1. Surety provided guarantee for performance of a decree; decree-holder subsequently entered into a compromise with the principal judgment-debtor without the surety's knowledge. (Para 2 )
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1994 Supreme(SC) 1215
SUPREME COURT OF INDIA
K. RAMASWAMY AND N. VENKATACHALA, JJ.
Amar Chand, Appellant
Versus
Bhano and another, Respondents.
Civil Appeal No. 9225 of 1994 (arising out of S.L.P.(C) No. 6694 of 1990)
Decided on 1-12-1994.
Advocates:
ANANT PALLI, E.C.AGARWAL
ANANT PALLI, E.C.AGARWAL
A compromise between a decree-holder and the principal judgment-debtor, made without the surety's consent, constitutes full satisfaction of the decree. As the surety's liability is co-extensive with the judgment-debtor, such a compromise releases the surety from their liability under the guarantee or surety bond.
Headnote:
Civil Procedure Code,1908 – Section ,47 - Order, 21 - Performance Of Any Decree Or Any Part - Decree-holder compromised - Appearing either in person or through counsel- We have heard counsel for appellant- Admittedly appellant had undertaken as a surety on behalf of defendant due performance of decree for a sum including profits payable by to decree-holder- By subsequent conduct decree-holder compromised with principal judgment-debtor and a compromise was recorded in that behalf without reference to surety –Held, Judgment-debtor to decree-holder and latter is entitled to proceed against him in manner laid down But when decree-holder himself had compromised with principal debtor and had discharged himself from liability to performance of decree in law it must be a full satisfaction of decree and relevant rule Full satisfaction recorded in that behalf relieves guarantor or surety from obligation with decree-holder and decree-holder cannot seek any further remedy against surety- liability of guarantor or surety is co-extensive with judgment-debtor- compromise entered by decree-holder binds himself by his conduct and releases guarantor or surety from liability undertaken in guarantee or surety bond for due performance of decree- In case compromise was with consent of guarantor or surety compromise with principal judgment-debtor is for or liability or than extent of liability undertaken by guarantor or surety in that event guarantor or surety is not relieved from his liability for due performance of decree- Such is not case here compromise was without reference appellant- appellant must be deemed to be relieved from liability from surety bond and decree holder no longer is entitled to proceed against appellant to recover from appellant- High Court is clearly in error in impugned order made in dismissing his revision execution petition shall stand closed as full satisfaction must be deemed - Appeal allowed
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Table of Contents
2. Whether a surety remains liable for the performance of a decree after the decree-holder has entered into a compromise with the principal judgment-debtor. (Para 3 )
3. A compromise between the decree-holder and principal debtor constitutes full satisfaction of the decree, thereby releasing the surety whose liability is co-extensive with the debtor. (Para 3 )
4. A compromise between a decree-holder and principal debtor without the surety's consent constitutes full satisfaction of the decree, relieving the surety of their liability. (Para 3 )
5. Appeal allowed; the execution petition is closed as the decree is deemed fully satisfied. (Para 3 )
6. Does a compromise between a decree-holder and a principal debtor release the surety?
Yes, if the compromise is recorded as full satisfaction of the decree under Section 47 and Order 21 of the CPC, it relieves the guarantor or surety from their obligation. (Para 3 )
7. Under what circumstances does a compromise with a principal debtor not release a surety?
A surety is not relieved if the compromise was made with their consent or if the compromise pertains to liabilities other than those undertaken by the guarantor. (Para 3 )
8. What is the nature of a surety's liability regarding the performance of a decree under Section 145 of the CPC?
A person furnishing security for the performance of a decree is personally liable to the extent of the undertaking and is deemed a party within the meaning of Section 47. (Para 3 )
JUDGMENT
Leave granted.
2. Though the respondents have been served, they are not appearing either in person or through counsel. We have heard the counsel for the appellant. Admittedly, the appellant had undertaken as a surety, on behalf of the defendant Dia Singh, for the due performance of the decree for a sum of Rs. 10,000/- including mesne profits payable by Dia Singh to the decree-holder. By the subsequent conduct, the decree-holder compromised with the principal judgment-debtor and a compromise was recorded in that behalf without reference to the surety.
3. The question, therefore, is whether the amount undertaken by the appellant towards mesne profits as surety could be recovered from him. Section 145 of C.P.C. provides thus:
"Where any person has furnished security or given a guarantee -
(a) for the performance of any decree or any part thereof......the decree or order may be executed in the manner herein provided for the execution of the decrees, namely,
(i) if he has rendered himself personally liable against him to that extent .......and such person shall be deemed to be a party within meaning of S. 47."
A conjoint reading of these clauses do clearly indicate that when a person has undertaken as a guarantor or a surety for the due performance of a decree or any part thereof, to the extent of the undertaking or guarantee, the guarantor or the surety is personally liable for due performance of the liability of the judgment-debtor to the decree-holder and the latter is entitled to proceed against him in the manner laid down in S. 145. But when the decree-holder himself had compromised with the principal debtor and had discharged himself from the liability to the performance of the decree, in law it must be a full satisfaction of the decree under S. 47 and the relevant rule in O. 21, C.P.C. Full satisfaction recorded in that behalf relieves the guarantor or surety from the obligation with the decree-holder and the decree-holder cannot seek any further remedy against the surety. The liability of the guarantor or surety is co-extensive with the judgment-debtor. The compromise entered by the decree-holder binds himself by his conduct and releases the guarantor or surety from the liability undertaken in the guarantee or surety bond for due performance of the decree. In case the compromise was with the consent of the guarantor or surety compromise with the principal judgment-debtor is for other liability other than the extent of the liability undertaken by the guarantor or surety, in that event the guarantor or surety is not relieved from his liability for due performance of the decree. Such is not the case here. The compromise was without reference to the appellant. The appellant must be deemed to be relieved from the liability from surety bond and the decree-holder, no longer is entitled to proceed against the appellant to recover Rupees 10,000/- from the appellant. The High Court is clearly in error in the impugned order made in C.R. No. 3040/89 dt. Jan. 29, 1990 dismissing his revision. The appeal is allowed. The execution petition shall stand closed as full satisfaction must be deemed to have been recorded. No costs.
Appeal allowed.
For Citation: AIR 1995 SC 871
