Narsingh Mahton and Others vs Nirpat Singh and Others

Courtney-Terrell, C.J.—This is an appeal from a decision of the District Judge of Patna setting aside an order of the Subordinate Judge in proceedings in execution for the enforcement of a surety bond. The facts are very simple. The decree-holders had brought a suit against the defendants to recover possession of a piece of land and also claimed mesne profits. They obtained a decree for recovery of possession and for such mesne profits as might be found on inquiry and an inquiry was directed. They applied for the appointment of a receiver of the property in dispute and the defendants offered the surety in the case as an alternative to the appointment of a receiver. The contract of surety, the surety bond, is quite explicit in character. The surety gives the property mentioned in the surety bond as security to meet the following contingency as stated in the bond:

If, God forbid, the suit is decided against the defendants and a decree for mesne profits is passed in favour of the plaintiffs, the plaintiffs would realize the amount of decree for mesne profits from the property mentioned in this deed.

Now in order to save the costs of an inquiry the plaintiffs and the defendants compromised their dispute as to the mesne profits and agreed upon a definite sum of Rs. 950. The original amount claimed was some Rs. 3,000. I forgot to mention that the surety bond fixes the liability of the surety at a maximum of about Rs. 500.

3.The plaintiffs then took steps under the proper procedure to enforce the surety bond against the surety in the process of execution. The surety objected that by reason of the compromise he was discharged from his liability. The learned District Judge in deciding the matter seemed to think that the proper test as to whether the surety was or was not discharged was whether the surety was prejudiced by the compromise arrived at and his process of reasoning was that whereas the compromise was, as it undoubtedly was, beneficial both to the plaintiffs and the defendants it must therefore be taken as beneficial to the surety and he was not damaged by the compromise and therefore remained liable.

Now this case may be very simply decided by reference to and construction of the contract of suretyship itself and from the words of the contract which I have quoted it is perfectly clear that the liability envisaged by the surety is that if a decree for mesne profits were passed by the Court against the defendants he would be liable for such amount as might be decreed up to Rs. 500.

On the other hand, if the Court should find as a fact affter inquiry, as it might well find, that notwithstanding the decree for possession and notwithstanding the decree for mesne profits, no profits were in the circumstances payable then the surety would not be liable in any sum. Now by the compromise for Rs. 950 the surety has been deprived of the possibility that he might be discharged by the decision of the Court from any liability, that is to say, if the Court found after inquiry that no mesne profits were in fact payable, and has thereby been forced to meet the liability to the full amount of his suretyship, that is to say, Rs. 500. This is clearly quite against the terms of the contract of suretyship and accordingly the surety is clearly discharged.

Various points were discussed by the learned Judge as to the proper construction of Sections 135 to 139, Contract Act, which concern the discharge of a surety but to my mind these matters are irrelevant when one considers the contract of suretyship itself in this case. Moreover in any ease it seems to me that the proper clause of the Contract Act which is applicable to this case is Section 135 and that section is quite specific in its character and lays down that if a suit is compromised, that is to say, if a compromise is entered into between the principal debtor and the creditor or if time is given to the principal debtor then the surety is discharged and if that section is applied to this case the surety is most certainly discharged for not only has a compromise been entered into but time has by the compromise been given to the principal debtor. The principle applicable was laid down as long ago as 1795 in the case of Rees v. Berrington [1795] 2 Ves. Jr. 543 by Lord Bough-borough as follows:

It is the clearest and most evident equity not to carry on any transaction without the privity of him who must necessarily have a concern in any transaction with the principal debtor. You cannot keep him bound and transact his affairs (for they are as much his as your own) without consulting him.

In these circumstances it is in my opinion, clear that the surety has become discharged and therefore I would set aside the order of the learned District Judge and the creditor must pay the costs of the surety throughout.

Fazl Ali, J.

8.I agree.