INTRODUCTION

It is a general rule in the Law of Contracts that consideration is an integral part of any agreement. The same general rule applies to a contract of guarantee too. A guarantee without consideration is void. Consideration, in the Contract Act, 1872, has been defined as any act done/abstinence/promise made, at the desire of the promisor, by the promisee or any other person, which has some value in the eyes of law. But, in a contract of guarantee, anything done/ promise made for the principal debtor’s benefit may constitute sufficient consideration. This means that there is no need for a direct flow of consideration between the surety and creditor.
The complication doesn’t arise in cases of guaranteeing some future loans/credit transactions but it does, in cases where a past debt is guaranteed. There have been numerous conflicting views amongst various High courts in India on this issue. This divergence exists, owing to the terminology of S.127 of the Contract Act, 1872, which mentions “anything done” shall be sufficient to be a valid consideration in a guarantee contract. This phrase is in stark contradiction with illustration (c) of the section. Some courts are of the view that past debt can constitute valid consideration, whereas others opined that past debt cannot constitute valid consideration.

TREND IN THE DECISIONS ON “VALIDITY OF PAST DEBT AS VALID CONSIDERATION IN GUARANTEE CONTRACT”

The period in which the cases considered in the paper lie is 1875-2005. The researcher has divided this period into 3 parts based on the cases referred to in this paper: 1. 1875-1928 (Invalidity of Past debt being majority view) 2. 1929-1952 (Validity of Past debt being majority view) 3. 1952-2005 (No consensus).

1875-1928 (INVALIDITY OF PAST DEBT BEING MAJORITY VIEW)

The issue of the validity of past debt as a valid consideration in guarantee first arose in the case of Nanak Ram v. Mehin Lal, where the Allahabad High Court held that though “illustrations”, in legal strictness, are not a part of the Act and thus, do not bind the courts unconditionally, yet past debt isn’t a valid consideration in a guarantee contract according to the language (“anything done”) of S.127. Later, in Muthukaruppa Mudali and Ors. vs Pi. Mu. Kathappudayan and Ors, the Madras High Court reiterated that past debt is no consideration in guarantee because the performance of a pre-existing legal obligation is no consideration for any new promise. The issue then became a complicated one, in the case of Kali Charan v. Abdul Rahman where a guarantee was furnished post the compromise between the creditor and debtor but in accordance with the compromise-agreement conditions of furnishing enough security for the lease. Two opposite interpretations of this have arisen – some are of the view that it supports the validity of past debt being valid consideration, whereas others opine that this case is not one of past consideration because the guarantee was furnished according to the agreement conditions though it was post-compromise-agreement.
Once again, in the case of Pestonji Meekji Mody v. Meherbai, it was held by the Bombay High Court that past consideration/benefit cannot constitute a valid consideration in a contract of surety.

1929-1952 (VALIDITY OF PAST DEBT BEING MAJORITY VIEW)

This trend of past debt as invalid consideration was slightly deviated from in Chakkan Lal v. Kanhaiya Lal. In this case, the court considered a past debt to be valid consideration for a surety because of various reasons like re-acknowledgment of debt from time-to-time through the renewal of hundies by Chakhan Lal (the debtor), joint execution of some hundies by the debtor, and surety and creditor’s promise to lend further sums to the debtor if Balak Ram (surety) would act as a surety. Another vital decision in this regard was made by the Madras High Court in Taluk Board Of Koilpatti v. Senthattikalai Pandia, where it was held that if a seller grants credit/goods based on the guarantee given, the guarantee may be extended to cover both the credit transaction as well as prior debts if the language of the guarantee deed is clear enough. In 1940, the Oudh High Court, in Gulam Hussain v. Faiyaz Ali, took up the question of whether the phrase “anything done… for the benefit of principal debtor” will include in its ambit, the acts done by the creditor in past as valid considerations. The court held that past benefit can constitute good consideration for a guarantee. Though the court held that it is not necessary that the past benefit be given at the desire of the surety, the court took note of the fact that the guarantee was given to the principal creditor because it (dargah committee) had passed a resolution requiring the debtor to furnish some security, failing which, the lease would be canceled. Thus, even in this case, the guarantee was furnished in pursuance of the contract and for the benefit of the principal debtor. This decision has been criticized as one attributing unnatural meaning to the phrase “anything done”.
Further, in Varghese v. I. Abraham, the Kerala High Court held that past debt is not a valid consideration because the creditor does not suffer any detriment at the instance of surety nor was there any benefit extended to the principal debtor at surety’s request.

1952-2005 (NO CONSENSUS)

Later in Ram Narain v. Hari Singh also the Rajasthan High Court held that reading past debt within the word “done” in S127, attributes an unnatural meaning to it. Thus, Past debt is not a valid consideration in a contract of guarantee. But in Jayakunvar Manilal Shah vs Syndicate Bank, the Karnataka High Court held that past consideration is a valid consideration in a contract of guarantee. Again in Bank of Credit and Commerce International S.A. v V.KAbdul Rahiman, the Kerala High Court reiterated that past benefit is not a valid consideration in a guarantee contract. Later, in Sicom Limited vs Padmashri Mahipatrai, the Bombay High Court held that where a guarantee is given subsequent to the grant of benefit to the principal debtor, it cannot be said that the guarantee is void for want of consideration u/s 23 of the Contracts Act.
Therefore, it is clear that that the law on the validity of past debt as a valid consideration in a guarantee is still unsettled. The trend visible from the above discussion is that past benefit has been held to be an invalid consideration in a guarantee contract by a majority of the Indian courts.

ANALYSIS AND COMMENTS ON THE DEVELOPMENTS OF THE SAID ISSUE

It is seen that some courts have relied only on the third illustration of S.127 while many others have placed reliance on the wording of the aforementioned section. The courts have also held that illustrations can neither restrict nor expand the definition and ambit of any section. In order to comment upon the validity of past debt as a valid consideration in guarantee, the principle u/s 127 of Contract Act has to be read largely in consonance with the basic elements constituting a contract though there may be slight variations (“Guarantee” being a specific contract).
There are three distinct principles that ought to be considered in analyzing the validity of Past Debt as a valid consideration in a guarantee contract. Firstly, any contract (generally) requires consideration that has some value in the eyes of law. It need not be adequate. It is an established rule in the Indian Contract law that past consideration in a contract is valid in the case of past voluntary services (Section 25(2) of the Contract Act) and past service at the request. Secondly, a mere ‘recommendation’ differs from ‘request’ made. Lastly, a Contract of Guarantee is entered into for the benefit of the principal debtor and not that of the principal creditor.
Past voluntary service refers to any service provided without any prior request/promise for the performance of the service and there is a promise to pay for that past service made in the future. According to the Indian Contract Act, past voluntary service includes an act done voluntarily for the “promiser”. Where a guarantee is given for past debt, there is no voluntary service done in favor of the guarantor at the time of advancement of a loan but in favor of the principal debtor. The idea here is that the surety is nowhere in contemplation of the principal creditor when he advances a prior loan to the principal debtor. Furthermore, once the creditor contracts with the debtor to advance benefit to the debtor, he becomes legally bound by the contract and it is well settled that performance of a task, which a person is legally bound to do doesn’t constitute valid consideration for a new promise unless there are practical benefits for the promise. Thus, past debt to a principal debtor can’t be read into S.25(2) of the contract act, to constitute valid consideration.
Past service done at request has long been construed to be included under section 2(d) of the Contract Act to constitute a valid consideration. It has been upheld in Lampleigh v. Brathwait that a past service performed at request constitutes valid consideration for a subsequent promise. In Upton-on-Severn RDC vs Powell, it was held that despite there being no subsequent promise for a past act done at request, the court can infer an implied promise in the request. It was also held in Sindha Shri Ganpat Singh Ji v. Abraham that services rendered to a minor at his request but continued after his attaining majority at the same request constituted a valid consideration for the minor’s promise to pay. Therefore, past debt can constitute a valid consideration in a guarantee contract if the benefit was advanced to the principal debtor at the request of the future guarantor. Here, a distinction has to be noticed between “request” and “recommendation”. A request is “A notice of a desire on the part of the person making it, that the other party shall do something in relation to a contract.” A recommendation, on the other hand, allows persons and institutions to make known their views and opinions about a person/organization without any responsibility for injury (if any) sustained by the third party (to whom the recommendation is given) as a result of such recommendation, provided, the recommender acts in good faith. The court, in a case reported in Juggot Indur Narain Roy Choudhry v. Nistarinee Dassee, passed a dictum that a person will not be liable as a surety for a loan advanced to a third party by the lender on a mere recommendation of his.
Thus, it is clear that past debt can be a valid consideration if the creditor has incurred some detriment to advance some benefit to the debtor at the request of the surety. In a case where the creditor has advanced the benefit to the debtor without any prior request made by the surety, it means that the creditor has voluntarily undertaken the risk of advancing the benefit to the debtor without the surety in the contemplation. If a guarantee is executed subsequently, it would mean that the guarantee is for the benefit of the creditor rather than that of the debtor, which reverses the object of a guarantee contract.
Another mode of a guarantee contract where a past benefit can be allowed to be a valid consideration is when the principal creditor advances some additional benefit to the principal debtor when the subsequent guarantee is given by the surety and there is a clear understanding that guarantor’s liability is extended for all the obligations of the debtor which are coupled up. Such an arrangement would be valid because the additional benefit advanced to the principal debtor is sufficient consideration for the surety to guarantee even the prior debts of the debtor. Moreover, such a guarantee would be for the benefit of the principal debtor. The past benefit can also constitute a valid consideration in a subsequent guarantee where the creditor demands the principal debtor to furnish some security post the advancement of benefit due to the debtor’s failure in fulfilling his obligations as per contract (for instance, failure to pay installments for a lease/goods) and failing such furnishment, the benefit advanced would have to return. In such cases, the guarantee advanced would be for the benefit of the principal debtor. Such a situation arose in the Gulam Hussain case.

CONCLUSION

As is evident, there hasn’t been any consensus reached among the courts on the validity of past benefits to constitute valid consideration in a guarantee contract. The trend of cases shows that majority of the Indian courts are not in favor of past benefit being a valid consideration in a guarantee contract. Based on the above analysis the researcher concludes that past benefit can constitute a valid consideration in at least three forms of arrangements in a guarantee contract. Firstly, subsequent guarantee for the past act done on request. Secondly, the additional benefit being advanced to the principal debtor and guarantor’s liability being extended to the prior debts of the principal debtor with a clear understanding of the same. Lastly, in a case where the creditor demands the benefit to be returned unless the debtor can furnish some security because of the debtor’s failure in fulfilling certain contractual obligations. Thus, it is high time that the Supreme Court should interpret the law on this issue, settle the issue and provide an illustrative list of circumstances (if any) where past debt can be considered valid in a guarantee contract.

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INTRODUCTION

The final stage in the system of criminal jurisprudence is the stage of punishment. Once the court, after having evaluated the evidence presented before it, arrives at a conclusion that the accused has been proved guilty beyond a reasonable doubt, it has to decide over the quantum of punishment that should be awarded to the convict. The broad principles used to determine the quantum of punishment has been dealt with under Chapter 3 of the Indian Penal Code (IPC). The sentencing policy across the country isn’t uniform and the sentences reflect the individual philosophy of the judges. The considerations affecting the sentencing policy were pointed out by Justice Krishna Iyer in Rajendra Prasad v. State of Uttar Pradesh – “Law must be honest to itself. Is it not true that some judges count the number of fatal wounds, some the nature of the weapons used, others count the corpses or the degree of horror and yet others look into the age or sex of the offender and even the lapse of time between the trial court’s award of death sentence and the final disposal of the appeal? With some judges, motives, provocations, primary or constructive guilt, mental disturbance and old feuds, the savagery of the murderous moment or the plan which has preceded the killing, the social milieu, the sublimated class complex, and other odd factors enter the sentencing calculus.” The prime focus of punishments in our criminal jurisprudence was considered in State of Gujarat v. Hon’ble High Court of Gujarat in which the Supreme Court observed that – “Reformation should hence be the dominant objective of punishment and during incarceration, every effort should be made to recreate the good man out of a convicted prisoner…. reformation and rehabilitation of a prisoner are of great public policy. Hence they serve a public purpose.”

KINDS OF PUNISHMENTS

The different types of punishments that a convict can be awarded have been listed out u/s 53 IPC. This provision itself is indicative of the restricted discretion of the judge in ascertaining the type of penalty as it provides only for a select few punishments. The IPC doesn’t even allow the courts the discretion to impose even the latest forms of punishments like community service and open-air prisons on a person convicted of any offense under the IPC. The IPC has for some offenses itself provided for a minimum sentence whereas, in most other crimes, the trial court has got a wide discretion in the ascertainment of the period of sentences and the choice amongst the aforementioned kinds of punishments, given the nature and gravity of the crime, manner in which it was committed, the conduct of the accused before and after the commission of the crime and other mitigating and aggravating factors.

The various types of punishments that a convict can be sentenced to are –

Death penalty –

It is the harshest of all punishments provided under the IPC. It involves killing the convict as a punishment for his crime. Numerous arguments have been raised both for and against the imposition of capital punishment. One side argues it to be a deterrent while the other raises the question of whether the state has a right to take an individual’s life, something which it cannot restore in case of an erroneous judgment. The IPC provides the death penalty only as an uppermost limit to which a convict can be sentenced and has nowhere made it compulsory for the courts to award a death sentence. The IPC provides capital punishment for Treason (S.121), Abetment of mutiny (S.132), Perjury (S.194), Murder (S.302), Abetment of suicide by minor/insane/intoxicated person (S.305), Attempt to murder by life convict, causing hurt (S.307) and Dacoity with murder (S.396)
The question over the constitutional validity of capital penalty was answered and laid to rest by the Supreme Court in Bachan Singh v. the State of Punjab, where the 5-judge bench, with a 4:1 majority, upheld the constitutional validity of the death penalty. It went on to observe that life imprisonment is the rule and the death penalty an exception and that the judge must state in detail the special reasons for his awarding capital punishment. The court further went on to hold that a convict should not be sentenced to capital punishment “except in rarest of the rare cases when the alternative option is unquestionably closed”
The courts have from time to time come up with principles explaining the rarest of the rare cases doctrine. The Supreme Court in Machhi Singh v. the State of Punjab, Lehna v. the State of Haryana, and Brajendra Singh v. State of Madhya Pradesh laid down various guidelines to be considered while granting capital punishment. They include –

• The death penalty cannot be inflicted except in gravest cases of extreme culpability;
• The circumstances of the offender, circumstances in which the crime was committed and the method and manner of commission of the crime need to be considered;
• Balance sheet of aggravating and mitigating circumstances should be drawn up and mitigating circumstances should be accorded full weightage to draw a just balance between the aggravating and mitigating circumstances;
• Death penalty may be awarded when the crime committed is extremely brutal, grotesque, diabolical, revolting, and dastardly (or) is committed for a motive which evinces total depravity and meanness (or) for the betrayal of the motherland (or) where a member of Scheduled Caste or an innocent child or a helpless woman or old or infirm person has been murdered (or) where the imposition of any punishment other than the death penalty is completely inadequate.

In a case where the judge is of the opinion that the accused is, in fact, guilty and should be awarded capital punishment, he must give a chance to the accused as per section 235 CrPC to put before the judge the facts and circumstances which in the accused’s opinion would allow the judge to mitigate his sentence. Non-compliance with this sentencing procedure vitiates the sentence.

Life Imprisonment –

It means rigorous imprisonment running throughout the remaining period of a convict’s natural life. Imprisonment for life is not equivalent to imprisonment for 14 years or 20 years. Section 57 of the IPC makes life imprisonment equivalent to imprisonment for 20 years only for the purpose of calculating fractions of terms of punishment. The Supreme Court in Gopal Vinayak Godse v. State of Maharashtra clarified that no provision of the law states that life imprisonment is for a period of 20 years. Furthermore, section 55 of the IPC r/w Ss.432-433 CrPC state that an appropriate government may suspend or remit the life sentence of a convict. The condition attached to it is that the convict must have served at least 14 years in prison. However, if the President or the Governor (by exercising their powers under article 72 and 161 respectively) of the Indian constitution decide to remit or commute the life sentence of the convict, the convict shall be released immediately even if he hasn’t served the statutory requirement of 14 years in prison. This is because Section 433A of CrPC, being a statutory provision, cannot override the constitutional power conferred upon the President and the Governor under articles 72 and 161.
NOTE: Commutation under section 55 IPC means that the punishment is altered to a different type than the one originally proposed whereas Remission refers to the act of reducing the amount of punishment without changing its character.

Imprisonment –

It refers to the confinement of a convict in a place used to detain persons convicted of crimes. The IPC recognizes two forms of imprisonment, namely, rigorous and simple. Rigorous imprisonment involves putting the convict to hard labor such as grinding corn, digging the earth, drawing water, cutting wood, bowing wool, making furniture, etc. whereas a convict is not put to any work in case of simple imprisonment.
The Supreme Court in State of Gujarat vs Hon’ble High Court of Gujarat clarified that the prisoners who are put to hard labor should necessarily the paid minimum wages for the work extracted. It has also been noted by the Supreme Court that S.53-fourthly mandates the jail authorities to impose hard labor on the convict sentenced to rigorous imprisonment. In the course of doing so, the jail official cannot be said to have been committing any offense under section 374 IPC. This will not, however, be applicable in cases where the accused is awarded simple imprisonment or detained under preventive detention laws or under trial prisoners.

Forfeiture of Property –

This form of punishment involves depriving a person of his property as a penalty for the offense committed. It can be imposed under the IPC only when the crimes committed are those under S.126 (committing or making preparations to commit depredations on territories of power in Alliance or at peace with Government of India), 127 (a receipt of the property taken in the commission of War or depredation), 169 (unlawful buying or bidding for property in own name by a public servant) and to some extent S.263A (Prohibition of fictitious stamps). The Supreme Court in Shobha Suresh Jumani v. Appellate Tribunal, Forfeited Property recognized the rampant corruption prevailing in the society and recommended the reintroduction of S. 61 and 62 of the IPC on forfeiture of property which was repealed by the Indian Penal Code (Amendment) Act, 1921.

Fine –

It means forfeiting money as a form of penalty. This form of punishment has been considered valid on the ground of its universality; however, the fine imposed should be proportionate to the offense committed because it not only affects the convict but also his dependents. Under IPC, a fine can be imposed as the sole punishment or an alternative punishment or for a limited amount or unlimited amount. Judges have broad discretion while quantifying the fine to be imposed, especially where the provision makes no stipulation as to the amount of fine. Courts being the administrators of justice, it is expected of them that the fines imposed should be fair, just, reasonable, and not excessive. The fine imposed should be within the convict’s capacity to pay but he must feel the pinch in paying it. The imposition of a sentence of fine should be on an individual basis and not collectively. Various cases of non-payment of fine and its various forms have been dealt with under Ss. 64-69 IPC.
The IPC, under Ss. 73 and 74, also provides an award of Solitary confinement only as a part of a sentence of rigorous imprisonment if the court deems fit. It refers to the separation and keeping the prisoners in complete isolation in a cell where he cannot have any direct interaction with or sight of any human being and is without employment or instruction. Solitary Confinement is one of the harshest punishments, the court has held that it shouldn’t be awarded unless the crime committed was extremely brutal or accompanied by unparalleled atrocity. Under no circumstances can solitary confinement be imposed for a period of more than 14 days at a time and not more than 7 days in any month of the whole imprisonment. Solitary confinement cannot be awarded for more than: a. 1 month, where imprisonment doesn’t exceed 6 months; b. 2 months, where imprisonment exceeds 6 months but is less than 1 year; c. 3 months, where imprisonment exceeds 1 year. In cases where a person has been held guilty for various offenses but it’s doubtful as to which of these is the person guilty, he shall be sentenced for the offenses with the lowest punishment.

PROPOSALS FOR REFORMS

The Law Commission, in its 156th Report, recommended few changes to the punishments under IPC:

 The amounts to be imposed as fine be increased at least by 20 times with a corresponding change in the powers of First Class Magistrates to impose such fines;
 The open-air prison system, according to the commission, would be more effective than Community service among the punishments because the latter involves various enforcement issues.
 A punishment of “Public Censure” was sought to be included in S.53 IPC for the offenses in Chapters XII-XIII, Ss. 272-276, 383-389, 403-409, 415-420 and offenses proposed under new S. 420A and 462A, IPC (Amendment) Bill, 1978. These are offenses where persons entrusted with some public duties commit offenses. Such a punishment is likely to act as a greater deterrent due to the fear of infamy resulting from publicity.
 The death Penalty should be retained but awarded as per the guidelines of the Supreme Court.

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