The acceptance of the composition by the principal creditor during the insolvency after part-payments by the surety did not entitle the surety to a refund of such part-payments. The acceptance of the composition by the principal creditor after notice to the surety became an act of the Court and the principle of Sections 134 and 185 had no application.

John Wallis, C.J.

1. This is an Appeal from an order of Mr. Justice Coutts Trotter in the insolvency of one Sithapati Ayyar, who was formerly a dubash of Messrs. Dymes & Co. and afterwards of the Bombay Company who took over the business, directing the Bombay Company to repay to the Official Assignee as representing the estate of the insolvent Rs. 27,243-13-0, which the Bombay Company had appropriated out of monies belonging to him in redaction of the loss the above firms had sustained in transactions with one V.V. Somasundaram Chetti which Sithapati had guaranteed under his dubash agreement. The ground upon which the refund was directed was that the effect of the arrangement entered into by the Bombay Company with Somasundaram Chetti was to release the dubash from his liability as surety. Assuming for the moment that the effect of this agreement was to release the surety from all further liability, I am not satisfied, and no authority has been cited to show that this surety also became entitled to recover the monies which he had already paid under his contract of suretyship. But before dealing further with this point it will be as well to set out the facts as they appear in the evidence.

2. On June 15th, 1915, as appears from Exhibit IT, the Bombay Company terminated Sithapatis employment as dubash and about the same time, as appears from the same Exhibit and their accounts, Exhibit C (3), they realized the promissory notes deposited with them and appropriated the proceeds and the other monies standing in their books to the dubashs credit, some Rs. 33,940 in all, to the losses they had sustained on the various transactions for which he was responsible. There was no specific appropriation to the various heads of loss, but, assuming the other losses to have been met in full, this balance of Rs. 27,000 remained and must have been appropriated to the loss sustained in the transactions with Somasundaram.

3. Somasundaram and Sithapati both became insolvents, and Mr. Rao on behalf of the Bombay Company, in January 1916 tendered proofs in Somasundarams insolvency for the full amount of his indebtedness to Dymes & Co., and the Bombay Company, which eventually came to some Rs. 54,000 in all without making any reduction on account of the appropriation from the dubashs account. This, as will be seen, he was entitled in law to do.

4. Somasundaram after his insolvency carried on business successfully, and on 14th September 1918 he filed an affidavit in support of an application to dispense with his public examination on the ground that his creditors with the exception of the Bombay Company had accepted his friends offer to pay 6 annas in the rupee and that the Bombay Company had also agreed to settle out of Court, but Mr. Rao, the Managing Director, was away in Calcutta and the real loss account had not been adjusted. The Official Assignee who, as appears from his letters, was fully alive to the fact that the money was coming not from the insolvents friends but from his own earnings in the business which he had carried on after his insolvency and which were at his disposal until the intervention of the Official Assignee, opposed the application at the instance of the present insolvent, and applied for the public examination of the insolvent Somasundaram, with a view to seeing if better terms could not be arranged. Before this question came before the Court, the contemplated settlement with the Bombay Company had been arrived at with Mr. May, an assistant of the Company, and on the 8th November 1918 the Company gave Messrs. Moonuswami Chetty & Sons, who were acting for Somasundaram, two receipts for Rs. 12,545 and Rs. 6,580 or Rs. 19,125 in full settlement of two debts of Rs. 36,211-12-10 and Rs. 18,989-11-1, or Rs. 55,201-7-11 in all.

5. Rs. 19,125 is 6 annas in the rupee on Rs. 51,000 and in his reply affidavit of 28th August 1919 the present insolvent states that he was informed and believed that it was agreed that Rupees 51,000 was t