Sri.Manchikatla Ramanadham vs Shriram Chit Pvt. Ltd
2023 Latest Caselaw 2862 Tel

           THE HON'BLE Dr. JUSTICE G. RADHA RANI

            CIVIL REVISION PETITION No.2221 of 2023

O R D E R:

This Civil Revision Petition is filed by the petitioners-Judgment

Debtors 2 and 3 aggrieved by the order dated 29.04.2023 passed in

E.P.No.81 of 2022 in AACF No.408 of 2021 on the file of the Court of

the I Additional Senior Civil Judge at Hanumakonda.

2. The facts of the case in brief were that the respondent No.1-

Decree Holder was a registered chit fund company carrying chit fund

business in accordance with the Chit Fund Act, 1982. The respondent

No.2 was the subscriber of a chit for a value of Rs.25,00,000/- at the rate

of installment of Rs.50,000/- per month. He became a successful bidder

and agreed to forego Rs.10,00,000/- and received an amount of

Rs.15,00,000/- on 12.06.2020. The respondent No.2 paid eight

installments in full and ninth installment in part and defaulted paying

further installments. As such, the respondent No.1-Decree Holder filed a

claim petition before the Deputy Registrar of Chits at Warangal. The

Deputy Registrar of Chits vide AACF.No.408 of 2021 passed an ex-parte

order directing the respondent No.1 to recover the total amount of

Rs.23,80,623/- including the interest @ 18% per annum on the principal

amount of Rs.20,69,499/- and costs of Rs.13,725/- from the principal CRP_2221_2023 Dr.GRR, J

debtor as well as sureties and that they were jointly and severally liable to

pay the said amount.

3. Basing on the said order, the respondent No.1-Decree Holder

filed E.P.No.81 of 2022 under Order XXI Rules 48 and 64 of the Code of

Civil Procedure, 1908 against the Judgment Debtors 2 and 3. The I

Additional Senior Civil Judge, Hanumakonda passed an order attaching

the salaries of Judgment Debtors 2 and 3 for an amount of Rs.9,16,850/-

in 24 monthly installments. Aggrieved by the said order, the Judgment

Debtors 2 and 3 filed this Civil Revision Petition contending that the

Decree Holder filed the execution petition leaving out the principal debtor

and one other surety, though the Decree Holder company mentioned their

names in the cause title of the execution petition. The Decree Holder

stated in the affidavit that was filed along with the execution petition that

it was filed for the relief of the order for attachment of salaries of

judgment debtors 1, 2 and 3 for realization of decretal amount of

Rs.27,37,652/- which was inclusive of costs and interest. The decree

holder could not file execution petition in respect of the decretal amount

against the selective judgment debtors that too without touching principal

borrower and other surety for total decretal amount. As such, the

execution petition was liable to be dismissed in limini. The Decree CRP_2221_2023 Dr.GRR, J

Holder was very much aware about the whereabouts of the principal

debtor and other surety, but for obvious reasons to harass the judgment

debtors 2 and 3 and to extract the entire amount only from them, filed the

present execution petition, even though the judgment debtors 2 and 3 were

liable to pay only their individual share 1/3rd or 33.3% share of the claim

of execution petition amount. The primary liability to make payment was

on the principal debtor. The sureties liability was only secondary. The

executing court failed to consider the principles of equity and the

petitioners' right to equality secured by Article 14 of the Constitution of

India and also the provisions of Sections 126 and 146 of the Indian

Contract Act, 1872. When the principal debtor could not be held liable

for any payment due to any defect in documents, then surety was also not

responsible for such payment. The executing court failed to appreciate the

fact that Exs.A6 and A7, Agreement of Guarantee marked in AACF

No.408 of 2021 was a joint agreement for all three sureties for the claim

amount and it was squarely covered by the illustration (a) of Section 146

of the Indian Contract Act, 1872. The three sureties did not execute

separate surety agreements independently of guarantee that either of them

would pay the entire claim amount or in different sums and the

petitioners-judgment debtors 2 and 3 also did not execute any separate

agreement that they would pay the entire claim amount or in different CRP_2221_2023 Dr.GRR, J

sum. The executing court allowed E.P.No.81 of 2022 without following

the ratio laid down by the Hon'ble Apex Court in its judgment dated

24.05.2012 in Civil Appeal No.6204 of 2009 in the case of Ram Kishun

and Others Vs. State of U.P. and others, wherein it was held that:

"the law can be summarized to the effect that the recovery of the public dues must be made strictly in accordance with the procedure prescribed by law. The liability of a surety is co-extensive with that of principal debtor. In case there are more than one surety the liability is to be divided equally among the sureties for unpaid amount of loan."

3.1. He further submitted that the executing court failed to

comprehend and appreciate the legal position that clause 3 of Ex.A7

Agreement of Guarantee was inconsistent with the provisions of Law of

Guarantee contained in Chapter VIII of Indian Contract Act, 1872 as it

takes away the rights of sureties under Sections 133, 134, 135 and 141 of

the Indian Contract Act, 1872. The principal borrower was having

capacity to pay from his salary and income from other sources including

properties lying on his name. The decree holder was not entitled to

recover amounts from petitioners-judgment debtors 2 and 3 alone. The

terms of the contract could not override the provisions of the statute, as

there was no estoppel against the statute and prayed to allow the revision.

CRP_2221_2023 Dr.GRR, J

4. Heard the learned counsel for the revision petitioners and the

learned counsel for the respondent No.1-Decree Holder.

5. The learned counsel for the revision petitioners argued on the

same lines as raised in the grounds of appeal.

6. The learned counsel for the respondent No.1-Decree Holder

supported the order of the executing court and contended that the amount

of Rs.27,37,652/- was equally apportioned by the executing court between

the principal debtor as well as the petitioners-judgment debtors 2 and 3.

The respondent No.1-Decree Holder had not proceeded against the third

surety as he was a business person and his whereabouts were not known

and as he was not a salaried employee. It was within the purview of the

Decree Holder to choose against whom he intended to proceed with and

submitted that the executing court had not committed any error or

illegality in passing the impugned order attaching the salaries of the

petitioners-judgment debtors 2 and 3.

7. Perused the record. The contention of the learned counsel for

the revision petitioners was that as per Section 146 of the Indian Contract

Act, 1872, the co-sureties are liable to contribute equally. On a perusal of

Section 146 of the Contract Act, it would read as follows:

CRP_2221_2023 Dr.GRR, J

146. Co-sureties liable to contribute equally.--Where two or more persons are co-sureties for the same debt or duty, either jointly or severally, and whether under the same or different contracts, and whether with or without the knowledge of each other, the co-sureties, in the absence of any contract to the contrary, are liable, as between themselves, to pay each an equal share of the whole debt, or of that part of it which remains unpaid by the principal debtor.

Illustrations

(a) A, B and C are sureties to D for the sum of 3,000 rupees lent to E. E makes default in payment. A, B and C are liable, as between themselves, to pay 1,000 rupees each. (a) A, B and C are sureties to D for the sum of 3,000 rupees lent to E. E makes default in payment. A, B and C are liable, as between themselves, to pay 1,000 rupees each."

(b) A, B and C are sureties to D for the sum of 1,000 rupees lent to E, and there is a contract between A, B and C that A is to be responsible to the extent of one- quarter, B to the extent of one-quarter, and C to the extent of one-half. E makes default in payment. As between the sureties, A is liable to pay 250 rupees, B 250 rupees, and C 500 rupees. (b) A, B and C are sureties to D for the sum of 1,000 rupees lent to E, and there is a contract between A, B and C that A is to be responsible to the extent of one-quarter, B to the extent of one-quarter, and C to the extent of one-half. E makes default in payment. As between the sureties, A is liable to pay 250 rupees, B 250 rupees, and C 500 rupees."

(emphasis supplied)

8. The learned counsel for the revision petitioners relied upon

illustrations (a) and (b) under the said provision and contended that none

of the Sections of Chapter VIII of the Indian Contract Act, 1872 would

provide for joint and several liability of the sureties. The provisions of

Sections 126 and 146 of the Indian Contract Act, 1872 would only speak CRP_2221_2023 Dr.GRR, J

about the joint or several liability of sureties but not about joint and

several liability of sureties. The Hon'ble Apex Court in its judgment

dated 28.06.2021 in Criminal Appeal No.533 of 2021 in the case of Shaik

Ahmed Vs. State of Telangana held that:

"The word "and" is used as conjunction. The use of word "or" is clearly distinctive. Both the words have been used for different purpose and object. Crawford on Interpretation of Law while dealing with the subject "disjunctive and "conjunctive" words with regard to criminal statute made following statement:

"........ The court should be extremely reluctant in a criminal statue to substitute disjunctive words for conjunctive words, and vice versa, if such action adversely affects the accused.""

9. The above statement was made by the Hon'ble Apex Court

while dealing with Criminal Appeal and while dealing with criminal

statutes.

10. As per Section 146 of the Indian Contract Act, the sureties are

liable to pay an equal share of the whole debt or of that part of it which

remains unpaid by the principal debtor in the absence of any contract to

the contrary. But the Agreement of Guarantee would disclose that there

was a specific agreement between the Decree Holder and the judgment

debtors that they would pay jointly and severally on par with the

successful bidder. As such, the liability of the sureties was joint and CRP_2221_2023 Dr.GRR, J

several on par with the principal debtor and they could not contend that

the primary liability to make the payment was on the principal debtor and

that their liability was only secondary.

11. Section 146 of the Contract Act speaks about the liability of co-

sureties when there is no contract to the contrary. When there is a

contract, the liability of the surety is as per the terms of the contract. The

judgment of the Hon'ble Apex Court in Ram Kishun and Others Vs. State

of U.P. and Others while interpreting Section 146 of the Indian Contract

Act, 1872 would say that only in the absence of separate contract to the

contrary by any of the sureties, Section 146 is applicable.

12. The order of the executing court would also disclose that the

executing court had apportioned the decree for an amount of

Rs.27,50,552/- equally between the principal debtor and the judgment

debtors 2 and 3 and required the employers of the judgment debtors 2 and

3 to withhold only a sum of Rs.9,16,850/- which was 1/3rd of the amount

of Rs.27,50,552/-. Though the execution petition was filed only against

the judgment debtors 2 and 3, the amount directed to be attached from the

salaries of judgment debtors 2 and 3 was only to an extent of 1/3rd of the

total decretal amount. Hence this Court does not find any illegality in the

order of the executing court to set aside the same.

CRP_2221_2023 Dr.GRR, J

13. In the result, this Civil Revision Petition is dismissed,

confirming the order of the executing court dated 29.04.2023 in E.P.No.81

of 2022 in AACF No.408 of 2021

Miscellaneous petitions, if any pending shall stand closed.

_____________________ Dr. G. RADHA RANI, J October 4th, 2023 ss