(Delivered by Chandra Reddi, J.)
These appeals raise an interesting question of law namely whether the release of an insolvent father under S. 44 of the Provincial Insolvency Act from all debts extinguishes the liability of the son who is liable under a decree along with the father in respect of his father's debts. The son of the quondam insolvent is the appellant in all the appeals while the decree-holders are the respondents in these appeals. The questions arising in these appeals are common and so they can be disposed of together.
In order to appreciate the points at issue, it is necessary to set out a few material facts. Garikipati Sitharamiah the first respondent in C.M.S.A No. 250 of 1947, obtained a decree in O.S No. 467 of 1933, on the file of the District Munsif's Court, Repalli against the appellant and his father on a promissory note executed by the father. It is the execution of that decree which has led upto C.M.S.A No. 250 of 1947. There was another decree obtained against the appellant and the Official Receiver, Guntur, as representing his father's estate, by one Kesavayya who instituted a suit in the Sub-Court, Bapatla, O.S No. 44 of 1934 on a debt contracted by the father. E.P No. 150 of 1946 which has given rise to C.M.A No. 339 of 1948 was filed by the decree-holder in execution of this decree. The decree-holder in O.S No. 467 of 1933 obtained another decree against the appellant in O.S No. 206 of 1936 on the file of the District Munsif's Court of Repalli in respect of a debt contracted by the father who had by the time of the decree become an insolvent, C.M.S.A No. 249 of 1947 arises out of this decree.
The appellant's father was adjudged an insolvent in a petition in I.P No. 73 of 1934, and his properties were vested in the Official Receiver of Guntur. While the administration of the insolvent's estate was pending, there was a reference to arbitration by the insolvent and his creditors as evidenced by Ex. D-2 dated 12th August 1937. The purpose of this reference was to fix the proportion of the debts due by the insolvent by the payment of which the debts should be discharged. In pursuance of this reference the arbitrators passed an award on 17th March, 1938 under which a payment of three annas in the rupee, would extinguish the debts not only as against the father insolvent but as against the son as well and thereby exonerating the son (appellant) completely. In accordance with the terms of this award, the insolvent deposited a sum sufficient to meet all the debts on the basis of the proportion fixed by the arbitrators.
As soon as this was done, the insolvent filed an application in the Sub-Court of Bapatla I.A No. 927 of 1940 for accepting the award and treating it as a composition. This was opposed by several of the creditors of the insolvent some of whom were parties to the arbitration agreement on grounds of fraud and misrepresentation. Overruling the objections raised on behalf of the creditors, the Court approved the proposal for compensation as embodied in the said award. Two of the creditors, who were aggrieved by this order, filed an appeal against that order in the Court of the District Judge, Guntur. While the appeal was pending an agreement was reached between the insolvent and the appellants therein whereby the clause affecting the rights and obligations of third parties in the scheme was to be omitted. Embodying this agreement, the District Court passed a decree approving the scheme of composition based on the award and confirming the decree of the Subordinate Judge to that extent but deleting the clause which operated to release the third parties from all obligations in respect of the decrees mentioned above. Thereafter, the amount in Court deposit was distributed amongst the creditors of the insolvent and the adjudication of the appellant's father was annulled. Subsequently, the insolvent applied to grant him an absolute discharge and this was granted.
After receiving the dividends from the insolvent's estate, the decree, holders mentioned above sought execution against the son, the appellant herein, in respect of son's liability. The execution petitions were resisted by the appellant on the grounds that his liability under the several decrees was wiped out by reason of the award and secondly as a result of the extinction of the debts of his father by the operation of S. 44 of the Provincial Insolvency Act.
The trial Court which heard the execution petitions in O.S No. 467 of 1933 and 206 of 1936 accepted the contentions put forward on behalf of the appellant and dismissed the execution petitions as not maintainable. On appeal the Subordinate Judge of Tenali who also heard E.P No. 150 of 1946 in O.S No. 44 of 1934 on the file of the Sub Court, Bapatla took the view that the son was not released from his obligation consequent on release of the father from all the debts under S. 44 of the Provincial Insolvency Act. In the result he directed that execution might issue in all the three decrees mentioned above. It is these orders that are under appeal now.
In support of these appeals Mr. Narasaraju the learned Counsel for the appellant raised two contentions. Firstly he maintained that the award not having been found to be vitiated by fraud or misrepresentation as alleged by some of the creditors, its efficacy was not destroyed though merged in the scheme of composition and the legal consequence resulting in wiping out the debts completely not only against the father but the son as well must flow. The short answer to this is that even assuming that the appellant could take advantage of the award which, according to the appellant's Counsel, still retains its independent character, in spite of his not being a party thereto, the award, as it emerged from the appellate Court judgment, did not confer any benefit on the third parties including the appellant. We therefore reject this contention as lacking in force.
It was next argued by Mr. Narasaraju that the liability having been fastened on the son in respect of a debt contracted by the father by the operation of the theory of pious obligation the son's liability had ceased to exist the moment the father's liability was extinguished by virtue of the provision of S. 44 of the Provincial Insolvency Act.
The various steps in his argument are as follows: The liability of the son which was imposed on him by the doctrine of pious obligation under the Hindu Law is co-extensive with that of the father, the liability not being either joint or several and it subsists only so long as the father's liability continues. The fact that this liability has fructified into a decree would not in any way alter the nature of the liability. When the father's liability was wiped out, it discharges pro tanto the liability of the son. In other words, when the debt itself is extinguished, there is no more liability attaching to the son who is only under an obligation to discharge an existing debt of his father. To substantiate his contentions, he relied on a passage of Mayne's Hindu Law, 11th Edn., at page 410 which is in the following words:
“The pious obligation of the son lasts only so long as the liability of the father subsists. The son's liability is neither joint nor joint and several as those terms art ordinarily understood in English law.”
The learned Counsel also referred us to a decision of a Bench of this Court in Narayana Chettiar v. Veerappa Chettiar (1). The facts in that case were that a creditor who proved a debt and received a dividend in the insolvency of a Hindu domiciled in India but carrying, on business in Singapore and adjudicated a bankrupt for debts incurred by him at Singapore, filed a suit against his son for the balance of debt due to him seeking to make the son liable under the theory of pious obligation. It was decided by the Bench that the extinction of the liability of the father operated as the extinguishment of the debt as against the son also and therefore a suit could not be maintained for the recovery of the balance. It was observed there that under the Hindu law a son is not jointly bound with his father to pay the debts contracted by the latter. This case is not of much help in deciding the point in this appeal because the pious obligation had not fructified into a decree as in the present case.
To show that the son's liability for the father's debts is not independent and does not exist apart from the liability of the father, a ruling in Periasami Mudaliar v. Seetharama Chettiar(2) was cited to us. There it was observed by the learned Judge, Mr. Justice Bhashyam Aiyangar that during the father's lifetime a suit could not be brought against the son alone for the recovery of a debt due by the father though he might be impleaded as a party to a suit against the latter.
Next reliance was placed on Chockalingam Chettiar v. Meyyappa Chettiar (3), for the proposition that the existence of a decree against the son does not in any way alter the situation so far as the liability of a Hindu son under the doctrine of pious obligation is concerned. But an examination of the facts of the case shows that no such proposition is laid down in that decision. In that case one of the partners who was obliged to pay a decree debt due by the partnership instituted a suit for contribution against another partner and his sons. By the time the suit was instituted the remedy available as against the partners was barred. One of the contentions put forward on behalf of the plaintiff in order to get over the bar of limitation was that the liability of the sons not having anything to do with the contract or partnership liability but resting only on the theory of pious obligation the sons were liable even if the suit was barred against the father. This contention was repelled, on the ground that the liability of the sons was not an independent one and it was an obligation co-extensive with that of the father. It was observed further in that case that the obligation came into existence because or the father's liabilility and whatever defences were open to the father were available to the son and the fact that the debt due by the partnership had become a decree debt did not alter the situation. That was not a case where a decree was obtained against the sons and the nature of the liability under the decree against the sons was considered.
Our attention was next drawn to the decision of the Full Bench in Hanumanthappa v. Eranti Seethayya and Co. as substantiating Mr. Narasaraju's contention. According to the learned Counsel this case laid down the law that despite a decree the parties were governed by the general law applicable before the decree and the intervention of the decree did not make any difference so far as the rights and liabilities of the parties are concerned. But we do not think that it adumbrates any such principle. The question that arose for consideration in that case was whether a payment made to one of the partner-decree-holders in respect of a decree passed in favour of the partnership would bind the other partner-decree holders. The majority of the Full Bench took the view that such a payment did operate as a discharge of the decree debt; but it was open to the other partner-decree-holders to show that the partner to whom the payment was made was not authorised to receive the payment. The following observations of the learned Chief Justice at page 226 would show that that decision did not lend any support to the contention put forward on behalf of the appellant:
‘If it is sufficient that the agency is expressly declared in the decree itself I am prepared to hold that the fact that the decree is expressed to be in favour of a firm amounts to a declaration that each partner is an agent of the other partners. One can realise that when the decree is merely in favour of two or more decree-holders without anything more appearing on the face, it is necessary to insist upon proof of special agency conferring the right to receive the decree amount on one of them. But when on the face of the decree it appears that the decree is in favour of the firm that is in favour of all the partners as such, I think it is reasonable to imply that the decree itself declares the rights which the partners would have under the general law.”
It is manifest this ruling is not an authority for the proposition that no legal consequences from a decree flow and the rights and obligations of the parties are governed by the general law as before the decree.
On the other hand, it was contended by Mr. Ramachandra Rao, that whatever might be the position before the decree was passed the moment the liability of the sons for the father's debt by reason of the pious obligation fructified into a decree, the parties thereafter were governed by the decree. In support of this contention he cited to us a decision of a Bench of this Court in Venkataranga Reddi v. Chinna Sithamma . The facts of that case were these: A decree was obtained against father and sons for delivery of possession of some immovable properties and for mesne profits. In pursuance of the terms of the decree possession of the proper, ties was delivered. When the decree was put into execution for mesne profits, the decree-holder was met with a plea of limitation raised on behalf of the sons. In answer to that the decree-holder relied on the circumstance that the decree was in time as against the father which according to him made the son's share also liable by reason of the pious obligation. This theory found favour with the trial Court which directed execution to proceed against the sons also. In the appeal against the decree a Bench of this Court held that when the pious obligation merged into a decree, it was the decree that governed the rights and obligations of the parties and the mere fact that the decree was not barred against the father would not keep-it alive so far as the sons were concerned.
With regard to this decision Mr. Narasaraju made a submission that the view taken in this case is opposed to the Full Bench ruling in Hanumanthappa v. Eranti Seethayya and Co. and is therefore no longer good law. As already observed the decision in Hanumanthappa v. Eranti Seethayya and Co. has not adumbrated any rule of law which is opposed to the view taken in this case. This ruling was followed in Balayya v. Parvatheeswara Rao . The statement of law contained in Venkaiaranga Reddi v. Chinna Sithamma is in consonance with the principle laid down by the judicial Committee of the Privy Council in Rajaram v. Raja Baksh Singh (4). There a suit was filed by a creditor against a Hindu, his sons and his grandsons. While the suit was decreed against the father and the sons, it was dismissed as against the grandsons who were exonerated from all liability. The decree-holder sought to execute the decree against the grandsons also on the basis of their pious obligation to discharge the debt of their grandfather. When the matter came up ultimately before the Judicial Committee, their Lordships upheld the objection of the grandsons regarding the executability of the decree as against them on the ground that since a decree was passed exonerating them from liability and that decree having become final the creditor could not proceed against their interests in the joint family properties. So we think that the statement of law contained in Venkataranga Reddi v. Chinna Sithamma , represents the correct view and we express our respectful agreement with it.
It was then urged on behalf of the appellant that his case was governed more by the ruling in Subramania Chettiar v. Narayanasxvami Goundar(5) which held that when a debt due by a principal debtor had been scaled down under the provisions of the Madras Agriculturists Relief Act, the non-agricultural surety would not be liable for the entire debt but only to the amount of the principal debt as scaled down. It was observed in this case that Subramania Chittiar v. Batcha Rowther (6), which laid down that where the debt of a principal debtor was discharged by operation of a statute subsequently passed and not by voluntary act of parties the surety could not claim pro tanto discharge was wrongly decided. It was further stated there that the liability of the surety being co-extensive with that of the principal debtor when the principal debt was extinguished either by the voluntary act of the parties or by operation of the provisions of a Statute the liability of the surety was pro tanto reduced or extinguished. According to Mr. Narasaraju on the analogy of the principle laid down in this case when the debt against the father is extinguished, the liability of the sons which is co-extensive with that of the father is pro tanto wiped out. We must say that the principle laid down in this case under reference can have no application to the present case.
The present case has to be considered with reference to S. 44 of the Provincial Insolvency Act. S. 44(2) of the Provincial Insolvency Act lays down:
“Save as otherwise provided by Sub-S. (1) an order of discharge shall release the insolvent from all debts provable under this Act.”
Sub-S. (3) of S. 44 provides that:
“An order of discharge shall not release any person who at the date of the presentation of the petition was a partner or co-trustee with the insolvent, or was jointly bound or had made any joint contract with him or any person who was surety for him.”
It is seen that under the Sub-S. (3) of S. 44 of the Provincial Insolvency Act a person who is jointly bound or had made any contract with the insolvent or a partner on the date of the presentation of the petition is liable in spite of the insolvent's discharge under Sub-S. (2). If the contention of Mr. Narasaraju that the appellant's case is governed by the principle stated in Subramania Chettiar v. Narayanaswami Goundar is to prevail, a surety who gets pro tanto discharge when the principal debt is extinguished should also be released from all liability and his case will not attract the provisions of Sub. S. (3). But the wording of the subsection makes it clear that a surety comes within the meaning of Sub-S. (3) because obviously a surety is one who is jointly liable with the insolvent. Mr. Narasaraju had to concede that a surety's case is not saved from the operation of Sub-S. (3) and his liability would continue despite the release of the principal debtor from all debts under S. 44(2). So different considerations prevail in the case of a debtor jointly bound along with an insolvent who gets relief under S. 44(2) of the Provincial Insolvency Act. Hence the rulings relied on by Mr. Narasaraju are not of any help to him.
It was next argued by Mr. Narasaraju the effect of S. 44(2) of the Provincial Insolvency Act is to extinguish the debt as such and therefore there is nothing for which the sons could be made liable. To give effect to this argument is to ignore the Sub S. (3). If under Sub-S. (2) the release of the insolvent from all debts provable under the Act operates as a complete extinction of the debt which the insolvent is jointly bound along with others to pay, then the Sub S. (3) has no meaning at all. On the other hand the fact that Sub-S. (3) provides for the continuance of the liability of persons jointly liable along with the insolvent indicates that the debt as such is not extinguished but it only releases the insolvent from all liability keeping alive the liability of the other debtors jointly liable with him. It therefore follows that the liability of a person jointly bound is not extinguished despite the discharge of the insolvent.
The next question to be considered is whether the son against whom the decree has been passed along with the father can be said to be jointly bound with the insolvent to discharge the debt We have no doubt that the effect of a decree against the son is to make him jointly liable along with his father to discharge the debt. Whatever might be the position prior to the decree, when the obligation of a Hindu son to pay his father's debts fructifies into a decree it imposes a joint liability on the son along with the father and the former is jointly bound along with the latter within the meaning of Sub-S. (3).
Our conclusion receives support from the observations made by Ramesam J. in Mayanadan and Bros. v. Arunachala . In dealing with the question whether the son's liability goes with the disappearance of the father's obligation to pay the debts, the learned Judge after answering it in the affirmative observed that it would have been different if a decree had been obtained against the son. Though this observation is obiter, with respect we agree with it.
Mr. Narasaraju referred us to the decision of Panchapakesa Aiyar J. in an unreported decision in Tummula Brahmayya v. Davambhotla Krishnamurthi , where the learned Judge observed that though the right of the decree-holder as against one of the sons did not rest on the mere theory of pious obligation but there was a decree eo nomine against him, it did not make any difference as the decree was passed on the pious obligation. No doubt these observations of the learned Judge support the argument of Mr. Narasaraju. But for the reasons already mentioned we regret we cannot agree with the view taken by the learned Judge in this case.
For the foregoing reasons we think that the discharge of the appellant's father from liability under S. 44 of the Provincial Insolvency Act has not the effect of extinguishing the appellant's liability. The appellant continues to be liable and the decree-holders are entitled to enforce the liability against the sons in execution of the decree or decrees. We therefore think that the decision of the lower appellate Court is correct and ought to be affirmed. The appeals are dismissed with costs, (one set).
N.R.R