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S.P. Abraham Servai Vs. Raphial Muthirian - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported inAIR1915Mad675; (1914)27MLJ746
AppellantS.P. Abraham Servai
RespondentRaphial Muthirian
Cases ReferredWool Merchansen v. Gullick
Excerpt:
.....the duty to contribute is clearly distinct from the duty to pay to the promisee :the right of each joint promisor to claim indemnity does not consist merely of being subrogated to the right of the original promisee :for though the promisee's rights may have been released the responsibility to the joint promisor is not annulled (section 44). following therefore the wording of the act it may be stated that the right of each joint promisor to compel every other joint promisor to contribute equally with himself to the performance of the promise, is unaffected by the mode in which the promisee exercises or fails to exercise his rights (a) to compel all the joint promisors to fulfil the promise (section 42) or (b) to compel anyone of them to do so (section 43) or (c) to release one, without..........suggested that the defendant is responsible. whether the plaintiff is regarded as the defendant's joint contractor, or as he contends that he should be, as his surety in respect of the amount which he has had to pay on the defendant's behalf, is immaterial, because he could not affect the defendant's position in either capacity. the debt having been held unrecoverable from the defendant directly, it is unjust that it should be recovered from him indirectly in consequence of the plaintiff's conduct, which he did not authorise. this treats the defendant's liability as originating in or at least as depending on the fact that a decree preceded the plaintiff's payment. but on the other side it is contended that it should be placed on a broader basis with reference to an earlier stage in the.....
Judgment:

Oldfied, J.

1. The plaintiff and the defendant in this case were joint executants of a promissory note. It is common ground that each received part of the sum borrowed and the correctness of the Lower Court's, finding as to its division between them and the amount repaid by each cannot be disputed. They were however sued by their creditor for the balance due; and a decree was passed against the plaintiff for the whole, the defendant being exonerated on his plea of limitation. The plaintiff satisfied the decree and sues the defendant for contribution. The Lower Court held that, notwithstanding the defendant's exoneration, it was equitable that his should contribute towards the discharge of the common debt. This Civil Revision Petition has been argued against that decision. It has been referred to a Bench by a learned Judge sitting in the Admission Court.

2. As pointed out by the learned Judge, the facts in Ramayya v. Veerapurani Venkatappiah (1910) M.W.N. 889 on which the Lower Court relied, differed materially from those now in question, because in it there was no decision on limitation or any other ground, such as there is here, against any of the defendants, and some had not been sued by the creditor. The principle there recognised is merely that liability for contribution between co-contractors is enforceable, although the suit to enforce it is brought after a suit on the original liability would be barred. Here the point is that the original liability was held unenforceable against the defendant not only before the present suit was brought, but also before the plaintiff was, held liable or made any payment.

3. The argument, apart from authority, has been presented as follows. The defendant has been exonerated; and the debt must have been kept alive against the plaintiff by some act on his part, for which it is not suggested that the defendant is responsible. Whether the plaintiff is regarded as the defendant's joint contractor, or as he contends that he should be, as his surety in respect of the amount which he has had to pay on the defendant's behalf, is immaterial, because he could not affect the defendant's position in either capacity. The debt having been held unrecoverable from the defendant directly, it is unjust that it should be recovered from him indirectly in consequence of the plaintiff's conduct, which he did not authorise. This treats the defendant's liability as originating in or at least as depending on the fact that a decree preceded the plaintiff's payment. But on the other side it is contended that it should be placed on a broader basis with reference to an earlier stage in the transaction, the separate contract between the parties, when the debt was incurred, to indemnify each other for any excess payment made by one for the other, which was independent of the creditor's suit and its result. We have to decide which of these views is correct.

4. There is, so far as we have been shown, no direct Indian authority. But Subrahtnania Aiyar v. Gopala Aiyar I.L.R. (1909) M. 308 is relied on by the plaintiff though one portion of the Judgment certainly supports the defendant. It is therefore necessary to ascertain what was really decided in it. The plaintiff, a trustee sued the sons of his predecessor in the trusteeship for damages on account of their father's misfeasance. The limitation applicable was that, which would have been applicable to a suit against him Periasami Mudaliar v. Sitarama Chetty I.L.R. (1903) M. 243. The suit against them was therefore barred. The plaintiff also however sued certain sureties, against whom (so far as the report shows) the suit was still in time, solely because they had given land as security. It was held that they had not been discharged by the fact that the remedy against their principal had been lost, since his liability, and therefore theirs, to plaintiff were still subsisting. That is intelligible. But the question there was between the creditor and his debtors, principal and surety directly, whereas here it is only between the latter : and the case therefore gives no support to this part of the plaintiffs argument. He relies here in fact on an identification of the defendant's liability to the creditor, which no doubt is unaffected by the latter's loss of his remedy, with nis distinct liability to the plaintiff, which has not been shown to be legitimate and is irreconcilable with other cases he has cited. The relation between the sureties and their principal debtor is in fact dealt with in Subramania Aiyar v. Gopala Aiyar I.L.R. (1909) M. 308. only obiter in the words at page 311. 'It has been urged that the surety will be prejudiced, if he is liable to be sued, when he' cannot have any remedy against the debtor, after a suit against him has become barred. The answer is he is himself to blame. He can easily avoid the risk and clothe himself with all the creditor's rights by payment or: performance as soon as the debtor becomes liable. Section 140 of the Indian Contract Act.'; This no doubt, supports the view for which the defendant contends. The question however was not before the learned Judges directly, and the authorities relevant to it were not referred to; and, if the hardship involved and the means of avoiding it are to be considered it may respectfully be suggested that there is no more reason for penalising the surety for not paying and for failure to acquire the right to sue the principal debtor, than the debtor, for not paying what he primarily was bound to pay.

5. The other cases are Woolmer Shansen v. Gulick (1898) II Ch. D. 611 and Gardner v. Brooke (1897) II Ir. R. 6. They are directly relevant and are in the plaintiff's favour. In the the first, question arose between cosureties and is dealt with very shortly. The Court inclined to the belief that the statute did not begin to run, until the plaintiff made his payment, but was not obliged for the purpose of the; case to decide between that date and the date on which the. amount of his liability was ascertained. That point however; was placed beyond doubt as regard this presidency by Narayana murthi v. Marimuthu Pillai I.L.R. (1902) M. 322 and is not left open in the second case above mentioned, in which the discussion is full and the parties, like those before us, were: joint makers of a promissory note. The reasons for the decision in the plaintiffs favour were that the defendant's liability rested on grounds of equity, independent of the original contract with the creditor, and was, based on the payment made in discharge of the common obligation and had no existence till that payment was made. These: decisions are directly in point and in the circumstances must be followed in preference to the obiter dictum above referred to though it occurs in a Judgment of this Court. In accordance with them the conclusion must be in the plaintiff's favour. The Civil Revision Petition is therefore dismissed with costs

Tyabji, J.

6. The question before , us is, where a joint promisor., whose liability to the promisee was kept alive. beyond three years from the date of the promissory note, and who was consequently compelledto pay by a decree of the court more than his proportion of the debt to the promisee, can sue another joint promisor for contribution though the decree exonerated that other joint promisor from payment, on the grourid that the debt as against him was barred by limitation.

7. The facts are as follows:-

The plaintiff and the defendant executed a joint promissory note on 25th June 1903. In or before January 1905 the defendant sent Rs. 20 to the plaintiff for part payment to the promisee and the plaintiff paid this sum together with Rs. 58 on his own account, Subsequently the promisee sued both the plaintiff and the defendant for the balance still due. A decree was passed on 5th August 1911 in which the whole balance, was ordered to be paid by the present plaintiff and the present defendant was exonerated from all payment, the suit on the promissory note having become barred at the time as against the present defendant. On the 9th March 1912, the plaintiff paid the whole of the amount decreed and in the same year sued for contribution from the. defendant. His suit was allowed by the District Munsif. This petition raised the question whether the District Munsif was right.

8. Being a suit for contribution between joint promisors (there being no express contract for indemnity between the joint promisors) the case must be governed by sections 42-44 of the Indian Contract Act, the effect of which for the present purpose may be stated as follows. Where two or more persons have made a joint promise, in the absence of a contract to the contrary

(1) as between the joint promisors and the promisee,

(a) all the joint promisors must fulfil the promise (section 42):

(b) the promisee may compel any one to perform the whole promise (Section 43).

(c) a release by the promisee of one joint promisor does not discharge the other or others (S. 44, first part).

(2) As amongst the joint promisors themselves, each joint promisor may compel every other joint promisor to contribute equally with himself to the performance of the promise (Section 43 paragraph 2). Three incidents connected with the right of con-, tribution are expressly laid down :

(a) if any one joint promisor makes default in contributing, the other must bear the loss (Section 43, paragraph 3).

(b) Section 43 does not derogate from the rights of a surety to recover from his principal payments made on behalf of the principal, and

(c) the release of a joint promisor by the promisee does not free the joint promisor so released from responsibility to the other joint promisor or joint promisors (Section 44, second part).

9. The right to contribution (as between joint promisors) is referred to in the part of the Act directly applicable as a right to compel contribution to the performance of the promise,'

10. This may at first sight appear to make the liability to contribute, co-incident with the performance of the promise. But the duty to contribute is clearly distinct from the duty to pay to the promisee : the right of each joint promisor to claim indemnity does not consist merely of being subrogated to the right of the original promisee : for though the promisee's rights may have been released the responsibility to the joint promisor is not annulled (Section 44). Following therefore the wording of the Act it may be stated that the right of each joint promisor to compel every other joint promisor to contribute equally with himself to the performance of the promise, is unaffected by the mode in which the promisee exercises or fails to exercise his rights (a) to compel all the joint promisors to fulfil the promise (Section 42) or (b) to compel anyone of them to do so (Section 43) or (c) to release one, without discharging the other (Section 44). . An express release by the promisee cannot (on principle even apart from Section 44) affect the right of a third person (the joint promisor) the direct liability on the joint promise may thus be expressly annulled, without affecting the collateral liability, It is difficult then to conceive how the 'promisee's mere omission annulled, without affecting the period--an omission which does not destroy even his own right, but merely bars his remedy by suit Subramania Aiyar v. Gopala Aiyar I.L.R. (1910) M. 308--can affect the joint promisor's collateral right.

11. It seems to me therefore that the District Munsif was right.

12. The result at which I have arrived agrees with the view of a strong court of appeal in Ireland in Gardner v. Brooke (1897) 2 Ir. Rep. 6 upholding the concurrent decisions of Brain C.J. and the Division Court. In that case the right of contribution from a joint promisor was thus referred to: the right comes in equity originally. and absolutely by the payment in discharge of a common burthen and has no existence whatever, inchoate, or complete, till the payment is made. It is net therefore affected by what affects the contract... The principle came into England from the Civil Law where it pursues exactly the same consequences and distinctions that are found in equity all based on community of burthen and benefit from payment, and more from agreement.' In. the same case Gibson J. said ' contribution is not limited to cases of guarantee, but extends to all cases where one is compelled to pay more than his proportion of a joint liability : Ramskil v. Edwards 31 Ch. D, 100. The question here is what is the extent of the obligation of the joint makers to one another. Is it an unqualified liability, according to the proportionate shares of each, to indemnify any joint maker who may at any time be legally compelled to pay more than his share or does the duty depend on the co-debtor, who has paid in excess of his share, being merely subrogated into the creditor's rights?, or does the obligation only bind a party so long as he himself remains liable to the creditor, and therefore may himself require the benefit of indemnity against the others The first view is, I think, plainly the true one. When they signed the note, the parties must have contemplated that it would be paid, and that the burden should be shared equally. The fact that one happens to escape from legal liability to the creditor, without the consent of his associates, and perhaps even without their knowledge, cannot be allowed to disturb the original obligation, between the co-debtors or to alter the proportions of liability or contribution, which must be ascertained from the note at the time that it was made. The duty to contribute here binds all, so long as any one remains legally liable by virtue of the joint contract.'

13. The facts of the case last cited are exactly similar to those now before us except in two particulars, (1) there the payments in respect of which contribution was brought was not made in execution of a decree; (2) there was no decree exonerating the defendant from liability on the contract.

14. The first of these particulars does not distinguish the case in favour of the defendant.

15. With reference to the second, the defendant before us contends that by being exonerated from payment in the previous suit he is exonerated from the duty to contribute. But the decree gave effect to the direct liability arising from the contract as between the promisee and the joint promisors in so far as that liability could be enforced by suit. It did not affect the collateral liability as between the joint promisors themselves arising not from the contract which was the cause of action in the first suit, but from the payment consequent on the decree.

16. Another argument addressed to us was that the acts of the plaintiff, keeping the debt alive against himself after the promissory note became barred as against the defendant, made in effect a new contract between the plaintiff and the promisee, that the defendant was not privy as a joint promisor to this new contract. Such may conceivably be the case were a joint promisor against whom the debt is barred pays the debt; a payment so made may conceivably be taken as a payment not on account of any legal liability, but made out of honour : and a person making such a payment cannot in honour ask another to contribute to the maintenance of his honoun where under such circumstances an attempt is made to compel contribution. Mr. Justice Sadasiva Iyer's fears (expressed in his referring judgment) that the first payment might in fact have been made in collusion with the promisee might be well founded. But in the present case there is no suspicion of collusion and no basis for saying that a new contract for payment was made between the plaintiff and the promisee. The final payment was made because there was a decree against the plaintiff and it would appear that at least one of the earlier payments which kept the debt alive was made on behalf of the defendant.

17. It seems to me therefore that alike on the construction of the section, on principle, and on authority, the plaintiff ought to succeed in the suit.

18. Before concluding I must refer to two decisions of this Court. In Putti Narayanamurthi Aiyar v. Marimuthu Pillai I.L.R. (1902) M. 323 Section 145 of the Indian Contract Act was referred to as though it directly governed a joint promisor's right of contribution. It seems to me that though the joint promisor's right is analagous to the surety's right of indemnity under. Section 145, there are distinctions between the two. The right of indemnity referred to in Section 145 and the connected Section 126-131, 133-147 inheres in a person who contracts with the promisee himself expressly and solely as surety : in such a case the right to indemnity is implied. Section 145. Next there is the case of a person who is a principal joint promisor as between himself and the promisee, but as between himself and another, the joint promisor is (expressly or impliedly) only a surety; the promisee not being privy to the contract of the suretyship between the promisors inter se Section 132. Thirdly there is the case of an express contract of indemnity (Section 124) as distinct from a promise to indemnify implied by Section 145 in a contract of guarantee. All these rights and liabilities are analogous to the one with which we have to deal. But if and in so far as the direct rules contained in Ss. 42-44 are not a sufficient guide, resort should be had, it seems to me in the first instance to Section 124, which refers to the rights under an express contract to indemnify similar to that which Section 43 implies amongst joint promisors: rather than to Section 145 which refers to a contract for indemnity implied between a person who, contracts expressly and solely as a surety on the one hand and the principle debtor on the other hand in order to make Section 145 applicable to joint promisors the contractual liability of each joint promisor as principal debtor must be assumed to have reference only to a proportionate part of the debt, an assumption that is opposed to Section 42. The next case is Subramania Aiyar v. Gopala Aiyar I.L.R. (1910) M. 308 which has been already referred to. The question there before the court was whether a surety's liability to the creditor (as defined in Section 126) was discharged by the fact that the creditors suit against the principal debtor was barred by limitation. That question was answered in the negative. The ground for decision was that though the surety's liability continues only so long as there is no act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor ' yet it could not be said that the It gal consequence of the creditor's forbearance to sue the principal debtor during the period of limitation and the consequent loss of his remedy was a discharge of the principal debtor. In dealing with an objection to the result of this reasoning, it seems to have been assumed by the Court that the surety's rights against the principal debtor had become' barred at the time of the decision, i.e., before the surety had made any payments. It is unnecessary to consider whether this assumption was consistent with the terms of Section 145 of the Indian Contract Act, and with the ruling in Putti Narayana Murthi Aiyar v. Marimuthu Pillai I.L.R. (1902) M. 322 where it was held that the cause of action under Section 145 does not arise until actual payment by the security. See also Marrivdde Chinna Ramayya v. Veerapurani Venkatappiah (1910) M.W.N, 839 Wool Merchansen v. Gullick (1893) 2 Ch. D. 514. For the remark in Subrahmaniya Aiyar's case based on the assumption just referred to was purely obiter dealing not with the rights of the creditor against the surety which were being adjudicated upon, but dealing with the remedy of the surety which might or might not have been barred as against the principal debtor. The circumstances alluded to on p. 304 of the report, and the fact that some property was given as security seems to have brought about the result that the creditor's remedy was barred against the principal debtor, but enforceable against the property given as security. It seems to me that it would be going beyond all the limits of the doctrine of stare decisis to consider ourselves bound by an assumption as to a question, which is not before the Court an assumption made merely for the pur-p6se of dealing with an argument that was not accepted.

19. I agree that the petition should he dismissed with costs.


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