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The Code Of Civil Procedure (Amendment) Act, 1956
Section 135 in The Indian Contract Act, 1872
The Indian Contract Act, 1872
Section 141 in The Indian Contract Act, 1872
Sheopat Singh vs Ram Pratap on 28 August, 1964

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Delhi High Court
Manaohar Lal Beli Ram vs Har Kishan Lal And Anr. on 14 April, 1967
Equivalent citations: AIR 1968 Delhi 108
Bench: M Ismail



JUDGMENT  

 (1) On 1-10-1956 Shri Manohar Lal the appellant herein made an application to the court of the commercial Sub Judge, First Class, Delhi for permission to sue in forma pauperis for the recovery of Rs. 8498/- from the Har Kishan Lal, Bhalla. This application was granted on 15-6-1957 and the application itself was directed to be numbered and registered as suit. When the said application was pending the appellant herein filed an application under O. 39. Rr. 1 and 2 of the Civil Procedure Code for restraining the defendant in the suit from removing or alienating the goods lying in possession of the one Pearey Lal of Delhi. The said application was contested by the defendant. The Court in that application which had issued the ex parte order of injunction, set aside the injunction order on furnishing a security in the suit amount by the defendant. In pursuance of the said order, Shri Shivraj, the second respondent herein made an application to the court on 11-10-1956 to stand surety for the defendant. In the application he stated that;     

"I, Shiv Raj son of Shri Mulkh Raj resident 13, Rajpur Road, Delhi, of my own accord and free will stand surety for the above named respondent in the above case and agree and undertake that the said Respondent will perform and satisfy the decree that may be ultimately passed in the above cause and in case the said Respondent makes default therein, I, the aforenamed Shiv Raj, bind myself, my heirs, executors and representative and all moveable and immovable property belonging to me or that I may possess hereafter to pay the whole or any part of the claim of the petitioner that may be decreed in the above case against the respondent. To this effect I execute this surety bond on this the 10th October, 1966 at Delhi in presence of .........................." (1-A) The statement of the surety was recorded and the said security was attested on 11-10-1956.

(2) In the suit itself the appellant herein (Plaintiff) and the 1st Respondent (defendant) entered into a compromise on 25-11-57. On the basis of the said compromise a decree was passed on that date. Under, the terms of the said compromise the judgment-debtor, namely, the 1st respondent herein was directed to pay Rs. 8498 with costs and future interest at 6% per annum from the date of institution of the suit till the realisation of the decretal amount to the decree-holder and in case the judgment debtor paid to the decree-holder the above amount by monthly Installments of Rs. 600, the first Installment being payable on the last day of December, 1957 and the subsequent Installments on the last day of every English Calendar month, then the decree was to be deemed to be satisfied. The compromise further provided that in case the judgment debtor committed default in the payment of any Installment, he was liable to pay the entire decretal amount in lump sum to the decree-holder and the decree-holder was to execute the decree.

(3) The appellant herein on 3-2-1960 filed the execution case No. 48 of 1960. He stated in that application that the judgment-debtor had paid him Rs. 4800 and had nto paid the balance of the decretal amount which was to the tune of Rs. 6204/14 inclusive of interest and the costs of the suit and prayed for the recovery of the amount form Shiv Raj, the 2nd respondent herein. The 2nd respondent herein objected to the claim for recovery from him on the grounds that the compromise entered into between the parties was collusive, it went beyond the scope of the surety bond, and that he was liable only in case the decree was passed after contest and he was nto liable since the plaintiff agreed to the contest decree and that too for receiving the amount in Installments. On the pleadings of the parties the lower court framed the issue, namely "Whether the surety stands discharged as alleged." It came to the conclusion that since the appellant herein entered into a compromise with the 1st respondent herein and also agreed to give him time for payment of the amount in Installments, the right and remedy of the surety become impaired and therefore, the surety, the stood discharged. In the result the execution application was dismissed by the lower Court. The decree-holder had preferred the present appeal.

(4) The contention of the learned counsel for the appellant is that a compromise decree giving time for payment of the decretal amount to the judgment-debtor is nto outside the scope of the surety bond extracted above in this case and consequently the conclusion of the lower court is nto sustainable. One thing can be stated straightway that whether a particular decree is within the scope of the surety bond or nto depends upon the terms of the surety bond and the decree and consequently is a question of fact in each case. This proposition is so well established that it is unnecessary to refer to decided cases on this point. As far as the particular decree in the present case is concerned it can be said to consist of two parts, namely, the fixation of the amount which the parties agreed as being payable by the judgment-debtor to the decree-holder and secondly the manner in which the said amount should be paid by the judgment-debtor to the decree-holder and in this case by Installments. The learned counsel for the appellant referred to the cases where it had been held that a compromise decree as a rule, need nto be outside the scope of the surety bond, and a compromise decree will nto be outside the scope of the surety bond unless it is explicitly or implicitly excluded from the terms of the surety bond itself, and in the present case a compromise decree had nto been excluded either explicitly or implicitly by the terms of the surety bond. For the purpose of this case I am assuming, without deciding, that the compromise decree in question is nto outside the scope of the surety bond. Still the question remains whether the agreement between the appellant and the 1st respondent herein for receiving the decretal amount in Installments, is within or outside the surety bond in question. The learned counsel for the appellant relied upon certain observations contained in Jia Bai v. Joharmull Btohra, and the actual observation is as follows:-- "I would say upon this case (Tatum's case) that if it is to be contended that the surety is discharged from his bond in any case where there is a consent decree proving for postponed payment or payment by Installments, then that is a proposition to which as at present advised, I am nto prepared to assent."

This was the observation of Rankin, C. J. who proceeded in the very next sentence to state that the case before the court did nto raise the exact question and therefore, he was content merely to say that he had some difficulty in holding that a provision for Installments releases the surety in a case of consent. Thus it will be seen that the observation of the learned Chief Justice was merely obiter dictum and it was so held by Bench of the Calcutta High Court in case Kanailal Mookerejee v. Kali Mohan Chatterjee, . On the toher hand there is a decision of Bench of the Lahore High Court in Pirthi Singh v. Ram Charan, Air 1944 Lah 428 directly on this point. In the course of the judgment, after referring to the applicability of the principles underlying sections 133 to 141 of the Indian Contract Act to such surety furnished to the Courts, the learned judges observed as follows:-- "There is no doubt that if this bond were nto in favor of the court but in that of the respondent, the terms in which Section 135, 139 and 141 are couched would have come into play and discharged the surety from his liability. A contract was made between the creditor and the debtor by which the former had promised to give time to the debtor and Installments were fixed without the surety's assent or even knowledge which prevented him to require the decree-holder from calling upon the principal debtor to pay off the entire debt or to pay the entire debt himself and then to recover it from the principal debtor, see (1812) 56 Mad 625 at pp 633/634:AIR 1933 Mad 309 at p.3412) Annadana Jadaya v. Konnammal."

This decision of the Lahore High Court has been followed by several toher decisions including the one that I already referred to, namely, the decision of the Calcutta High Court .

(5) The learned counsel for the appellant sought to distinguish the decisions reported in Air 1944 Lah 428 and on the ground that in those cases and the surety bond referred to the actual amount for which the executant of the bond stood surety while in the present case the surety bond merely refers to the amount ultimately to be decreed by the Court. I do nto find any merit in the distinction sought to be made by the learned counsel for the appellant, particularly, with reference to the compromise where the decree-holder, had agreed to receive the decretal amount from the judgment-debtor in Installments. Such a distinction has no relevancy to payment in Installments and cannto be sustained or justified either by logic or by law. The learned counsel for the appellant also contended that if the consent decree can be within the scope of the surety bond, then any manner of payment agreed to between the two parties, namely, the decree-holder and the judgment-debtor, as for instance payment in Installments, must also be deemed to be comprehended by the surety bond. I am unable to accept this contention. After all the surety undertakes to discharge the liability of the principal debtor. It is one thing to say that if a creditor and the principal debtor compromise, and arrive at a particular figure the surety is bound to pay that amount in case the principal debtor commits default and it is an entirely different thing to say that having agreed to the figure, if the creditor and the principal debtor without the consent of the surety, also agreed to an agreement under which the principal debtor will be given time for payment of the amount, then also the surety is bound and he is nto discharged. The discharge of the surety under such circumstances flow from different considerations altogether, namely, that the rights and remedies which the surety has against the principal debtor ought nto to be prejudiced or impaired by the arrangement between the creditors and the principal debtors without reference to him. In view of his, I am unable to accept this contention of the learned counsel of the appellant. The learned counsel for the appellant was unable to cite before me any authority holding that the surety continues to be liable even in case where the decree-holder and the judgment-debtor entered into a compromise nto only fixing the amount payable by the judgment-debtor to the decree-holder but also proving that the said amount was payable in Installments, at particular intervals, by the judgment-debtor to the decree-holder, except the obiter dictum contained in already referred to. No toher point was argued before me. In the view that I have taken that by the agreement of the appellant with the 1st respondent to receive the decretal amount in Installments, the surety is discharged, since such an arrangement does nto fall within the scope of the surety bond executed by the second respondent herein and prejudices and impairs the rights which the surety has against the judgment-debtor. I agree with the conclusion of the lower court and dismiss the appeal. In the circumstances of the case I do nto pass any order as to costs.

(6) Appeal dismissed.