JUDGMENT

Abdur Rahman, J. - The real question that falls to be determined in this appeal is whether the liability of a surety who has executed a bond in favour of a Court under the provisions of the Code of Civil Procedure can be held to have come to an end if the creditor for whose benefit the bond was given is found without the surety's knowledge to have entered into a contract with the debtor which would be hit by the provisions contained in Sections 133 to 141, Contract Act, although they are not in terms held to be applicable? The facts out of which the above stated question has emerged may be briefly stated. A suit was brought by one Ram Charan to recover a sum of Rs. 3386-13-0 from Phul Chand on 24th June 1938, in the Court of the Subordinate Judge at Delhi. The plaintiff then made an application under Order 38, Rule 5, Civil P.C., for attachment before judgment. This was granted on 15th July 1938, and the defendant was directed to furnish a security for a sum of Rs. 1600. Munshi Prithi Singh, the appellant in the present appeal, furnished the security on the same date. The bond executed by him (Ex. D.H./2) was to the effect that if the defendant did not pay the sum of Rs. 1500, the Court (sarkar) might realise this money from him at once. The suit was subsequently referred to arbitration and was compromised before the arbitrators who gave their award in accordance with the terms of the compromise. The terms of this award were accepted by the parties and a decree was accordingly passed. According to the terms of the award, which form a portion of the decree, the plaintiff was to deliver three ornaments deposited with him by Phul Chand on receipt of a sum of Rs. 800 and the balance of the decretal amount was to be paid by instalments of Rs. 75 per mensem. It was also mentioned in the award that the security bond furnished by Prithi Singh would remain in force until the whole decretal amount was paid off and the plaintiff would be entitled to proceed against the surety for the recovery of the amount decreed in favour of the plaintiff.

2. Prithi Singh was no party to the compromise or to the award. When the decree-holder wished to execute the decree by enforcing the surety-bond, he objected on various grounds, only two of which may be mentioned in this appeal: (1) that the plaintiff had released some property under his charge for the debt in suit and appropriated the property towards some other debt due to him by the debtor; and (2) that the suit was referred to arbitration and the plaintiff had agreed to grant time to the debtor and accept payment by instalments. The execution Court upheld these objections as the liability of the surety was found to have been co-extensive with that of the debtor and the former's rights after he had discharged his liability under the bond not less co-extensive with those of the creditor. And since in order to enable the surety to enforce his rights against the principal debtor it was essential/that his remedy against the principal should have remained unimpaired and the surety was found to have been adversely affected by the compromise between the debtor and the creditor, it was held that the surety could not be saddled with any liability under the surety bond. In coming to that conclusion the execution Court appears to have relied on Section 139, Contract Act. On appeal the learned District Judge was also of opinion that the right of the surety to proceed against the debtor had been impaired to some extent but as he was of the view that the bond was in favour of the Court and the decree-holder was not a creditor as defined in Section 126, Contract Act, the provisions contained in Sections 133 to 141, Contract Act, were held not to apply and the surety found to be incapable of deriving any help from the compromise arrived at between the decree-holder and the judgment-debtor. In view of this opinion the appeal was allowed and the surety's objections to the execution of the decree were disallo