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  • Nasim Ali
  • R.C Mitter, JJ.
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Smart Summary

Concise Analytical Summary of the Provided Opinion

Factual and Procedural Background

Gurupada Bhowmick (identified in the opinion as respondent 1 in the appeal) instituted a suit in the Court of the Subordinate Judge at Dacca on 25 April 1931 for recovery of Rs. 7,351 from two defendants (referred to as respondents 2 and 3). On 27 April 1931 he applied for attachment before judgment of certain immoveable properties alleged to belong to one of the defendants. The Subordinate Judge ordered the defendants to show cause and provisionally attached properties said to belong to defendant 2 (respondent 2) while directing security to the extent of Rs. 8,000.

Defendant 2 gave an undertaking and a security bond for Rs. 8,000 executed by defendant 2 and the present appellants was filed on 5 May 1931; the Nazir tested the security and on 12 May 1931 the court found the security sufficient and revoked the attachment. On 20 November 1931 the suit was decreed on compromise: the plaintiff obtained a decree but it was to be treated as satisfied if defendants paid Rs. 6,000 by 15 February 1932 and a further Rs. 2,000 by September 1932; the surety bond was to remain in force until the money was paid off.

The defendants failed to pay the instalments. Multiple execution proceedings followed; by one such execution Rs. 2,000 was realized on 25 May 1935. On 26 September 1935 the decree-holder applied for execution against the judgment-debtors and the appellants (who had stood as sureties) seeking attachment and sale of properties of the judgment-debtors and, if necessary, of the sureties.

On 18 January 1936 the appellants (sureties) objected under Section 47, Civil Procedure Code (CPC), contending that execution against them was barred by limitation and that they had been discharged by the compromise decree. The Subordinate Judge overruled these objections by order dated 17 March 1936 and ordered execution to proceed; a subsequent order (28 March 1936) directed that the sureties' properties should not be attached until remedies against the judgment-debtors were exhausted. The sureties appealed against the 17 March 1936 order to the court that produced this opinion.

Legal Issues Presented

  1. Whether the appellants (who stood as sureties under the Rs. 8,000 security bond) were discharged from liability by the compromise decree which produced an instalment decree rather than a single lump-sum decree.
  2. Whether the concluding term of the compromise — that the "surety bond executed by defendant 2 will remain in force so long as the money is not paid off" — operated to discharge the sureties (appellants) from liability under the surety bond.
  3. Whether an application for execution against the sureties is barred by limitation and, in particular, whether such execution falls under Article 181 or Article 182 of the Limitation Act.

Arguments of the Parties

Appellants' Arguments (as presented in the opinion)

  • The compromise altered the terms of the original obligation in such a way that the sureties were discharged. The appellants argued that the bond contemplated a decree payable immediately on passing of the decree (i.e., a lump sum) and that an instalment decree made it impossible for the guaranteed performance to occur as originally contemplated; reliance was placed on a decision reported at 62 IA 231 (Judicial Committee) and Lord Atkin's dicta about discharge of a surety where the original contract is varied without the surety's consent.
  • The concluding clause of the compromise (stating the surety bond executed by defendant 2 will remain in force so long as the money is not paid off) implied that the decree-holder had given up rights under the surety bond against the appellants, thereby discharging the sureties.
  • The execution application against the sureties was barred by limitation: the appellants contended that execution against them falls under Article 181 of the Limitation Act (and not Article 182), and so the decree-holder's application was time-barred.

Decree-holder / Other Parties' Arguments

The opinion does not contain a detailed account of the decree-holder's or other respondents' separate legal arguments beyond the relief sought in the execution application and the court's recitation of the proceedings.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
62 IA 231 (Judicial Committee) — observations of Lord Atkin The principle that a surety is discharged if the original parties vary the terms of the original contract without the surety's assent, because the guaranteed obligation becomes different and the guaranteed performance may be made impossible. The court considered the dictum but emphasised that its application depends on analysis of the particular guarantee. It held that the bond language ("if any decree is passed") was wide enough to include an instalment decree and therefore the compromise did not vary the obligation in a way that discharged the sureties under the principle cited; the court also relied on the Judicial Committee's caveat (p.35) limiting the operation of the principle.

Court's Reasoning and Analysis

The court proceeded by textual analysis of the surety bond and by reference to relevant statutory provisions and the cited precedent.

  1. Textual interpretation of the bond: The bond provided that "if any decree is passed" the executants would be liable to deliver properties or pay up to Rs. 8,000 if the principal failed to do so. The court emphasised the word "any" as being broad enough to include an instalment decree and therefore rejected the contention that the bond necessarily contemplated only a lump-sum, immediately payable decree.
  2. Consideration of authorities/statutes: The court referred to Section 133 and Section 135 of the Contract Act. These sections indicate that a variance without the surety's consent can discharge a surety as to subsequent transactions, and that giving time or making a composition with the principal debtor discharges a surety unless the surety assents. However, the court concluded that these provisions were of no assistance to the appellants because the compromise terms did not, in the court's view, introduce a variance incompatible with the bond.
  3. Application of the cited precedent: The court considered the Lord Atkin observation in 62 IA 231 and the Court's own note that the principle's application requires correct analysis of the specific guarantee. Applying that approach, the court concluded the compromise did not make performance of the guarantee impossible nor did it vary the contract in a way that discharged the sureties.
  4. Construction of the compromise phrase: The court interpreted the clause that "the surety bond executed by defendant 2 will remain in force so long as the money is not paid off" as descriptive language indicating continuance of the bond rather than language limiting liability to defendant 2 alone. The court held those words did not show an intention to release the sureties.
  5. Limitation point and statutory operation: On the limitation issue, the court examined the nature of the execution application. By accepting the security bond, the court effectively incorporated its terms into the proceedings; consequently, under Section 145 of the CPC a person who has become liable as surety for the performance of a decree is liable to execution "to the extent to which he has rendered himself personally liable" and is to be treated as a party for purposes of Section 47. The court held that the application for execution against the sureties was an application for execution of a decree and therefore falls under Article 182 of the Limitation Act (not Article 181). It rejected the appellants' contention that Article 181 applied.

Holding and Implications

Final Holding: The court affirmed the order of the learned Subordinate Judge dated 17 March 1936 rejecting the appellants' objections under Section 47, CPC, and making the sureties liable for Rs. 6,000. The appeal was dismissed with costs; the hearing fee was assessed at one gold mohur.

Consequences and immediate implications:

  • The appellants (sureties) remain personally liable under the surety bond up to the extent found by the court (Rs. 6,000 as specified in the decree enforcement context) and execution may proceed against them subject to the procedural direction already made by the subordinate court (including the order that the sureties' properties not be attached until remedies against the judgment-debtors are exhausted, as per the subsequent order dated 28 March 1936).
  • The court concluded no discharge of the sureties resulted from the compromise; the compromise did not vary the contract in a manner that relieved the sureties.
  • The court treated the execution application as falling under Article 182 of the Limitation Act, thereby rejecting the appellants' limitation defence premised on Article 181.

The opinion does not expressly state any broader legal or precedent-setting implications beyond the direct effect on the parties; it resolves the questions presented in this factual matrix without purporting to lay down a new general rule.

Source material: Summary strictly confined to statements and reasoning contained in the provided opinion text.
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    Harendra Kumar Ghosh v. Gurupada Bhowmick

    JUDGMENT

    1. Gurupada Bhowmick, respondent 1 in this appeal, instituted a suit in the second Court of the Subordinate Judge at Dacca for recovery of Rs. 7,351 from respondents 2 and 3 on the basis of two hand-notes on 25th April 1931. On 27th April 1931 he applied for attachment before judgment of some immoveable properties belonging to respondent 3. The learned Subordinate Judge thereupon passed the following order:

    The defendants do show cause within a week from the service of notice upon them as to why they should not furnish security to the extent of Rs. 8,000. In the meantime let the properties said to belong to defendant 2 (respondent 2 in the appeal) be attached conditionally and provisionally and let the attachment continue till vacated.

    2. On the next day the issue of the writ of attachment was stayed on defendant 2 giving undertaking that he would not transfer his properties. On 5th May 1931 a security bond for Rs. 8,000 executed by defendant 2 and the appellants before us was filed before the learned Subordinate Judge. The Court asked the Nazir to test the sufficiency of the security.

    3. On 12th May 1931, the Court found the security to be sufficient and the order directing attachment before judgment of the properties of defendant 2 was revoked. On 20th November 1931 the suit was decreed on compromise, the terms of which are as follows:

    (1) The plaintiff will get a decree against the defendants for the entire amount under claim with costs, but the decree will be made final by treating it as fully satisfied on payment by the defendants of an amount of Rs. 6,000 within 15th February 1932, and a further sum of Rs. 2,000 within September 1932. In default of payment the entire balance of the decretal dues will be realizable and interest will run on the said amount at the rate of Rs. 1-8-0 percent per month till the date of realization, which we will pay;

    (2) the surety bond executed by defendant 2 will remain in force so long as the money is not paid off.

    4. Defendants 1 and 2, however, did not pay the instalments as directed in the decree. Thereupon several execution cases were started against defendants 1 and 2, the last of which was disposed of on 25th May 1935. By this execution proceeding the sum of Rs. 2,000 was realized. On 26th September 1935, the decree-holder filed an application in the Court of the Sub-ordinate Judge against defendants 1 and 2 as well as the appellants who stood sureties for realization of the balance of the decretal amount. The prayer in this petition is as follows:

    Notices may be issued upon the sureties and the judgment-debtors 1 and 2. Then the immoveable properties mentioned in the Schedule annexed to the petition in the ownership and possession of defendants X and 2 and the sureties may be attached and then the attached properties of defendants 1 and 2 may be sold first for satisfaction of the decretal dues and in case the entire amount was not satisfied then simultaneously the attached properties of the sureties may be sold in auction and the entire decretal amount may be realized.

    5. On 18th January 1936, the sureties filed an objection to this execution under Section 47 of the CPC. Their objections in substance are: (1) That the application for execution against them was barred by limitation; (2) that the application for execution was not maintainable against them as they have been discharged from their liability under the surety bond by the compromise decree. The learned Subordinate Judge, by his order dated 17th March 1936, over, ruled these objections and ordered execution to proceed against them also. On 28th March 1936, the learned Judge ordered that the properties of the sureties should not be attached until and unless the decree-holder had exhausted his remedies against defendants 1 and 2. The sureties appeal against the order of the learned Subordinate Judge, dated 17th March 1936. The first point urged by Mr. Gupta on behalf of the appellants is that the decree-holder is not entitled to execute the decree against the appellants inasmuch as they were discharged from their liability under the surety bond by the compromise decree. The material portion of the surety bond is as follows:

    If any decree is passed against executant 1 (defendant 2 in the suit), I, executant 1, shall deliver to court my properties or their value or such portion of them as would be sufficient for the satisfaction of the decree and if I, executant 1, fall to do this, we all the executants (defendant 2 and the sureties) will be jointly and severally liable for Rs. 8,000 mentioned in this surety bond and the amount of Rs. 8,000 which is the subject-matter of this surety bond will be realized from the moveable and immoveable properties and the executants of the bond and we and our heirs and legal representatives would be bound by the terms of this document.

    6. The first contention of Mr. Gupta appearing on behalf of the appellants in substance is this: The decree contemplated in the bond was a decree for money payable at once on the passing of the decree and not an instalment decree by which the payment of the decretal amount, would be deferred. The sureties guaranteed the promise of defendant 2 to deliver the properties to Court as soon as the decree would be passed and as by the compromise an instalment decree was passed the plaintiff decree-holder by entering into this compromise has made it impossible for the guaranteed performance to take place. The sureties therefore have been discharged from their liabilities under the surety bond. In support of his contention Mr. Gupta relied on the recent decision of their Lordships of the Judicial Committee in 62 IA 231 at p. 33 in which Lord Atkin made the following observation:

    The principle is that the surety, like any other contracting party, cannot be held bound to something for which he has not contracted. If the original parties have expressly agreed to vary the terms of the original contract, no farther question arises. The original contract has gone, and unless the surety has assented to the new terms, there is nothing to which he can be bound, for the final obligation of the principal debtor will be something different from the obligation which the surety guaranteed. Presumably he is discharged forthwith on the contract being altered without his consent, for the parties have made it impossible for the guaranteed performance to take place.

    7. At p. 35 of the report, however, we find the following observation:

    It is, perhaps, desirable to add that the application of this principle must always depend upon a correct analysis of the contract in fact made. Guarantees frequently relate to obligations without special reference to any specific contract between the creditor and the principal debtor. In such a case the doctrine referred to would have a very limited operation.

    8. The words in the bond indicate that the sureties would be jointly and severally liable up to the extent of Rs. 8,000 if the suit be decreed and defendant 2 fails to produce the properties which the plaintiff wanted to attach before judgment. The properties of defendant 2 were going to be attached before judgment. In order to release these properties from attachment, he promised that on the suit being decreed he would produce the property which the plaintiff wanted to attach before judgment and on his failure to do so, the sureties undertook to pay up to the amount of Rs. 8,000. We do not agree with the contention of Mr. Gupta that by the terms of this bond the sureties intended that the decree must not be an instalment decree and that the decretal amount must be payable as soon as the decree was passed. The contention of Mr. Gupta involves certain limitations in the terms of this bond which we do not find in the bond. The words used in the bond are “if any decree is passed”. The word “any” is wide enough to include an instalment decree. By Section 133 of the Contract Act, any variance made without the surety's consent in the terms of the contract between the principal and the creditor, discharges the surety as to transactions subsequent to the variance. By Section 135, 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.

    9. These provisions of law are of no assistance to the appellants as we are of opinion that the terms of compromise are not at variance with the terms of the bond. The surety bond contemplated an instalment decree also. The question of giving any time by the creditor to the principal debtor, therefore, does not arise in the present case. The next contention of Mr. Gupta is that the liability of the sureties under the decree came to an end by the concluding portion of the terms of compromise, namely, that “the surety bond executed by defendant 2 will remain in force so long as the money is not paid off”. It is contended by him that the evident implication of this portion of the compromise is that the decree-holders gave up their rights under the surety bond against the appellants. We are unable to agree with him in this view of the matter. These words simply indicate that the surety bond will continue to be in force till the money is realized. The words “executed by defendant 2” are merely descriptive and they were not intended to limit the liability under the surety bond only to defendant 2. We are therefore unable to hold that the liability of the appellants under the surety bond has been discharged by the compromise between the plaintiff decree-holder and defend, ant 2. The last contention of Mr. Gupta is that the application for execution against the sureties is barred by limitation. His argument is that an application for execution against the surety comes under Article 181, Lim. Act, and not under Article 182 of the said Act. The decree holder wants to enforce the payment of the decretal amount against the sureties evidently under Section 145, Clause. (a) and (c) of the CPC. By this section, when any person has become liable as surety for the performance of any decree or any part thereof or for the payment of any money or for the fulfilment of any condition imposed on any person under an order of the court in any suit or in any proceeding consequent thereon, the decree or order may be executed against him to the extent to which he has rendered himself personally liable, in the manner herein provided for the execution of decrees, and such person shall, for the purpose of appeal, be deemed a party within the meaning of S. 47.

    10. The appellants made themselves liable as sureties for the performance of any decree that would be passed in the suit ultimately. It is true that there is no specific order of the Court making the sureties liable for the decretal amount. But the order accepting the security bond necessarily incorporated within it the terms of the bond by which the sureties made themselves personally liable to the extent of Rs. 8,000 to the plaintiff. The application for execution against the sureties is, therefore, an application for execution of a decree as by operation of S. 145 of the Code the sureties become judgment-debtors under the decree. Such an application for execution therefore comes under Article 182. It cannot come under Article 181, Lim. Act. The result therefore is that the order of the learned Subordinate Judge, dated 17th March 1936, rejecting the appellants' objections under Section 47 of the CPC, and making the sureties liable for Rs. 6,000 is affirmed and this appeal is dismissed with costs; hearing fee being assessed at one gold mohur.

    S.C/D.S

    11. Appeal dismissed.

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    Comments

    Harendra Kumar Ghosh v. Gurupada Bhowmick
    (Apr 15, 1937)