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Hajarimal v. Krishnarav
Analytical Summary of the Opinion (Westropp, C.J.)
Factual and Procedural Background
This reference arose from a suit on a bond dated 8 August 1877, conditioned for payment of Rs. 50 (principal payable on demand). The plaint was presented on 11 September 1880. Under the Indian Limitation Act (Act XV of 1877, Schedule II, Article 59) the period of limitation for such a bond was three years from the making of the loan (i.e., from the date of the bond).
The principal debtor was not an agriculturist within the meaning of the Dekkhan Agriculturists' Relief Act (XVII of 1879), but the surety was an agriculturist under that Act. As filed, the suit was time-barred against the non-agriculturist principal debtor; the Special Judge, having doubts about the effect of the Dekkhan Agriculturists' Relief Act on the agriculturist surety, referred the question to this Court. The Special Judge's own opinion inclined against holding the agriculturist surety liable notwithstanding section 72 of the Dekkhan Act.
Legal Issues Presented
- Whether the effect of section 72 of the Dekkhan Agriculturists' Relief Act (XVII of 1879) is to leave the agriculturist surety still liable for the principal and interest due on the bond, even though the action against the non‑agriculturist principal debtor was barred under the Indian Limitation Act (Act XV of 1877).
- Whether, assuming that the barring of the action against the principal debtor operates to extinguish the right (and not merely the remedy), the surety is nevertheless discharged under the contract law provisions governing guarantees, or whether statutory extension of limitation for agriculturists alters that result.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court addressed the reference in two principal stages: statutory construction of section 72 of the Dekkhan Agriculturists' Relief Act, and application of the Contract Act provisions relating to guarantees (sections 126–147), in particular sections 128, 133, 134, 137 and 139.
1. Construction of section 72 of the Dekkhan Agriculturists' Relief Act
- Section 72 substitutes longer limitation periods for suits against agriculturists—twelve years for suits based on registered written instruments and six years in other cases—and contains a proviso that nothing shall revive rights already barred immediately before the Act came into force.
- The proviso was held inapplicable because, when the Dekkhan Act came into force on 1 November 1879, the three‑year limitation under the Indian Limitation Act had not yet expired (it expired on 8 August 1880).
- Section 72 contains no exception for sureties. The Court noted that the Legislature did make exceptions for a defendant "not being merely a surety of the principal debtor" elsewhere in the Act (clause (y) of section 3 and the first passage of section 12), and that the omission of any such exception from section 72 is significant.
- Applying the canon expressio unius est exclusio alterius, the Court inferred that the Legislature intended section 72 to apply to all agriculturists in the affected districts, whether principals or sureties; the legislative purpose was to relieve agriculturist debtors from pressure to execute fresh onerous security.
- The Court emphasized that, although the Legislature could have excepted sureties, the absence of such exception means a judicial court should not itself create one (i.e., doing so would be legislating, not interpreting).
2. Interaction with contract law on guarantees (sections 126–147 of the Indian Contract Act)
- The Court assumed for analytical purposes that the barring of the creditor's action against the principal debtor by the Limitation Act might extinguish the principal's right (referring to section 2(j) of the Indian Contract Act declaring that a contract which ceases to be enforceable by law becomes void), while noting section 25(3) of the Contract Act which qualifies that position to the extent of fresh promises in writing.
- Section 128 provides that the liability of the surety is co‑extensive with that of the principal debtor unless otherwise provided by contract. The Court considered whether the extension of limitation for agriculturists effected by section 72 of the Dekkhan Act amounts to such a variance.
- The Court held that the legislative extension of limitation is not a contractual variance made by the principal debtor and creditor and therefore does not fall within section 133 (which deals with discharge of surety by variance of contract), so that the surety is not discharged by virtue of such legislative change alone.
- Section 134 discharges the surety where the creditor and principal debtor agree to release the principal or where the creditor's act or omission legally discharges the principal. Prima facie, omission to sue the principal within the three‑year period produced the legal consequence of discharging the principal and, if section 134 were applied alone, might discharge the surety.
- But section 137 qualifies section 134 by declaring that mere forbearance by the creditor to sue the principal, in the absence of a provision in the guarantee to the contrary, does not discharge the surety. The Court explained "mere forbearance" to mean forbearance not founded on, or consequent upon, a promise such as that dealt with in section 135.
- Section 139 discharges the surety where the creditor does an act inconsistent with the surety's rights or omits an act his duty requires, and thereby impairs the surety's eventual remedy against the principal. The Court cited commentary (Cunningham and Shephard) to support the view that the creditor is not under a duty to sue the principal at any particular time; so section 137 must be effective and not rendered meaningless.
- The Court observed that a surety who pays the creditor has a remedy against the principal; the limitation period for that remedy does not begin to run until payment by the surety, so in many cases the surety's right of recoupment against the principal survives even though the creditor's direct right against the principal has been barred when the creditor failed to sue in time.
- Drawing these threads together, the Court concluded that statutory extension of limitation for agriculturists (section 72) and the Contract Act provisions considered led to the result that the agriculturist surety is not discharged merely because the creditor's action against the non‑agriculturist principal became barred under the Limitation Act.
3. Comparative doctrinal point (authorities cited)
- The Court discussed an example from M. Merlin's Repertoire de Jurisprudence about termination of suretyship by lapse of limitation, and emphasized a key distinction: in the Merlin example the prolongation of liability beyond the period of limitation was attributable to an act of the principal (an oath), whereas in the present case the prolongation (or alteration) is by legislative enactment which uniformly affects principal, surety and creditor.
Holding and Implications
HOLDING: The Court held that the action against the agriculturist surety is not barred by reason of the action being barred as against the non‑agriculturist principal debtor under Act XV of 1877, Schedule II, Article 59.
Implications:
- Direct effect on the parties: The agriculturist surety remains liable to the creditor on the bond notwithstanding that the creditor's remedy against the non‑agriculturist principal was time‑barred when the suit was instituted. The surety's obligation therefore survives the barring of the creditor's action against the principal.
- On precedent and statutory policy: The Court based its conclusion on statutory construction of the Dekkhan Agriculturists' Relief Act and on the relevant provisions of the Indian Contract Act governing guarantees; the decision proceeds from those statutory texts rather than from creation of a new judicial exception.
- On legislative remedy: The Court acknowledged that the Legislature may not have foreseen this consequence of section 72 and noted that remedy lies with the Legislature. The opinion records that an amendment bill either exists or is about to be submitted to introduce an exception for mere sureties in section 72; the Court observed that such an amendment could, if enacted, be made retrospective and would not cause great hardship to creditors. The Court did not itself alter the statutory text.
This summary is confined to the matters expressly stated in the provided opinion and does not introduce material beyond that opinion.
Westropp, C.J:— The reference in this case arises in a suit upon a bond, dated the 8th of August, 1877, conditioned for payment of Rs. 50, principal, payable on demand. Under act xv of 1877, sched. ii, art. 59, the period of limitation on such a bond would be three years from the making of the loan, i.e, in the present case, the date of the bond. The principal debtor is not an agriculturist within the meaning of the Dekkhan Agriculturists' Relief Act, but the surety is such an agriculturist. The plaint was presented on the 11th September, 1880, i.e, more than three years after the date of the bond, which, accordingly, as against the non-agriculturist principal debtor was then barred by the enactment in the limitation. act of 1877 just referred to. The question is, whether the effect of section 72 of the Dekkhan Agriculturists' Relief Act (XVII of 1879) is to leave the surety still liable for the amount of principal and interest due on the bond. The learned Special Judge under that Act having some doubt on the point, referred it to this Court, his opinion, however, inclining against the liability of the agriculturist surety, notwithstanding section 72 of the last-mentioned act, which enacted that, “in any suit against an agriculturist under this Act for the recovery of money, the following periods of limitation shall be deemed to be substituted for those prescribed in the second column of the second schedule annexed to the Indian Limitation Act, 1877 (that is to say):— (a) when such suit is based on a written instrument registered under this Act or any law in force at the date of the execution of such instrument,—twelve years; (b) in any other case, six years. Provided that nothing herein contained shall revive the right to bring any suit which would have been barred by limitation if it had been instituted immediately before this Act comes into force.”
That concluding proviso does: not apply to the present case— the right of action on the bond not having been barred by Act XV of 1877, Sched. II, art. 59, when the Dekkhan Agriculurists' Relief Act came into force, viz., oh the 1st of November, 1879, (section 1)—the three years' period of limitation did not expire until the 8th of August, 1880. section 72 of the Dekkhan Agriculturists' Relief Act occurs in its eleventh chapter, and contains no exception of a surety,—a circumstance rendered important by the fact that the case of a surety was evidently present in the mind of the Legislature when framing that Act, and is mentioned in two parts of it, viz., first, in clause (y) of the third section which occurs in chapter II of the Act; and, secondly, in the first passage of section 12, which occurs in chapter III. In both of these instances the case of a defendant “not being merely a surety of the principal debtor” is excepted from the operation of the portions of the Act in which those exceptions are made, but those exceptions have not any bearing upon the enactment as to limitation contained in section 72, save in rendering more remarkable the absence of any such exception from that section. Hence in accordance with the familiar rule of construction, expressio unius est exclusio alterius, we think that we are bound to infer that section 72 was intended by the Legislature to apply to all agriculturists in the districts affected by the Dekkhan Agriculturists' Relief Act XVII of 1879, whether filling the character of principals or sureties. The intention of the Legislature in extending the period of limitation was to remove the frequent pressure on agriculturist debtors to execute fresh and probably more stringent deeds or bonds than those originally given by those, debtors, and thus to benefit such agriculturists. The Legislature might perhaps have, advantageously to agriculturists, excepted sureties from the operation of section 72, but it has not made any such exception. Were we to do so, we should be acting as legislators and not as judges.
Assuming that the result of the barring, by the Limitation Act of 1877, of the action against the principal debtor is that the right is gone as well as the remedy barred, or, in other words, that he is discharged from the debt to the obligee in the bond by virtue of section 2, clause (j), of the Indian Contract Act IX of 1872, which enacts that “a contract, which ceases to be enforceable by Jaw, becomes void when it ceases to be enforceable,” (which enactment is, however, qualified by section 25, clause 3, of the same Act, which treats a debt barred by the law for the limitation of suits as a good consideration for a fresh promise in writing signed by the party to be charged or his agent to pay such debt in whole or in part), we proceed to consider such portion of the same Act (extending from section 126 to section 147) as relates to contracts of guarantee and is relevant to the present case.
The first of these which it is important to notice is section 128, which enacts that “the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.” This is merely a re-enactment of the Common Law— (see Theobald on Principal and Surety, chapter IV). Although, this co-extensiveness is laid down in section 128, the same Legislature, which there so enacted, might subsequently vary or modify that provision, and has done so by section 72 of the Dekkhan Agriculturists' Relief Act in extending the period of limitation, of suits against all agriculturists—without regard to the distinction between principal and surety. If this can be regarded as a variance in the contract, yet not being a variance made by the principal debtor and the creditor, but by the Legislature, it does not fall within section 133, and, therefore, does not discharge the surety. Section 134 especially demands our consideration. It runs thus:— “The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal, debtor.” The omission of the creditor to sue the principal debtor within three years from the date of the bond, has undoubtedly (having regard to section 2, clause j, already mentioned, and to the limitation act of 1877) produced the legal consequence of the discharge of the principal debtor; and, prima facie, if we were not to look beyond section 134, we should hold the surety to be discharged. But this view is dispelled by section 137, which, qualifies section 134 by enacting that “mere forbearance on the part of the creditor to sue the principal debtor, or to enforce any other remedy against him, does not, in the absence of any provision in the guarantee to the contrary, discharge the surety.” Mere forbearance means a forbearance not resting upon or in onsequence of such a promise to give time to, or not to sue the principal debtor, as is the subject of section 135. The next section to be mentioned is section 139, which is as follows:— “If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself, against the principal debtor is thereby impaired, the surety is discharged.” As to this section, Messrs. Cunningham and Shephard in their commentary upon the Contract Act, page 214, (ed. 1873) say: “It must be inferred from section 137 that it is no part of the creditor's duty to sue the principal debtor at any particular time.” That remark appears to us to be well founded. To hold otherwise would be to treat section 137 as a dead letter. The illustrations to section 139 are not inconsistent with that view. We may observe that, although the creditor's right to sue the principal debtor is barred, such will not be the case with the surety's right to sue the principal debtor, if the surety be compelled to pay the amount of the bond or any part of it to the creditor: inasmuch as the period of limitation to the surety's suit against the principal debtor would not commence to run until such payment. Even when the action against the surety has been commenced within the period of limitation applicable to the principal debtor (who may at the time of the institution of such action be beyond the jurisdiction, and, therefore, not joined as a defendant in the action) it must often happen that the decree or execution against the surety under which he is compelled to pay is not made until after the period of limitation has expired as against the principal debtor, yet the latter must, recoup the surety, whose cause of action does not accrue against the principal debtor until payment by the surety. The contract between the creditor on one side and the principal debtor and surety on the other, which as regards the principal debtor is avoided by expiration of the period of limitation, is distinct from the contract implied by law from the former on the part of the principal debtor to recoup the surety if he be compelled to pay the debt. That latter contract is still in full force.
Our attention has been drawn to a passage in M. Merlin's Repertoire de Jurisprudence, Volume II, page 445, Tit. Caution (Bail, Surety, Security). It occurs under the sub-division V, which treats of the manner in which contracts of suretyship (cautionnements) are terminated, and gives in pl. 5 an instance of one of the modes of such termination, which when translated is as follows “When the period of limitation has elapsed since the contract of suretyship. For example, I have guaranteed to a tradesman payment for trimmings which he has furnished to my friend for a dress. That tradesman, instead of compelling payment within the time which the law allowed to him, has permitted that period of limitation to run against him. It is certain that, although, according to custom, he may yet put my friend to his oath(1) as to the payment for what has been supplied to the latter, the affirmation which he may make as to his still owing the money, cannot injuriously affect me, because it is to be presumed that I had not any intention that any suretyship should endure longer than the time within which the right to bring the principal action existed. At the moment when the period of limitation accrued, I had the right to suppose that the tradesman was paid, and no longer to trouble myself as to the solvency of my friend.” There is, between the case thus put by M. Merlin and the present case, this vital distinction, that, in the case of M. Merlin, the prolongation of the liability beyond the period of limitation was the act of the principal debtor, i.e, his oath that he had not paid the price, and he could not by his act without the concurrence of the surety vary the liability of the latter, whereas the prolongation of the liability in the present case is the act of the Legislature, which may control alike the principal debtor, the surety, and the creditor.
Our reluctant reply to the Special Judge must be that the action as against the surety is not barred by reason of the action being barred as against the principal debtor by Act XV of 1877, Sched. II, art. 59. Although upon our rendering of the Dekkhan Agriculturists' Relief Act, arrived at in conformity with he settled principles of the construction of statutes, we have come to that conclusion, we have not any difficulty in supposing that the Legislature may not actually have contemplated or???oreseen such a consequence of section 72 of that act. The???emedy, however, is easy, and lies in its own hands. We understand that there either now is, or there is about to be submitted to it a bill for amending the Act. In that bill an exception of the case of a mere surety for a principal debtor may be introduced in section 72, and it would not be any great hardship to creditors if such an amendment were made retrospective.
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