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B. Narayana Rao and ors. Vs. S.K. Francis - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKarnataka High Court
Decided On
Case NumberRegular Appeal No. 183 of 1950-51
Judge
Reported inAIR1953Kant68; AIR1953Mys68
ActsCode of Civil Procedure (CPC), 1908 - Sections 145 - Order 41, Rule 5 and 5(2); Indian Contract Act, 1872 - Sections 126, 133, 135, 137 and 139
AppellantB. Narayana Rao and ors.
RespondentS.K. Francis
Appellant AdvocateB. Somaiya and ;N.S. Narayana Rao, Advs.
Respondent AdvocateV.L. Narasimhamurthy and ;Ratnabai Chittur, Advs.
Excerpt:
.....on 8-12-47, the judgment-debtor filed an application under order 41, rule 5 (2), civil p. the decree-holders' counsel, it is noted in the order sheet, accepted them on condition of their executing a registered security bond charging their immoveable properties the sureties being agreeable, the case was adjourned to 18-12-47. by that date, apparently, no such bonds had been given and the decree-holders' counsel said that he was not willing to accept the suretyship of two of three new persons who had been offered earlier and that 'he would be satisfied with the attachment of the immoveables of francis (the petitioner) who has already stood surety. the subordinate judge was not satisfied about their solvency and he reported that security had not been furnished within the prescribed..........order in an execution case on the file of the subordinate judge at kolar. the appellants are the decree-holders in a suit o. s. no. 7 of 46-47 and the respondent is one of the sureties who is sought to be proceeded against to obtain satisfaction of the decree they have secured in that suit against one aruldoss. 2. the plaintiffs filed their suit for the recovery of rs. 6,500/- against the judgment-debtor and applied for attachment before judgment of his shop goods when the warrant was about to be executed the respondent and another susinathan jointly entered into a surety bond exhibit i on 15-9-1946 in favour of the court agreeing to pay the entire amount of the decree that may be passed in the case and so the attachment was not effected. the plaintiffs' suit was ultimately decreed on.....
Judgment:

1. This appeal arises out of an order in an execution case on the file of the Subordinate Judge at Kolar. The appellants are the decree-holders in a suit O. S. No. 7 of 46-47 and the respondent is one of the sureties who is sought to be proceeded against to obtain satisfaction of the decree they have secured in that suit against one Aruldoss.

2. The plaintiffs filed their suit for the recovery of Rs. 6,500/- against the judgment-debtor and applied for attachment before judgment of his shop goods When the warrant was about to be executed the respondent and another Susinathan jointly entered into a surety bond Exhibit I on 15-9-1946 in favour of the Court agreeing to pay the entire amount of the decree that may be passed in the case and so the attachment was not effected. The plaintiffs' suit was ultimately decreed on 29-11-1948 and the same was confirmed by this Court in R. A. No. 108 of 47-48.

3. On 5-12-1948, almost immediately after the decree was passed in their favour, the decree-holders filed an execution application No. 12 of 1947-48 and applied for attachment of the judgment-debtor's moveables both in his shop and in his residence as well as two items of immoveable properties belonging to the sureties 'as the decree amount was large and as one of the sureties had already alienated by way of mortgaging his property and the other also was about to alienate his' On that application, on 6-12-47 the Subordinate Judge ordered notice to the sureties and the attachment of immoveables On 8-12-47, the judgment-debtor filed an application under Order 41, Rule 5 (2), Civil P. C., for stay of execution. The learned Judge made an order on that application in the following terms :

'Judgment-debtor by K. V. for Mr. P. R. R. files an application today under Order 41, Rule 5, Civil P. C., praying to stay execution of the decree on the ground that the defendant intends to prefer an appeal against the decree of this court. 'It is seen that the previous bond executed subsists only till the decree in the original suit is granted.' (Ex. V-a). Mr. K. V. says that the same sureties will come and execute a fresh bond and that the defendant is going to appeal against the judgment and that therefore the execution may be stayed. Execution is stayed. Defendant should furnish security in 3 days Bring up on 12-12-47.'

It is to be noted that the decree-holders were not present or represented when this order was passed.

4. On 12-12-47, the case was adjourned to 13-12-47 and on the latter date the decree-holders' counsel was present. The first judgment-debtor offered three sureties who were named. The decree-holders' counsel, it is noted in the order sheet, accepted them on condition of their executing a registered security bond charging their immoveable properties The sureties being agreeable, the case was adjourned to 18-12-47. By that date, apparently, no such bonds had been given and the decree-holders' counsel said that he was not willing to accept the suretyship of two of three new persons who had been offered earlier and that 'he would be satisfied with the attachment of the immoveables of Francis (the petitioner) who has already stood surety.' The execution case was then posted to 22-12-47 as the judgment-debtor was absent and an adjournment was sought for by his pleader. On 22-12-47, a further adjournment was sought for on behalf of the judgment-debtor. This was opposed by the decree-holders' counsel who insisted on the attachment of the respondent's (surety's) immoveables and the Subordinate Judge ordered the attachment by 30-1-48. The order sheet further shows that the two items of immovables were accordingly attached and that the Subordinate Judge ordered the same to subsist when he dismissed that execution application. Then the judgment-debtor filed an appeal in this Court and obtained an 'ad interim' order of stay of execution subject to his furnishing security within a fortnight. The same two persons who had been proposed by the judgment-debtor as his new sureties,' viz., Dhanapal and T. V. Subba Rao were again offered. The Subordinate Judge was not satisfied about their solvency and he reported that security had not been furnished within the prescribed time. The judgment-debtor then applied for and obtained an extension of time for furnishing security and on 14-7-1948 the Court accepted with the consent of the decree-holders' counsel a surety bond filed by the three new sureties with a note that they would be in addition to the sureties offered at the time of attachment. This Court thereafter made the stay absolute. Soon after the appeal was disposed of by this Court on 3-8-49, the decree-holders filed their present Exn. Application No. 20 of 49-50 on 4-1-50 for recovery of the amount of the decree, subsequent interest and costs of both the Courts and prayed for attachment of the salary of the respondent.

5. The respondent objected to execution. He pleaded that he executed the surety bond without knowing its contents and that he thought he was thereby merely undertaking to produce the judgment-debtor whenever called upon; and that his liability under that bond had been discharged by the order of 3-12-47; further as the judgment-debtor had been given time without his consent and the agreement by which he undertook to be surety had been also otherwise materially varied without his knowledge or his consent he was no longer liable in law.

6. The Subordinate Judge of Kolar (who is not the Subordinate Judge who passed the orders in the previous Ex. Case 12 of 46-47) upheld his objection and dismissed the execution application.

7. For the appellants-decree-holders, their learned counsel Mr. Somayya has taken us through all the relevant Judge's notes and orders passed from time to time and he contends that far from agreeing to grant any time for payment his client has all along been thoroughly prompt and diligent in pressing for his remedies against the judgment-debtor as well as the sureties, that the interpretation of the present learned Subordinate Judge on the order of 8-12-47 of the previous Subordinate Judge and the conclusion he has come to that the respondent has been discharged from liability are not correct.

8. Mr. V. L. Narasimhamurthy, learned counsel who appears for the respondent, has strenuously attempted to uphold the order of the Court below. The learned Subordinate Judge has written a long and elaborate order discussing numerous cases The questions involved, however are really quite simple, and it is not possible to support his order. The learned Judge has rightly held that the story of the respondent that he executed Ext. I in ignorance of its contents is not true and that finding is not questioned here. The learned Judge has put a clearly erroneous interpretation on his predecessor's note in the order sheet of 8-12-47, viz., 'it is seen that the previous execution subsists only till the decree in the original (suit) is granted.' That that Subordinate Judge who made that note did not consider that the security bond executed, by the respondent had ceased to have any validity and that his liability had become somehow terminated by reason of that note is quite obvious from the fact that he himself shortly afterwards directed the attachment of the sureties' immoveables. That rather casual note, which the learned Subordinate Judge has treated as an 'order passed rightly or wrongly by his predecessor which the decree-holders were bound to have got set aside by a competent Court' could in that context only mean that by the previous surety bond the sureties were liable only for the amounts due to the decree-holders upto the date of the decree and that it would not enure to secure in their favour the payment of any further interest and costs which may become due to them as a result of the proposed appeal. The reason for that observation was obviously because in para 3 of the judgment-debtor's application 1-A, under Order 41, Rule 5, Civil P. C. the judgment-debtor had stated that he had already furnished a security bond which would cover future interest and costs also and that there was no need to insist on his furnishing any further security as required under that order. Mr. V. L. Narasimhamurthy conceded that the note was no doubt unreasonable and meaningless but nevertheless he urges it has to be given effect to as pointed out by the learned Subordinate Judge. We do not, however, think that the earlier Subordinate Judge meant to pass any such unreasonable, indeed perverse or absurd order. After having himself granted a decree a few days back in a contested suit he could not have intended in effect to deprive the decree-holders of the fruits thereof merely because the defendant said he would file an appeal against the decree. The decree-holders were not even present or heard when that note was made and it certainly cannot be said to be an order as being a formal expression of any decision which determined the rights of the parties with regard to any controversy between them.

9. The note goes on to say 'Mr. K. V. says that the same sureties would come and execute a fresh bond,' Mr. Narasimhamurthy urges that Mr. K. V. has not filed a vakalath for the suretieS. But we think we can in the circumstances justifiably raise a reasonable presumption that the sureties might have been consulted by Mr. K. V. before a responsible pleader like him made a statement before the Court that the same sureties would come and execute a fresh bond. The sureties have not examined him nor given any evidence to the contrary. We, therefore, think that the sureties may have been fully aware of the proceedings that took 'place in Court on and after 6-12-47 and by entering appearance even if informally they rendered the issue of notice which had been ordered to them and the judgment-debtor unnecessary.

10. Even otherwise, the subsequent proceedings in the execution case clearly show that the decree-holders were resisting the stay of execution and insisting on additional satisfactory security. Their request that the immovables of the sureties may be attached was made as the judgment-debtor was gaining time. In the execution application itself the decree-holders had stated that the sureties were about to alienate their properties and that one of the items had been mortgaged subsequent to the execution of the surety bond. It is difficult, therefore, to see what else the decree-holders could have done when the Court was giving time to the judgment-debtor to furnish further security before ordering stay. Mr. Narasimhamurthy has urged that by asking for such attachment the decree-holders Impliedly consented to the stay being made and thereby to the grant of time to the judgment-debtor. To put such a construction on the decree-holders' action would, we think, be not reasonable. They were bound to submit themselves to the orders of the Court and if they felt that they might at least secure the attachment of the immovables before they were disposed of by the sureties, taking advantage of the delay in the proceedings in Court, their action can certainly be not considered as conceding that a stay might be made or that the judgment-debtor should have time to make payment or as throwing any additional burden on the sureties. They applied for attachment and the order was made in the execution case itself and not in any independent proceedings and was a part of the execution process. Further, it is seen that in the security bond Ext. I the sureties also have expressly agreed that they would be liable for all orders that may be passed by the Court and such orders may well be deemed to include orders like the ones above mentioned.

11. Mr. Narasimhamurthy has argued that the Court's order staying execution under Order 41. Rule 5 itself operates as an extension of time for payment to the judgment-debtor and that the effect of it is to discharge the liability of the sureties under Section 135, Indian Contract Act. Section 135 refers to 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 as discharging the surety unless the surety assents to such contract. The reason of this rule appears to be that a surety has a right immediately on a debt becoming due to insist on proceedings being taken at once against the principal debtor and any contract that would prevent the creditor from suing him would be inconsistent with that right. See Section 139, Indian Contract Act. 'Mere forbearance on the part of the creditor does not in the absence of any provision in the guarantee to the contrary discharge the surety under Section 137 of the Act.'

12. For the respondent some cases have been cited and they will be presently examined. But none of them has laid down that a Court before granting stay of execution is bound to consult the surety or that the surety will be discharged by an order staying execution under Order 41, Rule 5 either by the Court which passed the decree or by the appellate Court. In - 'Krishtappa v. Adinarayanappa' : AIR1937Mad584 the decree-holder agreed to receive the decree amount by instalments and Horwill J. held that such an agreement to give time to the judgment-debtor had the effect of discharging the surety while recognising that there is an exception even to this general rule, i.e., when the decree-holder gives concession to the judgment-debtor while the right to proceed against the surety is specifically reserved. In - 'Smith v. Wood', (1929) 1 Ch 14 at p. 23 (B) it has been observed that it is for the sureties to judge and for them to decide whether they would allow any alteration in the contract between the principal debtor and the judgment-debtor and that it is not for a Court or Jury to determine the materiality of the alteration. That was not a case of a surety bond given in favour of a Court and has no application to the circumstances of the present case.

13. Mr. Narasimhamurthy has relied very strongly on the case reported in - 'Parvatibai Harivallabhdas v. Vinayak Balvant', AIR 1939 Bom 23 (C). The facts of that case, however, appear to be rather peculiar. In that case, security bonds were executed by sureties during the pendency of a suit against the principal debtor. A decree having been passed against the principal debtor the decree-holder took out execution proceedingS. The principal debtor went up in appeal against the decree and execution against him was stayed on offering of fresh security for the decretal amount. The question was whether the old sureties were discharged by reason of the acceptance of the new sureties. It is seen in that case that after the ' passing of the decree the High Court granted interim stay in the usual terms leaving the question of security to the trial Court. The decree-holder then made an application in that Court in which she mentioned that her execution application to recover the mesne profits was pending, that if execution was to be stayed altogether RS. 15,300/- would be due by the defendant and that the Court should take a proper and solvent surety for Rs. 6,000/-. In his reply to this application the judgment-debtor requested that as regards mesne profits the same sureties as before may be taken and that a statement may be taken from them as to their willingness to execute a fresh surety bond and suggesting further that if the Court did not deem it proper to continue the sureties, a notice should be issued to them. No such notice appears to have been issued and a fresh surety was appointed for the total amount of mesne profits for which the two previous sureties were liable. The record did not show that the defendant offered a new surety in place of the former two sureties. Subsequently the High Court made the order of stay absolute only as regards the immoveable property but discharged it in other respects. The result of it was that there was nothing to prevent the plaintiff from proceeding with the execution application for recovery of mesne profits. But, nevertheless, the execution proceedings were kept pending until the decision of the appeal. There was a delay of about six years in pressing for relief against the surety which was quite unnecessary, there having been no stay and the appeal not relating to the matter covered by the execution application at all. In those circumstances, it was held that the previous sureties were discharged. We think that the case must be held to apply only to the facts and circumstances of that particular case.

Even the decree-holder appears to have been under the impression that the fresh surety bond superseded the prior one and the Court itself was responsible for substituting fresh sureties. Indeed that decision itself recognises that having regard to the definition in Section 126 it is clear that Sections 133, 135 and 139, Contract Act cannot in terms apply to a transaction where the surety bond is given to the Court and there is no creditor within the meaning of Section 126, the principles underlying those provisions being only applied 'mutatis mutandis'. Such application can obviously be only to do substantial justice between the parties for which the Courts are bound. We do not think that AIR 1939 Bom 23 (C) lays down any general principles which are applicable in the circumstances of the present case or which we would like to follow. Mr. Narasimhamurthy has also referred to certain passages in Rowlatt on Principal and _Surety, 3rd Edition, at pp. 253 and 256. While the passages at p. 253 are merely general, the reference at p. 256 to the effect that the principle that a surety is discharged by a binding agreement giving time to the principal was applied to bail in actions at law is clearly (applicable?) when the plaintiff gave time after judgment-- 'Willison v. Whitaker', (1816) 7 Taunt 53 (D) or 'accepted a confession of judgment' agreeing to postponement of payment - 'Whitfield v. Hodges', (1836) 1 M & W 679 (E); - 'Croft v. Johnson', (1814) 5 Taunt 319 (F). We think that in this case there has neither been any extension of time granted by the decree-holders nor any variation of the contract by the surety which has the effect of discharging his liability. We cannot also accept the contention that stay of execution by the Court by itself operates to discharge the surety.

14. The next contention for the respondent is that the sureties are liable only for the amount decreed by the lower Court. But this contention is clearly opposed to the terms of the surety bond which provides that they would pay the entire amount of the decree which may be passed against the defendant in the suit O. S. No. 7 of 46-47. It has been held in 49 Mys HCR 221 (G), which was dealing, with a language similar to that in Ext. I, that the surety was liable for any decree that may ultimately be passed against the defendant and that his obligation is not limited to the decree that is passed by the Court of first instance. There is, therefore, no substance in this contention either.

15. Mr. Narasimhamurthy has next contended that under Section 145, Civil P. C. the issue of a notice to the surety is a condition precedent before action can be validly taken against him in execution and has relied on some decisions in that connection. That point, however, does not seriously arise for consideration in this case. It is very significant that the plea of want of notice was not taken in the earlier statement of objections filed by the surety on. 8-2-50 and was only taken later on on 2-3-1950 by way of additional objections. This would strongly proabilize that the sureties were fully aware of the proceedings which were sought for against them in Ex. 12/46-47 and that by intervening in those proceedings through a counsel as referred to above rendered the issue of a formal notice unnecessary. Moreover, it is represented for the appellants that after filing an appeal in this Court they have obtained a fresh order of attachment. Even in - 'Rahim-ud-Din v. Murli Dhar', AIR 1938 Lah 593 (H), which was one of the cases relied on for the respondent in this connection, Addison J. while recognizing that 'there must be notice of some kind to the surety before his property could be attached in execution of the decree', directed that the notice required by law may be handed to the surety in Court; and this was subsequent to the initiation of the execution proceedings against the surety. In - 'Nanak Chand Ramji Das Firm v. Ibrahim', AIR 1937 Lah 772 (I), Tek Chand J. observed that Section 145, Civil P. C. does not lay down that the notice of attachment should be in writing, that all that is necessary under the law is that before the attachment actually takes place, the surety should have notice of the order directing attachment, the object being that he may be able to raise objections, if any, to the validity of the order and that if the objection of want of notice is not raised before the executing Court, it must be taken to have been waived. The real purpose of the notice to the surety appears to be to give him a chance to persuade the judgment-debtor or make him pay the decree amount or point out the properties of the judgment-debtor so that they may be proceeded against in the first instance and to avoid his being taken by surprise. The mere absence of notice cannot be relied upon to claim discharge of the liability of the surety altogether. It is, however, unnecessary to go into the question further in the view we have taken that the surety in this case had notice of the previous execution proceedings against him and that the attachment made in the course of those proceedings is not therefore invalid.

16. In the result this appeal is allowed, the order of the Court below is set aside. The Subordinate Judge will now proceed with the execution in accordance with law. The appellants will get their costs both here and in the Court below.

17. Appeal allowed.


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