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Tarachand Lakhmichand Chuhan Vs. Gopal Lachiramkumar - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMadhya Pradesh High Court
Decided On
Case NumberSmall Cause Revision No. 121 of 1957
Judge
Reported inAIR1959MP297
ActsContract Act, 1872 - Sections 145; Evidence Act, 1872 - Sections 101 to 104
AppellantTarachand Lakhmichand Chuhan
RespondentGopal Lachiramkumar
Appellant AdvocateR.B. Vohra, Adv.
Respondent AdvocateJ.D. Patel, Adv.
DispositionPetition dismissed
Cases ReferredContract Act. In Jawala Singh v. Mt. Raj Kaur
Excerpt:
.....can be raised, it cannot be said that onus shifts exclusively and heavily on him to prove his innocence. conviction of appellant is liable to be set aside. - the view that a surety cannot recover from the debtor the sum which he has paid to the creditor after the period of limitation as against him as well as the principal debtor finds support in the statement in chitty on contracts (volume-i) at pages 475 and 476 where it has been stated that a surety may recover against the principal all he has paid or any damages he has incurred under, his guarantee, as often as he pays such moneys or incurs such damages, unless the debt paid was statute barred......on 28-8-1956 was not a rightful payment inasmuch as on that date nandibai's claim against both the principal debtor gopal and the surety tarachand was barredby time. the plaintiff has now. filed this revision petition.3. it is common ground that on 28-8-1956 when the plaintiff was said to have made a payment of rs. 50/- to nandibai, the claim of nandibai against both gopal and tarachand was barred by time. mr. vohra, learned counsel for the applicant, however, argued that the payment made by the plaintiff to nandibai could not be said to be one not rightfully made under the contract of suretyship merely because nandibai's remedy against the principal debtor and the plaintiff-surety had become barred by limitation. learned counsel said that though theremedy by action was barred by.....
Judgment:
ORDER

P.V. Dixit, J.

1. This is a petition to revise a decision of the Court of Small Causes of Ratlam dismissing the plaintiff applicant's suit for the recovery or Rs. 50/- together with interest thereon from the non-applicant Gopal.

2. The facts of the case are that on 14-3-1950 Gopal borrowed Rs. 100/- from one Nandibai. The plaintiff Tarachand stood surety on that very date for the repayment of the amount by Gopal. The defendant Gopal made a repayment of Rs, 50/- to Nandibai. It is not known when this repayment was made. Thereafter Gopal did not pay anything to Nandibai, According to the plaintiff on 28-8-1956 he himselfpaid Rs. 50/- to Nandibai which Gopal had to pay to her and that, therefore, he was entitled to recover this amount from Gopal,

The learned Judge of the lower Court dismissed the plaintiffs suit on the ground that the payment made by the plaintiff Tarachand to Nandibai on 28-8-1956 was not a rightful payment inasmuch as on that date Nandibai's claim against both the principal debtor Gopal and the surety Tarachand was barredby time. The plaintiff has now. filed this revision petition.

3. It is common ground that on 28-8-1956 when the plaintiff was said to have made a payment of Rs. 50/- to Nandibai, the claim of Nandibai against both Gopal and Tarachand was barred by time. Mr. Vohra, learned counsel for the applicant, however, argued that the payment made by the plaintiff to Nandibai could not be said to be one not rightfully made under the contract of suretyship merely because Nandibai's remedy against the principal debtor and the plaintiff-surety had become barred by limitation. Learned counsel said that though theremedy by action was barred by limitation, there was no extinction of the debt and that, therefore, the surety was justified in making the payment that he did to Nandibai. I am unable to accede to the contention advanced by the learned counsel for the petitioner. The matter is governed entirely by Section 145 of the Contract Act which says:

'In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety; and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but no sums which he has paid wrongfully.'

4. It will be seen from this provision that the implied promise by the principal debtor to indemnify the surety arises only when the surety has rightfully paid any sum to the creditor under the guarantee. The real question for determination, therefore, is whether the sum paid by the plaintiff to Nandibai was rightfully paid under the contract of suretyship. It is no doubt true that the meaning of the expression 'rightfully paid' as used in Section 145 of the Act is somewhat obscure. As has been remarked in Mulla's Contract Act the words 'rightfully' and 'wrongfully' in the second clause of Section 145 of the Contract Act do not seem felicitous. I shall not attempt to define the expression 'rightfully paid'.

But to my mind, according to the dictionary meaning of the word 'rightful', a payment in order to be a rightful payment must be one in conformity with what is right or just or fair or equitable. The question whether the payment made by the surety was or was not rightful has, therefore, to be adjudged in the context of the circumstances, in which it was made and not by the solitary circumstance whether on the date of payment the claim against the debtor or against both the debtor and the surety was barred by time. No doubt if the claim of the cre-ditor is barred by time against both the surety and the debtor, then prima facie the payment made by the surety to the creditor would not be right or just.

The argument of the learned counsel that if the creditor omits to sue the principal debtor within the period of limitation the surety is not discharged as barring of the remedy by action has not the effect of complete extinction of the debt and that, therefore, likewise the barring of remedy against the surety does not relieve the debtor of his obligation to indemnify the surety is fallacious. It fails to take note of the fact if the remedy against the principal debtor is barred by time, but is alive against the surety and the creditor reserves his right against the surety, there is no complete extinction of the debt and that where the remedy of the creditor is barred both against the debtor and the surety there is an absolute release of the debt.

That being so, the solitary fact of payment of Rs. 50/- by the plaintiff to Naudibai after the period of limitation against both the debtor and the surety had expired would, in my opinion, be sufficient to hold prima facie that the payment made by the plaintiff was not a rightful payment. The burden of proving that this payment even though it was after the expiry of the period of limitation was yet rightful was on the plaintiff.

But he led no evidence whatsoever to show the circumstances in which the payment was made. The view that a surety cannot recover from the debtor the sum which he has paid to the creditor after the period of limitation as against him as well as the principal debtor finds support in the statement in Chitty on Contracts (Volume-I) at pages 475 and 476 where it has been stated that a surety may recover against the principal all he has paid or any damages he has incurred under, his guarantee, as often as he pays such moneys or incurs such damages, unless the debt paid was statute barred.

The observations of the Bombay High Court in Raghavendra v. Mahipat ILR 49 Bom 202: AIR 1925 Bom 244 also tend to support this view. In that case the surety had kept the liability alive by bona fide payments of interest within time to the creditor and it was because of these payments of interest within time that the Bombay High Court held that the payment made by the surety to the creditor was not wrongful within the meaning of Section 145 of the Contract Act. In Jawala Singh v. Mt. Raj Kaur, AIR 1930 Lah 812 a payment was made by the surety to the creditor after the creditor had instituted a suit against the principal debtor. The payment was made by the surety with the object of assisting the creditor in the prosecution of the suit.

The Lahore High Court held that the payment that the surety made was a wrongful payment within the meaning of Section 145, Contract Act, This case only shows that the question whether the payment made by a surety is rightful or wrongful within the meaning of Section 145 of the Contract Act does not depend on the fact whether the creditor's claim against the debtor or the surety is within time, but on the surrounding circumstances in which the payment was made. In that case, it was held that a payment made by surety to a creditor before the institution of the suit could be held to be a rightful payment but not one made after the institution of the suit against the principal debtor for the purpose of assisting the creditor in the successful termination of the suit,

5. For all these reasons, I am of the opinion that the learned Judge of the Court of Small Causes, Ratlam arrived at the right conclusion in dismissing the plaintiff's suit. This petition is, therefore, dismissed with costs.


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