SUBRAMANIA AYYAR Vs. SUPPARAYA PILLAI

JUDGEMENT

(1.) This revision petition arises out of an order made by the District Court of East Tanjore in an appeal under the Provincial Insolvency Act. The petitioners here stood surety under a composition scheme in 1. P. No 10 of 1931 on the tile of the Sub-Court of Tiruvarur. The debt due by respondent in this revision petition is shown as item 16-A in the composition schedule. The foot-note to that schedule indicates that the terms on which that particular debt was to be included in that schedule were finally settled only when the scheme came before the Court for approval, because in respect of that debt there was a litigation pending at the time in O.S. No. 256 of 1931 on the file of the District Munsifs Court of Tiruvarur, for a declaration that the promissory, note on foot of which that amount was claimed to be due had been discharged. The-Court therefore took care to indicate that this item would be payable under the scheme of composition "only if the creditor is finally successful in O.S. No. 256 of 1931." That suit was dismissed by the Court of first instance. An appeal preferred by the debtor was returned by the appellate Court on a requisition that the appellant should pay a. higher court fee. That question, I am told, is now the subject-matter of a revision petition before this Court. In the meanwhile, the creditor, in order to escape the bar of limitation in respect of this claim on the promissory note, filed O.S. No. 70 of 1933 on the file of the District Munsifs Court of Tiruvarur and obtained a decree thereon. It is not suggested that any appeal has been filed against that decree,

(2.) In this state of things the creditor put in the two applications, one on the execution side and the other to the insolvency Court, to recover the amount of his decree from the sureties, to the extent to which they have rendered themselves liable under the surety bond given in the insolvency composition. The execution petition was transferred to the insolvency Court, by some procedure which I am not able to understand and the two petitions were dealt with together. Both the Courts below have made an order calling upon the sureties to make the payment in terms of the surety bond. The learned District Judge rightly points out various difficulties in the way of ordering the execution petition, (see para. 4 of his judgment). But as the merits of the contentions were practically the same in both the petitions he deals with the matter by a single order. Confining myself for the moment to the order on the petition filed in the insolvency proceedings, I see no reason to differ from the view taken by the Courts below. On the terms of the surety bond, two objections, somewhat inconsistent with each other, were taken before me. It was contended that, according to the order of the Court in the composition schedule, the creditor was entitled to payment in respect of this item only after the litigation in O.S. No. 256 of 1931 had been finally settled in favour of the creditor. It was argued that as the Civil Revision Petition relating to the court fee matter is pending, it could not be said that that litigation had been finally settled. I am free to confess that this may be literally so. But in view of the fact that the decree in O.S. No. 70 of 1933 had been allowed to become final. I see little substance in this objection. However, to be on the safer aside, 1 propose to safeguard any possible rights that may accrue to the sureties in the event of a reversal of the decision in O.S. No. 256 of 1931, by providing that if by any final decree in that litigation the creditor's right to the amount therein involved should be negatived, he shall be bound to bring back into Court the amount that he may draw under the order in the present petition. In view of what is stated to have happened in the first Court, I leave it to the present petitioners, if so advised, to apply to the Court of first instance to take a bond from the creditor in the above terms.

(3.) The other argument was that this note made by the insolvency Court stating that the moneys shall be payable only after the final termination of the dispute, in O.S. No. 256 of 1931, amounted to a variation of the contract between the creditor and the debtor without the knowledge of the surety and accordingly discharged the surety. I do not find that any such contention had been raised in the Court below. I have no reason to assume that the variation, if really it was a variation, was made without the consent or knowledge of the sureties. The contract is one between the Court and the sureties and it becomes complete only when the Court accepts the surety bond; and a perusal of the papers leads me to think that this note in the insolvency schedule was made at the time when the Court accepted the surety bond. In these circumstances, I see no force in the contention about the sureties having been discharged by reason of any variation in the principal contract. It only remains to deal with the objections taken as regards the jurisdiction of the insolvency Court to deal with these applications. It has been contended that the Provincial Insolvency Act does not contain any provision corresponding to Clause 2 of Section 30, Presidency Towns Insolvency Act, and that it is therefore not open to the insolvency Court to give relief against the sureties by summary orders, and that the only course open to the creditor is to take an assignment of the bond and sue thereon. Reliance has been placed in this connexion on some observations at p. 255 of the 1930 Edition of Mulla's Law of Insolvency.