Rajasthan High Court - Jaipur
Ramswaroop And Anr. vs State Bank Of Bikaner & Jaipur And Anr. on 14 February, 2002
Equivalent citations: RLW2003(1)RAJ399
Author: Prakash Tatia
Bench: Prakash Tatia
JUDGMENT Tatia, J.
1. This is an appeal against the judgment and decree dated 28.4.1981 passed in Civil Suit No. 33/1979.
2. Brief facts of the case are that the plaintiff respondent No. 1 Bank filed the suit for recovery of Rs. 13,156,15 against the defendant Nos. 1, 2 and 3. The defendant No. 1 is the borrower, got the loan of Rs. 10,000/- from the plaintiff-Bank which was sanctioned as back as on 3.7.1976 by the plaintiff- Bank. The defendant Nos. 2 and 3 gave guarantees for repayment of the above amount. The loan amount was not paid either by the borrower nor by the guarantors, therefore, the plaintiff filed the suit on 1.6.1979 before the trial court for recovery of the aforesaid amount along with interest. The written statement was filed by defendant No. 1 denying the liability. Defendant Nos. 2 and 3, who were the guarantors, submitted separate written statement. The trial court recorded statement of the defendant under Order 10 Rule 1 of the Code of Civil Procedure on 1.5.1980. The defendant No. 1 admitted the documents filed by the plaintiff- Bank, therefore, the documents were marked as Ex.1 to Ex.10. These documents are, therefore, admitted documents. In view of the admission of the documents by the borrower, issues were framed placing burden upon the defendants and the case was fixed for the evidence of the defendants. The defendants came in the witness-box as DW-1 and DW-2. The evidence was closed of the defendants and, thereafter, the plaintiff and defendant No. 1 submitted a compromise before the trial court on 27.11.1980. The compromise, as a whole, is relevant which is required to be considered in this appeal and, therefore, it would be useful to quote the same in extenso which reads as under :-
^^lsok esa] Jheku~ fMLVªDV tt lkgc HkhyokM+k eqdnek uEcj 33 lu~ 79 bZ- nh-
LVsV cSad chdkusj ,.M t;iqj cuke Jh jkefjNiky oxSjk &&&&&&&oknh &&&&&izfroknh nkok :i;k 13156@15 iS- mijksDr ekeys esa Qjhdsu ds fuEu izdkj jkthukek
gqvk gS ftl ekfQd fMØh cgd oknh f[kykQ izfroknhx.k nh tkus gsrq izkFkZuk gS%µ 1- ;g gS fd oknh dk okn ekfQd nkok e; [kpkZ fMdh Qjek;k tkosA 2- ;g gS fd izfroknh u-1 fMdh dh jde dh vnk;xh fuEu izdkj fd'rksa ls djsxkA izFke fd'r 3000@& rhu gtkj :i;s rk-
10-12-80 dks vnk gksxh rRi'pkr~ 700@&& lkr lkS :i;s izfrekg izfroknh ua-
1 oknh cSad dks gj ekg dh izFke rkjh[k dks vnk djrk jgsxk ;kfu izFke fd'r 700@ :i;s dh lkr lkS :i;ksa dh rkjh[k 1-1-81 dks vnk gksxh o vk;Unk gj ekg blh izdkj rkdqd csckdh vnk gksrh jgsxhA 3- ;g gS fd dksbZ Hkh nks fd'r pwd tkus ij oknh dqy jde ,d eq'r olwy djus dk vf/kdkjh gksxkA 4- ;g gS fd rkjh[k fMdh ls C;kt ekfQd cSad jsV izfroknnh dks vnk djsxkA vr% fuosnu gS fd ekfQd jkthukek fMdh lkfnj QjekbZ tkosA fnukad 27-11-80 ,lMh@& ,lMh@& 27-11-80**
3. In view of the above compromise, the trial court passed the decree on 5,12.1980 for the entire suit amount of Rs. 13156.15. The costs of the suit was also awarded in favour of the plaintiff and against defendant No. 1. The trial court, in view of the compromise between the plaintiff and defendant No. 1, passed the decree for payment of the amount in installments; the first installment was to be paid by defendant No. 1 was of Rs. 3000/- and was payable by 10.12.1980 and the rest of the amount was to be paid by the defendant No. 1 in installments of Rs. 700/- per month to the plaintiff. The first installment of Rs. 700/- was to be paid by 1.1.1991 and, thereafter, every month. It was provided in the decree that in case of two defaults of payment of the installments by the defendant No. 1, the plaintiff will have a right to recover the entire amount. The trial court granted the interest from the date of the suit as per the interest rate of the Bank which is to be paid by defendant No. 1.
4. This compromise decree was passed in presence of counsel for the appellant, counsel for defendant No. 1 and counsel for defendant Nos. 2 and 3. On the same day, when the decree was passed, as said above, the counsel for the plaintiff shown his desire to proceed with the suit against defendant Nos. 2 and 3, therefore, the suit was fixed for the evidence of the plaintiff. In this way, the plaintiff's evidence was recorded after decree dated 5.12.1980 of entire suit amount and even cost of the suit against defendant No. 1, the evidence of witnesses K.L. Sharma and Surat Raj were recorded and the suit was posted for final arguments.
5. The trial court, after hearing arguments, of defendant Nos. 2 and 3, passed second decree of Rs. 7808.37 against defendant Nos. 2 and 3 on 28.4.1981. By this decree, the trial court also awarded interest from 7.4.1979 to 28.4.1981 @ 11.5% per annum and interest from 28.4.1981 till the date of payment @ 6% per annum. The suit for the rest of the amount against defendant Nos. 2 and 3 was dismissed by the trial Court.
6. Therefore, there two decrees in this one suit; one is dated 5.12.1980 against defendant No. 1 only on the basis of the compromise dated 27.11.1980 and second is the impugned decree dated 28.4.1981. Since the decree dated 5.12.1980 has not challenged by any of the parties, therefore, that decree became final and binding.
7. The defendant Nos. 2 and 3 against whom the impugned decree was passed on 28.4.1981, have challenged the judgment and decree on the ground that in view of the compromise dated 27.11.1980, the appellant-defendant Nos. 2 and 3, who were the guarantors for the loan obtained by defendant No. 1, stand discharged and the compromise dated 27.11.1980 is substantially variation in the terms of the contract by which the loan was granted. It was also submitted that the compromise dated 27.11.1980 is also a novation of contract, therefore, also the guarantors stand discharged in view of the new contract between the plaintiff and defendant No. 1.
8. The learned counsel for the appellants further submitted that by compromise dated 27.11.1980 itself it is clear that the suit of the plaintiff has been decreed in total wherein the entire amount was to be paid by the defendant No. 1 only and this was accepted by the plaintiff in the compromise, therefore, no further decree could have been granted by the trial court. It is also pointed out by the learned counsel for the appellants that when the entire suit for Rs. 13156.15 has been decreed by the trial court by decree dated 5.12.1980 then if the impugned decree will be allowed to stand, it will result into passing of the decree for the amount more than the claim in the suit itself. According to the learned counsel for the appellants, the guarantors are liable to make payment of the amount in case of default by the borrower and when the plaintiff has accepted that the entire amount is to be paid only by defendant No. 1 then also no decree can be passed by the trial court against defendant Nos. 2 and 3.
9. The learned counsel for the appellants relied upon the judgments delivered in : Brahmayhyua and Co. Official Liquidator v. K. Srinivasan Thangirayar and other (1), and Kanailal Mookerjee v. Kali Mohan Chatterjee (2).
10. The learned counsel for the respondent appearing for the Bank vehemently submitted that the compromise was entered into between the plaintiff and defendant No. 1 which was in the knowledge of defendant Nos. 2 and 3. The counsel for defendant Nos. 2 and 3 was present in court when the decree dated 5.12.1980 was passed. The presence of the counsel is presence of party and when the counsel did not object to the compromise decree then the appellants have no right to challenge the compromise dated 5.12.1980, nor they can challenge the compromise which was entered into between the plaintiff and defendant No. 1 on 27.11.1980 in presence of their counsel. The learned counsel for the respondent further vehemently submitted that the plaintiff-Bank made it very clear on 5.12.1980 itself when the decree against defendant No. 1 was passed by the trial court, that the Bank will proceed against defendant Nos. 2 and 3, therefore, all these facts clearly show that the defendant Nos. 2 and 3 had knowledge of the compromise. They never objected to the compromise, they never objected to the passing of the decree by the trial court on 5.12.1980, they never raised any objection with respect to the proceeding with the suit by the plaintiff before the trial court, therefore, the defendants-appellants cannot challenge the judgment and decree subsequently passed against them.
11. The learned counsel for the respondents relied upon the judgments delivered in : Mohan Lal v. Suraj Mani and Anr. (3), Chakkunny (Surety) v. Viswanatha Iyer (Decree-holder) (4), and Amin Abdul Kadar Murtasa v. Jivraj Otmal Ratnagiri Bhagldari, a firm and Ors. (5). The learned counsel for the respondent also relied upon the judgment of the Hon'ble Apex Court delivered in : K.t Vehkata Seshiah v. Kanduru Ramasubbamma (dead) by Lr. (6), and Anr. judgment of the Hon'ble Apex Court delivered in : Raja Bahadur Dhanraj Girji v. Raja P. Parthasarathy Rayanimvaru and Ors. (7).
12. I considered the rival submissions of the parties and also considered Sections 135 of the Indian Contract Act. Section 135 of the Contract Act is the basis of the arguments of the learned counsel for the appellants in addition to other grounds. Section 135 of the Indian Contract reads as under :-
"135. Discharge of surety when creditor compounds with, gives time to, or agrees not to sue, principal debtor.-A contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue the principal debtor, discharges the surety, unless the surety assents to such contract."
13. It is clear from Section 135 of the Contract Act that in given circumstance the surety stands discharged and, as per the above provisions, if the guarantor and principal debtor entered into contract by which the creditor makes; (i) composition with, (ii) promises to give time, (iii) or not to sue the principal debtor, it discharges the surety unless the surety assents to such contract. According to the learned counsel for the appellants, as per the above provisions and as per the contract between the plaintiff-creditor and defendant No. 1 debtor, the creditor accepted to recover entire amount claimed in the suit only from defendant No. 1 and also gave concession of installments and time to defendant No. I to make payment of the decretal amount in installments and for this, the respondent No. 2 never gave any consent, therefore, the surety stands discharged.
14. After considering the rival contentions, it is clear from the compromise dated 27.11.1980 that the language of the compromise reveals that this compromise was entered into between the plaintiff and defendant No. 1 only. The presence of advocate or presence of party through advocate at the time of entering into compromise or passing of the decree losses its significance in the present case because of the fact that the defendant Nos. 2 and 3 are not challenging the compromise dated 27.11.1980 at all. In fact, the defendant Nos. 2 and 3 relying upon the compromise want to take benefit of the compromise. This is not the case of the defendants that the above compromise is wrong, illegal or not binding, either against them or between defendant No. 1 and the plaintiff. Therefore, the judgments cited by the learned counsel for the appellants have no relevance to the facts of this case. The judgment delivered in the case of Raja Bahadur Dhanraj Girji (supra), the Hon'ble Apex Court, while dealing with the matter with respect to a surety bond filed in favour of the court, considered the matter of discharge of surety in given circumstances, the Hon'ble Apex Court considered Section 135 of the Indian Contract Act. The Hon'ble Apex Court held as under :-
"Section 135 provides that a contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor discharges the surety, unless the surety assents to such contract. There can thus be no doubt that a contract of suretyship to which Section 135 applies would be unenforceable if the debt in question is compromised between the debtor and the creditor without the assent of the surety. But this provisions in terms cannot apply to a surety who has executed a bond in favour of the court, because such a contract of guarantee of suretyship does not fall within the scope of Section 126 of the Contract Act. A contract of guarantee under the said section postulates the existence of the surety, the principal debtor and the creditor, and this requirement is not satisfied in the case of a bond executed in favour of the court. Such a bond is given to the court and not to the creditor and it is in the discretion of the court to enforce the bond or not. Therefore, there cannot be any doubt that in terms, the provisions of Section 135 cannot apply to a court bond."
15. A bare perusal of the above reasonings, it is clear that by this judgment relied upon by the learned counsel for the respondents, the Hon'ble Apex Court held that there can be no doubt that a contract of suretyship to which Section 135 applies would be unenforceable if the debt in question is compromised between the debtor and the creditor without assent of the surety. The Hon'ble Apex Court, thereafter, held that this proposition is not applicable when a bond is executed in favour of the court because of the reason that the contract of guarantee of suretyship does not fall within the scope of Section 126 of the Contract Act and the existence of the surety, the principal debtor and the creditor is missing in case of bond executed in favour of the court. Here is not the case when any bond was submitted in favour in favour of the court.
The Hon'ble apex Court in this judgment, while dealing with the controversy which was between the parties in the above case after discussion, held as under :-
"Consequently, in the present case where the surety bond was executed in favour of court and by it the sureties understood to pay certain amount of money on behalf of the respondent if decreed by the court and the compromise decree between the parties introduced complicated provisions enabling the appellant to take possession of the properties in adjustment of rival claims, granted time, albeit to both the parties, to discharge their obligation thereunder and included matters extraneous to the judicial proceedings in which the surety bond was executed, Held, that the sureties stood discharged by the compromise decree."
16. Even in case surety bond was executed in favour of the court and the court passed the compromise decree including the matters extraneous to the judicial proceedings in which the surety bond was included it was held that the sureties stand discharged by the compromise decree. Therefore, it is clear that surety stands discharged on happening of events mentioned in Section 135 of the Indian Contract Act. The judgment relied upon by the learned counsel for the respondents nowhere supports the respondents. Even in view of law laid down by the Hon'ble Apex Court it is to be seen whether, by above compromise dated 27.11.1980 and decree dated 5.12.1980, guarantee given by the defendant Nos. 2 and 3 stands discharged or not?
17. Now, the point remains is that what is the effect of the compromise in this case in view of the legal proposition laid down by the Hon'ble the Apex Court in the case of Raja Bahadur Dhanraj Girji (supra). Opening para of the compromise clearly reveals that both the parties mentioned in the compromise submitted that the matter has been settled between the parties and decree in favour of the plaintiff, against the defendant, be passed. In first para of the compromise it is prayed that suit is to be decreed in toto including the costs of the suit. In para No. 2 of the compromise the plaintiff-Bank accepted that defendant No. 1 will make payment of the entire amount of the decree in installments. By this compromise, further concession was granted by creditor to defendant No. 1 by making payment in installments. It is true that in each and every case of compromise surety cannot claim discharge of the liability under the surety bond but when the creditor accepted that the decree be passed against all the defendants and this decree is to be satisfied by defendant No. 1 and when the creditor himself agrees to accept entire decretal amount from only the borrower defendant, then it amounts to voluntarily entering into new contract by the creditor with the debtor. This new compromise (agreement), by necessary implication, discharges the guarantor.
18. So far as controversy of consent to the compromise dated 27.11.1980 is concerned, first of all it can safely be held that this was a compromise between creditor and the debtor by which creditor sought relief of entire suit to be decreed with specific term that entire decretal amount is to be paid only by the borrower then if mere presence of advocate at the time of filing of compromise and remaining present at the time of passing of the decree even if taken as assent of the guarantor then also assent can be presumed to the extent of facts mentioned in the compromise only. By this implied consent, the borrower gave consent of passing of decree for entire suit amount fully understanding that the entire suit amount will be paid by the only defendant No. 1 and as per this compromise the defendant Nos. 2 and 3 will not have to pay a single penny. Therefore, it is held that in the facts of this case even the consent of the guarantor to the compromise only absolves the guarantor from its liability under the guarantee, even if it is held that the guarantor never gave consent for the compromise dated 27.11.1980 even then in view of substantial variation in contract the guarantors stand discharged from their liability.
19. Now, the decree dated 5.12.1980 is also on record. By this decree, the trial court decreed the suit of the plaintiff for the entire sum of Rs. 13156.15 and by the impugned decree dated 28.4.1981, the trial court passed the additional decree of Rs. 7808.37 against defendant Nos. 2 and 3 (appellants). It appears that the trial court failed to appreciate the nature of the liability of the guarantors. As per the law governing the case of guarantee, a guarantor is liable to make payment of the amount received by the borrower. At the same time, the guarantor also has an option to make payment of the debt and has a right to recover the amount from the borrower, but the guarantor himself is not responsible for any money decree independently as a borrower. He merely promises to make the payment in the happening mentioned in the agreement for advancement of the loan to third party-borrower. If decree dated 5.12.1980 passed in this very suit against defendant No. 1, will be allowed to stand and the decree dated 28.4.1981 will also be allowed to stand, then there will be two decrees in the same suit; one for the entire suit against defendant No. 1 and in the decree dated 5.12.1980 it has not been held that since the borrower is liable to make payment of the decretal amount in installments, therefore, the guarantor is also liable along with the borrower. This decree against defendant No. 1 is final and for the plaintiff is also final. This decree dated 5.12.1980 gives right to the plaintiff-Bank to recover the entire decretal amount from the defendant No. 1 and by decree dated 28.4.1981, the plaintiff Bank is further entitled to recover Rs. 7808.37. This decree is also executable. In this decree dated 28.4.1981, it is also nowhere provided that in case defendant No. 1 will fail to make payment of the decretal amount as decreed on 5.12.1980 then the amount will be recoverable from defendant Nos. 2 and 3 in pursuance of the decree dated 28.4.1981. Therefore, the trial court has passed the decree for the amount which is not even the claim of the plaintiff in the suit and, in a suit for Rs. 13156.15, two decrees for total Rs. 20,964.52 has been passed by the trial court, therefore, the decree dated 28.4.1981 cannot be allowed to stand.
20. The trial court also, while passing the decree dated 28.4.1981, his not given any reason for arriving at a conclusion to hold defendant No. 2 and 3 liable for the amount of Rs. 7808.37. Therefore, the decree is non-speaking also.
21. In compromise dated 27.11.1980, the defendant and plaintiff agreed for the rate of interest as per the interest rate prevailing in the Bank and in decree dated 28.4.1981, the trial court granted the decree of interest over Rs. 7808.37 @ 11.5% per annum from 7.4.1979 to 28.4.1981 and from 29.4.1981 till the date of payment @ 6% per annum. Therefore, there are two decrees for different rate of interest against one applicable to defendant No. 1 and second is applicable to defendant Nos. 2 and 3 which is also not permissible under any law.
22. Therefore, the decree dated 28.4.1981 deserves to be set aside. Hence set aside.
23. The learned counsel for the appellants also produced copy of the statement of one of the witness of the Bank who categorically stated that the compromise talks were only between the plaintiff and the defendant No. 1. Therefore, also the trial court, while deciding the suit against defendant Nos. 2 and 3, was required to apply its judicial mind to determine the liability of the defendant Nos. 2 and 3. The trial court, therefore, without considering the important piece of evidence and admission of the plaintiff wrongly passed the decree in favour of the plaintiff and against defendant Nos. 2 and 3. Therefore, the judgment and decree dated 28.4.1981 cannot be allowed to stand on this point of law.
24. No other point was pressed.
25. Therefore, this appeal is allowed and the judgment and decree dated 28.4,1981 is set aside. The suit of the plaintiff against defendant Nos. 2 and 3 is dismissed with costs throughout.