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Mohd. SultanuddIn Vs. Mohd. Dastagir and anr. - Court Judgment

LegalCrystal Citation
SubjectContract;Limitation
CourtAndhra Pradesh High Court
Decided On
Case NumberSecond Appeal No. 39/2 of 1955
Judge
Reported inAIR1960AP210
ActsIndian Contract Act, 1872 - Sections 128; Limitation Act, 1908 - Schedule - Articles 115, 120 and 132
AppellantMohd. Sultanuddin
RespondentMohd. Dastagir and anr.
Appellant AdvocateSadashiv Rao, Adv.
Respondent AdvocateD.M. Deshmukh and ;S.M. Abdullah, Advs.
DispositionPetition allowed
Excerpt:
.....surety - section 128 of contract act, 1872 and articles 115, 120 and 132 of limitation act, 1908 - suit against surety on a simple bond for payment of mortgage debt - challenged on ground of limitation - sought for applicability of article 132 - article 132 relates to charges on property - article 115 not only limited to case of damage for breach of contract and is also applicable to case of liability under a simple bond - held, suit barred under article 115 as it was brought more than three years from date of bond. (ii) liability of surety - section 128 of contract act, 1872 - liability of surety is co-extensive with principal debtor under section 128 - question of liability depends on terms of contract of guarantee - held, section 128 intended to provide for contractual obligation of..........property. he has asked for a personal decree. this claim is based against the appellant on the surety bond executed by him. it is no doubt true that under section 128 of the contract act the liability of the surety is co-extensive with that of the principal debtor.but the question of his liability will depend on the terms of the contract of guarantee by which he has bound himself. section 128 merely defines the measure of liability and has no reference to the extinction of the liability by the operation of the statute of limitation. in other words, the lability of the principal and the surety are distinct because the liability of the surety does not necessarily, in all cases, arise simultaneously with that of the principal.section 128 of the contract act, we think, is intended to.....
Judgment:

Manohar Pershad, J.

1. This is an appeal on behalf of the 2nd defendant against whom and the 1st defendant (2nd respondent herein) a suit was filed for the recovery of Rs. 937/- O. S. The plaint allegation was that the 2nd respondent had borrowed a sum of Rs. 1500A from him in cash agreeing to repay the same together with a sum of Rs. 500/- on account of profits. According to the plaintiff; the 2nd respondent executed a mortgage deed in his favour for Rs. 2000/-, (Rs. 1500/- being the amount advanced and Rs. 500/- being the profits) and the appellant stood surety for him after executing a bond on 28th Amardad 1355F (3-7-1946) i.e. on the date of the execution of the mortgage bond undertaking the liability to pay the sum of Rs. 2000/-.

The plaintiff avers that a sum of Rs. 1100/-has been paid towards this mortgage bond and the balance, according to him, was Rs. 900/-. Including the registration charges for the mortgage bond, the plaintiff claimed Rs. 937/- as stated earlier. The 2nd respondent, who was the 1st defendant in the trial court, was absent and he was set ex parte. The appellant in his written statement, while admitting-the execution of the bond, pleaded that there was no amount due, as the whole amount due under the bond had been paid.

He also pleaded that the claim as against him was barred by limitation. The trial court, on the evidence accepted the payment pleaded by the appellant and dismissed the suit as against him and the 2nd respondent. Aggrieved by the judgment and decree of the trial court, the plaintiff filed an appeal to the lower appellate court, which disagreed with the trial court and held that only the payment of Rs. 1100/- inclusive of Rs. 400/- has been proved.

In the result the appellate court allowed the appeal, set aside the judgment and decree of the trial court and decreed the suit to the extent of Rs. 487/- O. S. Aggrieved by the judgment and decree is this second appeal, which initially carne up for arguments before our learned brother Sri-nivasachari, J. who having regard to the importance of the question of law involved, has referred this to a Bench.

2. The question of law is what is the limitation prescribed against a surety. The contention of the learned counsel for the appellant is that the suit by the plaintiff is for the recovery of the mortgage money from the defendant personally and not ' from the property and though the period of limitation as against the 2nd respondent is 6 years, but as against the appellant, he urges, the document being unregistered it would be three years and therefore the suit is barred by limitation.

Reliance is placed upon the case of Charu Chandra v. L. Faithful, AIR 1919 Cal 636, and of P. C. Muthu Chettiar v. Rengappa Naidu, AIR 1927 Mad 945(1). He next contended that the appellate court has erred in holding that Rs. 400/-, which admittedly had been received by the plaintiff (1st respondent herein) was included in Rs. 1100/-, when the evidence on record does not warrant such a conclusion and if this payment is accepted no amount would be due to the plaintiff.

On behalf of the plaintiff respondent it is contended that the liability of the surety and that of the principal debtor being co-extensive the period of limitation prescribed for both would be the same and the appellate court has rightly held that no question of limitation arises at all. Reliance is placed on the case of Daljit Singh v. Har-kishan Lai, AIR 1940 All 116. It is further urged that even if it is held that the period of limitation prescribed for the surety is not the same as that prescribed for the principal debtor, article 115 08 the Limitation Act would not be applicable.

On the other hand he urges that the articla applicable would be Article 132 or Article 120. Aa regards the receipt of Rs. 400/-, it is contended that the lower appellate court has erred, in holding that this amount is included in the amount of Rs. 1100/-, when the evidence on record sufficiently proves that this amount has nothing to do with the suit transaction,

3. The first point that falls for determination is what is the period of limitation prescribed against the appellant, viz., the 2nd defendant. Admittedly the plaintiff has not claimed the recovery of the amount from the mortgaged property. He has asked for a personal decree. This claim is based against the appellant on the surety bond executed by him. It is no doubt true that under Section 128 of the Contract Act the liability of the surety is co-extensive with that of the principal debtor.

But the question of his liability will depend on the terms of the contract of guarantee by which he has bound himself. Section 128 merely defines the measure of liability and has no reference to the extinction of the liability by the operation of the statute of limitation. In other words, the Lability of the principal and the surety are distinct because the liability of the surety does not necessarily, in all cases, arise simultaneously with that of the principal.

Section 128 of the Contract Act, we think, is intended to provide for the contractual obligation of the surety but is not concerned with the enforcing creditor on breach. We may now refer to the terms of the bond. The bond reads :

'Having stood surety for Mushtyal Khutubud-din resident of Ladhoor I promise to pay the amount of Rs. 2000/- which Mushtyal Khutubuddin has taken, on loan from Khader Abdul Aziz son of Mohd. Dastagir, advocate for his trade. If Musht-yal Khutubuddin does not repay the amount within the prescribed period or evades the payment of the amount or if that amount is not recoverable from his property, to that extent, I shall pay If personally and the creditor also would be entitled to recover this amount from me personally and from my property.'

A reading of this document would show that the appellant has agreed to pay the amount in case of default by the principal debtor within the prescribed period. The period fixed is one year. The document is dated 28th Amardad, 1355F. It follows therefore that if by 28th Amardad 1356F, the amount is not paid limitation would begin to run. If it is a registered document the period would be six years and in other oases three years. The mortgage bond for which this document fs executed is a registered document whereas this bond by the surety fs unregistered.

Question arises whether in an action against the surety the same period of six years would apply. Admittedly the suit against the appellant is instituted on 27-6-1953 more than 3 years from the date of the bond. In the case of Sreenath Roy v. Peary Mohan Mookerjee, 39 his Cas 205 : (AIR 1917 Gal 154), an identical question had arisen, That was suit against the surety on a pronote payable on demand. The question arose whether the limitation to enforce the contract of guarantee was governed by Article 65 or Article 115 of the Limitation Act.

It was held that the case was governed by Article 115 of the Limitation Act. This case has been approved in another case of the same High Court in AIR 1919 Cal 636, and it has been held that Article 115 of the Limitation Act applies to the claim of the plaintiff against the surety. In the Madras High Court in the case of AIR 1927 Mad 945 (1).. an identical question had arisen.

This was a suit against the surety on a simple bond for payment of mortgage debt. It was urged there that Article 132 of the Limitation Act applies. This contention was negatived and it was held that Article 115 of the Limitation Act applied. We are also of the opinion that so far as the appellant, who was the surety, is concerned Article 115 of the Limitation Act would apply. Article 132 relied upon by the learned counsel for the respondent relates to a charge on the property and as the plaintiff himself has not claimed any charge on the mortgaged property this article, in our opinion, would not be applicable.

Article 120 is a residuary article. It will only apply provided, there is no other article applicable to the case. The contention of the plaintiff respondent is that Article 115 applies only to cases for compensation for breach of any contract and hence that article cannot be applicable to the present claim which is not for compensation. On reading the language of this article it is clear upon the authorities that it is not limited to case of damages for breach of contract and that it is applicable to the case of liability under a simple bond. We may in this connection refer to the Full Bench decision of the Calcutta High Court reported in 39 Ind Cas 205 : (AIR 1917 Cal 154).

4. The case of AIR 1940 AH 116, relied upon by the learned counsel for the plaintiff-respondent does not apply to the facts of this case. In that case the undertaking given by the surety to the mortgagee was that if the latter's money was not realised from the mortgaged property then the mortgagee would be entitled to realise his money from the surety. In other words there was a clear intention of the parties that the mortgagee should first proceed against the mortgaged property and take every step that could be taken to realise his money and only when he failed to realise the money he was to proceed against the surety.

As stated earlier, the surety is bound by the terms of the guarantee given by him. The guaran tee given in the instant case is not similar to that given in the case relied upon. This case therefore does not take the case of the plaintiff-respondent any further. As discussed above the case would be governed by Article 115 of the Limitation Act and if this article which prescribes a period of 3 years is taken into account admittedly the suit against the appellant becomes time barred and would be liable to be dismissed.

5. After this we need not go into the other question raised by the lenrned counsel for the appellant that Rs. 400/- which is admittedly received by the plaintiff-respondent relates to the suit transaction. Sri D. M. Deshmukh on behalf of the 2nd respondent herein contended that when the plaintiff-respondent has admitted that he has received Rs. 400/- as evidenced by Ex. D-4 and has also admitted that except the suit transaction there was no other dealing between him and 2nd respondent, the appellate court erred in holding that this amount of Rs. 400/- has been included in the admitted amount of Rs. 1100/-,

He therefore urged that if this amount of Rs. 400/- is added to Rs. 1100/- admitted by the plaintiff the suit as against him would also be liable to he dismissed. In this connection the learned counsel placed reliance on Order XLI Rule 31 Civil Procedure Code and urged that under this provision this court was bound to give relief to this respondent. Sri A. Timmapuri the learned counsel for the plaintiff on the other hand urges that the 2nd respondent not only remained ex parte but did not file any written statement, and appearing as a witness raised 'this plea which the plaintiff was not in a position to meet and as suck this court was not justified in exercising its discretion, under Order XLI Rule 33 Civil Procedure Code.

We find sufficient force in this contention of the learned counsel for the plaintiff-respondent, it is a fact that the 2nd Respondent remained ex parte. He did not file any written statement and appearing as a witness filed this document ex-B-4 at a stage when the plaintiff-respondent had already given his statement and he had no further opportunity to explain that document. It is no doubt true that the plaintiff has admitted the receipt of this Rs. 400/-.

But his case is that this relates to another transaction and has nothing to do with the suit transaction. The learned counsel for the 2nd defendant relying on the statements of the plaintiff-respondent that there was no other dealing between the parties after the mortgage contends that in the absence of any evidence on his part the acceptance of this amount would go to show that no debt was due at all to the plaintiff. There is no force in this contention either.

The trial court held that as the 2nd defendant had not proved the existence of any other dealing between the parties the admission of the plaintiff that he received Rs. 400/- was sufficient to hold the payment as against him. The appellate court on the other hand held that the receipt of Rs. 400/- was included in Rs. 1100/- admitted by the plaintiff-respondent. We cannot agree with the appellate court that Rs. 400/- is included in Rs. 1100/- as that is not the case of the plaintiff. It would follow therefore that apart from Rs. 1100/- the plaintiff has received Rs. 400/-. But (he question is whether this Rs. 400/- relates to this transaction or to any other transaction.

In the absence of any written statement and issue, on the mere admission of the plaintiff without giving him an opportunity to explain, we cannot hold that it relates to the suit transaction. That apart the 2nd defendant has not filed any appeal against the order of the appellate court and that has become final. No doubt Order XLI Rule 39, Civil Procedure Code gives a very wide discretion to the court. But having regard to the facts mentioned above we are not inclined to exercise the discretion in favour of the 2nd defendant.

The appeal is therefore allowed. The judgment and decree of the appellate Court in so far as it is against the appellant is set aside and the suit as against him is dismissed. As against the 1st defendant the judgment and decree of the appellate court is upheld. Having regard to the facts of the case the appellant and the plaintiff respondent will each bear their own costs in all the courts.


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