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Parvatibai Harivallabhdas Vani Vs. Vinayak Balvant Jangam - Court Judgment

LegalCrystal Citation
SubjectProperty;Contract
CourtMumbai
Decided On
Case NumberFirst Appeal Nos. 17 and 186 of 1936
Judge
Reported inAIR1939Bom23; (1938)40BOMLR989
AppellantParvatibai Harivallabhdas Vani
RespondentVinayak Balvant Jangam
DispositionAppeal dismissed
Excerpt:
indian contract act (ix of 1872), sections 133, 135, 139 and 126-surety-surety-bond executed in trial court-decree by trial court-execution of decree against sureties -appeal against decree-stay of execution-acceptance of new surety in appeal-discharge of first sureties.;the provisions of sections 133, 135 and 139 of the indian contract act, 1872, do not apply in terms to a surety bond given to the court, for there is no ' creditor ' within the meaning of section 126 of the act. the question whether a surety is discharged from the undertaking he gives to the court depends on the construction of the surety-bond, but the principles underlying the sections can be applied mutatis mutandis to such a bond.;mahomed ali v. lakshmibai (1929) 31 bom. l.r. 1442 narsingh mahton v. nirpat singh (1932)..........jangam was offered and accepted as surety for rs. 5,000. on november 8, 1928, he executed a surety bond in favour of the court in essentially similar terms.3. the suit was decreed in favour of the plaintiff on march 6, 1929. on april 16, 1929, the plaintiff filed darkhast no. 108 of 1929 against the defendant martand for possession, mesne profits and costs. in this darkhast she obtained possession of all the immoveable properties except one house, but no part of the mesne profits was recovered. on july 15, 1929, she filed darkhast no. 192 of 1929 against martand and the two sureties mohite and jangam, for recovery of the amounts mentioned in the two surety bonds. then in july, 1929, the defendant filed an appeal in this court (first appeal no. 222 of 1929) in which he challenged.....
Judgment:

Broomfield, J.

1. The facts in these two appeals are as follows :-

On July 28, 1920, the appellant Parvatibai purchased for Rs. 65,000 certain immovable properties from one Martand Narayan. The latter alleged that the transaction was a mortgage and not a sale. Parvatibai had to bring a suit No. 249 of 1927 for possession with mesne profits. Pending the suit she applied for the appointment of a receiver. The defendant agreed to give security for the profits for the year 1927-1928, and one Mohite was offered and accepted as surety for the amount of Rs. 4,851, which was agreed upon as the amount of mesne profits for that year, on October 20, 1927. The form of the bond taken from him provided :-Therefore I, Ganpat Narayan Mohite stand surety for the abovenamed Martand Narayan Indulkar and make an agreement for myself and my heirs by this document with the Court that the defendant will satisfy the decree or order that may be passed against the defendant in favour of the plaintiff, and that if he fails to do so and if the Court so orders I shall personally pay Rs. 4,851 as the Court may order or my heirs or executors will do so.

2. For the mesne profits for the following year 1928-29 one Babaji Sambhaji Jangam was offered and accepted as surety for Rs. 5,000. On November 8, 1928, he executed a surety bond in favour of the Court in essentially similar terms.

3. The suit was decreed in favour of the plaintiff on March 6, 1929. On April 16, 1929, the plaintiff filed darkhast No. 108 of 1929 against the defendant Martand for possession, mesne profits and costs. In this darkhast she obtained possession of all the immoveable properties except one house, but no part of the mesne profits was recovered. On July 15, 1929, she filed darkhast No. 192 of 1929 against Martand and the two sureties Mohite and Jangam, for recovery of the amounts mentioned in the two surety bonds. Then in July, 1929, the defendant filed an appeal in this Court (First Appeal No. 222 of 1929) in which he challenged the decree of the trial Court so far as it awarded possession, that is to say, the appeal was simply on the question whether the transaction was a mortgage or a sale and did not relate to the award of mesne profits. On July 19, 1929, the defendant applied for stay of darkhast No. 108 of 1929. The High Court granted a rule and interim stay on the usual terms leaving the question of security to the trial Court. The plaintiff then made an application in that Court in which she mentioned that her darkhast to recover the mesne profits was pending, that if the darkhast were to be stopped altogether Rs. 15,300 would be due from the defendant, that therefore the Court should take proper and solvent surety for Rs. 16,000, and that if the defendant failed to furnish this, the darkhast matter should be proceeded with. This application is exhibit 22 in First Appeal No. 186. In his reply to this application (exhibit 21) the defendant requested that as regards the mesne profits the same sureties should be taken as before. He suggested that a statement should be taken from them as to their willingness to furnish a fresh surety bond agreeing to pay such amount as might be ordered to be paid by the High Court, and suggesting further that if the Court did not deem it proper to continue those sureties a notice should be issued to them. It does not appear that any notice was issued, but on August 6, 1929, one Khan Saheb Dinshaw Adarji Wadia was appointed surety for the sum of Rs. 9,800, that is the total amount of mesne profits for which the two previous sureties were liable. The record does not show why the defendant offered a new surety in place of the former two sureties. The surety bond entered into by Wadia, which is exhibit 10 in First Appeal No. 186, recited :-

The defendant Martand Narayan Indulkar will abide by the final decree or order that might be passed in the said matter. If he fails to do so, I and my heirs will pay Rs. 9,800, if the Court passes orders to that effect.

4. Thereafter the High Court made the rule absolute as regards the immoveable property but discharged it in other respects. The result of this was of course that there was nothing to prevent the plaintiff from proceeding with the darkhasts for the recovery of mesne profits. Nevertheless both the darkhasts, No. 108 in which the application for stay had been made, and the other darkhast No. 192 which was the one against the defendant and the sureties, were kept pending. The order passed by the Court, which was repeated from time to time, was simply that the cases were adjourned pending the disposal of the appeal in the High Court. On November 23, 1934, the appeal in the High Court was decided and the decree of the trial Court was confirmed. After this the plaintiff applied that as the surety Jangam was dead his name should be struck off in darkhast No. 192, and this was done on April 11, 1935. Darkhast No. 108 was struck off as disposed of on August 27, 1935, on the plaintiffs statement that the judgment-debtor had no moveable property. Then on September 18, 1935, darkhast: No. 280 of 1935 was filed against the five sons of the deceased surety Jangam for attachment and sale of the immoveable property of their father, and this darkhast and darkhast No. 192 were then proceeded with. The surety Mohite and the heirs of the surety Jangam objected that they were discharged owing to Wadia having been taken as a new surety in their places.

5. The trial Court has upheld this contention, the reasons given by the learned Subordinate Judge being that no notice had been given to the old sureties at the time of taking security from Wadia and that the effect of making Wadia a surety in the stay application was that time had been given to the judgment-debtor, and there was a new contract and novatio under Section 135 of the Indian Contract Act. The learned Judge only refers to Section 135 but apparently he had in mind Section 133 also. First Appeal No. 179 of 1936 is the appeal in darkhast No. 280 of 1935. First Appeal No. 186 of 1936 arises from darkhast No. 192 of 1929. The substance of the argument of the learned advocate for the appellant decree-holder is that the provisions of the Indian Contract Act do not apply in the case of surety bonds given to the Court and that in any case the provisions of the Indian Contract Act relied upon by the trial Judge have no application to the facts of the present case.

6. Chapter VIII of the Indian Contract Act deals with ' Indemnity and Guarantee.' Section 126 is a defining section which says:-' A ' contract of guarantee' is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the 'surety' ; the person in respect of whose default the guarantee is given is called the ' principal debtor', and the person to whom the guarantee is given is called the ' creditor',' Section 133 says : ' Any variance, made without the surety's consent, in the terms of the contract between the principal debtor and the creditor, discharges the surety as to transactions subsequent to the variance.' Section 135 provides : 'A contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor, discharges the surety, unless the surety assents to such contract.' Reference was also made in the course of argument to Section 139 which provides as follows : 'If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged.'

7. It has been held in Madanlal v. Radhakisan AIR [1935] Nag. 258 that these provisions of the Indian Contract Act have no application to a surety bond taken by the Court. The material portion of the judgment is at p. 263 :-

The contention that the provisions of Ch. 8, Contract Act, or the principle underlying them govern the obligation which a surety incurs by giving a bond to the Court under the Code of Civil Procedure, when the Court itself is not concerned with the alteration of the terms of the surety bond, appears to us prima facie untenable. The obligation, which a surety incurs under the bond which he gives to the Court, is excluded from the definition of a ' contract of guarantee' as contained in Section 126, Contract Act...

Under the Act a contract of guarantee is a tripartite agreement between the ' surety ', the ' principal debtor' and the ' creditor '. No such tripartite contractual obligation is created between the parties to the suit and the surety when the latter gives a surety bond to the Court under the Code of Civil Procedure. By no stretch of imagination could the Court be called a ' creditor' in whose favour the surety executes the bond incurring the obligation which the Court is empowered to enforce summarily by way of execution under Section 145, Civil P.C. It therefore follows that the provisions of Sections 133-139, Contract Act, cannot be made applicable to the bond given by a surety to the Court.

8. Reference was made to Appunni Nair v. Isack Mackadan I.L.R. (1919) Mad. 272. where Sesha-giri Ayyar J. says at page 277 :-. Section 135 of the Indian Contract Act contemplates contractual obligation between the parties. Under the Code of Civil Procedure the bond is given to the Court and any infringement of the terms of the bond is a violation of the obligations to the Court, and therefore the agreement between the parties which resulted in a compromise decree has not the effect of discharging his liability to the Court

9. This latter case has been approved in Haji Ahmed v. Maruti Ramji I.L.R. (1930) 55 Bom. 97 : 32 Bom. L.R. 1394 where it was held that the question whether a surety is discharged by reason of a compromise of a suit depends upon the construction of the surety bond, and if the terms of the bond do not exclude the compromise, then the surety is not discharged. If Section 135 of the Indian Contract Act applied in such a case, it would seem that the surety must be discharged unless it appeared from the surety bond or otherwise that he had assented to the compromise.

10. Having regard to the definitions in Section 126 of the Indian Contract Act it is clear in my opinion that Sections 133, 135 and 139 cannot apply in terms to a transaction of this kind, where the bond is given to the Court, and there is no ' creditor ' within the meaning of Section 126. But though they do not apply in terms and though the question whether a surety is discharged from the undertaking he gives to the Court depends on the construction of the surety bond, it does not follow that the principles underlying these provisions should not be applied mutatis mutandis.

11. The learned advocate for the respondents referred us to three cases, Mahomed Ali v. Lakshmibai : AIR1930Bom122 Narsingh Mahton v. Nirpat Singh I.L.R. (1932) Pat. 590 and Muhammed Yusaj v. Ram Gobinda Ojha I.L.R. (1927) 55 Cal. 91. These were all cases in which sureties who had given bonds to the Court were held to be discharged by a compromise of the litigation. In the first of these cases Sir Norman Kemp Ag. C.J. left open the question whether Section 135 of the Indian Contract Act applies to the case of a bond passed to the Court or not. He said that he saw no reason why the equitable principle underlying Section 133 should not be applied in such a case. All the three cases were really decided on the construction of the surety bonds. It was held that the terms of the bonds showed that a compromise of the disputes was not in the contemplation of the parties, that security had been given on the understanding that the matter was to be decided by the Court itself and not by a composition, and on that ground the sureties were held to be discharged.

12. As has frequently been pointed out, the Indian Contract Act is not exhaustive. The general principles underlying the law of suretyship (and in particular the principle that the rights of a surety are not to be interfered with without his consent) may be applied and ought to be applied even though the provisions of the Indian Contract Act do not govern the case. In the Nagpur case to which reference has been made it is pointed out that the liability of the surety may be determined by the Court if it has itself been responsible for a change in the situation which materially affects the terms of the surety bond. It appears to me that that is what happened in the present case.

13. To recapitulate the material facts, there was no appeal against the decree so far as it awarded mesne profits, and after the interim stay order was discharged in July, 1930, there was nothing whatever to prevent the plaintiff from proceeding with the darkhast against the sureties. Mr. Kane says that the plaintiff was not responsible for the fact that the execution proceedings were kept pending until the decision of the appeal ; according to him the Court was responsible. But that only makes his position worse. There was a delay of about six years which was quite unnecessary, there having been no stay and the appeal not relating to the matter of the darkhast at all. Whether the Court misunderstood the position, or whatever the reason may have been, the effect of the orders passed from time to time was evidently to give time to the judgment-debtor. In Jagjivandas v. King, Hamilton & Co. : (1931)33BOMLR709 . Beaumont C.J. said (p. 715) :-

The general principle is that the rights of a surety are not to be interfered with without his consent, and it has always been held that giving time to the principal debtor does prejudice the rights of the surety by preventing him from paying off the creditor and then enforcing the creditor's original rights against the principal debtor.

14. It is urged by the learned advocate for the appellant that the sureties might have objected to the proceedings being held up in this way and might have applied for their being discharged, or might have paid off the debt and taken proceedings against the judgment-debtor themselves. But in this connection it is to be borne in mind that the proceedings in the stay application, to which I have referred, must almost certainly have misled the original sureties, and led them to suppose that a new surety Wadia had been substituted for them, that the darkhast proceedings thereafter no longer concerned them, and that therefore it was not necessary for them to take any steps. The fact that there was not legally any substitution of Wadia for the former sureties does not affect the question. It has also been contended that the act of the Court and delay due to the Court's action should be deemed to be within the contemplation of the parties and sureties. But it would be unreasonable I think to hold that interference with the ordinary course of litigation by an order adjourning proceedings for a period of six years without any justification whatever can have been contemplated as a risk which the sureties undertook to face when they executed the surety bonds. It seems to me therefore that this certainly is a case in which the Court was itself responsible for a change in the situation which materially affected the position of the former sureties under the terms of their surety bonds. Even according to the principles laid down in the Nagpur case, on which the learned advocate for the appellant relied, therefore, it seems that the order of the trial Court is right.

15. It has been held in Keshavlal v. Prolapsing (1931) 34 Bom. L.R. 167 that :-

If there is a substantial alteration in a contract by 'the principal, without the consent of the surety, even if there be no extra prejudice to the surety which can be shown to exist, the surety will be discharged, because the Court will not go into the question whether there has been any actual prejudice or not. The surety is to be the judge whether he will continue to remain liable on the new contract or not.

16. On the same principle the respondents are not bound to prove that they have actually been prejudiced. But there is little doubt that they have been, because the record of the case shows that on August 27, 1935, the proceedings against the judgment-debtor himself were abandoned on the ground that he had no moveable property.

17. I hold, therefore, that no good grounds have been shown for interfering with the decision of the lower Court, and the appeals must be dismissed with costs.

Macklin, J.

18. I agree.


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