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1966 DIGILAW 306 (ALL)

Vali Bai v. Mahraj Sheo Narain

1966-08-12

B.DAYAL, D.D.SETH

body1966
JUDGMENT B. Dayal, J. - This is an execution first appeal by Smt. Vali Bai daughter of Sri Megh Ji who had stood. surety for the judgment debtors Madan Lai and others. The facts of the case may shortly he stated as follows: 2. The decree-holders Sheo Narain and Dhararn Narain. - filed a suit for dissolution and accounts against the defendants Madan Lal and others and upon accounts for the recovery of Rs. 15,462/3/-. The decree holders made an application for attachment before judgment to avoid which the defendants persuaded Megh Ji Jeewan Das to stand surety. Sri Meghji appointed a special attorney for this purpose and the special attorney on the 16th of September 1954 executed a bond for Rs. 18,000/-undertaking that the decree which may be passed against the defendants may be realised from the person of the surety and from Government Promissory Notes which were deposited in court along with the surety bond of the face value of Rs. 18,000/-. In the suit a preliminary decree for accounts was passed on the 23rd of January 1951 but later on after several years the judgment debtors agreed that a sum of Rs. 15,462/- was due against them and a final decree was passed on that coin promise on- the 6th of February 1958. In execution of this decree the decree-holders wanted to proceed against the Government Promissory Notes which had been furnished by the surety and to this an objection was raised by the appellant, as her father Megh Ji had died in the meanwhile, that the decree being a compromise decree could not be executed against the Government Promissory Notes and the surety was discharged by reason of the compromise. Other objections had also been taken but they are no more relevant in this Court as learned counsel for the appellant has relied upon this point only. 3. The trial court held that the surety bond not having expressly excluded any compromise must be deemed to be binding even in case of a compromise decree and in any case since a preliminary decree for accounts had been passed on contest it cannot be said that the final decree was a decree on compromise and it, therefore, directed the execution to proceed against the Government Promissory Notes. Against this order under Section 145 of the Civil Procedure Code the present appeal has been filed and the contention mentioned above has again been pressed by learned counsel for the appellant. 4. The surety bond in this case was given at a very preliminary stage of the suit and obviously at that stage there was no question of suit being compromised and it cannot, therefore, be pre-supposed that the surety while giving the surety bond had in his contemplation a compromise decree. It is, therefore, not reasonable to include a compromise decree within the terms of the surety bond. The bond merely states, "if a decree is passed against the defendants by the court." These words in these circumstances can only refer to a decree on contest passed by the court upon the evidence before the court. A compromise decree was, therefore, not covered by the surety bond and obviously the surety was not liable to pay any decree which may be passed on compromise. This court had to consider this matter in Kunj Lal v. Munshi Batuk Prasad, 120 Indian Cases 551. In this case time had been granted to the judgment debtor for payment of the decretal amount and it was held on the principle of Section 135 of the Contract Act that the liability of the surety was discharged. A similar view was taken by the Calcutta High Court in National Coal Co. v. Bose and Co., AIR 1926 Calcutta 818. In that case also a consent decree was passed without the knowledge of the surety and it was held that the surety must be deemed discharged. In Mohammad Yusuf v. Ram Govinda Oja, AIR 1928 Calcutta 177, the question was again considered by a Division Bench of the Calcutta High Court. In that case after a surety had undertaken a liability the matter was referred to arbitration by consent of parties and it was held that the surety must be deemed discharged. In the Bombay High Court. however, there appears to be conflict of opinion. In Mahmedalli v. Lakshmibai, A.I.R. 1930 Bom. 122, a Division Bench of that court relied upon the Calcutta and the Allahabad cases mentioned above and agreed with the conclusion that a compromise decree discharges a surety if such a decree was not contemplated at the time the surety executed the surety bond. however, there appears to be conflict of opinion. In Mahmedalli v. Lakshmibai, A.I.R. 1930 Bom. 122, a Division Bench of that court relied upon the Calcutta and the Allahabad cases mentioned above and agreed with the conclusion that a compromise decree discharges a surety if such a decree was not contemplated at the time the surety executed the surety bond. Without preferring to this decision of the Bombay High court another Division .Bench of that Court in Ahmed Karim v. Maruti, A.I.R. 1931 Bom. 55 took a contrary view and it was held that the words `decree passed by the court' are wide enough to include a compromise decree. With due respect to the learned Judges we are unable to agree. A surety bond creates a liability against a surety which he has to discharge on account of the judgment debtor. His liability must, therefore, be very strictly enforced and unless the case is squarely covered by the language and the spirit of the bond it cannot be said to cover the liability of the judgment debtor. In the Patna High Court also the matter arose in Narsingh Mahton v. Nirpat Singh, A.I.R. 1932 Patna 313 and a Division Bench of that Court came to the conclusion that the language of the surety bond 'if the suit is decided against the defendants and a decree for mesne profits is passed in favour of the plaintiff; the plaintiffs would realise the amount of the decree of the mesne Sheo Narain (B. Dayal, J.) 275 profits from the property mentioned in this deed was held to include a decree for mesne profits in a suit in which a preliminary decree for mesne profits was passed on contest but subsequently at the time of the final decree the amount to be decreed as mesne profits was agreed to by the judgment debtor and on that basis the final decree for mesne profits was passed. It. was held that the surety bond did not contemplate a compromise decree and the fact that a preliminary decree had been passed on contest did not effect the matter. We entirely agree with the learned Judges, if we may say so with due respect. The real liability which is enforced against the surety under a compromise decree is the liability which arises from the compromise where the amount is fixed. We entirely agree with the learned Judges, if we may say so with due respect. The real liability which is enforced against the surety under a compromise decree is the liability which arises from the compromise where the amount is fixed. The mere passing of a preliminary decree did not create any liability which could be enforced against the surety. 5. In the present case upon taking accounts it may have been found that no amount was clue to the plaintiff and these circumstances the mere fact that a preliminary decree for accounts had been passed on contest does not affect the liability of the surety. Since the final decree which fixed the amount due from the judgment debtors was determined by compromise the surety must be deemed to have been discharged if his consent was not taken to it. The Madras High Court has also taken the same view in Annadana v. Konammal, A.I.R. 1933 Mad. 309 In that case a surety bond had been executed for staying execution of the decree pending appeal. The appeal was ultimately compromised by which time was given to the principal debtor to pay the amount by him and it was held in these facts that the surety was discharged. Thus on preponderance of judicial opinion as well as on principle we hold that in the present case the surety was discharged , when a compromise decree was passed and the decree cannot be executed against the Government promissory Notes deposited by the surety in court. The appeal is accordingly allowed with costs, the judgment of the court below dated- 9th of December 1959 is set aside and the appellant's objection allowed.