Case: Lakhi Ram Ram Dass Vs. Har Prasad Syal and Others

On January 30, 1951 the 2nd Joint Civil Judge, Ahmedabad passed a decree for Rs. 80,000/in favour of the appellants against M/s. J. S. Boota Singh and Co., Smt. Jasbir Kaur, the sole proprietor of that firm (respondents 1 and 2 herein) and Jasbir Singh, her husband (respondent 3 herein) in his capacity as a guarantor. The decree provided that Rs. 40,000/out of the said decretal amount of Rs.d be paid by all the three, who were made jointly and severally liable for that amount, within nine months from the data of the decree and the balance of Rupees 40,000/within three years from the date of the decree but in respect of which respondents 1 and 2 only were made liable. Respondent 3 was thus liable in respect of the guarantee given by him in the sum of Rupees 40,000/only along with respondents 1 and 2.3. The appeals arise from the following facts:On January 30, 1951 the 2nd Joint Civil Judge, Ahmedabad passed a decree for Rs. 80,000/in favour of the appellants against M/s. J. S. Boota Singh and Co., Smt. Jasbir Kaur, the sole proprietor of that firm (respondents 1 and 2 herein) and Jasbir Singh, her husband (respondent 3 herein) in his capacity as a guarantor. The decree provided that Rs. 40,000/out of the said decretal amount of Rs.d be paid by all the three, who were made jointly and severally liable for that amount, within nine months from the data of the decree and the balance of Rupees 40,000/within three years from the date of the decree but in respect of which respondents 1 and 2 only were made liable. Respondent 3 was thus liable in respect of the guarantee given by him in the sum of Rupees 40,000/only along with respondents 1 and 2.4. In January 1952, the appellants had the said decree transferred from the Ahmedabad court to the Court of the, Delhi for execution. On January 15, 1952, the appellants applied for execution in respect of the said Rs. 40,000/payable, as aforesaid, by all the three respondents jointly and severally under the said decree. The application for execution thus was in respect of the said sum of Rs. 40,000/for which respondent 3 was the surety. On March 15, 1952, Jasbir Kaur, respondent 2 herein, applied to the Tribunal under the Displaced Persons (Debts Adjustment) Act, LXX of 1951 for adjustment and apportionment of the said decretal amount between her and respondent 3 for which they were jointly and severally liable. In that application, respondent 3, (who was respondent 2 therein with the appellants as respondent 1) filed a written statement also praying for apportionment and determination of his liability. The parties arrived at a settlement in that application in terms of which the Tribunal passed an order dated June 29, 1953. That order, after reciting that the application was by a displaced debtor for declaration and adjustment of a debt due from the applicant and respondent 2 jointly on the basis of a consent decree passed against them, which, as claimed by the petitioners, is liable to be revised and apportioned under the provisions of Ss. 21 and 22 of the said Act" stated as follows:      "The parties have come to a mutual understanding as regards to (sic) the debt in dispute and their statements have been recorded accordingly. In accordance with the compromise of the parties it is hereby declared and ordered that Rs. 40,000/are due from the applicant to Lakhi Ram Ram Das respondent, and that the respondent will be entitled to recover the same as first charge from, and in proportion of the compensation, which the applicant will get on account of the claim preferred by her in respect of her property left in Pakistan."      On a reading of this order, there can be no doubt that the application for declaration and adjustment by respondent 2 was in respect of Rs. 40,000/jointly due by her as the principal debtor and respondent 3 as the guarantor and that it was that debt which the said order adjusted in the manner aforesaid, namely, that the amount recoverable by the appellants would be in proportion to the compensation which respondent 2 would get under a claim lodged by her in lieu of the property left by her in Pakistan.      5. Before, however, this order was passed the appellants filed an application, dated June 22, 1953 before the executing court in Delhi for realisation of Rs. 29,000/then due from respondent 3 out of the said joint decretal debt of Rs., the appellants having by then already realised a sum of Rs. 11,000/from him. At the instance of the appellants the executing court passed an order, dated June 23, 1953, attaching certain plots of land belonging to respondent 3. On August 5, 1953, an objection under Order XXI, R. 58 of the Code of Civil Procedure was lodged by Delhi Land and Finance co. Ltd. against the said order of attachment in claiming certain interest in the said plots and praying for raising the attachment. It would appear that there was an arrangement earlier made between respondent 3 and the said company whereunder the company was to develop the said lands and divide them into building plots with a view to sell them and for that purpose respondent 3 had placed the company in possession of those lands. On October 3, 1953, a settlement was reached between the appellants, respondent 3 and the said company under which the parties agreed that the plots already sold by the company were to be released from attachment and the company would be at liberty to sell the rest of the plots and either pay to the appellants or deposit in court an amount out of the sale proceeds thereof equivalent to the share of respondent 3 therein. On the said settlement having been arrived at, the executing court ordered that the execution proceedings taken out by the appellants should be struck off as infructuous. In pursuance of the said settlement the company deposited in court Rs. 5,000/and Rs. 24,000/on January 18 and February 25, 1954 respectively.      6. Despite the said order of the said Tribunal, dated June 29, 1953, and the settlement arrived at on October 3, 1953, the appellants filed, on March 11,1954, an application for execution in the very court at Ahmedabad which had passed the said decree against all the threes alleging that respondents 2 and 3 had applied under the Displaced Persons (Debts Adjustment) Act, 1951 for certain reliefs but that that application had been dismissed. That allegation was clearly untrue and was so found by that Court. The allegation by the appellants that respondent 2 had failed to disclose a tent manufacturing business carried on by her in the schedule to her application before the said Tribunal under the said Act was also found to be incorrect. The Court at Ahmedabad ultimately dismissed the execution application by its order dated May 3, 1954 on the ground that in view of the consent order passed by the said Tribunal on June 29, 1953 under the said Act the appellants execution application before it was not maintainable by reason of S.15 (c) of Act LXX of 1951. This view was upheld by the High Court of Bombay by dismissing the appellants appeal against that order.      7. Respondent 3 thereafter filed two applications before the, Delhi, one dated June 4, 1954 and the other dated March 28, 1955 for permission to withdraw the said sum of Rs. 29,000/deposited in that court by the Delhi Land and Finance Co. Ltd, on his behalf. The first application was on the ground that the order passed by the Tribunal on June 29, 1953 under Act LXX of 1951 had adjusted the decretal debt and such adjusted debt was made payable from out of the compensation payable to respondent 2, that therefore, there was no decree which remained to be satisfied, and consequently he was released from any liability under that decree as the guarantor. The second application was based on the ground of dismissal by the Ahmedabad court of the execution application filed by the appellants. The appellants contended (1) that the order of the Tribunal, dated June 29, 1953, did not affect the liability of respondent 3 to pay Rs. 40,000/as the guarantor, and (2) that by reason of the settlement between them and respondent 3 under which the said sum of Rs. 29,000/was deposited in court, respondent 3 was estopped from making an application denying their right to that amount.      8. The Trial Judge heard both the applications together and disposed them of by a common judgment by which he allowed the applications holding that the appellants were not and respondent 3 was entitled to the said sum of Rs.. On the question as to the proper interpretation of the Tribunals order dated June 29, 1953, the Trial Judge read that order together with the statement of counsel for the parties made at the time of the passing of that order and found that the decree fell into two parts, one, which provided for payment of Rs. 40,000/by all the three judgment debtors, and the other, for payment of another sum of Rs. 40,000/by respondents 1 and 2 only, that reading that order together with the statement then made by counsel, it was clear that the Tribunal kept the liability in respect of the find sum of rupees 40,000/intact and merely revised the decree in respect of the other amount of Rs. 40,000/for which the liability was of respondents 1 and 2 only, that therefore, the contention of respondent 3 that the application before the Tribunal was for adjustment and apportionment of the entire decree for Rs. 80,000/and that that debt was scaled down to Rs. 40,000/and was made payable out of compensation due to respondent 2 was unacceptable, and therefore, the liability of respondent 3 under the original decree to pay Rs. 40,000/remained untouched. But the Trial Court next held that the question of interpretation of the Tribunals order was not material as according to it the result of the proceedings before the Tribunal and its order dated June 29, 1953 was that the original decree merged in that order and stood adjusted in accordance with the provisions of Act LXX of 1951. Therefore, the respondents remained no longer liable to satisfy the original decree and the remedy of the appellants lay under S. 28 of that Act to execute the decree passed by the Tribunal against not only respondents 1 and 2, but also respondent 3. The Trial Court further held that the order, dated October 3, 1953 under which Rs. 29,000/were deposited was without jurisdiction, and therefore, no question of res judicata or estoppel making that order binding on respondent 3 could arise. Lastly, it held that the parent court at Ahmedabad having held that no execution proceedings could lie against respondents 1 and 2 in view of the proceedings under Act LXX of 1951 having been taken and the decree being subject to that Act, no execution proceedings could also lie against respondent 3 as his liability under the original decree being that of a surety became discharged once it was held that no execution proceedings lay against the principal debtors.      9. The appellants then filed an appeal against this judgment and order in the High Court. A learned Single Judge of the High Court who heard that appeal, observed that prima facie the order of the Tribunal, dated June 29, 1953 dealt with that part of the decree which provided that Rupees 40,000/out of Rs. 80,000/were payable jointly and severally by the three respondents, respondent 3 being liable therefor as the guarantor. The order of the Tribunal thus did not affect the rest of the decree, namely, the decree for the rest of the amount of Rs. 40,000/for which respondents 1 and 2 only were liable. He did not, however, pronounce a final opinion on that question as he thought that the appeal filed by the appellants was not sustainable on other grounds. The learned Single Judge next observed that according to the decision of the Ahmedabad court the appellants could not maintain any execution proceedings against respondents 1 and 2 in view of the proceedings earlier taken under Act LXX of 1951. The order of the Ahmedabad court became final after an appeal against it by the appellants had been dismissed by the High Court and no further appeal had been filed. The learned Single Judge held that if no execution proceedings could be filed against respondents 1 and 2, no such proceedings could also be filed under the decree against respondent 3 as his liability as the surety wase with that of the principal debtors. He also rejected the contention that the consent order, dated October 3, 1953 was passed against respondent 3 in his personal capacity and not as the surety, or that therefore, that order was valid and binding on him, and he therefore, could not be allowed to withdraw Rs. 29,000/deposited thereunder for the benefit of the appellants. The Single Judge held that there was nothing to show in that order that respondent 3 had held out in those proceedings that he was liable in his personal capacity dehors his capacity as the surety, that those proceedings were execution proceedings which could not be sustained against him in view of the decision of the Ahmedabad court that the said decree after the Tribunals said order was not executable against the respondents 1 and 2. In the result, he dismissed the appeal.      10. A further appeal before the Letters Patent Bench of the High Court met with the same fate, the Letters Patent Bench being substantially in agreement with the learned Single Judge.

Court's reasoning:
On a reading of this order, there can be no doubt that the application for declaration and adjustment by respondent 2 was in respect of Rs. 40,000/jointly due by her as the principal debtor and respondent 3 as the guarantor and that it was that debt which the said order adjusted in the manner aforesaid, namely, that the amount recoverable by the appellants would be in proportion to the compensation which respondent 2 would get under a claim lodged by her in lieu of the property left by her in PakistanThis statement clearly means that the application was in respect of the amount of Rs. 40,000/under the said decree for which respondents 1 and 2, as the principal debtors and respondent 3, as the surety, were jointly and severally liable. The order then states that the said debt was liable to be "revised and apportioned" under Ss. 21 and 22 of the Act. Lastly, it says that in accordance with the compromise between the parties "it is hereby declared and ordered that Rs. 40,000/are due from the applicant (respondent 2 herein) to Lakhi Ram Ram Dass respondent (the appellants herein) and that respondent will be entitled to recover the sum as first charge from and in proportion of the compensation which the applicant will get on account of the claim preferred by her in respect of her property left in Pakistan"15. That being the position, it would be correct to say that the Tribunals order related to Rs., out of the total decretal amount of Rs. 80,000/in respect of which respondents 2 and 3 were jointly and severally liable. It would further appear from the statement of counsel before the Tribunal that the liability of respondent 3, as the surety for that amount, was not dealt with by the Tribunal, and therefore, remained unaffectedTherefore, the appellants had the right to proceed in execution against respondent 3 in respect of his liability as the surety for. But his liability as such surety wase with the liability of respondents 1 and 2, the principal debtors, and could not exceed their liability18. The position is thus clear that the appellants could not recover any amount from respondent 3 in excess of the amount claimable by them from respondents 1 and 2. No doubt, the Tribunals order had declared the joint debt to be Rs., but it also provided that respondent 2 had to pay that amount in proportion to the compensation which she would receive under her claim in lieu of the property left by her in Pakistan. The amount recoverable from respondent 3 could not exceed that amount by reason of S. 22 (g) as also the principle that the liability of a surety ise with that of the principal debtor. It has not been the case of the appellants during any stage of these proceedings that the compensation payable to respondent 2 has so far been fixed or ascertained. So long as that has not been done, the extent of the liability of respondent 3 as the surety also cannot be fixed. In any event, since the liability of respondent 2, as the principal debtor, has been made payable from out of the compensation recoverable by her and in proportion to such compensation, the Tribunals order has superseded the decree at least as regards Rs. 40,000/payable jointly and severally by respondents 2 and 3 thereunder. That order having provided (1) that the amount recoverable would be in proportion to the compensation, and (2) that it would be recovered from that compensation, the appellant could not claim Rs. 29,000/deposited in the execution court, nor could that court order it to be paid to the appellants. In any case, so long as the compensation due to respondent 2 has not been ascertained, the appellants claim to the said amount of Rs. 29,000/was premature as the liability of respondent 3, if any, could not until then be ascertained. Further, the order of the Ahmedabad court, which on its confirmation by the High Court of Bombay, became final throws another difficulty in the way of the appellants, disabling them from claiming the said sum of Rs.. In our view, the High Court was right in repelling such a claim by the appellants and rejecting their appeal. That being so, the High Court was also right in directing rateable distribution of that amount amongst the other creditors of respondent 3 who are respondents in the rest of the appeals before us.