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Jekkannu Sami Aiyar Vs. Muthukumara Ramaswami Chettiar Major and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Reported in(1923)44MLJ171
AppellantJekkannu Sami Aiyar
RespondentMuthukumara Ramaswami Chettiar Major and ors.
Cases ReferredRamanathan Pillai v. Doraiswami Aiyangar
Excerpt:
.....in appeal, the surety's engagement, being one of indemnity, would diminish in like proportion. the district munsif as well as the sub-judge assumes that the plaintiffs succeeded to the properties of the 1st defendant as his heir, but the correct view would seem to be that the plaintiffs acquired the said properties by transfer from the 2nd defendant who is the heir of the 1st defendant. 7. it seems to me that the sub-judge was clearly wrong. where a judgment-debtor dies before the decree has been fully satisfied, the holder of the decree may apply to execute it against the legal representatives of deceased judgment-debtor. the circumstance that the plaintiffs did not actually take out execution against themselves and recover the sum in execution is immaterial and i am therefore..........c.p.c. be taken out against his property in the hands of his legal representative. this judgment debtor's property is now in the hands of the decree-holders. when it is apparent that they can now do nothing but take out execution against themselves, the argument ends in a reductio ad absurdum.4. the appeal is allowed with costs here and in the lower appellate court, and the district munsiff's order dismissing the 1st and 2nd respondents' petition is restored.venkatasubba rao, j.5. this appeal raises the question whether the plaintiffs are entitled to execute the decree under section 145, c.p.c. against the surety who is the appellant before us. the district munsif held that the plaintiffs were not entitled but the sub-judge reversed the decision of the district munsif.6. the facts may.....
Judgment:

Spencer, J.

1. This appeal raises a question as to the liability of a surety when his principal's debt has been extinguished by an act which causes the merger of the estates of the debtor and the creditor. As the facts have been set out in my learned brother's judgment, I will not recapitulate them. Ordinarily the liability of a surety is co-extensive with that of the principal debtor, unless it is otherwise provided for. There is no provision to the contrary in the security bond executed on January 16th, 1917 by the appellant and his mother. Therein they declared that they would stand as sureties and make themselves responsible for the amount of Rs. 225 that might be found due to the plaintiffs (from the defendants). An illustration of the effect of Section 128 of the Contract Act occurs in Sheik Suleman v. Shivzan Bhikaji I.L.R(1887) . 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 The present is not a case of a continuing guarantee, or of time being given to the principal debtor, or of the terms of any contract between the creditor and the debtor being varied. Therefore the references by the respondent's vakil to Sections 129, 130, 133 and 135 of the Contract Act and to Subroya Chetty v. Ragammal 14 M.L.J. 482 are not to the point. Nor is there any question of the remedy against the principal debtor becoming barred by limitation or being kept alive by payment, as to which it was held in Brajenndra Kishore Roy Choudhury v. Hindustan Co-operative Insurance Society I L.R(1917) . CM. 978 that Section 128, Contract Act, would not prevent the liabilities of the principal and the debtor being distinct in matters of limitation and in Jambu Ramaswamy Bhagavathar v. Sundararaja Chetty I. L. R. (1903) M. 239 that Section 134, Contract Act would not help the surety.

2. The main question to be decided in this case is whether the 1st defendant's debt became extinguished in consequence of the merger of his estate with the estate of the plaintiffs (respondents). If that question is answered in the affirmative it will follow from Sections 128 and 134 of the Indian Contract Act that the respondents cannot proceed to recover anything on account of mesne profits from the appellant who stood as surety for the 1st defendant. In other words the question is whether the legal consequence of the creditor's act in taking over the 1st defendant's estate was to discharge the principal debtor. The principle of merger has been described in Banarsi Das v. Maharani Kuar I.L.R. (1883) All, 27 as a union in the same persons of the character of debtor and creditor and its origin has been traced to the confusie of Roman Law. In Kudhai v. Sheo Doyal I.L.R(1888) . All. 570 it has been further explained by Mahmood, J. who observes at page 575 that a man cannot be his own creditor or the mortgagee of his own rights. Lord Halesbury in Vol. 13 of his Laws of England p. 146 states: 'At Law, when a less estate was vested in the same person as a greater estate without any intermediate estate between them, the less estate merged in the greater and was extinguished, without rgard to the intention of the parties concerned. But equity is not guided by the rules of law as to merger' and so the question whether merger takes place 'depends upon the intention, actual or presumed, of the person in whom the interests became united.' So, as I observed in my judgment in C.R.P. No. 980 of 1917, the question of merger is one of intention, and in the case of a limited owner the presumption is against a merger. Section 101 of the Transfer of Property Act which creates a statutory merger has no application to the present case of a personal decree obtained against the 1st defendant for future mesne profits at the rate of Rs. 75 per annum. But the principle of merger exists independently of statute, and the Transfer of Property Act has been treated as codifying the law that already existed prior to its enactment. In Kudhai v. Sheo Dayal I. L. R. (1888) All. 570 the principle is stated to apply whenever rights devolve either by inheritance or are acquired under a valid transfer if the result of such devolution or acquisition is that the estates of the judgment-creditor and the judgment-debtor or of the mortgagee and the mortgagor become united in whole or in part in the person of a single individual. From the intention of the parties in the present case it might be held that there was no merger when the 2nd defendant Nagammal succeeded to the estate of her deceased son 1st defendant, as the former was a limited owner and the decree remained executable against the 1st defendant's estate under Section 50, C.P.C. But when she surrendered the whole estate to the plaintiffs as being the nearest reversioners, reserving for herself nothing but a right of maintenance under Ex. II, it cannot be supposed that these reversioners intended to keep alive a debt owed by the estate to themselves, a debt of which no mention is made in Ex. II. They took over among others the properties which were pledged by the 1st defendant's guardian as security for reimbursement of the sureties in the event of their having to pay the 1st defendant's decree debt for mesne profits. What they must be deemed to have got in succession by 1st defendant's untimely death and his mother's release deed was the balance of his estate after wiping out his debt to them. Respondents vakil attempted to support the lower appellate Court's judgment by several other arguments. He contended that the rules as to creditors and debtors would not apply to this case, as the bond was executed under Section 145, C.P.C. in favour of the Court in the form given in Appendix H No. 13. He maintained that this procedure made the Court the creditor and prevented the surety from pleading discharge under Section 133 or 135 of the Contract Act on account of any variance of the terms or any composition between the creditor and the debtor. It is impossible to conceive how the execution of the surety bond in favour of the District Munsiff converted that officer into a creditor in respect of the decree debt. Section 145 has been enacted for the purpose of expeditious enforcement of liabilities against sureties, in order to avoid the cumbrous procedure of assigning the bond to a decree holder and his instituting a separate suit upon it. The surety can put forward in those proceedings any defence that is open to him, and for the purpose of appealing against any order that is made against him he is expressly declared to be deemed to be a party within, the meaning of Section 47. Though the security bond may be executed in favour of the Court, the Court holds it for the benefit of the decree-holder. No doubt it was held in Ramanathan Pillai v. Doraiswami Aiyangar 38 M. L. J. 65 that if the surety wants to get the bond cancelled, he must proceed by regular suit, but it was admitted that he might become a party to execution proceedings when an application was made for an order against him. This case is not an authority for the startling proposition now advanced that in proceedings under Section 145 a surety is precluded from raising any defence.

3. Then it was argued that the incidents connected with the merger of estates would not attach where the decree-holders obtain the 1st defendant's estate long after delivery of their share of property and some time after the estate vested in 1st defendant under a release deed of conveyance, and not by the mere operation of Hindu Law. But it is the surrender of the widow of her life estate by means of a deed that brings the Hindu Law into operation and it is immaterial when the surrender took place. Lastly stress was laid on the fact that the arrears accrued during the life time of 1st defendant and gave rise to a personal liability against him which had not been extinguished. On the death of a judgment debtor however, execution can only under Section 50 C.P.C. be taken out against his property in the hands of his legal representative. This judgment debtor's property is now in the hands of the decree-holders. When it is apparent that they can now do nothing but take out execution against themselves, the argument ends in a reductio ad absurdum.

4. The appeal is allowed with costs here and in the lower appellate Court, and the District Munsiff's order dismissing the 1st and 2nd respondents' petition is restored.

Venkatasubba Rao, J.

5. This appeal raises the question whether the plaintiffs are entitled to execute the decree under Section 145, C.P.C. against the surety who is the appellant before us. The District Munsif held that the plaintiffs were not entitled but the Sub-Judge reversed the decision of the District Munsif.

6. The facts may be briefly stated: The plaintiffs brought, the action for partition of certain properties and for possession of their share. A decree was passed which inter alia directed the 1st defendant to pay the plaintiffs mesne profits at the rate of Rs. 75 per annum from the date of the plaint. An appeal was filed to the District Court, and it was dismissed. A second appeal was preferred to the High Court and stay of execution was ordered of the decree on the condition that security was furnished in respect of the mesne profits decreed. A security bond was then executed by the surety-appellant who undertook to be liable to the extent of Rs. 225 on account of the said profits. The Second Appeal was also ultimately dismissed. It is alleged by the plaintiffs that a sum of Rs. 203-12-0 is due to them on account of mesne profits from the, date of the plaint till the date of the delivery of the immoveable property decreed to them. The execution petition is in respect of that sum. The 1st defendant died after the sum now claimed by the plaintiffs accrued due and the 2nd defendant, the mother of the 1st defendant took possession of all the properties of the latter claiming to be his heir under the Hindu Law. The plaintiffs asserted a title to the said properties against the 2nd defendant on the ground that their father and the 1st defendant who were step-brothers divided their properties under a partition award and that according to the terms of that award the plaintiffs were entitled to succeed to the 1st defendant's properties. It may be noted that apart from any question of any special rule of succession, the 2nd defendant the mother of the 1st defendant would under the Hindu Law inhert his properties. It is said that this special rule of succession was recognised and given effect to in the Second Appeal to which reference has been made, though I must confess this point is by no means clear to my mind and it is unnecessary to pursue this further, for, as a matter of fact the 2nd defendant as stated above took possession of all the properties of the 1st defendant without at first recognising the title of the plaintiffs but she subsequently surrendered the entire estate to the plaintiffs, who, on the date of the execution application, were in possession of it. It is not denied that the plaintiffs alone have come into possession of all the properties of the deceased 1st defendant and that the said properties far exceeded in value the sum now claimed in the execution petition. The District Munsif as well as the Sub-Judge assumes that the plaintiffs succeeded to the properties of the 1st defendant as his heir, but the correct view would seem to be that the plaintiffs acquired the said properties by transfer from the 2nd defendant who is the heir of the 1st defendant. The plaintiffs seek to recover the amount from the surety and the District Munsif dismissed the application on the ground that the debt was extinguished by reason of the fact that the qualities of debtor and creditor became united in the same person viz., the plaintiffs and that the extinction of the principal obligation put an end to that of the surety. The Sub-Judge disagreeing with the District Munsif held that the plaintiffs were entitled to recover the amount.

7. It seems to me that the Sub-Judge was clearly wrong. It is not denied that the plaintiffs became the legal representatives of the 1st defendant. Nor is it denied that the properties taken possession of by the plaintiffs were worth considerably more than the amount claimed by the plaintiffs in execution. Under Section 50, C.P.C. where a judgment-debtor dies before the decree has been fully satisfied, the holder of the decree may apply to execute it against the legal representatives of deceased judgment-debtor. The section further provides that where the decree is executed against such legal representative he shall be liable only to the extent of the property of the deceased which has come to his hands and has not been duly disposed of Now what has happened? The plaintiffs became the legal representatives of their debtor, and they were therefore entitled to execute the decree against themselves to the extent of his property which had come to their hands and the plaintiffs must accordingly be deemed to have obtained satisfaction of their decree: The circumstance that the plaintiffs did not actually take out execution against themselves and Recover the sum in execution is immaterial and I am therefore satisfied that the principal obligation was in this case extinguished.

8. The debt due by the judgment-debtor having become extinguished, are the plaintiffs entitled to poceed against the surety? They are not. To my mind the question does not admit of any doubt. Cunningham and Shephard in their Indian Contract Act quote the following passage from Pothier 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.'

9. I find it impossible to hold that the creditor can proceed against the surety although the debt has been recovered. It has been argued on behalf of the plaintiffs that this rule which accords with common sense is not applicable to surety bonds executed as in this case in favour of the Court. Though this extraordinary contention was repeatedly urged by the plaintiff's Vakil no authority was cited in support of it and I have no hesitation in rejecting it as utterly untenable. It may be remarked that there is an additional circumstance which renders this argument palpably unsound. In consideration of his having executed the bond in question, the surety obtained from the 1st defendant a mortgage in respect of a property belonging to the latter, with a view to recoup himself out of that property in the event of his being compelled to pay the decree amount on the judgment-debtor making default. That property has passed to the plaintiffs and is in their possession along with the other properties of the judgment-debtor. If the surety is compelled to pay the amount he can immediately claim it from the principal.debtor. In this instance the surety's position is even stronger. He can, on paying the amount, proceed against the property in the hands of the plaintiffs themselves and get a refund of the sura, in virtue of the express contract between him and the judgment-debtor.

10. Another argument which has been advanced on behalf of the plaintiffs is this: That when an application is made against a surety under Section 145, he is precluded from raising a defence on the score of the decree having become satisfied and that he must pay up the amount and then sue the plaintiffs again for the recovery of it. There is no warrant for this position and the argument must be rejected.

11. It has been further urged on behalf of the plaintiffs that the properties having been originally taken by the 2nd defendant from whom only the plaintiffs obtained them, the principal obligation was not extinguished. I have dealt with this point above and I cannot accept the argument. The appeal must therefore be allowed with costs in this and in the lower appellate Court.


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