entirely and explains that he had entrusted his uncle with a signed blank sheet of paper, and that all the statements made in that letter are the result of a conference held between his uncle and V. R. Srinivasans advocate. We are utterly unable to believe this or to believe that the 1st defendant would give a signed blank sheet of paper to anybody. He also pretends that, although his uncle had been managing his affairs for many years, and they had been on good terms, he had never told his uncle the real facts about the transaction of 1935 before he handed over the sheet of paper into his uncles hands. The whole story is, in our opinion, fantastic and we are quite certain that if the uncle negotiated on behalf of the 1st defendant he did so with knowledge of the facts and that the statements contained in Ex. E (1) are the result of the 1st defendants own information.

6. It is no doubt sought to be argued on behalf of the 1st defendant that he did not think that he was rendering himself liable for an overdraft account, that he thought that the word overdraft meant merely that a single loan was about to be advanced by the bank and that his liability would cease the moment that loan was repaid. Not only is this explanation falsified by the common acceptation of the term overdraft but it is quite clear from the contents of Ex. E (1) that in 1937 the 1st defendant was unable to think of any such case. Of course if that had in fact