1. C.M.A. No. 389 of 1944: This is an appeal against the decree of the District Judge of South Arcot determining the amount of the liability of the appellant under a security bond executed by him. The material facts are the following. One Muthuswami Jadaya Goundan filed O.S. No. 43 of 1936 in the Court of the District Judge of South Arcot for the recovery of an impartible estate known as Jadaya Goundar Jaghir. The first defendant in the suit was the rival claimant. The second defendant was the first defendant's son and was impleaded pro forma. The third defendant claimed to be a lessee of the forest produce in the Jaghir under a lease granted in 1934 by the previous Jaghirdar for a period of seven years commencing from 16th July, 1936. The suit was decreed and it was held that the plaintiff was entitled to succeed to the estate on the death of the last holder. The lease in favour of the third defendant was held to be not binding on the plaintiff and was consequently set aside. defendants 1 and 3 filed appeal No. 56 of 1939 in this Court. A receiver appointed during the pendency of that appeal paid certain amounts into Court from time to time. In November, 1941 the amount lying in deposit was about Rs. 12,000. The plaintiff applied for payment out of this amount and this Court directed in C.M.P. No. 6942 of 1941 that he may draw the amount upon furnishing security to the satisfaction of the District Court of South Arcot. In pursuance of that order the present appellant executed on the 18th April, 1942 a security bond the material portions of which we shall now refer to. After reciting that about Rs. 12,000 was lying in the Court of the District Judge of South Arcot to the credit of Jadaya Goundar estate the bond mentions that the plaintiff was permitted to withdraw the amount by the order of the High Court in C.M.P. No. 6942 of 1941, that he requested the executant to stand surety for the said amount and that he (the executant) agreed to do so. The bond then goes on to state that he executed the security bond binding himself ' in the above manner '. There is a reference to the approval of the draft security bond by the District Judge and then occur the following Clause which must be set out in full:
If the appeal, A.S. No. 56 of 1939, against the decree of this Court, pending in the High Court he dismissed and the decree of this Court confirmed, then this security bond will stand cancelled. If, however, the appeal in the High Court be allowed and the decree of this Court set aside, and if this Court directs that the said sum of Rs. 12,000 (twelve thousand), should be brought back into Court, the said Muthuswami Jadaya Goundar will pay it back into Court. In default of his doing so, I will pay the aforesaid amount of Rs. 12,ooo. If the amount is paid in the aforesaid manner, then also this bond shall stand cancelled.
2. A.S. No. 56 of 1939 was dismissed by the High Court so far as the first defendant was concerned. The appeal of the third defendant, (second appellant) was, how-ever, allowed and the suit against him was dismissed.
3. In pursuance of that decree the third defendant applied for restitution and he was held entitled to a sum of Rs. 5,417-1-0. The plaintiff was directed to pay that sum into Court on or before 29th April, 1944, and in default of such payment, the surety (the present appellant) was directed to pay the amount. On behalf of the appellant the first point taken by his Counsel is that on a construction of the security bond the appeallant is not liable in the events that have happened. It is argued that the security bond contemplated either the allowance of the appeal in its entirety or its dismissal and did not envisage the possibility of a partial allowance of the appeal and that since a contingency which is not provided for in the security bond has now arisen the surety is not liable.
4. Considerable argument has been addressed to us as to the principles governing the construction of security bonds but as pointed out in Paramasivam v. Ramaswami : AIR1939Mad152 .
The only certain proposition of law which can be deduced from all the authorities cited as this, that each bond must be interpreted according to its own terms.
5. It is therefore necessary to address ourselves in the first instance to the language of the security bond. In substance the obligation of the surety is to arise on the making of a direction by the District Judge of South Arcot that the amount paid to the plaintiff or any part of it should be brought back into Court. This can no doubt occur only if the decree in O.S. No. 43 of 1936 is varied. Apart from this material portion of the security bond there is, as already stated, another portion where the surety states that he executed the security bond binding himself in the manner contemplated by the order of the High Court in CM.P. No. 6942 of 1941.
6. Turning to that order there can be no doubt that when a person is permitted to draw an amount lying in Court on furnishing security to the satisfaction of that Court the security will be available, whether the whole or a portion of that amount is to be brought back into Court. The order of the High Court in C.M.P. No. 6942 of 1941 would be equally applicable whether the appeal is allowed in whole or in part and in consequence thereof the whole of the amount paid to the plaintiff becomes repayable or only a part of it. The argument on behalf of the appellant goes, as it necessarily must, so far as to say that whatever might have been intended by the High Court in its above order the security bond as executed provides only for the contingency of a complete allowance of the appeal. This argument seems to us to overlook the earlier portion of the security bond to which we have already drawn attention. In Raja Raghunatha Prasad Singh v. Raja Kirtyanand Singh Bahadur (1932) 63 M.L.J. 85 : Cri.L.J. 413 the Privy Council held that:
The bond must be considered in the light of the order directing the security to be given.
7. After giving their interpretation of the security bond before them their Lordships described it as ' the true construction of this document having regard to the circumstances in which it was executed.' The principle laid down in Raja Raghunatha Prasad Singh v. Raja Kirtyanand Singh Bahadur1 was applied in Mahendranath Banerji v. Sateeschandra Chowdri I.L.R. (1934) Cal. 890. In Nedungadi Bank, Ltd. v. Doraikannu Ammal : AIR1941Mad282 the question was whether a guarantee was a continuing guarantee. The learned Judges sum up the effect of the authorities as indicating:
That in deciding such a question the whole of the surrounding circumstances must be taken into consideration unless the wording of the guarantee is such that the Court is precluded from taking anything else into consideration.
8. In Pratapsingh Maholabhai v. Kesavlal Harilal (1934) 68 M.L.J. 339 : L.R. 62 IndAp 23 : I.L.R. 59 Bom. 180 (P.C.) the Privy Council quote the following passage from the judgment of the Lord Chancellor in Blest v. Brown (1862) 4De G.F. & J. 367 :
It must always be recollected in what manner a surety is bound. You bind him to the letter of his engagement. Beyond the proper interpretation of that engagement you have no hold upon him. He received no benefit and no consideration. He is bound, therefore, merely according to the proper meaning and effect of the written engagement that he has entered into.
9. Among the cases cited on behalf of the appellant it is sufficient to refer to the following: In Paramasivam v. Ramaswami : AIR1939Mad152 the actual sentence in which the liability of the executant of the security bond was expressed ran as follows:
If the C.M.A. No. 375 of 1931 preferred by me to the High Court against the order appointing receiver is decided in favour of the said first plaintiff, I shall pay into Court the one year's net income of Rs. 1,600-7-4 as aforesaid.
10. C.M.A. No. 375 of 1931 was allowed and not dismissed as contemplated by the security bond but there was a Letters Patent Appeal against the decision of the learned Judge who decided the Civil Miscellaneous Appeal and that Letters Patent Appeal was also allowed so that the ultimate decision was in favour of the first plaintiff though the decision in the Civil Miscellaneous Appeal was against him. The first plaintiff sought to enforce the security bond. The learned Judges felt that the terms of the bond were absolutely explicit, that the bond definitely said that if a particular appeal (the number of which was given) was decided in favour of the first plaintiff the executant of the bond shall pay money into Court and that there was nothing in the language of the bond which extended the liability to the contingency of a further appeal against C.M.A. No. 375 of 1931.
11. The decision of King, J., in Dharmapuram Mutt v. Mohamed Usman Sahib : AIR1941Mad151 was given on facts which closely resemble the facts in Paramasivam v. Ramaswami : AIR1939Mad152 . In Dharmapuram Mutt v. Mohamed Usman Sahib : AIR1941Mad151 the security was given against the possible alteration of the decision of the lower Court in this number (in Tamil) obviously meaning in the appeal on the file of the District Court in which the bond was given. It was decided that the obligation that was undertaken did not cover the possible contingency of a Second Appeal in the High Court and the alteration of the decree of the trial Court on such Second Appeal. In Veerasalingam v. Subbarayudu : AIR1939Mad932 it was held that the liability of the sureties conditioned on a success of the defendants in the appeals preferred by them did not arise when one only of the defendants succeeded and that the word ' defendants ' could not be read as meaning the defendants or either of them. To the same effect was the decision in Venkanna v. Sanyasayya (1937) 47 L.W. 84 where security was given ' for any amount that may be decreed in the plaintiff's favour in the said suit againtst the defendants.' A decree was passed against one of the defendants but the suit was dismissed against the other and it was held that the security was not available. In Muhammad Yusaf v. Ram Gobinda Ojha I.L.R.(1927) Cal. 91 a surety undertook that he would be liable to pay the decretal amount in the event of a decree being passed in the suit if the money could not be realised from the judgment-debtor. There was a reference of the suit to arbitration and in terms of the award which followed the Court decreed the suit. When the decree-holder sought execution against the surety to realise the decretal amount it was held that the surety was discharged as there was no decree on contest by the Court. It is unnecessary for us to say whether or not a decree passed in terms of an award given on a reference of the suit itself to arbitration is a decree passed in the suit. It is enough to say that the learned Judges in that case held on a con-struction of the bond before them that a decree passed in terms of an award was not such a decree as was contemplated by the terms of that bond. There is no general principle gatherable from this decision which can be applied to the circumstances of the present case.
12. It is true that a security bond should be strictly construed according to its terms but it seems to us that the real meaning and effect of this rule are very often misunderstood. In our opinion the true position is this. If it is reasonably clear that the contingency in which the bond is sought to be enforced would not fall within the language of the condition it is not permissible to override that language in the light of what the parties intended if they did not succeed in expressing that intention in suitable language. If, on the other hand, on a fair reading of the bond in the light of the surrounding circumstances--the most important of such circumstances being the order pursuant to which the security is given--the Court considers that the contingency in which the security is sought to be availed of falls reasonably within the language of the condition which is sufficiently wide to comprehend it, there is no rule compelling the Court to adopt the stricter of two con-structions to both of which the language may be susceptible.
13. We are inclined to hold that the security bond if interpreted in the light of the order of the High Court to which it refers and which it purports to effectuate and carry out, would cover a partial allowance of the appeal as much as its total allowance. There can be no doubt that both cases were contemplated by the order of the High Court and if the security bond is read along with that order and considered in the light of it there is no reason to put a strict interpretation on the wording of the security bond so as to hold that it meant only to provide for the appeal being allowed in its entirety.
14. Two further questions are raised in the appellant's behalf. The learned District Judge held that there must be a deduction of five per cent. out of the collections made by the receiver in respect of the forests over which the third defendant held a lease. The appellant's counsel argues that the customary allowance in such cases is ten per cent. and that ten per cent. should be allowed even in the absence of any evidence about the expenses incurred in realising the amount claimed by way of mesne profits and in support of this argument he relies on the decision of the Judicial Committee in Secretary of State for India in Council v. Saroj Kumar Acharjya Choudhuri (1934) 68 M.L.J. 580 : L.R. 62 IndAp 53 : I.L.R. 62 Cal. 499 (P.C.) which follows an earlier judgment of the Board in Crish Chunder Lahiri v. Shoshi Shikhareswar Roy . This percentage was allowed in a judgment of this Court in Krishnayya Rao v. Maharaja of Pithapuram : (1942)1MLJ472 . In a decision of another Bench of this Court reported in Dhara Rama Subbayya v. Annavarappu Lakshminarasimham : AIR1945Mad246 it was however held that the rule as to the ten per cent. recognised in Grish Chunder Lahiri v. Shoshi Shikhareswar Roy and Secretary of State for India in Council v. Saroj Kumar Acharjya Choudhuri (1934) 68 M.L.J. 580 : L.R. 62 IndAp 53 : I.L.R. 62 Cal. 499 (P.C.) is based on a well-recognised practice in the Courts of Bengal and that there is no such practice in the Courts of this province. It will be noticed that in Secretary of State for India in Council v. Saroj Kumar Acharjya Choudhuri (1934) 68 M.L.J. 580 : 1934 L.R. 62 IndAp 53 : I.L.R. 62 Cal. 499 (P.C.) the judgment of the Board was delivered by Sir John Wallis who had considerable experience of the working of the Courts of this province and that it is stated in the judgment that 'in India' ten per cent. is the customary allowance for collection charges in assessing mesne profits. It is however unnecessary to decide whether the principle of the rule laid down in the decisions of the Judicial Committee is or is not applicable to cases arising within our jurisdiction. In our opinion the rule as to ten per cent. is not an inflexible rule applicable to all cases regardless of the circumstances governing the realisation of the amounts claimed by way of mesne profits. Where evidence is available as to expenses actually incurred in the process of collection there will not of course be any difficulty, the amount actually spent being in the absence of any evidence that it was excessive or extravagant, a legitimate and permissible deduction. Even in the absence of any material to show the actual expenditure of realisation there is no reason why the Court should not take into consideration the comparative ease or difficulty of collection in any particular case and why the percentage allowed by way of collection charges should not accordingly be adjusted. The learned District Judge has quite rightly pointed out that all that the receiver had to do in the matter of realising the mesne profits now claimed by the lessee was to put up the leasehold right to auction, receive the lease amount from the successful bidder and deposit it into Court and that it would therefore be unreasonable to allow for collection charges anything like ten per cent. In his view the actual charges would be about Rs. 70 or Rs. 80. He has however allowed five per cent. on collection on the analogy of what is permitted to the Official Receivers in respect of their realisations. In support, the learned District Judge points out that it is not practicable in this case to fix that part of the costs of administration which can be properly attributed to the transaction in which the lessee is interested and that the lessee must have received some benefits of a general character from the administration of the entire jaghir being in the hands of the receiver. We consider these reasons to be valid and in our opinion they justify the assessment of the collection charges at five per cent. There is an appeal (CM. A. No. 442 of 1944) filed on behalf of the lessee questioning the correctness of the decision of the learned District Judge in this regard and seeking a reduction of the amount to a very small figure. But for reasons just given we consider that no case has been made out either on the one side or the other for interference with the fixation of collection charges made by the lower Court.
15. The next point taken on behalf of the appellant is that a sum of Rs. 3,000 contributed to the War Fund out of the amounts lying in deposit in Court must be held to be a contribution made by both the plaintiff and the third defendant and that the learned District Judge was in error in treating it merely as a contribution made by the plaintiff. On the 15th November, 1941, the first and the third defendants signed a memorandum (Ex. P-8-b) agreeing to the payment to the War Fund of a sum of Rs. 3,000 out of the amount lying to the credit of the suit. This was signed also by their lawyer on 17th November, 1941. On 26th November, 1941, a formal application, I.A. No. 388 of 1941 was filed for the purpose by the plaintiff. In the supporting affidavit (Ex. P-8-a) the plaintiff states as follows:
In view of the status and circumstances of the Jadaya Goundar estate aforesaid, I fully consent to add along with the sum of Rs. 200, which had already been sanctioned but not disbursed a further sum of Rs. 2,800 and to contribute in all a sum of Rs. 3,000 (Rupees three thousand) to the Governor's War Fund aforesaid.
16. In the petition itself (Ex. P-8) the third defendant endorsed his consent as also the pleader for defendants 1 and 3 acting under a special vakalat. The petition was ordered and Government promissory notes of the face value of Rs. 3,000 were sold and a cheque for Rs. 3,000 out of the amount realised by the sale was paid to His Excellency the Governor's War Fund. It is noteworthy that in Ex. P-9-c (LA. No. 47 of 1942 with endorsements) the application of 26th November, 1941, was described as 'an application of both sides.' On behalf of the respondent lessee it is argued that the contribution was one made by the plaintiff having regard to his position as jaghirdar and stress was laid on what is stated in his affidavit (Ex. P-8-a). On the other side appellant's counsel emphasises the fact that the amount came out of a composite fund and that the subscription was consented to by all the persons interested in that fund, and it is argued that the intention of every body concerned in the subscription is fairly apparent, from the proceedings. The matter is not free from difficulty. While it is true that the formal application was taken our by the plaintiff alone and while there is a reference in the affidavit filed in support of that application to the status and circumstances of the Jadaya Goundar estate, it is very material to note that defendants 1 and 3 expressed their consent to the payment of the War Fund of a sum of Rs. 3,000 several days earlier. It seems to us more probable that all the parties were willing to the extent of their respective interests to have a portion of the fund utilised for a purpose which every one of them considered to be laudable. In fact it is a matter of some doubt whether the plaintiff would have subscribed so large an amount as Rs. 3,000 if he was told or he under-stood that the entire amount would be debited to him. The question then arises as to how the amount is to be allocated between the plaintiff and the third defendant and what portion of it should be regarded as the contribution of the latter. It would appear that at the time when the order for payment of Rs. 3,000 to the War Fund was made the pecuniary interests of the plaintiff and the third defendant in the amount then lying in Court would be almost equal taking into consideration the rents which the third defendant in any view of the case was liable to pay to the plaintiff and the collection made by the receiver from the estate other than the forest area. The first defendant also consented to the payment of the subscription but that does not mean that the plaintiff, the first defendant, and the third defendant have each individually to contribute a third of the amount of Rs. 3,000. The plaintiff and the third defendant were fighting about the jaghirdar's interest. The more reasonable interpretation seems to us to be that the jaghirdar's interest and the lessee's interest should both contribute for the payment of that amount. The plaintiff has succeeded to the right of the jaghirdar and therefore will be liable in respect of Rs. 1,500 and the third defendant must be held to have contributed a like sum as the composite fund was divisible in almost equal shares, between the interests of the jaghirdar and the lessee at the time when the subscription was sanctioned. The learned District Judge held that no part of the Rs. 3,000 should come out of the amount payable to the third defendant but for reasons given above we do not agree with him. There must therefore be a deduction of Rs. 1,500 out of the amount to which the third defendant has been declared to be entitled. To this extent alone the appeal is allowed.
17. The appellant and the first respondent will pay and receive proportionate costs in G.M.A. No. 389 of 1944 and in the Court below. C.M.A. No. 442 of 1944 is dismissed with costs.