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Sripatrao Sadashiv Upre v. Shankarrao Sarnaik
Factual and Procedural Background
The plaintiff filed a suit seeking a declaration that the defendant is liable to pay him certain sums which the plaintiff was liable to pay under or in respect of a decree referred to in the plaint, along with costs and interest. The defendant raised two preliminary objections, contending that the plaint disclosed no cause of action and that the suit was not maintainable. The suit involved claims arising from an alleged contract of indemnity related to costs and liabilities under an execution decree.
Legal Issues Presented
- Whether the plaintiff is entitled to a declaratory decree under Section 42 of the Specific Relief Act in respect of rights arising out of a contract.
- Whether the suit is maintainable given that the plaintiff had not paid any sum under or in respect of the decree at the date of filing the suit.
Arguments of the Parties
Defendant's Arguments
- The plaint discloses no cause of action and the suit is not maintainable.
- Prayer (a) for a declaratory decree is not maintainable as it does not fall within the provisions of Section 42 of the Specific Relief Act, which requires a legal character or right in respect of property.
- Reliance on Section 145 of the Contract Act to argue that payment under the guarantee is a condition precedent for the surety (plaintiff) to recover from the principal debtor (defendant).
Plaintiff's Arguments
- The plaint prays for a declaration and recovery of moneys the plaintiff is liable to pay under a decree, including costs and interest.
- Although no specific sum was initially mentioned in the plaint, the plaintiff had paid Rs. 1,125 in full discharge of his liability, including execution costs and interest, and had furnished particulars to the defendant.
- The suit is maintainable despite the plaintiff not having paid under the decree at the time of filing, relying on precedents that a surety may claim indemnity once liability becomes absolute or a decree has been passed.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Bai Shri Vaktuba v. Agarsinghji Raisinghji | Section 42 of the Specific Relief Act is exhaustive for declaratory decrees involving legal character or property rights. | The Court held that declaratory relief under Section 42 does not extend to contractual rights affecting only pecuniary relationships. |
| Ramakrishna v. Narayana | Section 42 of the Specific Relief Act is not exhaustive for declaratory suits. | The Court noted the contrary view but found no exceptional circumstances to apply it to the present contractual indemnity case. |
| Bechevaise v. Lewis | A surety has a right in equity to be exonerated by the principal debtor as soon as the obligation to pay becomes absolute. | Supported the proposition that payment is not always a prerequisite for the surety to claim indemnity. |
| Aschersan v. Tredegar Dry Dock and Wharf Company, Limited | A surety may compel the principal debtor to pay what is due to relieve the surety. | Cited to show equitable relief available to sureties before actual payment. |
| Nisbet v. Smith | A surety may apply to compel the principal debtor to pay the money owed. | Reinforced the principle that sureties can seek relief from principal debtors in equity. |
| British Union and National Insurance Co. v. Rawson | The indemnifier's liability is measured by the indemnified's liability, not by payment made. | The Court held that the indemnifier is liable to pay even if the indemnified has not yet paid. |
| Chiranji Lal v. Nariani | A suit on an indemnity bond is maintainable if a decree has been passed against the indemnified, even if payment has not yet been made. | The Court accepted that a decree against the plaintiff is equivalent to payment for the purpose of indemnity claims. |
Court's Reasoning and Analysis
The Court examined the scope of Section 42 of the Specific Relief Act and found that it applies only to suits involving legal character or rights relating to property, excluding contractual pecuniary rights. Therefore, the declaratory relief sought in prayer (a) was not maintainable. However, prayer (b), seeking recovery of moneys allegedly payable by the defendant, was maintainable despite the plaintiff not having paid any sum under the decree at the suit's filing date. The Court relied on Section 145 of the Contract Act and several English and Indian precedents establishing that a surety may enforce indemnity rights once liability is established or a decree passed, without requiring prior payment. The plaintiff's claim was supported by particulars furnished to the defendant, and the amount claimed was ascertainable. Consequently, the Court ruled the suit maintainable in respect of prayer (b) and decreed recovery accordingly.
Holding and Implications
Holding: The suit is not maintainable in respect of the declaratory prayer (a), but is maintainable in respect of prayer (b). The Court decreed the plaintiff's claim for Rs. 866-11-4 with costs and interest.
Implications: The decision clarifies that declaratory relief under Section 42 of the Specific Relief Act does not extend to contractual indemnity claims involving pecuniary liabilities. However, a surety's suit for indemnity is maintainable once liability is established by decree, even if no payment has been made at the time of suit. The ruling directly affects the parties by granting recovery to the plaintiff but does not establish a new precedent beyond existing principles.
Mirza, J.:— The plaintiff prays for a declaration that the defendant is liable to pay him such moneys as the plaintiff is liable to pay under or in respect of a decree referred to in the plaint and certain costs incurred by the plaintiff. The plaintiff further prays that the defendant may be decreed to pay to him the moneys mentioned in the previous prayer, the costs of the suit and interest on judgment.
2. Two preliminary objections have been raised to the suit as framed. It is contended on behalf of the defendant that the plaint discloses no cause of action and that the suit is not maintainable.
3. Prayer (a) of the plaint asks for a declaratory decree. For a declaratory decree to be maintained it must fall within the provisions of Section 42 of the Specific Relief Act. That section provides that any person entitled to any legal character, or to any right as to any property, may institute a suit against any person denying, or interested to deny, his title to such character or right. There is no question in this suit as to any legal character or any right as to property. According to the ruling of this High Court in Bai Shri Vaktuba v. Agarsinghji Raisinghji (1), the section is exhaustive. Scott, C.J, remarks (p. 680):
“It has long been established that the general power vested in the Court in India under the Code of Civil Procedure to entertain all suits of a civil nature excepting suits of which cognizance is barred by any enactment for the time being in force, does not carry with it the general power of making declarations except in so far as such power is expressly conferred by statute.”
4. In Ramakrishna v. Narayana (2) the High Court of Madras has subscribed to a contrary view holding that Section 42 of the Specific Relief Act, is not intended to be exhaustive as regards the circumstances under which declaratory suits can be maintained. The learned Judges, however, state at p. 83 of the judgment:
“But we have not been referred to any case in which any of the High Courts in India has given a declaratory relief in respect of rights arising out of a contract which would affect only the pecuniary relationship between the parties to the contract and we do not think that there are exceptional circumstances in this case to take it out of the ordinary rule.”
5. The present case is in respect of alleged rights arising out of a contract and such rights, in my opinion, cannot form the subject matter of a declaratory suit. Prayer (b) of the plaint is not happily worded. It prays for a decree for moneys which are said to be mentioned in prayer (a). Prayer (a) has mentioned no specific sum and is too vague to be interpreted as meaning that an account is to be taken in order to ascertain in what sum the defendant has become liable to the plaintiff. At the date of the suit the plaintiff had paid no sum under or in respect of the decree referred to in the plaint for which he was claiming to make the defendant liable. Certain execution proceedings in respect of that decree were taken against him and he must or could have known in respect of what specific amount and costs the judgment-creditor was seeking to make him liable. No adequate reason has been shown why the plaintiff has omitted to set out in this prayer the specific sum and costs for which he was seeking relief against the defendant. The plaintiff is shown to have paid to the judgment-creditor since the filing of the suit sums aggregating Rs. 1,125 in full discharge of his own liability in respect of the decretal amount and all subsequent costs. That sum is made up of the item of Rs. 866-11-4 due for costs of execution under and in respect of the decree and about Rs. 225 for interest and costs of the execution proceedings against the plaintiff personally.
6. The defendant is not taken by surprise by the plaintiff's omission to set out the amount of his claim in the prayer of his plaint. He was well aware prior to the suit that the plaintiff was claiming to be indemnified by the defendant in respect of the costs payable under and in respect of the decree for which the plaintiff was liable. The amount of those costs was ascertained before the filing of the suit and due intimation of what it was, was given to the defendant. After the filing of the suit the defendant's attorneys have been furnished with particulars of the plaintiff's claim. Prayer (b) of the plaint may be taken, therefore, to stand for a claim for Rs. 866-11-4, costs of the execution proceedings against the plaintiff and the costs of certain third party notice proceedings instituted between the plaintiff and the defendant, and the plaintiff's costs of this suit and interest on judgment. The plaintiff in my judgment is entitled to proceed in respect of this prayer of the plaint.
7. It is contended on behalf of the defendant that as at the data of the suit the plaintiff had paid no sum of money under or in respect of the decree the suit is not maintainable. Reliance is placed on Section 145 of the Contract Act, which provides that 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. It is contended that payment under the guarantee is a condition precedent to being entitled to recover the amount from the principal debtor. English decisions have concurred in the proposition that as soon as the obligation to pay becomes absolute a surety has a right in equity to be exonerated by his principal: see Bechevaise v. Lewis (3). In Aschersan v. Tredegar Dry Book and Wharf Company, Limited (4). Swinfen Eady, J. remarks (p. 406):
“It has been the law of the Court for vary many years that a surety is entitled to come into equity to compel the principal debtor to pay what is due from him, to the intent that the surety may be relieved.”
8. He quotes from the remark of the Lord Chancellor in Nisbet v. Smith (5), viz.:
“It is clear and never has been disputed that a surety, generally speaking, may come into this Court, and apply for the purpose of compelling the principal debtor for whom he is surety to pay in the money, and deliver him from the obligation.”
9. In British Union and National Insurance Co. v. Rawson (6) the plaintiff company had recovered judgment against a married woman in respect of unpaid calls on shares against which the defendant had agreed to indemnify her. Not having any separate property she had assigned the benefit of her right of indemnity to the plaintiff company, who, after written notice of the assignment, had sued the defendant for the full amount of their judgment. The, Court of appeal, agreeing with the trial Court (Astbury, J.), held that although the married woman had paid nothing, nevertheless she was entitled to have the amount of the calls paid by the defendant either to the plaintiffs or to herself. Warrington, L.J, in the course of his judgment, remarks (p. 487):
“I think the real answer to the contention is that the measure of the liability of the indemnifier is not the capacity of the indemnified to pay, but his liability to pay. To adapt the words of Sir George Jessel, M.R in Lacey v. Hill (7), the indemnifier is liable to indemnify to the extent of the liability incurred by the indemnified.”
10. In Chiranji Lal v. Nariani (8) the Allahabad High Court has held that it is not necessary that, before a suit on an indemnity bond can be filed, the plaintiff should have already been compelled to make the payment in respect of which he is seeking to be indemnified. It is sufficient that a decree has been passed against him for such payment. The learned Judges allowed the plaintiff to produce before them a certified copy of the certificate recording payment of the amount of the mortgage decree which was satisfied by them after the institution of the suit. In the circumstances of the case the learned Judges held that the granting of the mortgage decree against the plaintiffs was equivalent to payment. Section 145 of the Contract Act, does not in my judgment debar a surety from making a claim against the principal debtor in cases where he has not made the payment under the guarantee but has become liable only in praesenti to do so. In the absence of a provision in the statute restricting the claim of a surety against the principal debtor to cases where the surety has already paid the amount, the Court would be at liberty to apply the principle of the English decisions which the Allahabad High Court has already adopted. I hold that the suit is maintainable.
11. I answer the first issue in the affirmative; my answer to the second issue is: the suit is not maintainable in respect of the declaratory prayer (a), but is maintainable in respect of prayer (b).
12. (His Lordship after dealing with the remaining issues, gave a decree in favour of the plaintiff for Rs. 866-11-4.)
J.M/R.K
13. Suit decreed.
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