RAJA PERTABGEERJEE Vs. RASHEED SHAWPOORJEE CHENAI

JUDGEMENT

(1.) The decree-holder is the appellant. He has in his favour a decree for Rs. 1,10,000 against Dara Shahpurji who is the brother of Rashid Shapurji. In proceedings for the arrest of the judgment-debtor the brother stood surety for producing him in Court. The executing Court had directed him to be surety for the entire decretal amount; but by an appellate order his liability was reduced to Rs. 50,000. Rashid Shapurji had, therefore, undertaken to be surety for Rs. 50,000 if his brother failed to appear in the execution proceedings. On Aban 22, I345-F. the judgment-debtor did not appear and his advocate promised to have him present on Aban 26. He was again absent and the Court thereafter issued notice to the surety. The notice was offered to the surety at his house, but he refused to take it. On Aban 29, 1354-F. the Court recorded the statements of the process-server and another who had accompanied him. Another notice was issued and on Dai 18, 1355-F. the surety pleaded that the Court had never ordered the surety to produce the judgment-debtor and, therefore, the proceedings concerning the forfeiture of the surety bond could not be proceeded with. The executing Court has however passed no judgment on the merits of the defence ; for on Shehrewar 14, 1356-F. a compromise was arrived at between the decree-holder and the judgment-debtor. Under this compromise Dara Shahpurji, the judgment-debtor, was to pay Rs. 60,000 and after payment he was to be discharged. The decree-holder however reserved his right of proceeding against property called Shapurwadi. It appears that the decree- holder had proceeded against this property, whereupon Rashid Shapurji, had pleaded that it was his property because the brother had released his share of the property in his favour . This objection was dismissed. Thereafter a suit was filed by Rashid Shapurji which was allowed and an appeal by the decree-holder was pending in the High Court when the compromise between the decree-holder and the judgment- debtor was arrived at. The decree-holder by the aforesaid agreement reserved to himself the right of proceeding against the property should his appeal be allowed and the property become thus available for purposes of executing the decree. The next important covenant under the agreement is that no other property of the judgment-debtor would be attached nor sold in execution of the decree, nor would he be arrested nor in any way proceeded against in execution of the decree. The learned Judge of the execution Court has held that because of this compromise the judgment-debtor's liability has become discharged and the decree-holder cannot thereafter proceed against the surety. He has accordingly concluded the proceedings against the surety. The appeal before us is against the aforesaid order.

(2.) The advocate of the decree-holder has argued that his client Was entitled to realise the decretal' amount from the two persons and because one of such persons, the judgment-debtor has been released the surety is not discharged. In support of his argument he relies on Jang Bahadur v. Basdeo Singh, A.I.R. 1936 All. 549. and on Dhari Mal v. Kanshi Ram, A.I.R. 1927 Lah. 336. He also relies on Raja Jaswant Rao v. Mahboob Ali, 31 Dec.L.R. 8. The aforesaid authorities have held that sections 134 and 137 of the Contract Act do not apply to the surety who had guaranteed an act in execution proceedings. The Hyderabad case lays down no different proposition of law. We are of the view that the correct legal position is that where the principal debtor is discharged, the decree-holder cannot proceed against the surety without expressly reserving such a right in the document discharging the judgment-debtor. There are cases, which we will presently refer, that the general rule governing the release of surety applies to the person who has become surety in execution proceeding also so that if the principal debtor is released by the creditor, the surety is also discharged. In this connection we would refer to Official Liquidators, T. N. and Q. Bank, Ltd. (In Liquidation) v. Official Assignee, Madras, (1944.) 1 M.L.J. 234 ; I.L.R. (1944) Mad.708 There in a surety had executed a security bond in favour of the Court in pursuance of an order setting aside an ex parte decree against a debtor.

(3.) The debtor took out an application under section 234 of the Companies Act for leave to compound with the creditor, who were the Official Liquidators. The creditor agreed to a composition at 8 annas in the rupee without the consent of the surety and an order was made accordingly. In these circumstances, the surety was held discharged. Leach, C.J., observes at page 711 :-