Case Study Of Ranjit Singh

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FACTS OF THE CASE:

As given in the case, Ranjit Singh, who was the Director of Shri Ranjit Singh and Sons. Ltd. acted as the Managing Agent of Shri Vikram Cotton Mills Ltd. which will hereinafter be referred to as the Company. The Company opened a cash-credit account with the Punjab National Bank and in order that the repayment of the balance is secured at the foot of the account on 27th June, 1953, four documents were executed- three of which were executed by the Managing Agents of the Company and one by Ranjit Singh. The three documents were as follows:
(a) A promissory note for ` 13,00,000 which was payable with interest at the rate of 2.5% over the rate prescribed by the Reserve Bank of India along with a minimum rate of 6% per annum till the payment is made,
(b) A deed of hypothecation as described in the Schedule which was annexed with the document,
(c) A letter to the Bank showing that during the continuation of the agreement as substantiated in the letter of hypothecation, the Company will be solely liable for all types of damage, loss or deterioration of the securities that have been delivered to the Bank on account of fire, theft, robbery, dacoity or by any other cause whatsoever.
Ranjit Singh also enforced a deed known as the “agreement of guarantee” thereby agreeing to pay on demand all monies as “ultimate balance” that were due to the Bank from the Company.
On December 1953, the Company got dissolved. The …show more content…

It is provided under Section 128 of the Indian Contract Act that “the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.” Therefore, it is imperative to consider whether according to the terms of the bond there is any particular thing which demonstrates that the surety’s liability is not co-extensive with that of the principal debtor. Few of the clauses of the bond are

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