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Narayan Singh Vs. Chhatarsingh and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtRajasthan High Court
Decided On
Case NumberEx. Second Appeal No. 21 of 1971
Judge
Reported inAIR1973Raj347; 1973()WLN128
ActsContract Act, 1872 - Sections 128; Rajasthan Relief of Agricultural Indebtedness Act, 1957 - Sections 6; Code of Civil Procedure (CPC) - Order 21, Rule 29
AppellantNarayan Singh
RespondentChhatarsingh and anr.
Appellant Advocate N.M. Kasliwal, Adv.
Respondent Advocate M.L. Shrimali, Adv. for Respondent No. 1
DispositionAppeal allowed
Cases ReferredBabu Rao v. Babu Manakkal.
Excerpt:
.....if any made by the debt relief court and on the basis of the sanctity attached to a decree, the decree-holder cannot be permitted to realise the entire amount of the decretal debt from the surety judgment-debtor. - - 1971, that the present appeal has been filed, inter alia, on the ground that the liability of asurety-judgment-debtor is co-extensive with that of the principal debtor and, therefore, unless the debt is re-determined by the debt relief court, the amount of the decree cannot be executed against that judgment-debtor who stood surety for the principal debtor to pay off the debt if the principal debtor failed to discharge his liability. 3. the only question to be determined by this court in this appeal is whether the liability of a surety even after the decree is passed by..........arises out of the following circumstances : 2. a decree from the civil court was obtained by the decree-holder respondent no. 1 against jeetmal respondent no. 2 and appellant narayan singh who stood surety for the debt advanced by the decree-holder to the principal debtor. after the decree was put in execution, principal debtor jeetmal made an application under section 6 of the rajas-than relief of agricultural indebtedness act. 1957 (hereinafter called the act) before the debt relief court for the re-determination of his decretal amount as he was an agriculturist. notice of that application of jeetmal was issued to the executing court. the executing court abated the execution proceedings against both the judgment-debtors. on appeal, the learned judge, relying on an authority of this.....
Judgment:

V.P. Tyagi, J.

1. This is an appeal filed by the judgment-debtor who stood surety for the principal debtor and it arises out of the following circumstances :

2. A decree from the Civil Court was obtained by the decree-holder respondent No. 1 against Jeetmal respondent No. 2 and appellant Narayan Singh who stood surety for the debt advanced by the decree-holder to the principal debtor. After the decree was put in execution, principal debtor Jeetmal made an application under Section 6 of the Rajas-than Relief of Agricultural Indebtedness Act. 1957 (hereinafter called the Act) before the Debt Relief Court for the re-determination of his decretal amount as he was an agriculturist. Notice of that application of Jeetmal was issued to the executing Court. The executing Court abated the execution proceedings against both the judgment-debtors. On appeal, the learned Judge, relying on an authority of this Court in Brij Gopal v. Bhanwarlal, 1965 Raj LW 196, upheld the order of abatement against the principal debtor only and directed that execution proceedings may continue against the appellant judgment-debtor (surety) as he was not an agriculturist. It is against this judgment of the District Judge, Kota, dated 15th of February. 1971, that the present appeal has been filed, inter alia, on the ground that the liability of asurety-judgment-debtor is co-extensive with that of the principal debtor and, therefore, unless the debt is re-determined by the Debt Relief Court, the amount of the decree cannot be executed against that judgment-debtor who stood surety for the principal debtor to pay off the debt if the principal debtor failed to discharge his liability.

3. The only question to be determined by this Court in this appeal is whether the liability of a surety even after the decree is passed by a competent Court is co-extensive with that of the principal debtor and if any relief is granted to the principal debtor by the Debt Relief Court, can the surety also take advantage of that relief

4. The argument of learned counsel for the decree-holder is that the liability of a surety under Section 128 of the Contract Act is co-extensive with that of the principal debtor only to the extent to which the decree is not passed by a competent Court, but if once the liability is determined both of the surety as well as of the principal debtor by a Civil Court, the decree-holder is entitled to execute the decree against anyone of those judgment-debtors, namely, the principal debtor or the surety and the liability being co-extensive, the decree-holder as of right can proceed against any of the two judgment-debtors and therefore the doctrine of the liability being co-extensive cannot preclude the decree-holder from proceeding against the surety even if the principal debtor claims any benefit under the Act.

5. This very question came up for the determination of a Full Bench of the Madras High Court in A. L. S. PL. Subramania Chettiar (deed.), v. Moniam P. Narayanaswami Gounder, AIR 1951 Mad 48 (FB) and the learned Judges after a very careful consideration of the liabilities of a surety as well as of the principal debtor, who happened to be an agriculturist held that a non-agriculturist surety will not be liable for the entire debt when the principal debt has been scaled down under the provisions of the Debt Relief Act but will be liable only to the extent to which the debt is scaled down and found due from the principal debtor.

6. The learned Judges while coming to the aforesaid conclusion considered the scope of Section 128 of the Contract Act which enacts that the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract. In this connection they placed reliance on the passage from Pothiar which reads as follows :

'It results from the definition of a surety's engagement as being accessoryto a principal obligation that the extinction of the principal obligation necessarily induces that of the surety, it being the nature of an accessory obligation that it cannot exist without its principal. The rule may also be put upon the less technical ground that if the release of the surety did not follow from that of the debtor, the latter's release would be purely illusory because the consequence would be that the surety on being compelled to pay would immediately turn round on the debtor. I find it impossible to hold that the creditor can proceed against the surety although the debt has been recovered.'

7. Referring to the judgment in Sami Iyer v. Ramaswami Chettiar, AIR 1923 Mad 340 = 44 Mad LJ 171 the remarks of Spencer. J. weighed heavily with the learned Judges who say :

'Ordinarily the liability of a surety is co-extensive with that of the principal debtor unless it is otherwise provided for ..... An illustration of the effect ofSection 128, Contract Act occurs in Shek Suleman v. Shivram Bhikaji. (1888) ILR 12 Bom 71 where it was observed that if an amount recoverable by a plaintiff, from a defendant debtor is diminished in appeal, the surety's engagement, being one of indemnity, would diminish in like proportion. So, if the sum recoverable became zero, owing to the decree being reversed, the surety's liability would also be reduced to nothing.'

8. In the present case, one of the judgment-debtors being an agriculturist moved the Debt Relief Court for the determination of the decretal debt. The question that arose before the learned District Judge was whether the decree-holder was entitled to realise the entire amount of the decree from the surety against whom the decree was obtained by him and who unfortunately is not an agriculturist to claim relief under the Act. The main argument of Mr. Kasliwal is that though his client who stood surety of the principal debtor may not be an agriculturist and may not claim any benefits under the provisions of that Act, but if the principal debtor gets any benefit out of the provisions of the Act, then those benefits would automatically enure for the benefit of the appellant as his liability under the contract could not be assessed more than that of the principal debtor- I agree with the remarks of Spencer, J. referred to above that the surety's engagement is one of indemnity and, therefore, his liability would automatically diminish in like proportion if the liability of the principal debtor is reduced and even if the debt which has once been determined by a Civil Court is scaled down by the Debt Relief Court.

9. A bare perusal of Section 128 of the Contract Act would make it clear that the liability of a surety is co-extensive with that of the principal debtor and if the latter's liability is scaled down in an amended decree or otherwise extinguished in whole or in part by a statute, the liability of the surety would also pro tanto be reduced or extinguished,

10. In Halsbury's Laws of England, Third Edition, Volume 18, para 952 at page 518 reads as follows;

'Whatever expressly or impliedly discharges the principal debtor from liability usually discharges the surety also by implication, as his position is thereby altered without his consent, not-withstanding that the alteration is accomplished by operation of law. He is therefore discharged where he can establish that the alteration changes the nature of his liability, but not otherwise.'

11. This shows that the extinction of a debt in whole or in part by operation of law would definitely go to reduce the liability of the surety judgment-debtor.

12. This question may be viewed from another angle also and it is that the surety, who has a right to be reimbursed by the principal debtor for the amount paid by him on his behalf, if allowed to realise the entire decretal amount from the agriculturist principal debtor after the decree-holder is permitted to get the entire decretal amount from the surety, then it would mean that whatever benefit the agriculturist debtor is entitled to get under the provisions of the Act shall be denied to him if the decree is allowed to be executed against the surety judgment-debtor be-cause after its satisfaction the principal judgment-debtor shall be required under the Contract Act to reimburse the surety. This process, if allowed, would ultimately deny the benefits of the Act to the principal debtor who is otherwise en-titled to get his debt scaled down. The benefits given to an agriculturist on the one hand shall be denied if the decree holder respondents' arguments prevail with this Court.

13. Niyogi, J. in Babu Rao v. Babu Manakkal. AIR 1938 Nag 413 has laid down in his own style the principle about the liability of a surety and he observed 3

'When the creditor seeks to enforce the debt against the surety, the latter is legitimately entitled to ask 'is the principal debtor himself liable If not, he has committed no default and you cannot compel me to discharge an obligation which has no existence. If, on the other hand, I pay you. how can I recover it from the principal debtor whose liability, the debt itself having vanished, hasceased ?' When the surety seeks his remedy against the principal debtor, he does it in respect of the same debt as the one owed by the principal debtor to the creditor. It is clear that the debt must exist.'

14. The decree even if passed would not change the position of a surety except that if the decretal amount is realised from the surety-judgment-debtor then it would confer a right on him to realise that amount from the principal debtor against whom the decree also stands.

Learned counsel for the decree-holder then argued that the surety's liability cannot be disturbed after the decree was passed unless that decree vis-a-vis the surety is altered by a competent Court There is a fallacy in this argument. Learned counsel forgets when he advances this argument that in this case the decree against the principal debtor is re-opened in the Debt Relief Court and that sanctity which is normally attached to a decree is washed away vis-a-vis the agriculturist principal debtor. To that extent it can safely be said that the surety judgment-debtor can also take advantage of the modification of a decree if any made by the Debt Relief Court and on the basis of the sanctity attached to a decree, the decree-holder cannot be permitted to realise the entire amount of the decretal debt from the surety judgment-debtor.

15. Learned District Judge fell in error in correctly applying the ratio of the judgment of this Court in 1965 Raj LW 196. That judgment is clearly distinguishable as in that case all the judgment-debtors against whom the decree was passed were mortgagors and out of those only one of the mortgagors was an agriculturist who made an application under Section 6 of the Act for determination of the debt. Under mortgage debt the liability of the mortgagors is not co-extensive with each other. Everyone of the mortgagors is liable to pay the mortgage debt and, therefore, in those circumstances, those mortgagors who were not agriculturists could not claim any benefit of the provisions of the Act because if the debt is scaled down in the case of agriculturist mortgagor that scaling down would enure only to the benefit of the agriculturist and not for non-agriculturists who could not take resort under the provisions of the Act. The case of a surety stands on a different footing and therefore the judgment of this Court in 1965 Raj LW 196 was of no avail to the decree-holder.

16. For the reasons mentioned above, the appeal is allowed and the judgment of the learned District Judge,Kota, dated 15th February, 1971, is set aside. The decree-holder shall be entitled to recover the amount of the decree as modified by the Debt Relief Court from the surety judgment-debtor-appellant. No order as to costs.


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