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Kanailal Mookerjee Vs. Kali Mohan Chatterjee - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKolkata High Court
Decided On
Case NumberA.F.A.O. No. 132 of 1954
Judge
Reported inAIR1957Cal645,62CWN136
ActsContract Act, 1872 - Sections 133 and 135
AppellantKanailal Mookerjee
RespondentKali Mohan Chatterjee
Appellant AdvocateRanjit Kumar Banerjee, Adv.
Respondent AdvocateRabindra Nath Bhattacharjee and ;Benoyendra Nath Deb Roy Mohasaya, Advs.
DispositionAppeal dismissed
Cases ReferredPirthi Singh v. Ram Charan
Excerpt:
- .....surety it would be necessary to examine the terms of the consent decree as also the terms of the surety bond. as i have mentioned, the decree was initially a decree for the full amount claimed with costs, although in the subsequent clause it is provided that if a sum of rs. 2,400 is paid within the month of aswin, 1358 b. s. the decree will be deemed to be satisfied by such payment. i am not for the moment considering as to the effect of the said clause. i shall deal with the same hereafter. i am now considering the matter on the basis that there was a decree for the full amount and that decree was passed by consent. the question is whether in such a case it can be said that the surety is discharged. as i said before, in order to determine that question it would be necessary to examine.....
Judgment:

S.R. Das Gupta, J.

1. The question which arises in this appeal is whether in the events which happened the surety has been discharged.

2. The appellant before us instituted a suit against one Lal Mohan Chatterjee for the recovery of Rs. 3100/-, Immediately after the Institution of the said suit he caused an attachment to be made on the undivided half share in the dwelling house of the said defendant under Order 38, Rule 5, Civil P. C. The said attachment was removed upon the respondent in this appeal having stood surety for Rs. 3535-13 for the payment of claim and costs of the appellant. The bond of surety was executed on 2-1-1951. The operative part of the said bond provides that the said surety Would remain liable for the payment of Rs 3535-13 and if the said sum is not realised from the defendant, then the Court would realise the same from his movable and immovable property or from his person. It should be noted that the said bond was given in favour of the Court. Thereafter, on 24-7-1951 a decree was passed by consent of the parties in the said suit. In the first clause of the consent decree it is mentioned that there will be a decree for the entire claim in the suit and costs. The second clause, which is important for our present purpose, provides that if the defendant pays within the month of Aswin 1358 B.S. the sum of Rs. 2400/-, then the decree will be deemed to have been satisfied otherwise the decree-holder will be entitled to realise the entire decretal amount by execution. In Clause (3) it is mentioned that the surety will remain liable until the decretal amount is realised. It should be noted that the respondent was not a party to this compromise. The said sum of Rs. 2400/- not having been paid within the month of Aswin as stipulated in the said consent decree, the decree-holder, started execution for the realisation of the entire decretal amount against the surety, that is with present respondent. An objection was filed to the said execution by the said surety under Section 47, Civil P. C. The substance of that objection was that in view of the consent decree and in view of the terms thereof the surety has been discharged. The trial Court negatived that contention. There was an appeal against the said decision and the lower appellate Court reversed the finding of the trial Court and held that the surety was discharged. It is against that decision that the present appeal has been preferred.

3. Before us the learned Advocate appearing for the appellant contended in the first place that the fact that the decree was passed by consent did not discharge the surety. He further contended that the fact that the decree-holder agreed to accept a lessor sum if paid within a certain date did not also absolve the surety of his liability. In support of his contention he relied on the case of Jia Bai v. Joharmull Bothra, decided by Rankin C.J. and Costello J. : AIR1932Cal858 .

4. The first question which we have to decide is whether or not merely because of the fact thatthe decree in question was passed by consent the surety is discharged. In our opinion, it is not possible to give effect to that contention. In order to determine whether or not the consent decree in question discharged the surety it would be necessary to examine the terms of the consent decree as also the terms of the surety bond. As I have mentioned, the decree was initially a decree for the full amount claimed with costs, although in the subsequent clause it is provided that if a sum of Rs. 2,400 is paid within the month of Aswin, 1358 B. S. the decree will be deemed to be satisfied by such payment. I am not for the moment considering as to the effect of the said clause. I shall deal with the same hereafter. I am now considering the matter on the basis that there was a decree for the full amount and that decree was passed by consent. The question is whether in such a case it can be said that the surety is discharged. As I said before, in order to determine that question it would be necessary to examine the surety bond. I have already referred to the operative part of the said bond. The' surety remains liable for the payment of Rs. 3.535-13-0 and if that amount is not realised from the defendant, then the same would be realised from the movable and Immovable properties of the surety or from his person. In this case the decree, although it was passed by consent, was a decree for the certain claim in the suit and costs; the liability of the surety is no doubt limited to the sum of Rs. 3,535-13-0 in respect of the said decree but there is nothing to show that that liability is limited only to decree passed on contest. The terms of the surety bond do not warrant such a restriction. In the circumstances, I cannot hold that merely because the decree was passed by consent the surety is discharged. I am supported in the view which I am taking in this matter by the decision of a Division Bench of the Court in the case of : AIR1932Cal858 . In that case the condition of the bond or obligation was that if the defendant shall pay and satisfy the claim for the principal with interest and costs under the decree that may be passed in the suit to the extent of Rs. 2,000 or if the said suit be dismissed, then the bond or obligation should be void and of no effect. AC the trial a decree was passed virtually by consent of the parties for the sum of Rs. 2,500 which included all costs. An execution was levied-thereafter against the surety for the recovery of the sum of Rs. 2,000. One of the pleas taken by the surety was that inasmuch as the decree was passed by consent the surety was discharged. Their Lordships negatived that contention. Rankin C. J., in his judgment observed that the consent decree in question was not such a decree which is not contemplated by the terms of the surety bond. His Lordship further held that there is nothing in the terms of this bond upon which it is possible to hang any argument that a consent decree or a decree that is not resisted is not within the terms of the bond. His Lordship referred to the English decision in Tatun v. Evans, (1885) 54 LT 336 (B), on the basis of which there have been some decisions of this Court to the effect that a consent decree discharges a surety and has observed that the said decision in Tatun v. Evang (B), does not warrant such a conclusion On the other hand, Rankin C. J., observed that Mr. Justice Denman in course of his judgment very clearly disclaimed any intention to hold the broad proposition that a surety for the liability of defendant was not liable upon a consent decree. Rankin C. J., quoted with approval the following observationof the said learned Judge in the said case of Tatun v. Evans (B) :

'I do not say that in no case where a person gives security as surety under Order 14, he is liable where a judgment is submitted to by consent; but I am of opinion that the compromise in this case is a thing so very different from judgment in invitum pronounced by the Court after some inquiry into the facts as to release a surety who was not consulted about it'

I agree with the view taken by their Lordships in the said case of Jia Bai v, Joharmull Bothra (A), on this point and in my opinion it cannot be said as a broad proposition that wherever there is a consent decree the person who stood surety for the claim of the plaintiff is discharged. It would, in my opinion, depend in each case on the terms of the decree and on the terms of the bond as to whether the consent decree in question discharged the surety. In. this case, I do not think that the consent decree if it is taken to be a decree for the payment of the sum claimed with interest is not within the terms of the bond. The surety stood liable for the payment of Rs. 3,535-13-0 and there is nothing in the terms of the bond to exclude a consent 'decree even though passed for the said amount. On this view of the matter, I accept this part of the argument advanced before us by the learned Advocate for the appellant.

5. But the difficulty in the way of the appellant is created by the provisions of Clause (2) of the said consent decree. I have already mentioned that the said clause provides that if the defendant pays the sum of Rs. 2,400 within Aswin 1938 B. S. then the decree will be treated as satisfied. Question is : Does this item affect the liability of the surety In my opinion, it clearly does and it discharges the said surety. Section 135 of the Contract Act lays down that a contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor, discharges the surety, unless the surety assents to such contract. In this case even assuming that it cannot be said that the consent decree amounted to making a composition within the meaning of Section 135 of the Contract Act, it surely amounts to giving time to the judgment-debtor to pay the sum decreed. Mr. Banerjee argued before us that the only effect of the clause was that the decree-holder would be entitled to receive a lessor sum than the sum for which the decree was passed. I am unable to accept that contention. The effect of that clause to my mind is something more. By that clause time was given to the judgment-debtor till Aswin 1358 B. S. to make payment of the decretal amount. The effect of that clause is that the decree-holder will have to wait till Aswin 1358 B. S. and to see if and what payment is made by the judgment-debtor. If within that date the sum of Rs. 2,400 is paid, then the decree will remain satisfied. If that amount is not paid, then and then alone the decree-holder will be entitled to proceed in execution of the said decree. Until that time arrives, the decree-holder on the terms of the said consent decree will not be entitled to levy execution of the decree.

6. The result, therefore, is that by agreeing to the provision of Clause (2) of the said consent decree the decree-holder in effect gave time to the judgment-debtor and came within the mischief of Section 135 of the Indian Contract Act. Mr. Banerjee again relied on the said case of Jia Bai v. Joharmull Bothra (A), and particularly on certain observations made by Rankin O. J., in support ofhis contention that even though there is a consent decree providing for postponed payment or payment by instalments, even then the surety is not discharged. The precise observation of Rankin C. J., on which Mr, Banerjee relied reads as follows :

'I would say upon this case that, if it is to be contended that the surety is discharged from his bond in any case where there is a consent decree providing for postponed payment or payment by instalments, then that is a proposition to which, as at present advised, I am not prepared to assent.'

7. It should be noted, as Rankin C. J., himself observed, that the case before their Lordships did not raise that exact question. These observations, it must be admitted, are in the nature of obiter dictum. Apart from that what Rankin, C. J., observed was that if it is to be contended that the surety is discharged from bond in any case where there is a consent decree providing for postponed payment or payment by instalments, then his Lordship was not prepared to assent to such a proposition. In other words, according to his Lordship there cannot be such a broad and general proposition, namely, that whenever there is a consent decree providing for postponed payment or payment by instalments, then the surety is discharged. . It seems to me that what the learned Chief Justice meant was that this question will have to be decided in each case on its own facts, and it cannot be laid down in general terms covering all cases that whether there is a consent decree providing for postponed payment or payment by instalments, then the surety is discharged. It may, perhaps, be possible to conceive of a case where although there is a consent decree providing for postponed payment the same does not conflict with the terms of the bond in question. In the case of Pirthi Singh v. Ram Charan, AIR 1944 Lah 428 (C), decided by Harries C. J. & Abdur Rahman J., it was held that a consent decree, which has the effect of granting time for payment or impairs the surety's remedies against the principal debtor which he would have been entitled to pursue on discharging his obligations, converts the contract between the creditor and debtor into a different one from what the surety had stood a guarantee for, and would entitle the surety to be relieved of his engagement & operate as a discharge. In that case also on an application made under Order 38, R. 5, Civil P. O., the defendant was directed to furnish a security for Rs. 1,500. The appellant before their Lordships furnished the security on the same date and the bond was to the same effect as in the present case, namely, that if the defendant did not pay the sum of Rs. 1,500 the Court might realise this money from him at once. The suit was referred to arbitration and the Arbitrators gave their award in accordance with the terms of a compromise. The said terms were accepted by the parties and a decree was accordingly passed. One of the terms of that decree was that the balance of the decretal amount was to be paid by instalments of Rs. 75 per month. Their Lordships held that by the said terms time was given to the debtor and instalments were fixed without the surety's assent, or even knowledge which prevented him to require the decree-holder from calling upon the principal debtor to pay off the entire debt or to pav the entire debt himself and then to recover it from the principal' debtor. On that view nf the matter, their Lordships allowed the contention of the surety. I find very little difference between the facts of that case and the facts of this case.The effect of the consent decree in the present case is to give time to the Judgment-debtor until Aswin 1358 B. S. and that brings the provisions of Section 135 of the Contract Act into operation and discharges the surety.

8. Mr. Banerjee appearing on behalf of the appellant finally argued before us that the provisions of the Indian Contract Act relating to the liabilities of a surety do not apply to a case where security bond is given to the Court and not to a party. In support of that contention he relied on a decision of the Nagpur High Court and a decision of the Madras High Court, i.e., Madanlal Motilal v. Radhakisan Laxminarain, AIR 1935 Nag 258 (D) and Appani Nair v Issak Mackadam, ILR 43 Mad 272 at p. 277 : (AIR 1920 Mad 355 at p 357) (E). Those decisions no doubt support the contention of Mr. Eanerjee on this point brut there are number of other decisions of the difterent High Courts, to which the learned Advocate for the respondent drew our attention which have taken a contrary view on this point. The case of Pirthi Singh v. Ram Charan (C), decided by Harries C.J., and Abdur Rahman J.. referred to above is one of them. This very question came up for their Lordships' consideration in that case. It was argued before them in the' first instance that the word 'Court' comes within the defnition of a 'creditor' as defined in Section 126 of the Contract Act. That contention was not accepted by their lordships, but they accepted the other contention urged on behalf of the appellant, namely, that even if those sections were not in terms held to be applicable, equity ought to step in and prevent the surety from being liable particularly when the bonds similar to the one in dispute are only executed for the benefit of a plaintiff creditor and if he alters his position by his own act or conduct, the Court should give the benefit of the principles on which the Court should have acted in equity and discharged the surety. Their Lordships in accepting that contention held that although it is true that equitable principles which the Indian Legislature wished to adopt in respect of tripartite agreements between a creditor, a debtor and a surety were embodied in the Contract Act and to that extent the Contract Act may be regarded to bs exhaustive; but the preamble of the Contract Act clearly showed that it was not intended to deal exhaustively with the whole branch of the law of contract but 'to define and amend certain parts of that law.

'If that be so', their Lordships observed, 'there appears to be no justification for holding, as was done by the lower appellate Court, that an undertaking by a surety in favour of a Court would not entitle him to be relieved of his engagement, as the principles on which Sections 133 to 141, Contract Act, are based are inapplicable to such Bonds.'

The decision of the Nagpur High Court on which Mr. Banerjee relied was cited before their Lordships in Pirthi Singh's case (C) and was considered bv them. But their Lordships referred to the decisions in Mahomedalli v Laxmibai, ILR 54 Bom 118 : (AIR 1930 Bom 122) (F). Parvatibat v. Vinayak. AIR 1939 Bom 23 (G), Bondra v Dagadu, 45 Bom LR 438 : (AIR 1943 Bom 246) (H) Annadana Jadaya v. Konnamal, ILR 56 Mad 625: (AIR 1933 Mad 309) (I), Md. Ehiya Sahib v. Valliappa, AIR 193G Mad 576 (J) and Ram Prasad v. Gordhan : AIR1934All616 and held that these decisions are more in point and support the propositions that the principles underlying Sections 133 to 141, Contract Act, apply to bonds in favour of Courts although the sections may not be by them-selves applicable. The other decision on which Mr. Banerjee relied, namely ILR 43 Mad 272: (AIR, 1920 Mad 355) (E), was also cited before their Lordships and their Lordships held that two of the subsequent Division Benches in Madras do not share the view expressed in this decision. Having given a careful consideration to the matter, I am of opinion that the view taken by their Lordships in the said case of Pirthi Singh v. Ram Charan (C), on this point is correct and should be accepted.

9. The result, therefore, is that all the contentions raised on behalf of the appellant fail and the appeal is dismissed with costs, hearing fee being assessed at three gold mohurs.

N.K. Sen, J.

10. I agree.


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