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A.L.S.P.Pl. Subramania Chettiar (Decd.) and anr. Vs. Moniam P. Narayanaswami Gounder - Court Judgment

LegalCrystal Citation
SubjectCommercial;Contract
CourtChennai High Court
Decided On
Case NumberAppeal No. 503 of 1946
Judge
Reported inAIR1951Mad48; (1950)2MLJ472
ActsContract Act, 1872 - Sections 128; Debt Law; Madras Agriculturists' Relief Act, 1938 - Sections 7; Code of Civil Procedure (CPC) , 1908 - Sections 35
AppellantA.L.S.P.Pl. Subramania Chettiar (Decd.) and anr.
RespondentMoniam P. Narayanaswami Gounder
Appellant AdvocateK.V. Ramachandra Aiyar, Adv.
Respondent AdvocateV.S. Rangaswami Aiyangar and ;M.S. Venkatarama Aiyar, Advs.
DispositionAppeal dismissed
Cases ReferredRamaswami Naicken v. Venkataswami Naicken
Excerpt:
contract - surety - section 128 of contract act, 1872, section 7 of madras agriculturists' relief act, 1938 and section 7 of code of civil procedure, 1908 - liability of surety - principal debt has been scaled down under act of 1938 - non-agriculturist surety will not be liable for entire debt - liability of surety will only be co-extensive with that of agriculturist principal debtor - surety will be liable only to extent of scaled down debt due by principal debtor. - - p-2, his letter of guarantee clearly stated that he was liable only for the amount due under the promissory note, ex. they said :a barred debt is a good foundation for a written promise to pay signed by the party liable to be charged therewith. further, in section 19, we find the significant expression 'amend the.....panchapakesa ayyar, j. 1. the point referred by the bench to this full bench for an authoritative decision is 'whether a non-agriculturist surety would be liable for the entire debt even though the principal debt was scaled down under the provisions of the madras agriculturists' relief act.' 2. the facts are briefly these : plaintiff 1 (since deceased) had brought 0. a. ho. 471 of 1945 in the court of the subordinate judge, coimbatore, against the five defendants for recovering rs. 6746 being the principal and interest due on a promissory note dated 22-9-1933, executed by defendants 1 and 2 in favour of the plaintiff for es. 1500 repayable with interest at 86 per cent, per annum, but he claimed only at 24 per cent, per annum. defendants 4 and 5 were the minor sons of defendant 1......
Judgment:

Panchapakesa Ayyar, J.

1. The point referred by the Bench to this Full Bench for an authoritative decision is

'whether a non-agriculturist surety would be liable for the entire debt even though the principal debt was scaled down under the provisions of the Madras Agriculturists' Relief Act.'

2. The facts are briefly these : plaintiff 1 (since deceased) had brought 0. a. Ho. 471 of 1945 in the Court of the Subordinate Judge, Coimbatore, against the five defendants for recovering Rs. 6746 being the principal and interest due on a promissory note dated 22-9-1933, executed by defendants 1 and 2 in favour of the plaintiff for ES. 1500 repayable with interest at 86 per cent, per annum, but he claimed only at 24 per cent, per annum. Defendants 4 and 5 were the minor sons of defendant 1. Defendant 8 was a surety for the debt and had executed a letter of guarantee and renewed his liability thereunder, just as the principal debtors had renewed their liability for the debt under endorsements. So the suit was not barred against either the principal debtors or the surety. But the principal debtors claimedthat they were entitled to a scaling down of the debt under the Madras Agriculturists'Belief Act, being agriculturists. The surety defendant 3) contended that the varthamanam executed by him did not amount to a contract of guarantee and that at any rate limitation had already operated against him. He contended further that he was also entitled to scaling down of the whole debt under the Madras Agriculturists' Relief Act, as his guarantee, even if there was one, would amountonly to a guarantee of the amount actually payable by the principal debtor on the dates of his renewal of it after 22-3-1938. He also statedthat 24 per cent, interest claimed in the plaint was penal and unconscionable and that the plaintiff could not claim more than 5 per cent.simple interest per annum. The learned Subordinate Judge held that there was no bar of limitation against the surety or against the principal debtors, that the surety's varthamanam deed constituted a contract of guarantee, and that the surety was not an agriculturist as he was paying house tax of more than Rs. 600 per annum to the Tiruppur Minicipality. But he held that though he was notentitled to the benefits of the Madras Agriculturists' Relief Act on the ground that he himself was an agriculturist, he would be liable to pay only the scaled down amount and nothing more, since the renewal endorsements found on Ex. P-2, his letter of guarantee clearly stated that he was liable only for the amount due under the promissory note, Ex. P-l, which in the opinion of the learned Subordinate Judge would amount to the surety saying that he would be liable for the amount due under the note as on the dates of the endorsements, inother words, only for the amounts as scaled down, as two of the endorsements were dated 10-9-1939 and 7-9-1942 long after the cominginto operation of the Madras Agriculturists' Relief Act on 22-3-1938. In that view, he scaled down the promissory note debt asagainst all the defendants an I gave a decree against all of them for Rs. 1500 the principal amount under the promissory note, with subsequent interest thereon at 6 1/4 per cent. per annum from 1-10-1937 till payment, less Rs. 55 paid by the defendants towards interest, and also awarded proportionate costs of us. 230-15-6.

3. Plaintiff 1 died, and plaintiff 2 is hislegal representative. Plaintiff 2 has filed thisappeal only as against defendant 3 (surety) and his only contention is that the lower Courtshould not have granted the surety the benefit of the scaling down under the Madras Agriculturists' Relief Act. The appeal relates toRs. 3357-4-0, the difference between the unsealed and the scaled down amounts. During the arguments in the appeal, the question referred to this Full Bench became necessary to be decided, and the Bench which heard the appeal was unable to agree with the Bench decision in Subramanian Chettiar v. Batcha Rowther : AIR1942Mad145 , and so has referred the matter to this Full Bench, reserving the other questions raised in the appeal for consideration by it after this question is answered by the Full Bench. Mr. K. V. Ramachandra Aiyar for the appellant, raised two main contentions. The first was that the scaling down under the Madras Agriculturists' Relief Act and the payment of the scaled down amount does not extinguish the debt itself, but only bars the remedy of the creditor as against the agriculturist debtor as regards the balance of the amount, and that the debt itself continues, as in the case of a debt barred by limitation, is not recoverable in bankruptcy. In other words, he equated this case with cases of debts barred by limitation or not recoverable under the bankruptcy law, and relied on the observations in Subramania Aiyar v. Gopala Aiyar, 33 Mad. 308 : 7 I. C. 898. In that case, Benson C. J. and Krishnaswami Aiyar J. held that a debt the recovery of which is barred by limitation is not extinguished and the debtor is not, by reason of the bar of limitation discharged therefrom and that the omission of the creditor to sue the debtor within the period of limitation is not an act the legal consequence of which is the discharge of the debtor and such omission has not the effect of discharging the surety under Sections 134 and 137, Contract Act. They wont on to say that there was hardly any room for doubt in the fact of the express language of Section 28, Limitation Act, which merely extinguishes the right to property when the period is determined for suits for recovery of such property and added that whenever personal actions are barred the rights themselves are not extinguished. They said :

'A barred debt is a good foundation for a written promise to pay signed by the party liable to be charged therewith. It is impossible to regard a debt as discharged by limitation when Section 60, Contract Act, speaks of a barred debt as a lawful debt actually due and payable to the creditor, Unless the law of limitation operates as wall as a law of extinctive prescription, omission to sue cannot discharge the debtor. Limitation, which merely bars the remedy, is never spoken of in works of Jurisprudence as a mode of discharging an obligation,'

They relied on Holland's not enumeratinglimitation, amongst the modes of terminationof rights in personal. They also relied onAnson's observations:

'At common law lapse of time does not affect contractual rights. Such rights are of a permanent and indestructible character unless either from this nature of the contract or from its terms it be limited in point of duration. But though the rights possess this permanent character, the remedies arising from their violation are by various statutory provisions withdrawn after a certain lapse of time. The remedies are barred though the rights are not extinguished,'

So, too the learned counsel for the appellant relied on In re Jacobs, (1875) 10 Ch. A. 211 : (31 L.T.. 745) where it was held by James L. J. that a discharge of a debtor under a liquidation or a composition is really a discharge in bankruptcy by operation of law, and will not discharge the surety from his liability. He also relied on the ruling in Bombay Co., Ltd. v. Official Assignee of Madras, 40 M. L. J. 404 : A. I. R. 1921 Mad. 236 where a Bench of this Court consisting of Wallis C. J. and Seshagiri Aiyar J. held that the acceptance of a composition by the principal creditor during the insolvency of the principal debtor after part payments by the surety will not entitle the surety to a refund of such part payments, following the principle in In re Jacobs, (1875) 10 Ch. A. 211 : (31 L. T. 745) and holding that it was the insolvency law and not the creditor that discharged the insolvent. He also relied on the observations of Rowlatt in his book 'Law of Principal and Surety', 1936 Edn., at p. 277 as follows :

'A guarantee is not put an end to by reason of the debt becoming unenforceable against the principal by reason of matters happening subsequently, unless it is due to an act or omission of the creditor contrary to his duty to the surety. Thus a surety is liable though the claim against the principal be barred by the statute of limitation or by reason of the bankruptcy of the principal.'

4. He relied further on the provisions of Sections 133, 134, 135 etc., Contract Act, which according to him are the only sections which will discharge the surety or enable the surety to claim the benefit given to the principal debtor and which do not maintain the benefit under the Madras Agriculturists' Relief. Act given to the surety by adding to or amending the sections of the Contract Act or even the section of the Madras Agriculturists' Relief Act. According to him, this also shows that the Madras Agriculturists' Relief. Act never intended to extinguish the debt or liability of the debtor, but only to bar the remedy regarding the amount lost by the scaling down. He strongly relied on the wording of Section 7 which uses the phrase 'No sum in excess of the amount as so scaled down shall be recoverable' thereby showing, according to him, that the intention is only to bar the remedy as against the agriculturist debtor and not to extinguish thewhole or any portion of the debt. He also relied on the phrase

'shall be deemed to be discharged and shall be deemed to be the amount repayable by the agriculturist on that date'

in Clause 8 (1) and 'shall be deemed to be wholly' discharged' in Section 8(2) for the position that the Legislature never intended to extinguish the liability as in that case, the phrase used would be 'shall be discharged.' I cannot agree with this. Mr. M.S. Venkatarama Aiyar, for the surety, pertinently pointed out that the phrase 'shall be deemed to be discharged' is used only to show that it is not an actual discharge by payment, but a discharge by operation of law I may add that in Section 8 (4), Madras Agriculturists' Relief Act, there is the phrase 'shall be deemed to require the creditor to refund any sum which has been paid to him,' etc., showing that the real meaning of the phrase is what Mr. Venkatarama Aiyar attributes to it. What is even more clinching is the fact that the Madras Agriculturists' Relief Act, provides for the amendment of the original decree by scaling down under Section 19. No amendment of the decree will be required if the debt is not extinguished in whole or in part but is intact as the original decree will do. It is obvious that a decree barred by limitation is not and cannot be amended but stands intact. Further, in Section 19, we find the significant expression 'amend the decree accordingly or enter satisfaction as the case may be'. The entering of satisfaction can only be done when the debt is satisfied or discharged or extinguished, and not when the remedy is merely barred. No satisfaction can be entered in respect of a decree barred by limitation or in the case of a debt in insolvency where only a dividend of any Re. 0-2-0, in the rupee, has been paid, to the creditor and the remainder cannot be recovered from the insolvent because the remedy as against him is barred. Moreover, it is obvious, as held in Subramania Aiyar v. Gopala Aiyar, 33 Mad. 308 : (7 I. C. 898), that a barred debt is a good foundation for a written promise to pay, signed by the party liable to be charged therewith. Whereas it has been held in Suryanarayana v. Alwandararao : AIR1946Mad111 by a Bench of this Court, that if an agriculturist debtor executes a promissory note in favour of his creditor including in it a sum which cannot be recovered from him under the Madras Agriculturists' Relief Act because of the scaling down the promissory note will be devoid of consideration to the extent to which the promissory note amount exceeded the amount due on a proper scaling down of the debt. That too shows the intention of theMadras Agriculturists' Relief Act to discharge or extinguish the debt to the extent of thedifference between the unsealed and scaled down amount.

5. It was then argued by Mr. Ramchandra Aiyar for the appellant, that the object of the Madras Agriculturists' Relief Act is only to benefit an 'agriculturist' debtor, and that, therefore, this non-agriculturist surety couldnever have been intended to be, or really, be benefited under any provision of the Madras Agriculturists' Relief Act. The proposition isnot sound. A Bench of this Court, consisting of King and Patanjali Sastri JJ. negatived its soundness when it was raised before it inArunachalam v. Seetharam Naidu, I. L. R. (194l) Mad. 930 : A. I. R. (28) 1941 Mad. 584 acase of 'Lucky purchase' by a court auction-purchaser. At p. 933 it is observed:

'It is undoubtedly true that agriculturist debtorsalone are entitled to the relief provided in the Act,which does not contemplate any scaling down of debtsdue by others, but it does not follow that a non-agriculturist debtor can in no circumstances be benefited by the scaling down of a debt under the provisions of the Act. The properties now held by the 12th respondent (who was a non-agriculturist auction-purchaser) are liable only as security for the debt due by the mortgagors (who were agriculturists), and, if as a result of the Act there is a statutory discharge or reduction of the debt, the properties cannot, it seems to us, be proceeded against for anything more than the scaled down amount of the debt.'

The same view was adopted by that Bench in Marina Ammayi v. Mirza Bakhar Beg : AIR1941Mad557 smother Bench of this Court consisting of Wadsworth and Patanjali Sastri JJ. in Satyanarayanmurthi v. Sathiraju : AIR1942Mad525 also accepted this view. We cannot accept Mr. EamachandraAiyar's contention that the observations inthat case must, be confined to the case of, amortgage suit where questions of the integrityof the mortgage, security for the mortgage etc. arise. The ruling in Arunachalam. v. Seetharam, I. L. R. (1941) Mad. 930 : A. I. R. 1941Mad. 584 was quoted by another Bench of thisCourt, consisting of Wadsworth and Patanjali Sastri JJ. in Srinivasa, Thathachariar v. Sivasubramania Chettiar : AIR1943Mad196 , without any dissent, though, on the facts of that case, where the mortgagor was not an agriculturist, they heldthat the unsealed amount could be recovered from the non-agriculturist purchaser. .

6. Section 128, Contract Act, says that the liability of the surety is co-extensive with that of the principal debtor unless it is otherwise provided by contract. It is a settled principleof law that the surety's- liability is only accessory and secondary. Under the express provisions of Section 128 his liability is made only co-extensive with that of the principal debtor. That can only mean that his liability, is no less or no more than that of the principal debtor. If the amount payable by the principal debtor is discharged in part, the surety's liability also is pro tanto reduced. Mr. Bamachan-dra Aiyar urged that Section 128 ought not to be read or supposing the surety were an agriculturist and the principal debtor was not an agriculturist, it could not be urged that the principal debtor could claim scaling down simply because the surety could claim it and his liability was co-extensive with the surety's. But here he is forgetting that the liability of the surety is accessory and secondary while the liability of the principal debtor is not and so the principal debtor, who is not an agriculturist and whose liability is primary, and not secondary or accessory, can be made to pay the full amount. In Sami Iyer v. Ramaswami Chettiar, 44 M. L. J. 171 : (A. I. R.1923 Mad. 340), a Bench of this Court, consisting of Spencer and Venkatasubba Rao JJ., held that the liability of a surety for a debt ceased to exist when his principal's debts were extinguished. In that case the debt was extinguished by an act which caused the merger of the estates of the debtor and the creditor. We are of opinion that Section 133 etc., Contract Act, do not exhaust the modes of discharges of a surety as they do not even mention the case of a voluntary payment of the entire debt or portion of the debt by the principal debtor to the creditor as effecting a discharge of the surety wholly or pro tanto. Section 140, Contract Act, says that the surety, on discharging a debt would only get all the rights which the creditor had against the principal, debtor. So, if the creditor could not recover any portion of the debt from the principal debtor, owing to sealing down under the Madras Agriculturists' Relief Act, it follows that the surety could not also recover that portion of the debt. That would be very unjust to the surety and would land him in unexpected and unmerited loss by the Madras Agriculturists' Relief Act intervening and Scaling down the debt. The Madras Agriculturists' Relief Act in our opinion, therefore, to prevent such injustice to the surety, intended to extinguish the portion of the debt affected by the scaling down and not merely ;to bar the remedy. By doing so it did not confer any benefit on the non-agriculturist surety but only relieved him from an extra burden and loss which would have been thrown on him if the debt was not extinguished and he was madeliable to bear the loss of the difference by virtue of Section 140, Contract Act.

7. The fact that there was a moratorium before the Act came into operation also shows that the intention of the Act itself is to extinguish the debt. This is shown further by the fact that the portion of the debt lost by the scaling down cannot form a good consideration for a fresh promissory note by the agriculturist debtor and that full satisfaction has to be entered under Section 19 whenever the debt as scaled down has been paid.

8. Mr. Ramachandra Aiyar relied on the ruling of a Bench of this Court consisting of Wadsworth and Patanjali .Sastri JJ. in Sundararaja Reddiar v. Ramachandra Reddiar 1945-1 M. L. J. 384 : (A. I. R. 1945 Mad. 385) which held that before the Court reduced a debt by the application of the scaling down provisions, it must be satisfied that there was at the date of the commencement of the Act a debt due from an agriculturist and that such debt was one which the agriculturist could be compelled to pay by legal process and that the provisions of Act IV [4] of 1938, were not intended to benefit an agriculturist who voluntarily paid debts which could not be enforced against him and urged that this ruling has impliedly held that the Madras Agriculturists' Relief Act does not extinguish the debt, but only bars the remedy against the agriculturist debtor. I am unable to agree. There, defendant 1 was an agriculturist but not defendant 8 from whom the whole of the unsealed debt could have been recovered. Defendant 1 paid the whole debt, which ho would not have been bound to pay under the Act, and then pleaded for scaling down and recovering the excess, paid, by him. But, of course, the Court refused his request, as there was no debt recoverable from him by process of law when he made the application, and under Section 8 (4), Madras Agriculturists' Relief Act, a creditor was not required to refund any sum which had been paid to him. It did not say that the Madras Agriculturists' Relief Act did not extinguish the debt but only barred the remedy. The argument of Mr. Ramachandra Aiyar that the debt is not extinguished but only barred because an agriculturist need not take advantage of the Madras Agriculturists' Relief Act but may pay the unscaled amount is unconvincing. A surety whose obligation is released under Sections 133 to 137, Contract Act can also pay up if he likes.

9. Now we come to the second point, namely, assuming that the intention of the Madras Agriculturists' Relief Act is to extinguish the whole or portion of the debt affected by thescaling down, would such extinction of the debt as regards the principal debtor ensure to the benefit of his surety and extinguish his liability also regarding that portion of the debt so extinguished? I have absolutely no doubt that it will. Section 128, Contract Act, clearly enacts that the liability of the surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract. There is nothing in Section 133 etc., to alter this general proposition. In Sami Iyer v. Ramaswami Chettiar, 44 M. L. J. 171 : A. I. R. 1923 Mad. 340 already referred to, it was held that the liability of a surety for a debt ceased to exist when his principal's debt was extinguished, in that case by an act which caused the merger of the estate of the principal debtor and the creditor. It was observed there by Venkatasubba Rao J. at p. 177 :

'The debt due by the judgment-debtor having become extinguished, are the plaintiffs entitled to proceed against the surety They are not. To my mind, the question does not admit of any doubt. Cunningham and Shephard in their 'Indian Contract' quote the following passage from Pothiar when dealing with Section 134 : 'It results from the definition of a surety's engagement as being accessory to 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 learned Commentators add 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.' .

Spencer J. remarks in the same case :

'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 of Section 128, Contract Act occurs in Shek Sulaiman v. Shivram Bhijai, 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 dimmish 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.'

It is obvious that in a case like this, where the decree is amended under Section 19, Madras Agriculturists' Relief Act, and the amount recoverable by a plaintiff from the principal debtor is diminished in appeal, the surety's engagement, being one of indemnity, would diminish in like proportion; and if the sum recoverable from the principal debtor becomes zero, under the amended decree the surety's liability would also be reduced to nothing.

10. Niyogi J. in Babu Rao v. Babu Manakkal, I. L. R. (1939) Nag. 175 : A.I.R. 1938 Nag. 413 lays down the principle in adifferent, though equally effective manner asfollows :

'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 de au!t and you cannot compel me to discharge an obligntion which has no existence. If, on the other hand, I pay you, how can I recover it from the principal debtor whoso liability, the debt itself having vanished, has ceased? ' When the surety seeks his remedy against the principal debtor, ho 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.'

So, it is clear that the debt must exist (and should not have been extinguished as under the Madras Agriculturists' Relief Act), if the creditor is to choose to enforce his remedy against the surety when the principal debtor stands discharged. In Annadana Jadaya Goundar v. Konammal, 64 M. L. J. 386 : 1933 Mad. 309 relied on by the learned counsel for the appellant the debt had not been extinguished, as the liability to proceed against the surety, in case the principal debtor defaulted to pay the amount under a private compromise with the creditor was expressly reserved, and so, the debt had not become extinguished, but only the remedy against the principal debtor affected.

10a. The learned counsel for the appellant relied on the rulings in the Nellore Co-operative Urban Bank, Ltd. v. Mallikarjunayya. : AIR1948Mad252 and above all, in Subramanian Chettiar v. Batcha Rowther : AIR1942Mad145 which last ruling has been the cause for this reference to this Full Bench, owing to the conflict of views it embodies. The Bench which decided Subramanian Chettiar v. Batcha Rowther : AIR1942Mad145 consisted of Wadsworth and Patanjali Sastri JJ. In that case they held that, where the discharge of a principal debtor is brought about, not by any voluntary act of the creditor, but by the operation of a statute subsequently passed, the surety cannot claim discharge pro tanto with the principal debtor since Section 128, Contract Act, merely defines the obligation of the surety on the date of the contract of guarantee, and is not intended to govern future changes in the liability of the parties. On this basis they held that a non-agriculturist surety was liable to pay the whole amount of the debt, even though the agriculturist principal debtor was only liable for the debt as scaled down in accordance with Act IV [4] of 1938. I am unable to agree with the view propounded therein or with the reasoning underlying it. The Bench relied on two main reasons, the first being that, Section 128,Contract Act, is not intended to govern all future changes in the liability of the parties, when there is no warrant in that section for any such conclusion. The second reason given; is that when a new statutory provision has had the effect of granting a partial discharge to the principal debtor, and the creditor has taken no part in releasing the principal debtor from his liability, the remedy of the creditor against the guarantor will not be affected. In other words, they held, like the Bench which decided the Nellore Co-operative Urban Bank Ltd. v. Mallikarjunayya : AIR1948Mad252 (Patanjali Sastri and Thyagarajan JJ.) that a statutory discharge of the whole or any part of a principal debtor's debt will not discharge the surety pro tanto as the creditor has taken no part in releasing the principal debtor from his liability. But it is, obvious that this position will not be valid when the debt itself has been extinguished as regards the principal debtor by the statute, as I have held to be the case under the Madras Agriculturists' Relief Act, and there is nothing; to be recovered from him, and so nothing to be recovered from the surety, who has only guaranteed the same debt, as was due from the principal debtor his engagement, being merely accessory to the principal obligation. It is clear to me therefore that the Bench ruling in Sami Iyer v. Ramasami Chettiar, 44 M. L. J. 171 : A.I.R. 1923 Mad. 340 represents the correct state of the law regarding this matter and that Subramanian Chettiar v. Batcha Rowther : AIR1942Mad145 was wrongly decided. I may add that the same Bench which decided Subramanian Chettiar v. Batcha Rowther : AIR1942Mad145 was a party to the decision in Satyanarayanamurti v. Sathiraju, 1942-1 M. L. J. 506 : A.I.R.1942 Mad. 525 and that they decided therein that a non-agriculturist purchaser of mortgaged property was entitled to redeem the mortgage as a whole after having, the debt scaled down, They remarked :

'It is therefore not correct to say, as was argued for the appellant, that the Court, by allowing the mortgagors to redeem the mortgage as a whole, was conferring a benefit upon a non-agriculturist, contrary to the intendment of the Madras Agriculturist's Relief Act. On the other hand, if the purchaser in such circumstances is made to pay the entire sum reserved with him for payment under the sale-deed, which was executed before the passing of the said Act, the mortgagor would stand ultimately deprived of the benefit which as agriculturists they are undoubtedly entitled to claim under the Act.'

The same reasoning would entitle a non agriculturist surety to claim the benefit of the scaling down in respect of the principal debtor as he must otherwise be allowed to recoverwhat he has paid, and the principal debtor would stand ultimately deprived of the benefit which as an agriculturist, he was entitled toclaim under the Act.

11. The argument of Mr. RamachandraAiyar, that the Madras Agriculturists' Relief Act allows unsealed debt to be recovered from a non-agriculturist debtor, while entitling him to recover only the scaled down amount from the agriculturist debtor and that therefore it would entitle him to recover the unsealed amount from the non-agriculturist-surety debtorwhile allowing him only to recover the scaleddown amount from the agriculturist principaldebtor overlooks the fact that the debt of anon-agriculturist joint principal debtor is independent of the agriculturist joint principal debtor's debt, and is not accessory to it, wholly dependent unit, going with it, and vanishing with it, as a surety-debtor's debt as pointed out in Sami Iyer v. Ramasami Chettiar, 44 M.L.J. 171 : A. I. R. 1923 Mad. 340 and in Babu Rao v. Babu Manaklal, I.l.r. (1939) Nag. 175 : A. I. R. 1938 Nag. 413 the ruling in Syed Fakir v. Abdul Samad Khan, I.L.R. (1938) Nag. 354 : A. I. R. 1938 Nag. 101 is not very relevant for this question but it shows that sureties cannot be held responsible for damages occurring to the creditor by acts for which they are not responsible, and those acts, in myopinion, will cover also acts of the Legislature extinguishing the debt of the principal debtor, us under the Madras Agriculturists' Relief Act.

12. Unhampered by judicial decisions also, on a fair reading of the provisions of the Contract Act, I am inclined to hold that as the liability of the surety is co-extensive with that of the principal debtor, if the latter's liability is scaled down in an amended decree, or otherwise extinguished in whole or in part by statute, the liability of the surety also is pro tanto reduced or extinguished. Paragraph 192 of Halsbury's Laws of England, Vol. 16, 1935 Edn.,contains the following passage :

' 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, notwithstanding 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 nototherwise.'

This shows that extinction of a debt in whole or in part by operation of law will do, and that the creditor need not take any part in realising the principal debtor from his liability. Mr. Ramachandra Aiyar relied on a passage in para. 195 which runs as follows :

'Though an alteration in the position of the surety by the principal debtor's discharge, or otherwise,accomplished by the operation of law, may discharge him this is not always the case.'

But this passage will not, in my opinion, help the appellant in this case as the exceptions given there relate to the release of the principal debtor's liability under the law of limitation, bankruptcy laws, etc. (which merely bar the remedy) and not to the extinction of the principal debtor's liability, as here under the Madras Agriculturists' Relief Act.

13. It was finally urged by Mr. Ramachandra Aiyar, for the appellant that the Madras Agriculturists' Relief Act could not have really intended to extend the benefit of the extinguishing of the debt of the principal debtor to his surety, as otherwise the Legislature when amending various sections of the Madras Agriculturists' Relief Act as soon as decisions of this Court were given against the intention of the Legislature in enacting those sections, had not amended the sections, and stated that the surety's liability also would stand discharged or would be deemed to stand discharged pro tanto on the principal debtor's liability standing discharged by scaling down, in spite of the decision of a Bench of this Court in Subramanian Chettiar v. Batcha Rowther : AIR1942Mad145 . I cannot accept this argument. Our country has only recently become a democracy. Law is not so advanced in this country as in England and U. S. A. and the Legislature is not yet keeping a vigilant standing committee to watch all judicial decisions and bring about amendments of the law at once where the decisions given are contrary to the intention of the Legislature. Even under the best of conditions the argument will not have much weight, as a Court is not concerned with the lack of amendment of sections by a Legislature consequent on a wrong decision, when it is satisfied about the true import of a particular section or sections in a piece of Legislation. In the circumstances mentioned above, this argument has even less weight.

14. In the end therefore, I hold that Subramanian Chettiar v. Batcha Rowther : AIR1942Mad145 was wrongly decided, and answer the reference made to us as below : 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 Madras Agriculturists' Relief Act, but will be liable only to the extent of the scaled down debt due by the principal debtor.

Subba Rao J.

15. I agree. I have nothing more to add to what I have already expressed in the order referring the question to the Full Bench.

Balakrishna Ayyar, J.

16. I agree with the answer proposed.(This appeal coming on for final hearing on 29-8-1950 after the expression of opinion by the Full Bench the Court consisting of Subba Rao and Panchapakesa Aiyar JJ. delivered the following Judgment.)

Panohapakeaa Ayyar, J.

17. The Full Bench, to which the main question of law was referred by us on 25-1-1950, has given its decision that a non-agriculturist surety will not be liable for the entire debt when the principal debt has been scaled down under the Madras Agriculturists' Relief Act, and that his liability will only be co-extensive with that of the agriculturist principal debtor. In view of this decision, the learned counsel for the appellant prays that the appeal may be dismissed but without costs, as the appeal was filed relying on the Bench ruling in Subramanian Chettiar v. Batcha Rowther : AIR1942Mad145 which has been held to be no longer good law by the Full Bench decision. He relied on fche Bench ruling in Ramaswami Naicken v. Venkataswami Naicken, 43 Mad. 61 : A. I. R. 1920 Mad. 567 for the position that when a ruling has altered the legal position after filing of the appeal, which is not argued in consequence, it is a fit case for dismissing the appeal without costs. But here, the appeal was argued fully before and during the reference to the Full Bench. So we consider that the appeal should be dismissed with half the costs of the respondent, in the circumstances, and order accordingly.


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