Karnail Singh Randhawa Vs. Jagir Kaur and ors. - Court Judgment

Permod Kohli, J.

1. This is defendant's Regular Second Appeal against the judgment and decree dated 6.6.2007 passed by the District Judge, Rupnagar against the judgment and decree dated 6.1 1.2006 passed by the Civil Judge (Senior Division), Rupnagar. It is apt to notice the factual background of the case.

2. Defendant No. 1-M/s Randhawa Rice and General Mills, Chamkaur Sahib, Rupnagar was a partnership firm comprising of Karnail Singh Randhawa, Bharpur Singh and one Harjinder Singh son of Karam Singh and its partners. The firm applied for loan from Punjab and Sind Bank, Chamkaur Sahib, Rupnagar-defendant No. 4. Later on, the Firm was dissolved and Harjinder Singh was absolved of his liabilities in terms of the judgment dated 19.8.1983 passed by the Sr. Sub Judge, Rupnagar and the entire liability was taken over by the other two partners who are defendants No. 2 and 3 in the suit. Defendants No. 1 to 3 failed to pay the loan amount to the Bank and consequently, a suit was filed by the Bank against defendants No. 1 to 3, borrowers and Hakikat Singh and Bara Singh, father of the plaintiffs, in their capacity as guarantors. Harjinder Singh who was one of the original partners, was also impleaded as defendant in the suit being Civil Suit No. 169 of 15.6.1981 for recovery of Rs. 3,17,140.88p in the Court of Civil Judge (Sr. Division), Rupnagar. The suit came to be decreed against all the defendants, except Harjinder Singh and a preliminary decree came to be passed on 19.8.1983. It may be relevant to mention that the land of Bara Singh, the guarantor had been mortgaged with the Bank and since the suit was based upon the mortgage, a preliminary decree came to be passed. Even after the passing of the preliminary decree, loan was not liquidated by the defendants and consequently a final decree came to be passed on 25.8.1987 against the defendants in that suit, including Bara Singh in his capacity as a guarantor. Decree having not being satisfied, the Bank filed Execution Petition for execution of the decree being Execution No. 16 dated 17.3.1990 and property of Bara Singh, subject matter of mortgage was attached in order to be sold. During pendency of the execution, Bara Singh died on 1.5.1999 and the plaintiffs in the suit came to be impleaded as judgment debtors in his place as his legal representatives. In view of the attachment of the property of Bara Singh which was, eventually, inherited by the plaintiffs, they paid the decretal amount of Rs. 9 lacs in two installments of Rs. 1.00 and Rs. 8.00 lacs. On satisfaction of the decree, the land of the plaintiffs was released from the attachment. After incurring the liability of payment of the decretal amount on behalf of their deceased father, Bara Singh, a guarantor judgment debtor, the plaintiffs filed the present suit for recovery of Rs. 9.00 lacs against defendants No. 1 to 3, appellants herein and claimed interest at the rate of 12% per annum. Defendants, appellant herein, appeared before the trial court and filed written statement taking several preliminary objections that suit is not maintainable as the same has not been filed by a competent person and that the suit is barred by time as also under Order 2 Rule 2 C.P.C. However, they admitted that defendants No. 2 and 3 are partners in defendant No. 1-firm. They also admitted to have entered into an agreement with the bank for sanctioning cash credit limit of Rs. 1,50,000/-, but stated that no amount was advanced by the Bank and also disputed the genuineness of the bank's documents. They even went to the extent of saying that the Bank embezelled the stocks of the Firm. The Punjab and Sind Bank, having been impleaded as defendant No. 4, admitted the averments made in the plaint and mentioned that the amount of decree against the firm and defendants No. 2 and 3 has been received from the plaintiffs in execution proceedings as the property of Bara Singh, predecessor-in-interest of the plaintiffs, who was a guarantor, had been mortgaged and attached in execution. The Manager of the Bank, who appeared in the witness box, proved the payment vouchers whereby decretal amount was paid by the plaintiffs. The trial court had framed following issues:

1. Whether Nachhatar Singh and Bara Singh the predecessor-in-interest of the present plaintiffs satisfied the decree of defendant No. 1 against defendants No. l to 3, if so, to payment of what amount and to what effect? OPP

2. Whether plaintiffs are entitled to receive and to recover the disputed amount against defendants as alleged? OPP

3. Is this suit not maintainable as alleged? OPD

4. Whether plaintiff has no locus standi to file the present suit? OPD

5. Relief.

3. An additional issue also came to be framed by the trial Court as additional issue No. 4-A which reads as under:

4-A. Whether the suit is barred under Order 2 Rule 2 of the C.P.C. against the answering defendants, if so, its effect? OPD

4. Defendants No. 2 and 3 pleaded that Bara Singh was also partner in defendant No. 1-firm to the extent of l/3rd share and thus, he was bound to discharge the liability on behalf of the Firm. Defendants No. 2 and 3, particularly, also pleaded that Bara Singh had entered into partnership and also relied upon alleged partnership deed, copy thereof was placed on record as Mark 'A', They also referred to an order dated 2.2.1996 (Mark-B) passed by one Arbitrator. On the basis of the evidence brought on record and while deciding issues No. 1 and 2, the trial court came to the conclusion that Bara Singh was a mere guarantor and after his death, plaintiffs discharged the liability of the Firm, defendant No. 1 and its partners, defendants No. 2 and 3 in the suit. The trial court also came to the conclusion that the alleged partnership with Bara Singh and arbitration award are not proved. The trial court also referred to the written statement filed by defendants No. 1 to 3 in the suit filed by the bank and found that no such plea of partnership or arbitration award was raised therein. It accordingly observed that the plea of partnership of Bara Singh and his liability as a partner is totally baseless. The trial court also came to the conclusion that the plaintiffs are entitled to recover Rs. 9.00 lacs paid by them in satisfaction of the decree as guarantors and also interest amounting to Rs. 84,000/-. The trial Court also did not agree with the plea of the defendants that the suit is hit by Order 2 Rule 2 C.P.C. As a matter of fact, plaintiffs had earlier filed a suit for permanent/prohibitory injunction restraining defendants No. 2 and 3 from alienating the property of defendant No. 1-firm. This suit was filed on 15.3.1995, but till then the plaintiffs had not paid the decretal amount to the Bank. The amount was paid in satisfaction of the decree on 30.3.1993 and the earlier suit thus was got dismissed and the present suit came to be filed. The trial court, while passing the decree for Rs. 9,84,000/- granted future interest at the rate of 12% per annum till realization vide its judgment and decree dated 6.11.2006. The defendants unsuccessfully contested the First Appeal before the District Judge, Rupnagar which came to be dismissed vide judgment and decree dated 6.6.2007. The First Appellate Court also appraised the evidence independent of the findings of the trial court and concurred with the judgment and decree of the trial court and dismissed the First Appeal. Findings of both the courts below are sought to be assailed before this Court, on the ground that the courts below have failed to appreciate the evidence. The other contention of the appellant is that the interest is not payable on the suit amount as the plaintiffs in the suit, respondents herein, have paid only Rs. 9.00 lacs to the Bank.

5. I have heard the learned Counsel for the appellant at length and perused the impugned judgments.

6. The contention of the appellants that the courts below have failed to appreciate the evidence, in my opinion, is not a ground for interference under Section 100 of the C.P.C. The findings arrived at by the courts below are based on correct appraisal of evidence on record. It is settled law that existence of substantial question of law is sine quo non for interference in Regular Second Appeal under Section 100 C.P.C.

The established facts, now emerge, from the judgments impugned are that the plaintiffs' father Bara Singh was a guarantor and was made to pay the debt of defendants No. l to 3 (appellants herein). The payment was made pursuant to the decree secured by the Bank against defendants No. 1 to 3 and predecessor-in-interest of the plaintiffs. It may be useful to notice some of the relevant provisions of law. Sections 42, 43, 128, 140 and 141 of the Indian Contract Act, 1872 (hereinafter referred to as 'the Act' are reproduced herein below:

42. Devolution of joint liabilities.- When two or more persons have made a joint promise, then, unless a contrary intention appears by the contract, all such persons, during their joint lives, and, after the death of any of them, his representative jointly with the survivor or survivors, and, after the death of the last survivor, the representatives of all jointly, must fulfill the promise.

43. Any one of joint promissors may be compelled to perform - When two or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any (one or more) of such point promisors to perform the whole of the promise.

Each Promisor may compel contribution - Each of two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract.

Sharing of loss by default in contribution - If any one of two or more joint promisors make default in such contribution, the remaining joint promisors must bear the loss arising from such default in equal shares.

Explanation.- Nothing in this Section shall prevent a surety from recovering from his principal, payments made by the surety on behalf of the principal, or entitle the principal to recover anything from the surety on account of payments made by the principal.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

128. Surety's liability.- The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

140. Rights of surety on payment or performance.- Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment of performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.

141. Surety's right to benefit of creditor's securities. - A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and, if the creditor loses, or, without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security.

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.

145. Implied promise to indemnify surety:- In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety; and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but no sums which he has paid wrongfully.

7. Section 42 of the Act imposes obligation upon the joint promisors to fulfill the promise. Section 43 of the Act further provides that any one of the joint promisors may be compelled to perform the promise. In the present case, defendants No. 1 to 3 and deceased Bara Singh had promised with the Bank to re-pay the loan advanced to defendants No. 1 to 3 and as a consequence to the commitment to perform the promise, Bara Singh had also mortgaged his land in favour of the Bank as a security in his capacity as a guarantor. So, the liability devolved upon not only on defendants No. 1 to 3, but the deceased Bara Singh also, being one of the promisors. The Bank was entitled to enforce that promise against deceased Bara Singh, being one of the promisors. Since Bara Singh, predecessor-in-interest of the plaintiffs was a surety, he had co-extensive liability with the principal debtors i.e. defendants No. 1 to 3. It was under these circumstances, that the Bank secured a decree against Bara Singh also alongwith defendants No. 1 to 3 and compelled plaintiffs' successor in interest Bara Singh to pay the decretal amount by initiating execution against the property of Bara Singh mortgaged with the bank. It is not in dispute that the liability of defendants No. 1 to 3 has been discharged by the plaintiffs in execution of the decree. The plaintiffs are thus, entitled to recover the same from defendants No. 1 to 3, in view of the explanation appended to Section 43 read with Sections 140 and 145 of the Act. Section 145 of the Act provides that there is implied promise to indemnify the surety meaning thereby that where the surety is made to discharge his liability, the debt of the principal debtor under a contract of guarantee, he is entitled to be indemnified by the principal debtor. In terms of Section 140 of the Act, surety who is made to perform or pay the debt on behalf of the principal debtor is entitled to recover the same from the Principal debtor. Upon such payment, he virtually becomes a creditor to recover the same from the principal debtor. The payment of debts of defendants No. 1 to 3 by plaintiffs to the Bank has been established. The plaintiffs who have stepped into the shoes of Bara Singh, the original surety and have discharged the liability, are entitled to recover the same from defendants No. 1 to 3. The decree passed by the courts below is thus legal and valid. As far as the question of payment of interest is concerned, plaintiffs having invested money on behalf of defendants No. 1 to 3 and they having been deprived of their right to utilize that amount, due to wrongful act of the principal debtor i.e. defendants No. 1 to 3, they are also entitled to recover interest on the amount so paid to the Bank. I am unable to accept the contention of the appellants that they have no liability to pay the interest. As a matter of fact, it was not only legal but also moral duty of the appellants to have discharged their liability, but they failed to do so and compelled the guarantor to pay their debt. The guarantor, including his successors-in-interest who virtually paid the amount are entitled to interest. No substantial question of law is involved in the present Regular Second Appeal. The findings of the courts below are based on evidence. I find no merit in this Regular Second Appeal which is accordingly dismissed.