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Smt. Kamala Devi Vs. Seth Takhatmal and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtSupreme Court of India
Decided On
Judge
Reported inAIR1964SC859; 1963MhLJ730(SC); [1964]2SCR152
ActsCode of Civil Procedure (CPC), 1908 - Sections 145 - Order XLI, Rule 5; ;Displaced Persons (Debts Adjustment) Act, 1951 - Sections 5 and 15
AppellantSmt. Kamala Devi
RespondentSeth Takhatmal and anr.
Cases ReferredThe State of Uttar Pradesh v. Mohammed Sayeed
Excerpt:
.....vacating order of attachment filed - second respondent offered security if time granted to him - surety bonds executed by appellant - court accepted bonds and withdrew order of attachment - appellant agreed that if second respondent made default in producing properties then he will pay decree amount upto particular limit to court - surety binds herself only if judgment-debtor makes default in producing document - court cannot decide beforehand default by judgment-debtor - surety bond has to be strictly construed - strict construction of bond lead to conclusion that demand of court on judgment- debtor and default made by him were necessary conditions for enforcement of bond against appellant. - sections 20 & 31(3), (4): [tarun chatterjee & dr. mukundakam sharma, jj] jurisdiction of..........1. this appeal by special leave raises, inter alia, the question ofconstruction of the terms of a surety bond. 2. the material facts are as follows : on august 26, 1947, seth takhatmal,respondent 1, filed civil suit no. 9-a of 1947 in the court of the firstadditional district judge, jabalpur, against mulkraj malhotra, the secondrespondent, for dissolution of their partnership and rendition of accounts. onaugust 27, 1947, the first respondent applied for attachment before judgment ofall the bills payable to 'm. r. malhotra and company', as perdescription given in schedule a attached thereto and for the issue of an orderto c. m. a. s. c., poona, prohibiting them from issuing any cheque due to m. r.malhotra and company, and on the same day the court issued notice of the saidapplication. on.....
Judgment:

Subba Rao, J.

1. This appeal by special leave raises, inter alia, the question ofconstruction of the terms of a surety bond.

2. The material facts are as follows : On August 26, 1947, Seth Takhatmal,respondent 1, filed Civil Suit No. 9-A of 1947 in the Court of the FirstAdditional District Judge, Jabalpur, against Mulkraj Malhotra, the secondrespondent, for dissolution of their partnership and rendition of accounts. OnAugust 27, 1947, the first respondent applied for attachment before judgment ofall the bills payable to 'M. R. Malhotra and Company', as perdescription given in Schedule A attached thereto and for the issue of an orderto C. M. A. S. C., Poona, prohibiting them from issuing any cheque due to M. R.Malhotra and Company, and on the same day the Court issued notice of the saidapplication. On August 28, 1947, the Court issued a conditional order ofattachment before judgment in respect of the said bills. On September 9, 1947,the second respondent applied for vacating the order of attachment. OnSeptember 11, 1947, the second respondent offered to give security if time wasgranted to him. On October 17, 1947, 5 surety bonds were executed by theappellant and 4 others for different amounts and presented to the Court. TheCourt accepted the bonds and withdrew the order of attachment. The appellant'ssurety bond to the Court was for a sum of Rs. 12,000/-. Under that bond sheagreed, if the second respondent made a default in producing and placing at thedisposal of the Court when required the properties specified in the Scheduleattached thereto or the value of the same or such portion of the same as may besufficient to satisfy the decree, to pay to the Court a sum not exceeding Rs.12,000/-. On October 13, 1948, a preliminary decree was made in the said suit.On August 1, 1951, the second respondent was adjudged as an insolvent by theHigh Court at Calcutta. On September 20, 1951, a final decree was passed in thesaid suit against the second respondent for a sum of Rs. 1,74,906/4/0 plus Rs.7868/10/0 as costs. On October 19, 1951, the first respondent filed anapplication for execution of the decree by enforcement of the surety bondsunder s. 145 of the Code of Civil Procedure. On December 7, 1951, the appellantfiled objections raising various pleas, inter alia, contending that the decreewas passed without jurisdiction and that the surety bond was void. On May 28,1952, the second respondent filed an application under s. 5 of the DisplacedPersons (Debts Adjustment) Act, 1951 (LXX of 1951), hereinafter called the Act,before the Tribunal at Dehra Dun for adjustment of his debts under theprovisions of the Act. On July 9, 1952, the adjudication of the secondrespondent as an insolvent was annulled. On August 2, 1952, the appellant filedan application before the District Court under s. 15 of the Act for stay of theexecution proceedings and for the transfer of all the records to the Tribunalat Dehra Dun. On August 20, 1956, the Tribunal at Dehra Dun, holding that ithad no territorial jurisdiction to entertain the application filed by thesecond respondent under the Act, returned it for presentation to a propertribunal. On August 22, 1952, the executing Court rejected all the contentionsof the appellant. On August 29, 1956, the second respondent preferred an appealagainst the order of the Tribunal at Dehra Dun returning his application filedunder s. 5 of the Act. It is represented to us by the learned counsel for therespondent on instructions that the said appeal was dismissed. The appellantpreferred Miscellaneous First Appeal No. 44 of 1952 against the order of theexecuting Court rejecting her objections to the High Court of Judicature atNagpur. That Court, by its order dated October 1, 1956, dismissed the appeal.The Letters Patent Appeal No. 212 of 1956 preferred by the appellant against theorder of the single Judge of the High Court was also dismissed by a DivisionBench of that Court on March 12, 1957. The present appeal has been preferred bythe appellant by special leave.

3. Mr. Mathur, learned counsel for the appellant raised before us thefollowing points : (1) The executing Court acted without jurisdiction inrefusing to stay the execution proceedings against the appellant contrary tothe express provisions of s. 15 of the Act. And (2) a surety bond has to bestrictly construed and if so construed it would be obvious on the express termsof the bond that the necessary conditions for its enforceability were notfulfilled.

4. We shall notice the arguments of the learned Additional Solicitor-Generalon behalf of the first respondent at proper places in the course of ourjudgment.

5. The first question turns upon the relevant provisions of the Act and theyread :

Section 5(1) At any time withinone year after the date on which this Act comes into force in any local area, adisplaced debtor may make an application for the adjustment of his debts to theTribunal within the local limits of whose jurisdiction he actually andvoluntarily resides, or carries on business or personally works for gain.

Section 15. Where a displaceddebtor has made an application to the Tribunal under section 5 or undersub-section (2) of section 11, the following consequences shall ensue, namely:-

(a) all proceedings pending atthe date of the said application in any civil court in respect of any debt towhich the displaced debtor is subject (except proceedings by way of appeal orreview or revision against decrees or orders passed against the displaceddebtor) shall be stayed, and the records of all such proceedings other thanthose relating to the appeals, review, or revisions as aforesaid shall betransferred to the Tribunal and consolidated.

6. Under the said provisions if a displaced debtor filed an applicationbefore a Tribunal described under s. 5 of the Act, all proceedings pending in acivil Court at the date of the said application in respect of any debt to whichthe displaced debtor is subject shall be stayed. The statutory stay can beinvoked only if two conditions are satisfied, namely, (i) the Tribunal beforewhich the application under s. 5 is filed shall be one within the local limitsof whose jurisdiction the displaced debtor actually and voluntarily resides orcarries on business or personally works for gain, that is to say the Tribunalshall be one which has territorial jurisdiction to entertain the application;and (ii) the proceedings shall be in respect of a debt owed by the saiddisplaced person. From the earlier narration of facts it is manifest that theDehra Dun Tribunal held that it had no territorial jurisdiction to entertainthe petition and returned it to be represented to a proper tribunal. Theapplication so returned was not re-presented to the proper tribunal. The appealfiled against the said order was dismissed. As there was no application pendingbefore and Tribunal, the Court was well within its rights in not acting unders. 15 of the Act.

7. Learned counsel for the appellant contended that he had no instructionsthat the appeal filed in the Allahabad High Court was dismissed. Assuming thatthe appeal is still pending against the order made by the Tribunal, Dehra Dun,returning the petition filed by the second respondent under s. 5 of the Act,the appellant would not be in a better position. It is not stated that afterfiling an appeal his client had obtained any interim suspension of the order ofthe Tribunal; indeed, it is not disputed that there was no such order. If so,the legal position would be that the order of the Tribunal would be in forcetill it was modified or set aside by the appellate Court. The filing of anappeal does not automatically suspend the operation of an order appealed fromunless the appellate Court stays it or a statute conferring a right of appealprovides for such a stay. Section 40 of the Act confers a right of appeal on anaggrieved party against the final order of a Tribunal to the High Court. Thesection conferring the said power does not provide for a statutory stay of theorder of the Tribunal till the disposal of the appeal. Indeed, Order XLI, r. 5,of the Code of Civil Procedure, which embodies the general principle of lawsays that an appeal shall not operate as a stay of proceedings under a decreeor order appealed from except so far the appellate Court may order. Thisprinciple which applies to stay of proceedings under an order will apply withgreater force to a suspension of an order. The Judicial Committee, in JuscurnBoid v. Pirthichand Lal (1918) L.R. 46 IndAp 52, 56, summarized the IndianLaw of procedure thus :

'.......... Under the Indian Law and procedure anoriginal decree is not suspended by presentation of an appeal nor is itsoperation interrupted where the decree on appeal is one of dismissal.'

8. Here, the application filed by the second respondent before the Tribunal,Dehra Dun, was rejected and the said order holds the field till it is reversedby the appellate Court. As the order of the Tribunal was not suspended, theeffect was that there was no application pending in a Tribunal as defined in s.5 of the Act. The order of the High Court in our view, is correct on this point.

9. The second question turns upon the interpretation of the surety bondexecuted by the appellant in favour of the Court. As the argument turns uponthe terms of the said bond, it will be convenient at the outset to read thematerial part of it. It reads :

'Whereas at the instance of Takhatmal, theplaintiff in the above suit; Mr. Mulkraj the defendant has been directed by theCourt to furnish security in the sum of Rs. 1,00,000/- (one lac only) toproduce and place at the disposal of the Court the property specified in theschedule hereunto annexed; Therefore, I Kamla Devi have voluntarily becomesurety and to hereby bind myself, my heirs and executors, to the said Court,that the said defendant shall produce and place at the disposal of the Court,when required, the property specified in the said schedule or the value of thesame, or such portion thereof as may be sufficient to satisfy the said decree;and in default of his so doing, I bind myself, my heirs, and executors, to payto the said Court, at its order, the said sum of Rs. 12,000/- only or such sumnot exceeding the said sum as the Court may adjudge.'

10. Schedule 'A'

x x x x x x x

(ii items)

Approximate grand total.... Rs. 1,10,000/-

11. Learned counsel for the appellant contended that the surety bond must bestrictly construed, that under the terms of the surety bond the liability ofthe surety arises only if the principal debtor is required to produce and placeat the disposal of the Court the said bills or the value of the same and if hemakes a default in doing so, and that in the present case it has not beenestablished, and indeed it is not the case of the respondent, that any suchdemand was made on the second respondent and that he made a default in doingso. Learned Additional Solicitor-General for the first respondent argued thatthe said plea was not taken by the appellant and that she should not be allowedto raise it at this stage, for, if it was raised, in the pleadings his clientmight have been in a position to allege and prove that the said condition hadbeen fulfilled or at any rate waived by the appellant. He further contendedthat on a fair reading of the terms of the surety bond, having regard to thecircumstances under which it was executed, it would be manifest that theappellant had accepted the liability to satisfy the decree debt if the secondrespondent failed to do so, upto a sum of Rs. 12,000/-. He would say that, asthe surety bond was executed for raising the attachment, the amount for whichit was given was clearly intended by the party to be paid towards the decreeamount in case the judgment-debtor made a default to place at the disposal ofthe Court the said bills or their value and that in the said circumstances a reasonableinterpretation of the terms of the bond without doing violence to the languagewould disclose the said intention. It is true that the plea now raised was notspecifically taken in the objections filed by the appellant and it was notspecifically advanced before the learned District Judge also. It was rejectedby Kotval J. on the ground that it was not raised in the pleadings, and by theDivision Bench on merits. But the question raised is one of construction of asurety bond and all the facts on which the respondent seeks to rely upon shouldonly be found in the order sheet. If a demand was made or if thejudgment-debtor or the surety waived the fulfilment of a condition, the ordersheet must disclose the issue of a notice or the facts constituting a waiver.There cannot possibly be any facts outside the record. The entire order sheetis on the file. The learned counsel is not able to show any entry therein whichwill support the fact of a demand or a waiver. In the circumstances, even if weremand the case, no useful purpose will be served for the necessary facts couldonly be gathered from the order sheet. That apart, before the Division Bench ofthe High Court the first respondent does not appear to have contended that hehad sources other than the order sheet to prove that either a demand was madeor the surety waived the fulfilment of the condition, and indeed his Advocateappears to have contended that in view of the subsequent events that happenedsuch a demand would only be an idle formality. In the circumstances, we aresatisfied that the respondent would not be prejudiced if the appellant wasallowed to argue on the construction of the surety bond, as she did in thecourts below.

12. Now coming to the construction of the surety bond, the first questionraised by the learned Additional Solicitor-General is that the terms of thesurety bond should be construed in the context of the surroundingcircumstances, namely, the circumstances under which the surety bond came to beexecuted. In support of this contention he relied upon the judgment of theJudicial Committee in Raghunandan v. Kirtyanand . There, the Judicial Committee was asked to construe a surety bond.The question raised was whether under the terms of the bond the liabilityundertaken by the surety was to pay the entire decree amount or to pay thebalance of the amount due under the decree after the mortgage security wasrealized, up to the limit of the amount guaranteed under the bond. The terms ofthe document were not clear and unambiguous. In those circumstances, LordTomlin, speaking for the Board, observed :

'The bond must be consideredin the light of the order directing the security to be given. ...................In thosecircumstances what is the meaning of the language employed in the bond ?'

13. These observations only apply the well settled rule of construction ofdocuments to a surety bond. Sections 94 to 98 of the Indian Evidence Act affordguidance in the construction of documents; they also indicate when and underwhat circumstances extrinsic-evidence could be relied upon in construing theterms of a document. Section 94 of the Evidence Act lays down a rule ofinterpretation of the language of a document when it is plain and applies accuratelyto existing facts. It says that evidence may be given to show that it was notmeant to apply to such facts. When a court is asked to interpret a document, itlooks at its language. If the language is clear and unambiguous and appliesaccurately to existing facts, it shall accept the ordinary meaning, for theduty of the Court is not to delve deep into the intricacies of the human mindto ascertain one's undisclosed intention, but only to take the meaning of thewords used by him, that is to say his expressed intentions. Sometimes when itis said that a Court should look into all the circumstances to find an author'sintention, it is only for the purpose of finding out whether the words applyaccurately to existing facts. But if the words are clear in the context of thesurrounding circumstances, the Court cannot rely on them to attribute to theauthor an intention contrary to the plain meaning of the words used in thedocument. The other sections in the said group of sections deal withambiguities, peculiarities in expression and the inconsistencies between thewritten words and the existing facts. In the instant case, no such ambiguity orinconsistency exists as we shall demonstrate presently. The Privy Council'scase was one of ambiguity and the surrounding circumstances gave the clue tofind out the real intention of the parties as expressed by them.

14. Bearing the said principles in mind, let us look at the documentclosely. The preamble to the surety bond in clear terms gives the object of thebond. It says that 'the defendant has been directed by the Court tofurnish security in the sum of Rs. 1,00,000/- to produce and place at thedisposal of the Court the property specified in the Schedule hereuntoannexed'. Therefore, the object is to see that the said direction isproperly carried out, and to provide for a contingency if a default is made bythe judgment-debtor in complying with the said direction. The second paragraphof the bond binds the surety to Court in that the said defendant shall produce andplace at the disposal of the Court, when required, the said property or thevalue of the same. The words used in this part of the undertaking given by thesurety is clear and unambiguous. The judgment-debtor shall produce the bills ortheir value and place them at the disposal of the Court when required to do so.The expression 'when required' can only mean 'when required bythe Court'. The obligation undertaken by the surety is that thejudgment-debtor shall produce the said property when required by the Court. Herobligation does not arise at all till the Court makes the requisition. In thiscase there is no order or entry in the order sheet requiring thejudgment-debtor to produce and place the property in Court; not even theexecution petition though it describes the judgment-debtor in one of thecolumns, asks for any relief against him. But it is said that the words'when required' must be confined only to a situation when the billscould be produced or the value of the same could be paid by the judgment-debtor;and that in this case, as the bills were cashed and the money misappropriatedby him and as he had been adjudged an insolvent, it would be an empty formalityto call upon him to do so. It is also said that the condition could apply onlywhen the money could lawfully be paid by the judgment-debtor; but, as thejudgment-debtor had become an insolvent, neither the Court could demand of himto pay the amount, not could he pay it. The construction of the word 'whenrequired' suggested by the learned counsel for the respondent, ifaccepted, would make those words unnecessary : it would mean that thejudgment-debtor should be required to produce the property only if he could doso and need not be required to produce it if he could not do so; in such a casethose words could as well be excluded from the sentence, for they would notserve any purpose. If the words were retained there to accept the argument ofthe learned counsel, they should be qualified by adding 'if the billscould be produced and when the money could lawfully be paid by thejudgment-debtor'. But those words are not there and we cannot add them,for without adding them, full meaning could be given to the words used in theclause. But whatever ambiguity there may be - in our view there is none - thewords 'in default of his doing so' make it absolutely clear that thesurety binds herself only if the judgment-debtor makes a default when he isrequired to produce the document. The intention of the parties is very clear.The surety undertook that the judgment-debtor would produce the bills ifrequired by the Court and that if he made a default, she would be bound to paythe decree amount up to a particular limit. A court cannot possibly decidebeforehand that the judgment-debtor would not produce the bills or at any ratethe value of the same if demanded; for ought we know he might have paid thatamount from other sources or he would have taken out an application to theOfficial Receiver to do so, or on the events that subsequently happened, i.e.,on the annulment of the adjudication, he could have paid that amount. It iswell settled that a surety bond has to be strictly construed. In The State of Bihar v. M. Homi : 1955CriLJ1017 , this Court ruled that provisions in asurety bond which are penal in nature must be very strictly construed. ThisCourt again in The State of Uttar Pradesh v. Mohammed Sayeed [(1957) S.C.R.770.], applied the strict rule of construction of a surety bond in that case.In the present case a strict construction of the bond leads to the onlyconclusion that a demand of the Court on the judgment-debtor and a default madeby him were necessary conditions for the enforcement of the bond against theappellant.

15. In the result, we set aside the order of the High Court and dismiss theapplication for execution filed by the first respondent against the appellant.But we do not think that this is fit case for awarding costs to the appellant.She has failed to raise this objection specifically in her objections or toplace before the learned District Judge the present contention. In thecircumstances we direct each party to bear his or her own costs throughout.


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