Jetu Jacques Taru Lalvani vs Shreeji Mineral Waters Pvt. Ltd. ...
2002 Latest Caselaw 1144 Bom

JUDGMENT

S.J. Vazifdar, J.

1. The plaintiff has taken out this Chamber Summons for an order under Section 145 of the Code of Civil Procedure, 1908 holding that the respondents have furnished a guarantee for the performance of the decree in the above suit and have rendered themselves personally liable for the same and that the plaintiff has therefore become entitled to execute the decree in the above suit against the respondents -- guarantors.

2. The plaintiff has also sought directions for issuing a warrant of attachment and other consequential reliefs. However, it is not necessary to consider prayer (b) in this regard in view of the statement made by Mr. Mudnaney, the learned counsel appearing on behalf of the plaintiff.

3. The Chamber Summons raises the following interesting questions of law :--

 (a)     Whether a person who is not a party to the suit can be held liable under Section 145 of Civil Procedure Code in respect of a guarantee issued before a decree is passed. 
 

 (b)    Whether Section 145 of the Civil Procedure Code, applies to decrees passed with the consent of parties.  
 

4. The plaintiff filed the suit to recover Rs. 1,44,59,450/- with further interest on Rs. 80,12,509/- at the rate of 30% p.a. compounded quarterly from the date of the suit till payment and for a declaration that the payment thereof is secured by an equitable mortgage in respect of a flat owned by defendant No. 2.

The suit was settled in terms of consent terms dated 30th March, 1998 whereby it was inter-alia declared, ordered and decreed that the above amount together with costs was due and payable by defendant No. 1 to the plaintiff and that defendant No. 2 as a guarantor was bound and liable to pay the same jointly and severally along with defendant No. 1,

The decree has been partly executed by sale of a flat which was mortgaged in favour of the plaintiff.

5. The consent terms could not be taken on record and a decree passed in terms thereof, as defendant No. 3 was not present in Court at the relevant time. This necessitated the plaintiff taking out Notice of Motion No. 2756 of 1998 for recording a compromise in terms of the consent terms.

By an order and judgment dated 7th March, 2000, D.K. Deshmukh, J., came to the conclusion that the consent terms had been signed by the defendants, that the Board of Directors of defendant No. 1 had passed a resolution on 29th March, 1998 authorizing defendant No. 2 to sign the consent terms on behalf of defendant No. 1 and that the Board of Directors had also approved the consent terms. The Learned Judge held that the affidavit in reply filed by the defendant was merely an attempt to wriggle out of the consent terms. The Learned Judge ordered:--

"The suit is, thus, directed to be decreed in terms of the consent terms at "X". No appeal has been filed against the said order.

6. In the meantime the respondents who are directors of defendant No. 1, signed a "LETTER OF GUARANTEE/SURETY" dated 12th November, 1998. The reference in the letter reads thus:--

"Re : Guarantee for performance of the decree in High Court Suit No. 1341 of 1998."

The respondents stated in the letter that the defendants had submitted to a decree for payment of the said amount, that in consideration of the plaintiffs agreeing to give time to the defendants for payment of the said amount till 30th November, 1998 they gave their personal guarantee for payment of the said amount in the event of the defendant committing any default and that their liability was joint and several.

7. On behalf of the respondents, Mr. Udaipuria submitted that the guarantee had been obtained by fraud and pursuant to a false representation. In the affidavit in reply, there is only a bald averment to this effect. There is not even a suggestion as to what the representation was. Naturally therefore, there is no suggestion as to how such a representation was false. Nor are there any particulars regarding coercion or fraud. Each of the affidavits contains the same averment. None of them however contains any particulars. The submission is therefore rejected.

8. Mr. Udaipuria, submitted that the said letter of guarantee is not a guarantee issued under Section 145 of Civil Procedure Code as it was issued on 12th November, 1998 i.e. before a decree was passed in terms of the consent terms dated 30th March, 1998. As stated earlier the decree in terms of the consent terms was ordered to be passed on 7th March, 2000.

9. Section 145 of Civil Procedure Code reads thus :--

"Where any person has furnished security or given a guarantee -

 (a)     for the performance of any decree or any part thereof, or  
 

 (b)     for the restitution of any property taken in execution of a decree, or  
 

 (c)     for the payment of any money, or for the fulfilment of any condition imposed on any person, under an order of the Court in any suit or in any proceeding consequent thereon,  
 

 the decree or order may be executed in the manner herein provided for the execution of decrees, namely ; 
   

 (i)      if he has rendered himself personally liable, against him to that extent; 
 

 (ii)     ................................. 
 

 (iii)    ................................. 
 

 and such person shall be deemed to be a party within the meaning of Section 47."  
 

Mr. Udaipuria submitted that the security or guarantee contemplated under Section 145(a) of Civil Procedure Code is one furnished after and not before the decree is passed. The submission is not well founded.

10. I do not read any such limitation or restriction in Section 145 of the Civil Procedure Code Clause (a) whereof makes it clear that it applies to a guarantee for the purpose of any decree. It does not state that the guarantee must be for the purpose of a decree which has already been passed. If such a limitation was intended it would have been specified. The use of the words "any decree" militates against such a narrow and restricted interpretation of Section 145. They in fact established that Section 145 contemplates a guarantee issued at any stage.

11. This interpretation cannot prejudice the rights of either the parties to the suit or the guarantors. On the other hand it would provide parties to the suit, especially defendants, a very valuable facility. It would enable defendants against whom or against whose properties or interests therein orders are or may be passed to persuade a Court not to do so by furnishing security or a guarantee of a stranger to the suit under Section 145. I can see no reason to deprive litigants of this facility.

12. I am supported in this view firstly by a judgment of a Division Bench of the Andhra Pradesh High Court in Kaluva Chenchayya v. Unnam Chatragudappa and Anr., (1991) I Andhra Weekly Reporter, where it was held :--

"The assumption that the security bond taken prior to the passing of a decree and which is to become operative after the passing of a decree, is not one contemplated by Section 145, Civil Procedure Code, is in our view unwarranted. The words any decree in Section 145, Clause (a), are wide enough to include a decree that may be passed after a person becomes a surety. Section 253 of the Code of 1882 was more restricted in its scope, but the present Section 145 has made a substantial alteration and is more comprehensive. Unlike the old section, this section includes the cases of sureties either before or after the decree, whether original or appellate, by the use of the words any decree. The section provides for the enforcement of the liability of a surety where a surety by his bond becomes liable as a surety for the purposes of any decree or any part thereof, summarily by execution without the necessity of filing a suit as was formerly held under the old Code. Thus, the words of the section "where any person has become liable as a surety, (a) for the purposes of any decree or any part thereof are, in our view, clear enough to cover the case of a surety who has given security prior to the decree for the enforcement of a decree when passed. The words become liable do not indicate that he should become liable at the time when he gives the surety bond but must become liable under the surety bond as a surety. A construction thus placed will clearly indicate that the intention was to include the cases of sureties either before or after the decree, whether original or appellate."

13. Mr. Mudnaney relied upon a judgment of a Learned Single Judge in the case of K.L. Gauba v. Sultan Singh and Anr., reported in AIR 1935 Lahore 189. During the hearing of the suit, the dispute was compromised. The defendant agreed to pay a sum of Rs. 8,000/- in instalments. The Appellant stood surety for the purpose of this agreement. A decree was accordingly passed by the trial Court and the terms of this compromise were incorporated in the decree sheet. Default having been made, the decree-holder applied for execution of the decree against the Appellant. It was contended on behalf of the Appellant that the decree cannot be executed against him because Section 145 of the Civil Procedure Code contemplates a case where a decree has already been passed and the surety has undertaken to satisfy the decree afterwards. The learned Judge turned down the contention and observed thus :--

"The phraseology of this section however does not lend any support to this contention and no authority has been cited by the learned counsel in support of his contention. The section provides for the liability of the surety to be enforced by execution, where any person has become liable as surety for the performance of any decree or any part thereof. The expression "any decree", in my opinion, is wide enough to cover a decree that has already been passed as well as a decree that may be passed after the person concerned has become liable as surety. In this case, the decree was passed immediately after Mr. K.L. Gauba had made a statement before the Court and had undertaken to become liable as a surety for the performance of the decree that was to be passed against Bishan Singh as a result of the compromise".

14. In Jafar Ali. v. Ramloo and Anr., the surety bond was executed after the decree was passed and during execution thereof against the judgment-debtor. The Division Bench however, while dealing with a similar contention observed in paragraph 5 as follows :--

"(5) Clause (a) of the above section is of a general nature and was designed to set at rest the conflict under Section 253 of the old Code and to make it wide enough to cover a decree that has already been passed as well as a decree that may be passed after the person concerned has become liable as surety, as also to surety-ships given for the performance of appellate decrees".

15. I am in respectful agreement with the ratio of the above judgments.

16. D.K. Deshmukh, J., by his order dated 7th March, 2000 passed a decree in terms of the consent terms dated 30th March, 1998. Under Order 23, Rule 3 of Civil Procedure Code where it is proved to the satisfaction of the Court that the suit has been adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties, the Court shall order such agreement or compromise to be recorded and shall pass a decree in accordance therewith. Thus in any view of the matter the order dated 7th March, 2000 is a decree within the meaning of that term in Section 145 of Civil Procedure Code. There is nothing in Section 145 to warrant a conclusion that a decree passed with the consent of the parties is not a decree within the meaning of that term therein. A view to the contrary would militate against the scheme of Section 145 and hamper the ability of parties to arrive at a settlement without being driven to an elaborate and expensive method of enforcing such a guarantee.

17. Considering the view that I have taken, it is not necessary to express any opinion on Mr. Mudnaney's submission that the date of the decree would relate back to the date of the consent terms i.e. 30th March, 1998.

18. Mr. Udaipuria made a feeble attempt to suggest that the consent terms were fraudulent and that the same was evidenced by the fact that the guarantee was executed for an inadequate consideration viz. the plaintiff's agreement to only extend the time for payment by the defendants by a mere eighteen days. The point was not seriously pursued. Nor has the point been taken in the affidavit in support of the Chamber Summons. A submission such as this would necessarily have to be taken on affidavit as it would be mainly a question of fact. Despite the same, Mr. Mudnaney referring to certain documents was prepared to meet the argument. I however, did not permit him to do so as the point has neither been seriously argued, nor taken on affidavit.

19. As far as prayer (b) is concerned, it is not necessary for me to go into the same at this stage. These are questions that relate to the terms and condition of sale which must be gone into by the Commissioner in the execution proceedings which the plaintiff may adopt against the respondents as per the rules.

20. In the circumstances :--

 i)       the Chamber Summons is made absolute in terms of prayer (a). 
 

 ii)      Liberty to the plaintiff as mentioned above in respect of the reliefs claimed in prayer (b) of the Chamber Summons.  
 

 iii)     The ad-interim order dated 6th November, 2001 shall continue pending the execution proceedings.
 

  iv)     The respondents shall pay to the plaintiff costs of this Chamber Summons fixed at Rs. 5000/-.  
 

 Parties to act on an ordinary copy of this order, duly authenticated by the Chamber Registrar/C.S. of this Court.