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Judgment
The plaintiffs who are respondents Nos. 1 and 2 herein arrested the 2nd defendant, the 3rd respondent herein, in execution of a money-decree.
The appellant executed a security bond on 11th December 1923 undertaking to produce and hand over the 2nd defendant whenever the Court
passed an order to produce him. The bond also provided that in default of the surety producing the second defendant and handing him over to the
Court, the amount of decree interest, and costs shall be recovered by the plaintiffs from the surety personally. On the execution of the bond, the
second defendant was released from arrest. The plaintiffs applied to the lower Court for an order that the surety be directed to produce the second
defendant and in default of producing him, the decree amount be realised from him. The appellant contended that the decree of the plaintiffs against
the second defendant had been satisfied and that no execution could issue against him in execution of a decree already satisfied. The District Judge
overruled the objection of the appellant and directed him to produce the second defendant on or before a certain date and on his failure to do so
that execution should issue against him. The appellant has preferred this civil miscellaneous appeal.
Two points arise for consideration in this case one of fact and the other of law.
The first point is whether the decree has been satisfied. Mr. Somayya for the appellant relies very strongly upon Ex. II which is the defendant''s
ledger, in the account book of plaintiffs. From the entries in the ledger, it is found that a nil balance is struck. And Mr. Somayya''s contention is that
the decree debt has been wiped off by payment. There are entries on both sides of the ledger and the balance is zero. In Ex. III, the ledger of the
3rd defendant, there is a debit entry of Rs. 5,000. It is argued for the appellant that the 3rd defendant paid Rs. 5,000 in discharge of the decree-
debt and thereby the decree-debt has been fully satisfied.
Exhibit I is the day-book and in it there is an entry that the decree in O.S. No. 2 of 1923 has been transferred to Adapala Varada Reddi for Rs.
5,000 and a promissory note for the sum of Rs. 5,000 has been obtained this day from him.
Mr. T.V. Venkataramier for the respondents Nos. 1 and 2 contends that there was no transfer of the decree in favour of Adapala Varada
Reddi, the 3rd defendant in the case, but there was only an agreement to transfer the decree to him. Exhibit A, pro-note executed by Varada
Reddi in favour of the plaintiffs on 10th January 1924 contains a recital but Varada Reddi had arranged to take a transfer of the decree-debt for
the plaintiffs. The entry in the day-book is of the same date as that of the pro-note. The 3rd defendant was only a surety for defendants Nos. 1 and
2, and in the razinama decree, he is made liable only for 2/5ths of the decree amount in case the plaintiffs were unable to realise the decree-amount
from defendants Nos. 1 and 2. It is unlikely that when he was made liable only for 2/5ths of the amount in case the plaintiffs were unable to obtain
satisfaction from defendants Nos. 1 and 2 that he would discharge the whole of the decree amount by undertaking to pay Rs. 5,000. There is no
evidence that the decree has been transferred to the 3rd defendant. The appellant''s contention is, that the decree has been transferred should be
taken to mean that the decree was transferred on the 10th January 1924. Taking the entry alone, in Ex. A, it cannot be said that the decree has
been'' transferred to the 3rd defendant. The onus is upon the appellant to show that the plaintiffs have transferred the decree and that they could
not apply for execution. On a consideration of the evidence we have no hesitation in holding that the decree was not transferred to nor was any
amount paid towards the decree by the 3rd defendant. The appellant has not shown that the decree has been satisfied by any amount being paid
by the 3rd defendant Varada Reddi.
The next question is granting for argument''s sake, that the decree amount was paid by the 3rd defendant can the appellant take advantage of the
payment, when the payment has not been certified by the Court as required by Order XXI, Rule 2. The appellant''s argument is that the surety is
not a party to the decree and he could not apply to the Court to, enter up satisfaction of a decree which has been satisfied by payment by the 3rd
defendant. The surety is not a party to the decree but becomes a party only for a limited purpose that is for purpose of appeal when an order is
made against him u/s 145, C.P.C. vide Ramanathan Pillai Vs. M. Doraiswami Ayyangar and Others, . The fact that he is not a party to the decree
is no ground for getting round a definite provision of law under Order XXI, r.2, Clause (3).
Mr. Somayya strongly urges that the said '' provision is contained in processual law and should not be held to override positive law and under
the law of contract a surety is not bound to pay when the debt which, he undertook to pay in case of default of the principal debtor has been paid
off or adjusted.
Whatever may be the policy of the Legislature in enacting Clause (3), the Court is bound to give effect to it. Where the decree is adjusted
wholly or in part the judgment-debtor should apply within three months to the Court and that such adjustment or payment should be recorded as
certified and if he fails to do so, he cannot plead adjustment or payment in answer to the execution of the decree against him. Considerable reliance
is placed by Mr. Somayya on the interpretation of Order XXI, Rule 16 by the Madras High Court that the Executing Court has a discretion to
refuse execution at the instance of a transferee of a decree.
In Rama Aiyen v. Sreenivasa Pattar 19 M. 230 : 5 M.L.T. 218 : 6 Ind. Dec. 865 the judgment-debtor transferred some of his Immovable
properties to a person in consideration of his paying the judgment-debt to the original decree-holder. The vendee without paying the decree-holder
the amount of the decree got a transfer of the decree to himself and, as assignee, applied for execution. It was held that he was not entitled to
execute the decree when he himself inspite of his undertaking to discharge the decree had fraudulently obtained a transfer of the decree from the
decree-holder. Mr. Justice Subramania Aiyar observed at page 232, with regard to Section 258 of the old Code corresponding to Order XXI,
Rule 2 of the present Code "" The last paragraph prohibits judgment-debtors, who omit to apply under the second paragraph or having applied fail
to establish their case, from relying in execution proceedings upon any payment, satisfaction or adjustment not duly certified. Manifestly, therefore,
the enquiry under the said paragraph can take place only between persons standing in the relation of judgment-debtor and judgment-creditor.
The surety not being a party to the decree could not apply under Order XXI, Rule 2. I am unable to accept the argument that a surety though
he is not a party to the decree could not ask the Court to hold an enquiry as to the decree being satisfied by payment or adjustment provided the
application is made within the time allowed by the law. Though he has no locus standi to insist upon an enquiry he could apply to the Court to hold
an enquiry inasmuch as he has an interest in showing that the decree has been satisfied. In Ponnusawmi Nadar v. Letchmanan Chettiar 12 Ind.
Cas. 657 : 35 M. 659 : 10 M.L.T. 442 : (1911) 2 M.W.N. 568 : 22 M.L.J. 170 there was a difference of opinion between Mr. Justice Adbur
Rahim and Mr. Justice Sundara Iyer as regards the question whether the prohibition regarding uncertified adjustment will or will not apply while the
adjustment is made by a third party.
In Bayyana Ramayya v. Nidamarthi Krishnamurthi 32 Ind. Cas. 952 : 40 M. 296 : 3 L.W. 186 : 19 M.L.T. 124 : (1916) 1 M.W.N. 133 it
was held that ""Order XXI, Rule 2 did not disentitle a judgment-debtor from proving facts that a transferee of a decree applying for execution was
merely a benamidar for another judgment-debtor.
These cases have no application to the present question and they do not throw any light upon the point raised in this case. The real question is
whether a surety can plead adjustment or the discharge of a decree when the judgment-debtor himself could not successfully put forward that plea.
In this case the payment or adjustment was not certified by the Court as required by Order XXI, Rule 2 and, therefore, execution could proceed
against the second defendant.
When there is an executable decree against the second defendant; can it be reasonably contended that so far as the surety is concerned there is
no executable decree? The Court cannot recognise any adjustment or payment out of Court unless certified as is required by law and in the
absence of such certificate, a decree-holder, however, fraudulent his conduct may be is entitled in law to execute his decree against the judgment-
debtor, and so long as he is entitled to execute the decree against the judgment debtor, a surety, who undertakes to pay the decree amount, cannot
plead that there is no decree against the judgment-debtor and, therefore, he is released from liability under the bond. Section 145 says "" Where
any person has become liable surety...the decree or order may be executed against him to the extent to which he has rendered himself personally
liable. On the failure of the surety to carry out the terms of the bond he makes himself liable for the amount of the decree or for such amount as he
has undertaken to pay.
It is next suggested that the original decree is not executed against the surety but a second decree passed on his failure to carry out his
undertaking and, therefore, that decree is different from the original decree. No second decree is passed against the surety. The order u/s 145 is
passed when he makes himself liable by failing to carry out the terms of the bond to the extent to which he has rendered himself liable. The decree
that is executed against him is the decree passed in the suit and, therefore, it cannot be said that a second decree is passed against him.
The contention of Mr. Somayya for the appellant that uncertified adjustment or payment could be pleaded by the surety, was specifically
negatived in a recent case decided by a Bench of the Calcutta High Court in Gangaram Majhi and Others Vs. Bamapada Mahapatra, . The
learned Judges observe at page 886 ""The surety is bound so long as the judgment debtor is bound. The judgment-debtor is bound so long as any
payments which he may have made are not certified to the Court.
In the result we have no hesitation in holding that so long as there is an executable decree against the judgment-debtor the surety is not relieved
from his liability to pay the decree amount under the terms of the security bond executed by him.
The appeal fails and is dismissed with costs.