PENUMARTHI SURYANARAYANA (DIED) P.L. SASTNY AND OTHERS Vs. P.S. SASTRY, RECEIVER OF SRI RAMA TALKIES, TENALI

JUDGEMENT

(1.) The only two questions raised by the learned Advocate General appearing for the appellants(defendants 2, 3, 4, 5 and 7) and which really arise from the contentions put forward by the parties are (1) whether there is any variation in the terms of the contract, namely, the lease deed, Ex. A-5, dated 12.5.53 without the knowledge and consent of the sureties so as to entitle them to plead discharge or the ground that the original contract is altered without their consent and (2) whether the suit filed by the Receiver (plaintiff) appointed by the Court is not maintainable, as the security bond was executed in favour of the Presiding officer of the Court, in the absence of assignment of that bond in favour of the Receiver.

(2.) To decide the questions involved, it is necessary to state the facts and circumstances under which the suit came to be instituted by the Receiver against the defendants for the enforcement of the security bond. A cinema hall known as "Srirama Talkies" was constructed by four persons and even before they could start ruining the cinema house, disputes arose between the owners whereupon one of them, Seetharamaiah, filed O. S. No. 85 of 1949 for partition of the cinema hall and other reliefs. During the pendency of that suit, the plaintiff was appointed as the Receiver and asked to take over possession of the cinema house, manage its affairs or lease it out on rent and collect the moneys. The Receiver sold the leasehold interest in the cinema house to the 1st defendant at a public auction held on 14.2.53 which was later confirmed by the Court. Under the terms of the auction (Ex. A-2), the 1st defendant was required to furnish security of immovable property in a sum of Rs. 30,000.00 for the due fulfilment of the conditions of a lease. Defendants 1 to 7 and another Purnanandam whose legal representatives are defendants 8 to 13 executed the security bond in question, Ex. A-4 dated 22-4-53 fora sum of Rs. 30,000.00 in favour of the Temporary Presiding Officer. Sub-Court, Tenali. The sureties bound themselves personally and also gave security of immovable properties belonging to them which are shown in the schedule to Ex. A-4. The 1st defendant executed a registered lease deed, Ex. A-5 dated 12.5.53 and took possession of the Cinema house and started running the business. It is one of the terms of the security bond that defendants 2 to 7 and Purnanadam shall make good any loss of rent or other amounts sustained by the owners of the cinema house in case the lease of the 1st defendant is cancelled or forfeited for non-compliance with the terms and conditions of lease. The terms of the lease deed provide that if the 1st defendant (lessee) continuously failed to pay the rent for two months to the Receiver and committed default, the lease shall stand automatically cancelled. There is another clause which provides that, in the event of the lease being cancelled or of forfeiture of the lease, the loss of rent that may be sustained by the partners of the cinema hall from the date of cancellation or forfeiture till the leasehold rights are re-auctioned and whatever loss is sustained by reason of the re-auction, shall be made good by the 1st defendant. The first default was committed by the lessee in the matter of payment of rent from 14.2.54 to 14.4.54 and this was reported to the Court by the Receiver in his Memo No. 69, dated 23.4. 54. The 1st defendant himself petitioned to the court on the next day i.e. 24.4.54 praying that the delay in payment of rent may be condoned. The Receiver filed another Memo No. 69-A on 26.4.54 stating that within half an hour after the filing of Memo No. 69 on 23.4.54, the lessee (1st defendant) tendered to him one month's rent of Rs. 1,505.00 and that he accepted it under protest, for he had no power to condone the delay. On the application of the lessee, after notices to the Receiver, the Court condoned the delay as no objection was raised to it. Subsequent to this there is another default on the foot of which the Receiver laid the suit. That default was for the period from 14.11.1954 to 14.1.55. The Receiver, without exercising his right of re-entry and taking possession of the property, filed Memo No. 73 (Ex. A-19) seeking directions of the Court. As the leassee (1st defendant) was made a party to this Memo, the Court ordered notice and refused to grant any extention of time to the lessee which he sought and directed the receiver to enforce the terms of the lease. The 1st defendant then filed a revision petition in this Court and obtained stay orders. The C. R. P. was ultimately dismissed. Thereafter, an application was made by the Receiver and the Court directed the plaintiff to take possession of the cinema hall which he did. It is to recover the arrears of rent and damages sustained by the re-auction of the leasehold interests in the cinema hall that the suit is instituted for enforcement of the security bond.

(3.) The line of defence adopted by the defendants is twofold:- (1) That the security bond was executed in favour of temporary Presiding Officer of the Sub Court, Tenali and not in favour of the Receiver and as such, the Receiver is not competent to lay action for its enforcement in the absence of a proper assignment of the security bond in his favour: and (2) that when admittedly there was default on the part of the lessee (1st defendant) arid that default resulted in automatic cancellation of the lease and its forfeiture, the Receiver should have exercised his right of re-entry and re-auctioned the leasehold rights, and his failure to do so constitutes variation of the terms of the contract thus discharging the sureties of the contractual liabilities under the surety bond.