Skip to content


Dharam Singh Vs. Lila Gurcharan Singh and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 112 of 1971
Judge
Reported in9(1973)DLT311
ActsCode of Civil Procedure (CPC), 1908 - Order 37; Indian Contract Act, 1872 - Sections 135
AppellantDharam Singh
RespondentLila Gurcharan Singh and ors.
Advocates: B.S.C. Singh,; C.S. Duggal and; A.L. Kapur, Advs
Cases ReferredMt. Radha Kunwar v. Ram Narain. That
Excerpt:
.....be relevant only if the provision of the defense of the suit by the defendant had not been incorporated in the deed i am, thereforee, satisfied that interms of the prevent deed the appellant had not undertaken a liability and would stand discharged by the fact that the plaintiff and the defendant had compromised the suit without his consent and without his being party to it. that case is clearly distinguishable. in that case, there was no suggestion even that the trust bad, at any stage of time, enlered into a contract with the judgment-debtor by which it had given the latter time to pay the decretal amount......not liable. on this, the following issues were framed by the learned trial court :- 1. did the surety bond furnished by dharam singh require registration and could that point be raised by him 2. has dharam singh been discharged from liability 3, relief. on issue no 1, the trial court held that the mortgage deed furnished by the appellant did not require registration. oa issue no. 2, the trial court has taken the view that the appellant was not discharged from his' liability incurred by him in favor of the decree-holder and dismissed his objection petition, ft is against this order that the present appeal has been filed. (3) the learned counsel for the appellant, bakshi man singh, did not challege the finding on issue no. 1 and no objection, thereforee, can be taken on the ground that.....
Judgment:

R. Sachar, J.

(1) This is anappeal preferred by the surety against the order date 154 1971 of the Sub Judge 1st Class, Delhi dismissing suretys objections. One Gurcharan Singh, who is now represened by his legal representatives as respondents Nos. 1 to 3 to the present appeal, filed a suit against one Ajit Singh, respondent No. 4 herein, under Order 37 Civil Procedure Code for recovery of Rs 21,800.00. The trial Court on 7.9.1966 permitted the defendant Ajit Singh to defend the suit on his depositing in cash by way of security the suit amount plus Rs. 2,000.00on account of costs. Defendant Ajit Singh, however, was not satisfied with the order and filed a revision petition being Civil Revision No. 145 D/66 in this Court. An interim order was passed staying the proceedings in the trial Court subject to the condition that the defendant would furnish security to the satisfaction of the trial Court. In pursuance of the order, Dharam Singh appellant furished security of two properties (which are now sought to beattached by the respondent decree-holder). Ultimately, on the final hearing in the civil revision', this Court modified the order into one of bank guarantee to be given by the defendant in the amount in dispute. The defendant was still dissatisfied with the order and filed a further appeal to the Supreme Court. The Supreme Court modified the order of this Court and permitted Ajit Singh defendant to contest the suit provided a surety of immovable property was furnished to the trial Court. In pursuance of the order of the Supreme Court, a mortgage was created on 13.3. 1967 in favor of the trial Court by appellant Dharam Singh. The matter, however, was compromised between the plaintiff and the defendant in terms of the compromise dated 28. 9. 1967 filed by them. By this compromise, the defendant agreed to pay the plaintiff Rs. 23,250.00 in full and final payment of all claims. By clause (2) of the compromise, it was provided that the said amount of Rs. 23,250.00 shall be paid in Installments of Rs. l,000.00per month. The first Installment was to be paid on or before 10th November,1967and the subsequent Installments on or .before the 10th of each succeeding month till the whole amount was fully paid off Clause (3) provided that if at any time four Installments have not been paid on the due dates and a default has been committed by the defendants, the whole or the balance of the amount, due as on the date of the fourth default shall become payable at once. Clause (4) provided that the srcurity furnished by the defendant in terms of the Order 37 Rule 3 Civil Procedure Code shall continue till the whole decretal amount has been paid infull. It is relevant to mention that the security mentioned in the clause (4) of the compromise refers to the security furnished in the shape of mortgage deed by the appellant. It is also not disputed that the compromise was signed only by the plaintiff and the defandant and that the appellant was neither aware Of this compromise nor did he give his consent nor was he signatory to the said compromise.

(2) The judgment-debtor did not pay the amount to the plaintiff with the result that the plaintiff decree-holder applied for the attachment of the mortgaged property for the purpose of realisation of the decretal amount by his application dated 5th May, 1970 The appellant filed his objections to the attachment and challenged the right of the decree-holder to recover any amount from him. His plea was that by granting time in terms of the compromise, the security furnished by him stood discharged and he was, thereforee, not liable. On this, the following issues were framed by the learned trial Court :- 1. Did the surety bond furnished by Dharam Singh require registration and could that point be raised by him 2. Has Dharam Singh been discharged from liability 3, Relief. On issue No 1, the trial Court held that the mortgage deed furnished by the appellant did not require registration. Oa issue No. 2, the trial Court has taken the view that the appellant was not discharged from his' liability incurred by him in favor of the decree-holder and dismissed his objection petition, ft is against this order that the present appeal has been filed.

(3) The learned counsel for the appellant, Bakshi Man Singh, did not challege the finding on issue No. 1 and no objection, thereforee, can be taken on the ground that the surety bond furnished by the appellant requires registration. Accordingly, the finding on issue No., 1 is confirmed. The arguments really have been confined on issue No. 2. Shortly put, the contention of the counsel for the appellant is that the surely is discharg- ed from any liability because of the two flaws. namely,- (i) that the appellant had undertaken a liability only in case of contest by the defendant and a decree following thereof and as the parlies have settled the matter by compronnise. he is not liable, and (ii) that as undoubtedly time was given by the decree-holder to the judgment debtor as the same was done without the consent of the appellant, the result is that the appellant-surety is discharged from any liability A reference to the mortgage deed dated 13. 3. 1967 shows that this is a mortgege made between the appellant in favor of the trial Court. After reciting the history of the litigation from the filing of the suit in the trial Court to the ultimate order passed by the Supreme C urt and noticing that the Supreme Court had permitted the defendant to defend suit on furnishing security of the sum of Rs. 23,800.00 the order of the trial Court shall be stayed, it goes on to recite that the appellant is the absolute and sole owner of the property intended to be mortgaged and has agreed to mortgage the same accordingly to secure the payment of Rs. 23, 800.00 to the said Gurcharan Singh plaintiff in case a decree is passed in his favor on defense of. the suit by the said defendant. (The underlined empbasis is mine). The deed then further goes on to recite that. ' 'In consideration of the promise the mortgagor doth hereby agree with the mortgagee that if on defense of the suit by the defendant S. Ajit Singh a decree is passed by the said Hon'ble Court against the defendant (Ajit Singh) and in favor of plaintiff (Gurcharan Singh) in that case the defendant will at once pay the whole amount of the decree to the plaintiff, and if he commits a default the mongugor (Dharam Singh) shall at once, pay the said decree to extent of Rs 23,800.00 (Rupees twenty three thousand and eight hundred only) in court or the successor court, and as a security for the payment of the said amount ofRs. 23,800.00 the said mortgagor hereby morigages in the favor of the Court of Shri H S Bakshi, Sub-Judge, 1st class, Delhi.' The above underlining is mine. Then follows the description of the properties. The first question that arises is whether or not the surety stands discharged because the suit was compromised and a consent decree was passed. Bakshi Gurcharan Singh, learned counsel for the respondent urges that the surety cannot resist enforcement of the bond simply on the ground that a consent decree has been passed without contest unless the consent decree is vitiated by fraud or collusion. In this connection, he refers to Ahmed Karim v. Maruti Ruvji Bhansle, Kabiruddin v. Debi Singh Chakkunny v Viswanathalyer and Adamasab Usmansab Kanakya v. Gurnshinddayya Lingayya In my view, it is unnecessary to discuss each of these authorities, because the matter had since been settled by the Supreme Court in Raja Bahudur Dhanraj Girji v. Raja P. Paithasaruhy Rawanimyaru and wherein their Lordships have laid down as under :- 'in determing the question as to whether liability under.such a surety bond is discharged by reason of the fact that a compromise decree has been passed in the judicial proceedings in which the surety bond came to be executed, it will always be necessary to examine the terms of the bond itself. Did the surety contemplate when he executed the bond that the dispute pending between the debtor and the creditor may be compromised, or did he contemplate 'that the dispute would, and must be settled by the Court and not compromised by the parties If the terms of the bond indicate that the surety undertook the liability on the basis that the dispute would be decided on the merits by the court in invitium and would not be amicably settled, then the compromise of the dispute would discharge the liability of the surety, xx xx xx xx If. on the other hand from the terms of the bond it appears that it was within the contemplation of the parties including the surety that the dispute may be amicably settled and the surety executed the bond know- ing that his liability may arise even under-The compromise decree, then the passing of the compromise decree will not entitle him to claim discharge, xx xx xx The question would thus always be one of construing the surety bond in order to decide whether compromise decree discharges the surety or not.' This authority has also laid down that though in terms the provisions of section 135 of the Contract Act cannot apply to bond in favor of a Court, yet the equitable principles under lying the provisions of section 135 of the said Act apply to such a bond. This also answers the contention of the learned counsel for the respondent that section 135 of the Contract Act being inappliable to the present bond which was executed in favor of a Court, the principles of equity could also not be invoked by the appellant.

(4) Now turning to the facts of the present case, can it besaid that it was in the contemplation of the appellant that he was undertaking a liability even if the matter was-compromised between the parties. The facts of the case show that though a suit was filed under order 37CPC, the defendant chose to contest it. Not only that, even when leave to defend was granted by the trial Court on certain terms, the defendant was so insistent that he took up the matter to this Court as well as to the Supreme Court for obtaining an order for furnishing security for paymint to defend the suit against an order which had permitted him to defend the suit but on either depositing the cash or byfurnishing bank guarantee. It was in this background of the conduct of the defendant that the security was furnished by the appellant. A reference to the mortgage deed shows that the mortgagor-appellant was agreeing that if on defense of the suit by the defendant a decree was passed, he would be liable for the same. Surely, the words 'on defense' cannot be taken to be superfluous. On the other hand, it indicates that the appellant was undertaking a liability only if the suit was fought out and not that it was compromised. It may be that if the words 'on defense' were not there, it may have been urged that there was no specific stipulation excluding compromise. But the law is not that unless there is a specific exclusion of a consent decree, a surety is always liable. It all depends on the facts of each case. When, thereforee, I find the appellant undertaking a liability by specifically providing in the mortgage deed that he promises to pay the amount if on defense of the suit by the defendant a decree is passed, it must follow that ha- was only contemplating to undertake liability when the dispute was settled by the Court after adjudication and not byconsent. It may be that a consent decree is also a decree of the Court, but that would be relevant only if the provision of the defense of the suit by the defendant had not been incorporated in the deed I am, thereforee, satisfied that interms of the prevent deed the appellant had not undertaken a liability and would stand discharged by the fact that the plaintiff and the defendant had compromised the suit without his consent and without his being party to it. The second objection of the learned counsel, namely. that bygiving time. to the judgment-debtor the surety stands discharged has also force. A reference to the compromise deed dated 28 9.1967 shows that though the plaintiff had obtained a decree by consent of Rs. 23.250.00 the same could not be executed by him at once. The plaintiff by that compromise gave time to the judgment-debtor to pay the amount of decree in monthly Installments of Rs. l,000.00 each which would spread it over a period of almost 2 years. Even the first Installment was not to fall due earlier than the 10th November, 1967, i.e, a month after the compromise was written. Can it be urged with any seriousness that this was not a compromise between the creditor, i.e. the plaintiff and the principal debtor, i.e., the defendant, by which rime was given to the judgment-debtor. If, as I held that by this compromise time was given to the judgment-debtor, it will immediately attract section 135 of the Contract Act and would lead to the dicharge of the surety- appellant. There is no suggestion that the appellant had ever assented to such a contract. A reference to the mortgage deed again will show that the appellant had undertaken his liability with the stipulation that if a decree was passed in favor of the plaintiff, the defendant will at once pay the whole amount of the decree to the plaimiff and if he commits a default, the mortgagor, i.e., the present appellant, shall at once pay the decretal amount. The appellant by the mortgage deed, thereforee, contemplated that if a decree was passed, the same was to be paid at once by the defendant. The result of the compromise dated 28 9.1967, however, was that the plaintiff could not have asked for the execution of the whole amount at once but had to be content with being paid Rs. 1,000.00in monthly Installments. This inevitably has the result of giving time to the judgment-debtor and a promise by the decree-holder not to seek his remedy against him during that period Thus, by the compromise deed the plaintiff bound himself not to claim full amount from his principal debtor at once. In such circumstances, it was held by the Supreme Court in Raja Bahdur .Dhanaj Girji's case that as the decree was not executable immediately after it was passed, it, i.n substance, gave time with the result that the lability of the surery under the bond stood discharged. Mr.Gurcharn Singh refered me to the following observations of Chief Justice Rankin in a Division Bench case Jai Bai v. Joharunlta Bothra:-

'I would say upon this case that if it is to be contended that the surety is discharged from his bond in any case where there is a consent decree proving for postponed payment or payment by Installments, then that is a pro position to which, as at present advised, I am not prepared to assent.'

But these observations obviously were obiter as is clear from the very next sentence that :- 'The case before us does not raise that exact question and thereforee I am content merely to say that I see some difficulty in holding that a provision for Installments releases the surety in a case of consent.' These observations of Chief Justice Rankin were considered in a later Division Bench case in Kanailal Mookerjee v. Kali Mohan Chatterjee', where S. R Das Gupta, J. (as his Lordship then was), who delivered the judgment of the Court, observed that these observations of Chief Justice Rankin were in the nature of obiter dictum and that all that they meant was that the question would have to be decided in each case on its own facts and that it cannot be laid down in general terms covering all cases that whether there is a conset.t decree providing for postponed payment or payment by Installments, then the surety is to be discharged. Reference may be made to the advantage in Dhanpat Mat Tek Chand v Emperor. In that case, on an application made under Order 38, Rule 5 Civil Procedure Code the defendant was directed to furnish a security of Rs. 1500.00. The surety was furnished wherein it was stated that if the defendant did not pay the sum of Rs. 1500.00, the Court might realise this money from the bond at once.

(5) Later on, the parties compromised and one of the terms of the compromise decree was that the balance of the decretal amount was to be paid by Installments of Rs. 75/ per month. That clause was held by the Lahore High Court to amount to giving of i me to the debtor with the result that as the surety had not assented to it, his liability stood discharged. This case was specifically approved and followed by the Calcutta High Court in : AIR1957Cal645 . In Narayan Ramchandra Bhagwat v. Markandya Tukaram, Mudbolkar, J. (as his Lordship then was) also held that the surely bond became unenforceable by virtue of a compromise by which the decree holder agreed to receive the amount in Installments without the assent of the surely. That the surety would be discharged if the decree-holder and the judgment debtor agree that the amount would be payable in Installments at particular intervals was accepted in Manohar Lal Beh Ram v. Bar Kishan Lal. In that case, the surety had agreed to be responsible for any decree that might be paased by the Court. Ultimately after a decree had not been passed for R.s. 8,498.00, the decree-holder and the judgment-debtor agreed that the said money might he paid in monthly Installments of Rs. 600.00. On this ground, it was urged by the surety that he stood discharged because this amounted to giving of time by the creditor to the debtor This plea was accepted by this Court following : AIR1957Cal645 . A Division Bench in Sardar Khan Singh v. Tek Chand Nanda, has also taken the view that where a decree is passed against a principal judgment.debtor and two others as sureties and decree holder compromises with the debtor without the consent of the surety for payment of decretal amount in Installments, the surety is discharged. This case also followed the law laid down by the Lahore High Court in Air 1944 Lah 428. In that case it was also laid down that in a case where the compromise was to receive money by Installments, the case was not covered by Section 137 of the Contract Act, because it was not a case of forbearance to sue but rather having obtained a decree to give time to the debtor to pay in Installments and to abstain to execute the decree immediately. In Amrit Lal Goverdhan Lalan v. State Bank of Travancare, the observation in Rouse v. Bradford Banking Company, (Thus to substitute for payment in one sum payment by Installments amount to a giving of time) were held to be what was contemplated by section 135 of the Contract Act. The argument of the counsel for the respondents that by allowing the defendant to pay the decretal amount in Installments merely amounts to forbearance within the meaning of section 137 of the Contract Act thus cannot be accepted. In this connection reference was made by the learned counsel for the respondents to Mt. Radha Kunwar v. Ram Narain. That case is clearly distinguishable. In that case, there was no suggestion even that the trust bad, at any stage of time, enlered into a contract with the judgment-debtor by which it had given the latter time to pay the decretal amount. All that happened was that the trust allowed an opportunity to the judgment debtor so as to enable him to raise money by a private sale of a portion of his properly and to utilise that money in a particular way, namely, the discharging of the decree itself. It was in these circumstances that it was held that this was an act of forbearance within the meaning of section 137 of the Contract Act. In that case Bo question of the decretal amount having been agreed to be paid in Installments arose and it is, thereforee, inapplicable to the facts of the present case. A reference was also made to Princess Ushadevi Malhotra of Indore and athers v. Bhagwandas Tiwari'. That case also has no applicability to the present case On the facts in that case it was held that at that had happened was that the principal deb' for having produced part of his first Installment was evading payment and the trustee, told him definitely that if he did not pay up by a particular date, they would not wait any more. This was held merely to he an act of for bebrance and not a question of giving time to the debtor to pay up the amount. It was also held that for this forbearance there was no act which the principal debtor was to do for the crecitors.

(6) As a resuit of the above discussion, I have no manner of doubt that when compromise was arrived at between the decree-holder and the judgment-debtor by which the decree-holder agreed to give time to the judgment-debtor to pay the decretal amount in Installments and did not insist upon the realisation of the decretal amount at once as was cantemplated by the mortgage deed, this amounted to giving of time within the meaning of section 135 of the Contract Act with the result that it would discharge the surety from his obligation under the deed. I would, thereforee allow the appeal set aside-the order of the trial Court and dismiss the application of the decree-holder against the appellant-surety. In the circumstances, however, there will be no order as to costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //