Aypunni Mani Vs. Devassy Kochouseph and ors. - Court Judgment

Gopalan Nambiyar, J.

1. The appeal arises out of proceedings in execution. The appellant had obtained a money decree in O.S. No. 68 of 1122 on the file of the District Court. Trichur, against the 2nd respondent. The 2nd respondent filed A. S. No. 149 of 1955 in the Travancore Cochin High Court against the said decree, and pending appeal, applied for stay of execution A condition stay was granted, and the 1st respondent executed a surety-ship bond on 12-7-1955. the material part of which runs as follows:

'' It is agreed that if the appeal preferred by the defendant from the above case is disposed of against the defendant. then I shall deposit the decree amount in whole due to the decree holder in the above first appeal without involving the defendant and in case of failure to do so it shall be realised from me and my properties in the same manner as it could be ealised from the defendant '

2. The Kerala Act 91 of 1958 (hereinafter referred to as the Act) came into force on 14 7-1958. The decree-holder (appellant) filed K.P No. 98 of 1960 on 17-9-1960 for execution both against the judgment debtor and against the surety. The judgment-debtor filed objections claiming himself to be an agriculturist entitled to the benefits of the Act, and further filed M.P. No. 1461 of 1960, depositing the four instalments as required by the Act and claiming benefits thereunder The surety, (the 1st respondent) also filed objections contending that execution against him, should be limited to the extent to which it would be available against the judgment-debtor and no further The court below held that the Judgment-debtor was an agriculturist entitled in the benefits of the Act. but that surely was not 11 further held cm a construction on the surety-ship bond above extracted, that on the terms thereof, the liability of the surely was only co-extensive with that of the judgment-debtor As the 5th instalment contemplated by the Act was in arrear the lower court directed that the decree-holder would be entitled to proceed against both the judgment debtor and the surely for the said instalment and also for the subsequent instalments

3. Counsel for appellant, contended that the suretyship bond must be construed strictly in accordance with the terms of the bond and that thereunder the 1st respondent is liable to pay the amount due as per the decrees of the trial court and of the appellate court. It was further contended that the equation of the position of the surely to that of the judgment-debtor by the terms of the bond is only in regard to the processual modes by which execution could be levied and not in regard to the measure of their obligations Counsel for the surety contended that both on the terms of the bond as well as on the provisions of S. 198of the Indian Contract Act, the measure of the obligation of the surely was co-extensive with that of the judgment-debtor.

4. As far as the terms of the bond are concerned, there is no doubt, that the surety's liability is limited to the amount due under the decree. The amount covered by the decree can be varied by such well known modes as by appeal or by review or by amendment. It seems to us, It can equally be varied or modified by statutory provisions. In whatever way the modification or variation of the decretal amount is brought about, we are of opinion that the surety is entitled to the benefit of the said modification or variation. So understood, we see nothing in the terms of the bond to enlarge the liability of the surely beyond the confines of the obligation of the judgment-debtor.

5. The above conclusion stands re-in-forced by the provisions of Section 128 of the Indian Contract Act, which provides:

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

6. Counsel for the appellant contended that there was sufficient provision 'otherwise' in the surety-ship bond to exclude the operation of the above section. We are unable to agree. According to us, what seems to be required is a provision in the contract to the effect that notwithstanding any circumstance the surety's liability is not diminished, and not a mere provision which in some way quantifies the measure of his obligation. There is no such provision, in the surety-ship bond executed in this case

7. On a consideration of the analogous provisions of the Madras Agriculturists Debt Relief Act, 4 of 1938, it has been held by a Full Bench of the Madras High Court in Subramania Chettiar v. M. P. Narayanaswami Gounder. AIR 1951 Mad 48 that if the liability of the principal debtor is scaled down under the provisions of the Act, the liability of the surety is also to that extent reduced. It appears to us, that Section 128 of the Indian Contract Act, sketches the ambit of liability of the surety when il enacts that the liability is coextensive with that of the principal debtor. It has nothing to do with the consequences of recovery of the debt Such being the scope and intendment section, we feet that a statutory reduction or extinguishment of the principal debtor's liability will operate as a protanto reduction, or extinguishment of the surety's debt. A reduction or extinguishment of the debt, is quite different from its unenforceability against the principal debtor by operation of the law of Bankruptcy or the statute of Limitation.

8. It appears to us, that to bold otherwise, would be to allogether deny the benefit of the ameliorative provisions of the Act, to the agriculturist-debtor On any other view, it would he open to the creditor to recover the debt as scaled down from the agriculturist debtor, and the balance from the surely, and the latter in his turn could seek reimbursement from the principal debtor (vide Section 145 of the Indian Contract Act) Such a construction would completely nullify the benefits of the ameliorative legislation to indebted agriculturist.

9. Counsel for appellant pressed before us the decision in Balkrishna v. Atmaram, AIR 1944 Nag 277. We do not find any reference in the said decision to Section 128 of the Indian Contract Act. Nor is any reference made to the prior decision of the same Court in Baby Rao Ramchandra Rao v. Babu Manaklal AIR 1938 Nag 413 where a somewhat contrary view was taken. We are therefore unable to follow the decision in AIR 1944 Nag 277. We may also refer to the decision in Iyyu v. Kunhayi. 33 Cochin LR 458 which followed the decision in AIR 1938 Nag 413

10. In Pollock and Mulla's Commentary on the Indian Contract Act (eighth Edn.) the effect of Debt Relief Acts on the liability of the surety, is noticed at pp. 535 and 536, and preference is expressed for the view taken by the Full Bench decision of the Madras High Court in AIR 1951 Mad 48. (The decision in, no doubt, criticised on a, ground not germane lo the present question).

11. The decision of the court below iscorrect. The appeal fails and is dismissed withcosts of the 1st respondent.