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Subramania Ayyar Vs. Supparaya Pillai - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported inAIR1936Mad424
AppellantSubramania Ayyar
RespondentSupparaya Pillai
Cases ReferredSomasundararn Chettiar v. Periakaruppan Chettiar
Excerpt:
- - in a case like the present, the suggestion of a remedy by way of assignment of the bond has very little to recommend it. to whom is the bond to be assigned ? the insolvency court can do justice much more effectively between the parties if it has power to enforce the terms of the bond than ordinary courts can do in a suit filed to enforce the bond if that bond is assigned to a third party. the trend of authority in this country is distinctly against that view......decree from the sureties, to the extent to which they have rendered themselves liable under the surety bond given in the insolvency composition. the execution petition was transferred to the insolvency court, by some procedure which i am not able to understand and the two petitions were dealt with together. both the courts below have made an order calling upon the sureties to make the payment in terms of the surety bond. the learned district judge rightly points out various difficulties in the way of ordering the execution petition, (see para. 4 of his judgment). but as the merits of the contentions were practically the same in both the petitions he deals with the matter by a single order. confining myself for the moment to the order on the petition filed in the insolvency.....
Judgment:
ORDER

Varadachariar, J.

1. This revision petition arises out of an order made by the District Court of East Tanjore in an appeal under the Provincial Insolvency Act. The petitioners here stood surety under a composition scheme in 1. P. No 10 of 1931 on the tile of the Sub-Court of Tiruvarur. The debt due by respondent in this revision petition is shown as item 16-A in the composition schedule. The foot-note to that schedule indicates that the terms on which that particular debt was to be included in that schedule were finally settled only when the scheme came before the Court for approval, because in respect of that debt there was a litigation pending at the time in O.S. No. 256 of 1931 on the file of the District Munsifs Court of Tiruvarur, for a declaration that the promissory, note on foot of which that amount was claimed to be due had been discharged. The-Court therefore took care to indicate that this item would be payable under the scheme of composition 'only if the creditor is finally successful in O.S. No. 256 of 1931.' That suit was dismissed by the Court of first instance. An appeal preferred by the debtor was returned by the appellate Court on a requisition that the appellant should pay a. higher court fee. That question, I am told, is now the subject-matter of a revision petition before this Court. In the meanwhile, the creditor, in order to escape the bar of limitation in respect of this claim on the promissory note, filed O.S. No. 70 of 1933 on the file of the District Munsifs Court of Tiruvarur and obtained a decree thereon. It is not suggested that any appeal has been filed against that decree,

2. In this state of things the creditor put in the two applications, one on the execution side and the other to the insolvency Court, to recover the amount of his decree from the sureties, to the extent to which they have rendered themselves liable under the surety bond given in the insolvency composition. The execution petition was transferred to the insolvency Court, by some procedure which I am not able to understand and the two petitions were dealt with together. Both the Courts below have made an order calling upon the sureties to make the payment in terms of the surety bond. The learned District Judge rightly points out various difficulties in the way of ordering the execution petition, (see para. 4 of his judgment). But as the merits of the contentions were practically the same in both the petitions he deals with the matter by a single order. Confining myself for the moment to the order on the petition filed in the insolvency proceedings, I see no reason to differ from the view taken by the Courts below. On the terms of the surety bond, two objections, somewhat inconsistent with each other, were taken before me. It was contended that, according to the order of the Court in the composition schedule, the creditor was entitled to payment in respect of this item only after the litigation in O.S. No. 256 of 1931 had been finally settled in favour of the creditor. It was argued that as the Civil Revision Petition relating to the court fee matter is pending, it could not be said that that litigation had been finally settled. I am free to confess that this may be literally so. But in view of the fact that the decree in O.S. No. 70 of 1933 had been allowed to become final. I see little substance in this objection. However, to be on the safer aside, 1 propose to safeguard any possible rights that may accrue to the sureties in the event of a reversal of the decision in O.S. No. 256 of 1931, by providing that if by any final decree in that litigation the creditor's right to the amount therein involved should be negatived, he shall be bound to bring back into Court the amount that he may draw under the order in the present petition. In view of what is stated to have happened in the first Court, I leave it to the present petitioners, if so advised, to apply to the Court of first instance to take a bond from the creditor in the above terms.

3. The other argument was that this note made by the insolvency Court stating that the moneys shall be payable only after the final termination of the dispute, in O.S. No. 256 of 1931, amounted to a variation of the contract between the creditor and the debtor without the knowledge of the surety and accordingly discharged the surety. I do not find that any such contention had been raised in the Court below. I have no reason to assume that the variation, if really it was a variation, was made without the consent or knowledge of the sureties. The contract is one between the Court and the sureties and it becomes complete only when the Court accepts the surety bond; and a perusal of the papers leads me to think that this note in the insolvency schedule was made at the time when the Court accepted the surety bond. In these circumstances, I see no force in the contention about the sureties having been discharged by reason of any variation in the principal contract. It only remains to deal with the objections taken as regards the jurisdiction of the insolvency Court to deal with these applications. It has been contended that the Provincial Insolvency Act does not contain any provision corresponding to Clause 2 of Section 30, Presidency Towns Insolvency Act, and that it is therefore not open to the insolvency Court to give relief against the sureties by summary orders, and that the only course open to the creditor is to take an assignment of the bond and sue thereon. Reliance has been placed in this connexion on some observations at p. 255 of the 1930 Edition of Mulla's Law of Insolvency.

4. The absence of a provision corresponding to Section 30, Presidency Towns Insolvency Act, may have an important bearing when a question of contempt of Court arises, because Courts in the mofussil may not be regarded as Courts of record and therefore may not have jurisdiction in contempt in the absence of specific statutory provision. But so far as the power to enforce the terms of the surety bond is concerned, the absence of such a provision is by no means conclusive. On the principles indicated in the judgment of the Judicial Committee in Raj Raghubar Singh v. Jai Indra Bahadur Singh 1919 42 All 158, the Court to which such bonds are given must prima facie have power to enforce them. In a case like the present, the suggestion of a remedy by way of assignment of the bond has very little to recommend it. The schedule may comprise numerous creditors-some of whom might have been paid, some of whom might have been partly paid and others not paid at all. To whom is the bond to be assigned The insolvency Court can do justice much more effectively between the parties if it has power to enforce the terms of the bond than ordinary Courts can do in a suit filed to enforce the bond if that bond is assigned to a third party. Reliance was placed on the decision in Ex parte Mira Bita, In re Dale (1875) 20 Eq 772, but that was a case of a bond given not to the Court but to a private trustee and the Court naturally held that the only remedy was by way of a suit on the bond.

5. I see little force in the objection that by reason of the annulment under Section 39, the insolvency Court becomes wholly functus officio and is no longer competent to pass any order by way of enforcement of the surety bond. The trend of authority in this country is distinctly against that view. Many of the authorities have been reviewed in the judgment of this Court in Kamlreddi Timmappa v. Devasi Harpal : AIR1929Mad157 and Somasundararn Chettiar v. Periakaruppan Chettiar : AIR1930Mad520 . The matter has been placed beyond question by the judgment of the Full Bench in Veerayya v. Srinivasa Rao : (1935)69MLJ364 . The doubt hitherto was in respect of the effect of an annulment under Section 43. An annulment under Section 39 has been assumed in accordance with the authorities in England not to put an end to the jurisdiction of the insolvency Court over all the parties and this view has in fact been relied on in support of the wider proposition that even an annulment under Section 43 does not wholly put an end to the jurisdiction of the insolvency Court. It is sufficient to refer in this connexion to the case in Kamlreddi Timmappa v. Devasi Harpal : AIR1929Mad157 and to the observations in Somasundararn Chettiar v. Periakaruppan Chettiar : AIR1930Mad520 at The revision petition therefore fails and is dismissed with costs.


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