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Narayan Ramchandra Bhagwat Vs. Markandya Tukaram and anr. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMumbai High Court
Decided On
Case NumberMisc. Second Appeal No. 250 of 1955
Judge
Reported inAIR1959Bom516
ActsIndian Contract Act, 1872 - Sections 126, 133, 135, 136, 137, 138 and 139; ;Code of Civil Procedure (CPC), 1908 - Sections 145
AppellantNarayan Ramchandra Bhagwat
RespondentMarkandya Tukaram and anr.
Appellant AdvocateB.B. Ranade, Adv.
Respondent AdvocateR.R. Dandige, Adv.
Excerpt:
- - 2 here, failed to prefer an appeal from the decree of the trial court and obtain a stay order from that court. 2 failed to furnish a fresh solvent security as contemplated in the compromise. 2 having failed to furnish fresh security the instalment arrangement did not come into operation at all. only the instalment scheme was made defeasible on failure to furnish security......was casting an additional burden on the appellant. where such a variation takes place it must be held that the surety is discharged. this is what has been held in t.n. and o. bank ltd. v. official assignee, madras : air1944mad396 . it is said that the surety's burden would not be increased as he could not be liable to the interest agreed to between the respondents 1 and 2. a complete answer is to be found in the following observations in keshaval harilal setalvad v. pratapsing moholalbhai sheth, 34 bom lr 167: air 1932 bom 168.'if there is a substantial alteration in a contract by the principle, without the consent of the surety, even if there is 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.....
Judgment:

1. This second appeal arises out of execution proceedings. The appellant had executed a surely bond in favour of the Court agreeing to pay Rs. 2,400/- to the decree-holder in case the judgment-debtor, who is respondent No. 2 here, failed to prefer an appeal from the decree of the trial Court and obtain a stay order from that Court. This was on 3-12-1952. The respondent No. 2 did not prefer an appeal nor did he bring any stay order. The decree-holder, i.e., the respondent No. 1, then sought to execute the decree. In the execution proceedings the parties arrived at a compromise the terms of which are as follows:

'(a) The J.D. paid the amount Rs. 200/- on 6-4-1953. The J.D. shall pay Rs. 600/- by 18-4-1953. The J.D. shall pay Rs. 800/- by 15-4-1954. The balance of instalment by 15-4-1955.

(b) The J.Ds. shall furnish solvent security within 15 days in the extent of the decretal claim interest and costs.

(c) In default of any of the terms mentioned above, the scheme of installments shall (sic) to operate.

(d) The decretal amount shall carry interest at 6 per cent per annum from date of application till realization.'

2. It would appear that the respondent No. 2 failed to furnish a fresh solvent security as contemplated in the compromise. He did not pay any money either and eventually the respondent No. 1 took out execution against the respondent No. 2 for the entire amount due under the decree together with interest as agreed to in the compromise between the respondents Nos. 1 and 2. Various objections were raised on behalf of the appellant to the execution but only one of those objections is pressed before me and it is only that which has to be considered. The objection is that by reason of the arrangement arrived at on 14-1-1953, there was a variation in the original contract and that consequently the appellant who was a surety was discharged on the principle underlying Section 133 of the Contract Act. This contention was negatived by both the Courts below.

3. No doubt as has been held in Madanlal Motilal v. Radhakishan Laxminarain, 31 Nag LR (Sup) 83: AIR 1935 Nag 258, the provisions of Sections 126 and 135 to 139 of the Contract Act (and a portion of Section 133) do not apply where the bond has been executed by the surety in favour of the Court. However, as has been held in Parvatibai v. Vinayak Balvant. AIR 1939 Bom 23, the principles underlying those sections do certainly apply. This decision is binding upon me. In Jagjivandas v. King Hamilton and Co., 33 Bom LR 709: AIR 1931 Bom 337, it has been held that the general principle is that the rights of surety are not to be interfered with without his consent, and that giving time to the principle debtor does prejudice the rights of the surety by preventing him from paying off the creditor and then enforcing the creditors original rights against the principle debtor. In the instant case, by making the decree payable by installments time was given to the respondent No. 2. In addition, there was a substantial variation in the original contract by reason of the fact that the judgment-debor that is the respondent No.2, was required to pay interest at 6 per cent per annum on the decretal amount. This was casting an additional burden on the appellant. Where such a variation takes place it must be held that the surety is discharged. This is what has been held in T.N. and O. Bank Ltd. v. Official Assignee, Madras : AIR1944Mad396 . It is said that the surety's burden would not be increased as he could not be liable to the interest agreed to between the respondents 1 and 2. A complete answer is to be found in the following observations in Keshaval Harilal Setalvad v. Pratapsing Moholalbhai Sheth, 34 Bom LR 167: AIR 1932 Bom 168.

'If there is a substantial alteration in a contract by the principle, without the consent of the surety, even if there is 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.'

4. Now it is argued that in the instant case, the respondent No. 2 having failed to furnish fresh security the instalment arrangement did not come into operation at all. That however is neither here nor there. What we have to look to is the state of affairs on 14-1-1953 when the new arrangement was arrived at. That arrangement came into operation immediately. The furnishing of security was not a condition precedent to the coming into force there of. Only the instalment scheme was made defeasible on failure to furnish security. Therefore, no sooner the arrangement was arrived at the surety bond became unenforceable. Apart from that there is the fact that by virtue of this new arrangement, the respondent No. 2 became liable to pay interest at 6 per cent per annum. His liability to pay interest was not dependent upon his being given the benefit of the installments. In these circumstances, it must be held that there has been a substantial variation in the original contract by reason of which the surety is discharged.

5. Accordingly, I allow the appeal and dismiss the application for execution against the appellant. Costs throughout will be borne by the respondent No. 1.

6. Appeal allowed.


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