KURIAN Vs. ALLEPPEY C C M S SOCIETY

JUDGEMENT

(1.) THE respondent, in this appeal, had instituted a suit for alleged balance due in the price of coir said to have been purchased by the 1st defendant, a firm. Defendants 2 to 5 were alleged to be partners of the firm. In the suit, the plaintiff (respondent herein) took out attachment before judgment of the goods belonging to the firm. THE third defendant the present appellant got the attachment released by executing a surety bond, marked as ex-P1 in this proceedings, by which he made himself liable for payment of the amount that might be found due to the plaintiff from the Ist defendant and the second defendant (who was described in the said bond as the sole proprietor of the Ist defendant-firm), in the decree to be passed in the suit in case the said amount could not be realised from defendants 1 and 2. THE surety bond was filed in court on 15-7-1957. On 20-9-1957, plaintiff and defendants 1 and 2 compromised the suit by filing a petition marked as Ex-B4 in the proceedings. Defendants 3 to 5 were removed from the party array. In the compromise decree that was passed on the same date, i. e. , 20 91957, it was provided that the plaint amount, costs and interest less Rs. 250/- remitted by the second defendant was to be paid before 30 61958 (nine months from date of compromise), in default of which the plaintiff was entitled to realise the said amounts from the assets of the Ist defendant and also from the 2nd defendant. It was also provided therein that the third defendant's liability, as surety, was to subsist though strangely enough he was removed from the party array and was not made a party to the compromise.

(2.) WHEN execution of this compromise decree was sought against the third defendant, he objected to the execution contending that he is exonerated from liability in view of the contract between the plaintiff and defendants 1 and 2 by which the principal debtor was given time for payment without the concurrence of the surety. For this contention, the appellant-third defendant relied on S. 135 of the Indian Contract Act which is as follows: "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". The executing court upheld this objection; but on appeal by the decree-holder, the District Court overruled this plea and the decree-holder was allowed to proceed against the surety, third defendant, in accordance with ex-P1 surety bond. In the second appeal filed by the third defendant-surety, a learned judge of this court referred the matter to a Division Bench in view of the importance of the question raised The learned counsel for the appellant strongly contended that when the plaintiff agreed to give nine months' time to the second defendant, the principal debtor for paying off the debt, that necessarily discharged the surety who has not concurred with this granting of time. It is a well recognised rule that a contract by a creditor to give time to the principal debtor discharges the surety. The principle underlying this rule is that the surety is entitled at any time to require the creditor to call upon the principal debtor to pay off the debt or himself pay off the debt and when he has paid it off he is at once entitled to sue the principal debtor; and if the creditor has bound himself to give time to the principal debtor, the surety cannot do either the one or the other of these things until the time as given has elapsed. See Rouse v. Bradford Banking Go. ( (1894) 2 Ch. D. 75) and Annadana jadaya Goundar v. Konammal AIR. 1933 Mad. 309 (at page 312 the dictum in the aforementioned English case is quoted with approval ).

(3.) THIS rule has been given statutory recognition in s. 135 of the Indian Contract Act. Though having regard to the definition in s. 126 of the Indian Contract Act, S. 135 cannot in terms apply to a transaction where the surety bond is given to the court, there can be no doubt that the principles underlying these provisions can be applied. See Parvatibai v. Vinayak Balvant (AIR. 1939 Bom. 23), Ramachandra Bhagwat v. Tukaram (AIR. 1959 bom. 516) and Parthi Singh v. Ram Charan Aggarwal (AIR. 1944 Lah. 428 ).