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Orissa Agro Industries Corporation Ltd. and ors. Vs. Sarbeswar Guru and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtOrissa High Court
Decided On
Case NumberCivil Revn. No. 250 of 1982
Judge
Reported inAIR1985Ori270
ActsContract Act, 1872 - Sections 128 and 137; Code of Civil Procedure (CPC) , 1908 - Order 9, Rule 5, 5(1) and 5(2)
AppellantOrissa Agro Industries Corporation Ltd. and ors.
RespondentSarbeswar Guru and ors.
Appellant AdvocateS.C. Ray, Adv.
Respondent AdvocateM.M. Sahu, Adv.
DispositionPetition allowed
Cases Referred(Punjab National Bank v. Mehra Brothers
Excerpt:
.....not been served, or (b) such defendant is avoiding service of process or (c) there is any other sufficient cause for extending the time, may extend the time for making such application for such period as it thinks fit. the law is also well settled that the creditor can sue both the debtor and surety together or he can sue the surety alone, likewise where he has sued both and obtained a decree, he can, in execution proceed against the surety in the first instance. ), as well as the statutory provision of sections 128 and 137 of the contract act......of the order of the trial court dismissing the suit against the principal debtor and the other surety, defendants nos. 1 and 3 respectively, under order 8, civil p. c., if the suit could proceed against the remaining surety, defendant no. 2 alone. order 9 rule 5, civil p. c. provides that : 1) where, after a summons has been issued to the defendant, or to one of several defendants, and returned unserved, the plaintiff fails, for a period of one month from the date of the return made to the court by the officer, ordinarily certifying to the court returns made a fresh summons the court shall make an ordinarily certifying to the court returns made by the serving officers, to apply for the issue of a fresh summons the court shall make an order that the suit be dismissed as against such.....
Judgment:
ORDER

D.P. Mohapatra, J.

1. The core question that arises for consideration in this Civil Revision petition is that if a creditor filed a suit against the principal debtor and the surety for realisation of the debt and the suit is dismissed for default under Order 8 Rule 5, Civil P. C. against the principal debtor, can it proceed against the surety.

The first appellate Court having answered the question in the negative, the plaintiff has filed this application under Section 115, Civil P. C.

2. The petitioner, the Orissa Agro Industries Corporation Ltd. filed M. Section No. 521 of 1977 before the Munsif, 1st Court, Cuttack, for realisation of Rs. 1500 from the defendants along with cost and interest in the said suit. The three opposite parties were impleaded as defendants in the said suit. The case of the plaintiff, as stated in the plaint, was that in pursuance of a scheme for providing gainful employment to qualified engineers and for imparting training to them for the purpose of setting up service stations in different parts of the State for providing servicing facilities to agriculturists, the plaintiff-Corporation agreed to impart such training to Someswar Guru, defendant No. 1 (opposite party No. 2) for a period of 4 months and to pay him a sum of Rs. 250/- per month as stipend during the period of training. An agreement was entered into between the Corporation and the said Someswar Guru on 7-11-1974 incorporating the terms and conditions therein. One of the conditions of the agreement was that if after completion of the period of training the trainee (defendant No. 1) either refuses or is unable to establish an Agro Service Centre within six months of the completion of training, he would refund to the Corporation (plaintiff) a sum of Rs. 1500/-, the expenses incurred and stipend paid to him by the Corporation. As per the terms of the said agreement, Sarbeswar Guru and Sidhendra Panda, defendants Nos. 2 and 3 (opposite parites 1 and 3) respectively, become sureties for due performance of the terms of the agreement. The necessary training was imparted to Someswar Guru by the Corporation for the operation and maintenance of Tractors, diesel engines, water pumps etc. for a period of 4 months commencing from 3-10-1974. After completion of his training, defendant No. 1 failed to set up the Agro Industries Centre as stipulated in the agreement and thereby committed breach of the agreement. Thereafter the plaintiff served a notice dated 21-10-1976 to the defendants for repaying Rs. 1500/- for their failure to honour their commitments in terms of agreement. But no such amount having been paid by them to the plaintiff, the plaintiff-Corporation filed the suit. It was asserted in para 9 of the plaint that the liability of the defendants to pay the sum of Rs. 1500/- in terms of agreement dated 7-11-1974 is joint and several.

3. The defendant No. 2 (opposite party No. 1) Sarbeswar Guru alone filed written statement. He denied the claim of the plaintiff stating inter alia, that the plaintiff has neither paid any amount to defendant No. 1 nor is it entitled to refund of any amount, for loss, the sum of Rs. 1500/-. He also denied the execution of agreement by defendant No. 1 as well as his having become surety for due performance of the alleged agreement. Alternatively, it was contended in the written statement that even if it is found that defendant No. 1 is liable to pay the amount of Rs. 1500/-, the defendant No. 2 has no liability for the said amount, since such liability as surety would be attracted only in the event of failure of the plaintiff to realise the amount from defendant No. 1.

4. The plaintiff examined one witness and filed several documents to establish its claim. No evidence was led on behalf of the defendants. By order dt. 27-4-1978, the Court directed that the suit shall cease to proceed against defendants, Nos. 1 and 3 (opposite parties Nos. 2 and 3) for failure of the plaintiff to take appropriate steps for service of summons on the said defendants. The petition of the plaintiff (petitioner) to get the said order recalled or for permission to implead the said defendants afresh in the suit was rejected by order dt. 8-9-1978 of the trial Court. Thereafter the suit proceeded against defendant No. 2 opposite party No. 1 alone.

The trial Court on consideration of the evidence in the case, came to hold that the plaintiff has been able to establish its case for realisation of the sum of Rs. 1500/- from the defendants. The court negatived the submission on behalf of the opposite party No. 1 that in view of the dismissal of the suit under Order 9 Rule 5, Civil P. C. against the principal debtor the surety cannot be made liable for the amount. Accordingly, the suit was decreed on contest against defendant No. 2.

5. On appeal by defendant No. 2, the Addl. District Judge, Cuttack took the view that the suit having been dismissed against the principal debtor, the liability of the applicant surety is , necessarily discharged. Dealing with the question that the liability of the principal-debtor and surety is joint and several, the appellate Court interpreted it to mean, once the liability is decreed against the principal debtor and the sureties the option of the decree-holder would arise against all or any one of them. Such option cannot be exercised before the decree. Rather, it is a matter of execution'. The appeal was accordingly allowed and the suit dismissed. The plaintiff has approached this Court challenging the order of the appellate court.

6. A perusal of the judgment of the appellate Court shows that he has agreed with the finding of the trial court that the appellant (opposite party No. 1) is a guarantor in relation to the agreement of the principal defendant with the plaintiff. Therefore, as noticed earlier, the controversy is within a narrow compass, in view of the order of the trial Court dismissing the suit against the principal debtor and the other surety, defendants Nos. 1 and 3 respectively, under Order 8, Civil P. C., if the suit could proceed against the remaining surety, defendant No. 2 alone. Order 9 Rule 5, Civil P. C. provides that : 1) Where, after a summons has been issued to the defendant, or to one of several defendants, and returned unserved, the plaintiff fails, for a period of one month from the date of the return made to the Court by the officer, ordinarily certifying to the Court returns made a fresh summons the Court shall make an ordinarily certifying to the Court returns made by the serving officers, to apply for the issue of a fresh summons the Court shall make an order that the suit be dismissed as against such defendant, unless the plaintiff has within the said period satisfied the Court -

(a) he has failed after using his best endeavours to discover the residence of the defendant who has not been served, or

(b) such defendant is avoiding service of process or

(c) there is any other sufficient cause for extending the time, may extend the time for making such application for such period as it thinks fit.

(2) In such case the plaintiff may (subject to the law of limitation) bring a fresh suit.'

7. In the present case, as stated earlier, there was an agreement between the plaintiff-Corporation as first party and the principal debtor-opposite party No. 2 as first party wherein it was provided inter alia that after completion of the training, if the first party either refuses or is unable to establish an Agro Service Centre within six months of completion of training, he will have to refund to the Corporation a sum of Rs. 1500/- being the expenses incurred and stipend paid to him by the Corporation and further that the first party undertakes to give two personal sureties in the prescribed form who will undertake and guarantee the refund of stipend and training expenses incurred by the first party in case the first party fails to deposit the dues payable by him to the second party, under Clauses (f), (e) and (g) (vide Clauses o, g and h) of the agreement). In accordance with the terms of the agreement, the opposite parties Nos. 1 and 3 executed a surety bond in favour of the petitioner-Corporation, wherein it was stipulated that if Someshwar Guru deposits the aforesaid sum in the manner stated above then this shall be null and void, otherwise the same shall remain in full force notwithstanding that Someshwar Guru fails to deposit or fails to join or dies, or becomes insolvent, in which event the whole of the amount spent for his training including Ms stipend as then unrecoverable shall immediately become due and payable to the Orissa Agro Industries Corporation Ltd. and recoverable from the said surety without intervention of any court from out of his pay or his property in one instalment by virtue of this bond, as if the surety himself has received the amount:

8. From the terms of the agreement stated above, it is clear that the moment the principal debtor defaults in the payment then immediately the surety becomes liable as if he was himself the principal debtor. The agreement entered into between the Corporation and Someshwar Guru the principal debtor (Ext. 2) and the surety bonds executed by the opposite parties Nos. 1 and 3 (Ex. 3) do not contain any stipulation to the effect that the creditor must exhaust his remedies against the principal debtor first before proceeding against the surety. Further, there is no controversy that once the liability of the surety arises, it is co-extensive with that of the principal debtor. The surety thus becomes liable to pay the entire amount. His liability is immediate. It is not deferred until the creditor exhausts the remedies against the principal debtor. The law is also well settled that the creditor can sue both the debtor and surety together or he can sue the surety alone, likewise where he has sued both and obtained a decree, he can, in execution proceed against the surety in the first instance. If the creditor had the option of suing the surety or any one of them without impleading the principal debtor in the said suit, it cannot be said that the dismissal of the suit under Order 9, Rule 5, Civil P.C. against the principal debtor would automatically discharge the liability of the surety for the agreed amount in question. As such, the finding of the lower appellate court that the dismissal of the suit against defendants Nos. 1 and 3, the principal debtor and one of the surety, respectively, necessarily discharges the liability of the other surety, is erroneous. The further finding of the court that the option of the creditor to proceed against the surety or the principal debtor is confined to only execution of the decree passed against both the principal debtor and the surety is also erroneous. The aforesaid discussions gain assurance from the decision of the Supreme Court in the case reported in AIR 1969 SC 297 (Bank of Bihar Ltd. v. Dr. Damodar Prasad) and of the Calcutta High court in AIR 1983 Cal 335 (Punjab National Bank v. Mehra Brothers (P) Ltd.), as well as the statutory provision of Sections 128 and 137 of the Contract Act. Further in view of the Order 9, Rule 5(2) Civil P.C. vesting a right in the plaintiff to file a fresh suit against the defendants subject to the law of limitation despite dismissal of the suit against the said defendant under Sub-rule (1) Rule 5 of Order 9 of the Code also lends support to the view that the dismissal of the suit under Order 9 Rule 5(1), Civil P.C. against the principal debtor will not automatically amount to discharge of the liability of the surety.

9. In view of the discussions aforesaid, the decision of the lower appellate court is unsustainable and it is set aside and the revision petition is allowed. In the facts and circumstances of the case there would he order for cost of this proceeding.


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