1. The plaintiffs who are respondents 1 and 2 herein arrested the 2nd defendant, the 3rd respondent herein, in execution of a money-decree. The appellant executed a security-bond on nth December, 1923 undertaking to produce and hand over the 2nd defendant whenever the Court passed an order to produce him. The bond also provided that in default of the surety producing the 2nd defendant and handing him over to the Court, the amount of decree, interest, and costs shall be recovered by the plaintiffs from the surety personally. On the execution of the bond, the 2nd defendant was released from arrest. The plaintiffs applied to the Lower Court for an order that the surety be directed to produce the 2nd defendant and in default of producing him, the decree-amount be realised from him. The appellant contended that the decree of the plaintiffs against the 2nd defendant had been satisfied and that no execution could issue against him in execution of a decree already satisfied. The District Judge overruled the objection of the appellant and directed him to produce the and defendant on or before a certain date and on his failure to do so that execution should issue against him. The appellant has preferred this Civil Miscellaneous Appeal.
2. Two points arise for consideration in this case, one of fact and the other of law.
3. The first point is whether the decree has been satisfied. Mr. Somayya for the appellant relies very strongly upon Ex.II which is the defendant's ledger in the account book of the plaintiffs. From the entries in the ledger it is found that a nil balance is struck. And Mr. Somayya's contention is that the decree-debt has been wiped off by payment. There are entries on both sides of the ledger and the balance is zero. In Ex. III, the ledger of the 3rd defendant, there is a debit entry of Rs. 5,000. It is argued for the appellant that the 3rd defendant paid Rs. 5,000 in discharge of the decree-debt and thereby the decree-debt has been fully satisfied.
4. Ex. 1 is the day-book and in it there is an entry that the decree in O.S. No. 2 of 1923 has been transferred to Adapala Varada Reddi for Rs. 5,000 and a promissory note for the sum of Rs. 5,000 has been obtained this day from him.
5. Mr. T.V. Venkatarama Aiyar for the respondents 1 and 2 contends that there was no transfer of the decree in favour of Adapala Varada Reddi, the 3rd defendant in the case, but there was only an agreement to transfer the decree to him. Ex. A, pro-note executed by Varada Reddi in favour of the plaintiffs, on 10th January, 1924 contains a recital that Varada Reddi had arranged to take a transfer of the decree-debt from the plaintiffs. The entry in the day-book is of the same date as that of the pronote. The 3rd defendant was only a surety for defendants 1 and 2, and in the razinama decree, he is made liable only for 2/5ths of the decree amount in case the plaintiffs were unable to realise the decree-amount from defendants I and 2. It is unlikely that when he was made liable only for 2/5ths of the amount in case the plaintiffs were unable to obtain satisfaction from the defendants 1 and 2 that he would discharge the whole of the decree amount by undertaking to pay Rs. 5,000. There is no evidence that the decree has been transferred to the 3rd defendant. The appellant's contention is, that the entry has been transferred should be taken to mean that the decree was transferred on the 10th January, 1924. Taking the entry alone, in Ex. A, it cannot be said that the decree has been transferred to the 3rd defendant. The onus is upon the appellant to show that the plaintiffs have transferred the decree and that they could not apply for execution. On a consideration of the evidence we have no hesitation in holding that the decree was not transferred to nor was any amount paid towards the decree, by the 3rd defendant. The appellant has not shown that the decree has been satisfied by any amount being paid by the 3rd defendant Varada Reddi.
6. The next question is, granting for argument's sake, that the decree amount was paid by the 3rd defendant, can the appellant take advantage of the payment, when the payment has not been certified by the Court as required by Order 21, Rule 2. The appellant's argument is that the surety is not a party to the decree and he could not apply to the Court to enter up satisfaction of a decree which has been satisfied by payment by the 3rd defendant. The surety is not a party to the decree but becomes a party only for a limited purpose, that is for purpose of appeal when an order is made against him under Section 145, Civil Procedure Code, vide Ramanathan Pillai v. Donaiswami Aiycmgar (1919) 38 MLJ 65. The fact that he is not a party to the decree is no ground for getting round a definite provision of law under Order 21, Rule 2, Clause (3)
7. Mr. Somayya strongly urges that the said provision is contained in processual law and should not be held to override positive law and under the law of contract a surety is nor bound to pay, when the debt which he undertook to pay in case of default of the principal debtor has been paid off or adjusted. Whatever may be the policy of the legislature in enacting Clause 3, the Court is bound to give effect to it. Where the decree i,s adjusted wholly or in part the judgment-debtor should apply within 3 months to the Court and that such adjustment or payment should be recorded as certified and if he fails to do so, he cannot plead adjustment or payment in answer to the execution of the decree against him. Considerable reliance is placed by Mr. Somayya on the interpretation of Order 21, Rule 16 by the Madras High Court that the executing Court has a discretion to refuse execution at the instance of a transferee of a decree.
8. In Rama Ayyan v. Srinivasa Pattar (1895) 5 MLJ 318 the judgment-debtor transferred some of his immoveable properties to a person in consideration of his paying the judgment-debt to the original decree-holder. The vendee without paying the decree-holder the amount of the decree, got a transfer of the decree to himself and, as assignee, applied for execution. It was held that he was not entitled to execute the decree when he himself in spite of his undertaking to discharge the decree had fraudulently obtained a transfer of the decree from the decree-holder. Mr. Justice Subramania Aiyar observed at p. 232, with regard to Section 258 of the Old Code corresponding to Order 21, Rule 2, of the present Code 'The last paragraph prohibits judgment-debtors, who omit to apply under the second paragraph or having applied fail to establish their case, from relying in execution proceedings upon any payment, satisfaction or adjustment not duly certified. Manifestly therefore the enquiry under the said second paragraph can take place only between a person standing in relation of a judgment-debtor and a judgment-creditor.'
9. The surety not being a party to the decree could not apply under Order 2, Rule 2. I am unable to accept the argument that a surety though he is not a party to the decree could not ask the Court to hold an enquiry as to the decree being satisfied by payment or adjustment provided the application is made within the time allowed by the law. Though he has no locus standi to insist upon an enquiry he could apply to the Court to hold an enquiry inasmuch as he has an interest in showing that the decree has been satisfied. In Ponnuswami Nadav v. Lutchmanan Chettiar (1911) 32 MLJ 170 there was a difference of opinion between Mr. Justice Abdur Rahim and Mr. Justice Sundara Aiyar as regards the question whether the prohibition regarding uncertified adjustment will or will not apply while the adjustment is made by a 3rd party.
10. In Ramayya v. Krishnamurthi (1916) 40 M. 296 it was held that Order 21, Rule 2, did not disentitle a judgment-debtor from proving facts that a transferee of a decree applying for execution was merely a benamidar for another judgment-debtor.'
11. These cases have no application to the present question and they do not throw any light upon the points raised in this case. The real question is whether a surety can plead adjustment or the discharge of a decree when the judgment-debtor himself could not successfully put forward that plea. In this case the payment or adjustment was not certified by the Court as required by Order 21, Rule 2, and therefore execution could proceed against the 2nd defendant.
12. When there is an executable decree against the 2nd defendant can it be reasonably contended that so far as the surety is concerned there is no executable decree? The Court cannot recognise any adjustment or payment out of Court unless certified as is required by law and in the absence of such certificate, a decree-holder, however, fraudulent his conduct may be is entitled in law to execute his decree against the judgment-debtor, and so long as he is entitled to execute the decree against the judgment-debtor, a surety, who undertakes to pay the decree-amount, cannot plead that there is no decree against the judgment-debtor and therefore he is released from liability under the bond. Section 145 says 'When any person has become liable as a surety, a decree or an order may be executed against him to the extent to which he has rendered himself personally liable.' On the failure of the surety to carry out the terms of the bond he makes himself liable for the amount of the decree or for such amount as he has undertaken to pay.
13. It is next suggested that the original decree is not executed against the surety but a second decree passed on his failure to carry out his undertaking and therefore that decree is different from the original decree. No second decree is passed against the surety. The order under Section 145 is passed when he makes himself liable by failing to carry out the terms of the bond to the extent to which he has rendered himself liable. The decree that is executed against him is the decree passed in the suit and therefore it cannot be said that a second decree is passed against him.
14. The contention of Mr. Somayya for the appellant that uncertified adjustment or payment could be pleaded by the surety, was, specifically negatived in a recent case decided by a Bench of the Calcutta High Court in Onkarmal Agarwala v. Nritya Gopal Chaki (1923) 67 IC 885. The learned Judges observe at p. 886 'the surety is bound so long as the judgment-debtor is bound. The judgment-debtor is bound so long as any payments which he may have made are not certified by the Court.'
15. In the result we have no hesitation in holding that so long as there is an executable decree against the judgment-debtor the surety is not relieved from his liability to pay the decree amount under the terms of the security bond executed by him.
16. The appeal fails and is dismissed with costs.