Spencer, J. — Sect. 69 of the Indian Contract Act, in ray opinion, applies to the case of a surety who pays a decree debt which other persons, besides the judgment debtor for whose appearance he made himself liable, were bound by law to pay.
I consider that the surety is not the less interested in the payment of the money (i. e., the decree-debt) because the decree-holder could legally compel him to pay the debt of the principal debtor. Even if the other judgment debtors are not to be regarded as principal debtors by a strict interpretation of the words of Sect. 126 (in which case Sect. 140 would apply to this case), the surety's liability is not co-extensive with that of the other judgment debtors, because he is invested by Sect. 140 with a right which they do not possess, namely, all the rights which the creditor had against the principal dibtor, whereas the judgment-debtors have inter se only the inferior right of contribution, that is, a right to recover a proportionate amount of the joint debt from a co-debtor. It was held in Jagapatiraju v. Sadrusannama Arad(1), that a right of contribution did not come within Sect. 69 of the Indian Contract Act.
A surety's right stands on a higher footing than a right for contribution.
He is bound by reason of his contract of guarantee to discharge the liability of the person for whom he stands surety in case of the latter's default, and he is not jointly and severally liable with all the judgment debtors to pay the whole or any portion of the decree debt.
The cases which have decided that a person “interested in the payment” in the words of Sect. 69 must not be a person who is himself liable to pay have to be understood in this sense; and I understand Srinivasa Aiyangar, J., in Jagapatiraju v. Sadrusannama Arad to be referring to joint liability when he speaks of a “person interested in the payment of money being a person who is not himself bound to pay the whole or any portion of the amount.”
The Lower Courts were right and the Second Appeal is dismissed with costs.
In the circumstances of the case, it will be equitable to add a direction in the decree as set out in my learned brother's judgment and the decree will be amended accordingly.
Ramesam, J.—On a proper construction of the surety bond, I am of opinion that the plaintiff was a surety for all the three defendants. The learned counsel for the appellant conceded that any amount paid under the surety bond goes in discharge of the decree amount to that extent. In other words the judgment creditor is not entitled to keep the money paid under the surety bond and yet execute the whole decree. Conversely, if any amount had been paid by any of the judgment-debtors before the surety was called upon to pay the surety would not be liable to pay it over again. Thus the liability of the surety under the surety-bond is to pay only the unpaid amount of the decree. Having regard to the main object of the surety bond, viz., the release of the 3rd defendant it is true that the liability of the surety arises on the 3rd defendant's failure to appear, and plaintiffs' failure to secure his appearance. The effect of this clause is to make the bond a conditional surety-bond but this clause has no bearing on the resulting liability on the part of the surety to pay only the unpaid balance of the decree amount or, in other words such portion of the decree amount which the judgment debtor had defaulted to pay up to the time when the surety may be called upon to pay. The motive for the transaction, viz., the release of the 3rd defendant should not be allowed to confuse the legal effect of the surety bond which is to make the surety liable, on default of 3rd defendant's appearance, to pay only such portion of the decree amount as the judgment-debtors might leave unpaid. It is true these words about the balance of the decretal amount are not in the bond but this is the obvious meaning of the bond. So read, the surety bond is a bond on behalf of all the three judgment-debtors who are all principal debitors. In my opinion, there need be no privity between the principal debtor and a surety and all debtors whose unpaid debt a surety promises to pay, are the principal debtors though they are not the objects of his benevolent intention.
In this view, the plaintiff is entitled to a decree under Sect. 140 of the Indian Contract Act and no question arises for decision with reference to Sects. 69 and 70 of the Indian Contract Act, though I am inclined to agree with my learned brother and uphold the decree even with reference to these sections. The Second Appeal fails and is dismissed with costs.
In the circumstances of the case, the plaintiff will execute the decree against the 2nd defendant for more than one-third of the suit amount, only after he makes reasonable attempts to recover it from the 3rd defendant or if the 3rd defendant is dead or adjudicated insolvent.
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K. V. S.Decree modified.