DHARAM SINGH Vs. LILA GURCHARAN SINGH

JUDGEMENT

(1.) This is anappeal preferred by the surety against the order date 154 1971 of the Sub Judge 1st Class, Delhi dismissing suretys objections. One Gurcharan Singh, who is now represened by his legal representatives as respondents Nos. 1 to 3 to the present appeal, filed a suit against one Ajit Singh, respondent No. 4 herein, under Order 37 Civil Procedure Code for recovery of Rs 21,800.00. The trial Court on 7.9.1966 permitted the defendant Ajit Singh to defend the suit on his depositing in cash by way of security the suit amount plus Rs. 2,000.00on account of costs. Defendant Ajit Singh, however, was not satisfied with the order and filed a revision petition being Civil Revision No. 145 D/66 in this Court. An interim order was passed staying the proceedings in the trial Court subject to the condition that the defendant would furnish security to the satisfaction of the trial Court. In pursuance of the order, Dharam Singh appellant furished security of two properties (which are now sought to beattached by the respondent decree-holder). Ultimately, on the final hearing in the civil revision', this Court modified the order into one of bank guarantee to be given by the defendant in the amount in dispute. The defendant was still dissatisfied with the order and filed a further appeal to the Supreme Court. The Supreme Court modified the order of this Court and permitted Ajit Singh defendant to contest the suit provided a surety of immovable property was furnished to the trial Court. In pursuance of the order of the Supreme Court, a mortgage was created on 13.3. 1967 in favour of the trial Court by appellant Dharam Singh. The matter, however, was compromised between the plaintiff and the defendant in terms of the compromise dated 28. 9. 1967 filed by them. By this compromise, the defendant agreed to pay the plaintiff Rs. 23,250.00 in full and final payment of all claims. By clause (2) of the compromise, it was provided that the said amount of Rs. 23,250.00 shall be paid in instalments of Rs. l,000.00per month. The first instalment was to be paid on or before 10th November,1967and the subsequent instalments on or .before the 10th of each succeeding month till the whole amount was fully paid off Clause (3) provided that if at any time four instalments have not been paid on the due dates and a default has been committed by the defendants, the whole or the balance of the amount, due as on the date of the fourth default shall become payable at once. Clause (4) provided that the srcurity furnished by the defendant in terms of the Order 37 Rule 3 Civil Procedure Code shall continue till the whole decretal amount has been paid infull. It is relevant to mention that the security mentioned in the clause (4) of the compromise refers to the security furnished in the shape of mortgage deed by the appellant. It is also not disputed that the compromise was signed only by the plaintiff and the defandant and that the appellant was neither aware Of this compromise nor did he give his consent nor was he signatory to the said compromise.

(2.) The judgment-debtor did not pay the amount to the plaintiff with the result that the plaintiff decree-holder applied for the attachment of the mortgaged property for the purpose of realisation of the decretal amount by his application dated 5th May, 1970 The appellant filed his objections to the attachment and challenged the right of the decree-holder to recover any amount from him. His plea was that by granting time in terms of the compromise, the security furnished by him stood discharged and he was, therefore, not liable. On this, the following issues were framed by the learned trial Court :- 1. Did the surety bond furnished by Dharam Singh require registration and could that point be raised by him ? 2. Has Dharam Singh been discharged from liability ? 3, Relief. On issue No 1, the trial Court held that the mortgage deed furnished by the appellant did not require registration. Oa issue No. 2, the trial Court has taken the view that the appellant was not discharged from his' liability incurred by him in favour of the decree-holder and dismissed his objection petition, ft is against this order that the present appeal has been filed.

(3.) The learned counsel for the appellant, Bakshi Man Singh, did not challege the finding on issue No. 1 and no objection, therefore, can be taken on the ground that the surety bond furnished by the appellant requires registration. Accordingly, the finding on issue No., 1 is confirmed. The arguments really have been confined on issue No. 2. Shortly put, the contention of the counsel for the appellant is that the surely is discharg- ed from any liability because of the two flaws. namely,- (i) that the appellant had undertaken a liability only in case of contest by the defendant and a decree following thereof and as the parlies have settled the matter by compronnise. he is not liable, and (ii) that as undoubtedly time was given by the decree-holder to the judgment debtor as the same was done without the consent of the appellant, the result is that the appellant-surety is discharged from any liability A reference to the mortgage deed dated 13. 3. 1967 shows that this is a mortgege made between the appellant in favour of the trial Court. After reciting the history of the litigation from the filing of the suit in the trial Court to the ultimate order passed by the Supreme C urt and noticing that the Supreme Court had permitted the defendant to defend suit on furnishing security of the sum of Rs. 23,800.00 the order of the trial Court shall be stayed, it goes on to recite that the appellant is the absolute and sole owner of the property intended to be mortgaged and has agreed to mortgage the same accordingly to secure the payment of Rs. 23, 800.00 to the said Gurcharan Singh plaintiff in case a decree is passed in his favour on defence of. the suit by the said defendant. (The underlined empbasis is mine). The deed then further goes on to recite that. ' "In consideration of the promise the mortgagor doth hereby agree with the mortgagee that if on defence of the suit by the defendant S. Ajit Singh a decree is passed by the said Hon'ble Court against the defendant (Ajit Singh) and in favour of plaintiff (Gurcharan Singh) in that case the defendant will at once pay the whole amount of the decree to the plaintiff, and if he commits a default the mongugor (Dharam Singh) shall at once, pay the said decree to extent of Rs 23,800.00 (Rupees twenty three thousand and eight hundred only) in court or the successor court, and as a security for the payment of the said amount ofRs. 23,800.00 the said mortgagor hereby morigages in the favour of the Court of Shri H S Bakshi, Sub-Judge, 1st class, Delhi." The above underlining is mine. Then follows the description of the properties. The first question that arises is whether or not the surety stands discharged because the suit was compromised and a consent decree was passed. Bakshi Gurcharan Singh, learned counsel for the respondent, urges that the surety cannot resist enforcement of the bond simply on the ground that a consent decree has been passed without contest unless the consent decree is vitiated by fraud or collusion. In this connection, he refers to Ahmed Karim v. Maruti Ruvji Bhansle, Kabiruddin v. Debi Singh Chakkunny v Viswanathalyer and Adamasab Usmansab Kanakya v. Gurnshinddayya Lingayya In my view, it is unnecessary to discuss each of these authorities, because the matter had since been settled by the Supreme Court in Raja Bahudur Dhanraj Girji v. Raja P. Paithasaruhy Rawanimyaru and wherein their Lordships have laid down as under :- "in determing the question as to whether liability under.such a surety bond is discharged by reason of the fact that a compromise decree has been passed in the judicial proceedings in which the surety bond came to be executed, it will always be necessary to examine the terms of the bond itself. Did the surety contemplate when he executed the bond that the dispute pending between the debtor and the creditor may be compromised, or did he contemplate "that the dispute would, and must be settled by the Court and not compromised by the parties ? If the terms of the bond indicate that the surety undertook the liability on the basis that the dispute would be decided on the merits by the court in invitium and would not be amicably settled, then the compromise of the dispute would discharge the liability of the surety, xx xx xx xx If. on the other hand from the terms of the bond it appears that it was within the contemplation of the parties including the surety that the dispute may be amicably settled and the surety executed the bond know- ing that his liability may arise even under-The compromise decree, then the passing of the compromise decree will not entitle him to claim discharge, xx xx xx The question would thus always be one of construing the surety bond in order to decide whether compromise decree discharges the surety or not." This authority has also laid down that though in terms the provisions of section 135 of the Contract Act cannot apply to bond in favour of a Court, yet the equitable principles under lying the provisions of section 135 of the said Act apply to such a bond. This also answers the contention of the learned counsel for the respondent that section 135 of the Contract Act being inappliable to the present bond which was executed in favour of a Court, the principles of equity could also not be invoked by the appellant.