2017 (6) TMI 1395 - HC - Indian Laws

Initiation of composite suit - whether a suit, initiated as a composite suit against the borrower and sureties, can be proceeded with and can the liability be fastened on the sureties alone, when the suit stands abated against the original borrower / principal debtor? - HELD THAT - Tlegal position on this aspect being well settled and well crystalized, it has to be held that in this case as the compositely instituted suit was abated and dismissed against defendant no.1 due to failure on the part of plaintiff to bring legal heirs of defendant no.1 on record, in view of the provisions of Section 134 of the Contract Act, suit stands abated against sureties viz. Defendant No.2 and 3 also. There can no be dispute that separate suit can be filed against the guarantor even without initiating action against the principal debtor. The suit for recovery can also be filed against sureties alone. However when both the principal debtor and guarantors are impleaded in one and same suit and the suit abates against principal debtor, then in view of the law laid down in the above said case of Hon ble Supreme Court Sri Chand and others V/s M/s Jagdish Pershad Kishan Chand and other judgments 1966 (2) TMI 104 - SUPREME COURT , it has to be held that the suit stands abated or dismissed against sureties also otherwise there would be a conflicting decree of dismissal/abatement passed against defendant no.1 and would further lead to the court passing the decree which is even otherwise become final to the same subject matter between appellant and deceased defendant no.1. In the instant case, therefore, as evidence on record shows that defendant no.1 has died leaving behind him some legal heirs and that was the reason why defendant no.4, employer of defendant no.1, was impleaded in the suit so that, his legal heirs cannot claim the terminal dues of defendant no.1 from the defendant no.4, and as those legal heirs were not brought on record, on account of failure of the plaintiff to do so, the suit had abated against the defendant no.1 principal debtor. Hence the decree passed in the said suit cannot be executable against defendant no.2 and 3 also. The observations which are appearing in both these authorities relied upon by learned counsel for appellant, are made in the context of, when the discretionary jurisdiction of the court is invoked and secondly pertaining to the facts are exclusively within the knowledge of the party. In this case there is no question of plaintiff misleading the court in any way for obtaining the decree, when those two documents were very much part of the record for the consideration of the trial court. Merely because the trial court has not considered these documents, does not mean that plaintiff has suppressed those documents in any way or thereby played fraud on court. Therefore this submission cannot be accepted. The impugned order passed by the executing court rejecting applicant s application for dismissal of the execution proceedings, needs to be quashed and set aside, it being against settled legal position and therefore cannot be called as legal, valid and proper - this revision application is allowed.

Summary

Issues Involved:
1. Legality, propriety, and validity of the order passed by the 9th Joint Civil Judge, Junior Division, Nagpur.
2. Whether a composite suit against the borrower and sureties can proceed and impose liability on the sureties alone if the suit abates against the principal debtor.
3. The enforceability of a decree against sureties when the suit abates against the principal debtor.

Detailed Analysis:

1. Legality, Propriety, and Validity of the Order:
The legality, propriety, and validity of the order passed by the 9th Joint Civil Judge, Junior Division, Nagpur, on 3rd September 2016, was challenged. The impugned order rejected the application filed by the judgment debtor (original defendant no.3) for dismissal of execution proceedings against him. The court invoked its revisional jurisdiction to address this challenge.

2. Composite Suit Against Borrower and Sureties:
The primary legal issue was whether a composite suit against the borrower and sureties could proceed and impose liability on the sureties alone if the suit abates against the principal debtor. The facts revealed that the principal debtor (defendant no.1) had died before the suit was filed, and his name was deleted from the suit as he had no legal heirs. The trial court decreed the suit against the sureties (defendant no.2 and 3) and the New India Assurance Company (defendant no.4), directing them to pay the Chit Fund installments jointly and severally.

3. Enforceability of Decree Against Sureties:
The judgment debtor (defendant no.3) objected to the execution of the decree, arguing that it was void and unexecutable since the principal debtor had died before the suit was filed. The plaintiff failed to bring the legal heirs of the principal debtor on record, leading to the suit's abatement against the principal debtor. The court examined whether the suit should abate as a whole against all defendants to avoid conflicting decisions.

The court referred to the Andhra Pradesh High Court decision in Syndicate Bank V/s Pamidi Somaiah, which held that once the suit abates against the principal debtor, it equally abates against the sureties. The court concluded that the liability of the surety is co-extensive with that of the principal debtor and that the surety is discharged if the principal debtor's liability is discharged due to the creditor's omission.

Judgment:
The court found that the trial court's finding that the principal debtor had no legal heirs was not based on facts, as evidence showed that there were legal heirs. The failure to bring the legal heirs on record resulted in the suit's abatement against the principal debtor. Consequently, the suit could not survive against the sureties, as per Section 134 of the Indian Contract Act.

The court also addressed whether the decree could be challenged in execution proceedings without an appeal. It cited the Supreme Court's decision in Seth Hira Lal Patni v. Sri Kali Nath, which allowed challenging the decree's validity in execution proceedings if the court lacked jurisdiction, such as when the defendant was dead at the time of the suit.

The court dismissed the argument that the decree was obtained by fraud, as the documents in question were part of the record, and the trial court's failure to consider them did not constitute fraud by the plaintiff.

Conclusion:
The court quashed and set aside the impugned order passed by the executing court, rejecting the application for dismissal of execution proceedings. The execution proceedings were dismissed against the applicant (defendant no.3), respondent no.2, and respondent no.3, as they stood in the same position.