TaxTMI 
TaxTMI 
2017 (6) TMI 1395
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....onal jurisdiction. 2. The legal issue involved in this revision application is 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 ? Facts, which are relevant, for deciding this issue can be stated as follows: 3. On 24/05/2001, Regular Civil Suit No. 1440/2001 was filed by respondent No.1 ­ the decree holder against the defendant no.1 ­ principal debtor and against defendant no.2 and 3 who were the sureties of defendant no.1, for recovery of the amount of the Chit Fund. In the said suit, though the defendant no.2 and 3 had appeared, they were proceeded without written statement. 4. In the course of the proceedings of the suit, it was pointed out to the court that defendant no.1 had died on 19.12.1999 itself. Purshis exhibit­12 was filed by the plaintiff stating that as defendant no.1 was unmarried, his name be deleted from the suit and order to that effect accordingly came to be passed. However, on the application of plaintiff, respondent No.3 herein the New India Assurance Co....
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....t no.1 on record and hence the suit was abated against the defendant no.1. If the suit was joint and composite against defendant no.1, who was the principal debtor, and defendant no. 2 and 3, who were the sureties, the suit had to be abated, as a whole, against all the 3 defendants so that there can be no conflicting decisions in the same litigation arising out of the same cause of action, with respect to the same subject matter. 7. It was further submitted that on account of failure on the part of plaintiff to bring the legal heirs of defendant no.1 on the record, the remedy available to the sureties under the Indian Contract Act is also lost. In this respect reliance was placed on the decision of Syndicate Bank V/s Pamidi Somaiah (died) and another reported at AIR 2002 ANDHRA PRADESH 12 to submit that, once the suit is abated against principal debtor, it is equally abated/dismissed against the sureties also. Thus, it was contended that the impugned decree passed against the sureties is illegal and unenforceable against them. 8. This application came to be resisted by the Decreeholder­plaintiff by contending that in the execution proceedings this issue can not be raised,....
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.... if the facts of the above said decision of the Andhra Pradesh High Court are perused they do appear to be identical to the facts of the present case. In the said case also, the suit was abated against the original borrower and the decree came to be passed only against the surety. It was challenged in execution proceeding on the ground that it is void, illegal and unexecutable. The executing court framed the issue, "whether the decree obtained against surety is executable or not?" and then relying upon the judgment of the same High Court in the case of Royal Finance Corporation v Venkata Seshaya 1983 (1) ALT 344, the executing court therein held that as the debt had abated against the principal debtor, the debt against surety also stands discharged. Accordingly, the executing court dismissed the execution petition. The petitioner/decree holder had preferred a revision against this order and while deciding the revision, the Andhra Pradesh High Court held that issue to be considered was, whether the plaintiff decree holder can proceed only against the surety when the principal debtor's liability stands discharged because of the omission on the part of plaintiff and the suit had abate....
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....creditor has the right to proceed against the surety also, even though he can proceed against the principal debtor. If the creditor has recovered the amount due by the principal debtor from the surety, the surety stands subrogated into the shoes of the creditor and he can proceed and recover the amount paid as a surety from the principal debtor. By virtue of the act of omission by the creditor, the surety had lost such a right. The surety is only a guarantor and in case he pays the amount guaranteed by him on behalf of the principal debtor, he must have the right to proceed against the principal debtor. In the present case, as a result of an act of omission on the part of the creditor, the liability of the principal debtor stands discharged, as the creditor's suit against him had abated. Therefore, in terms of S.134, it should be inferred that the liability against the surety also stands discharged, as a result of the abatement of the suit against the principal debtor". (emphasis supplied) After considering various other decisions cited before it, it was further held in this case that as a result of the omission on the part of the creditor in bringing legal heirs on rec....
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....ng his legal heirs on record did not arise. The executing court thus held that once that judicial finding has become final, it cannot be disturbed in the execution proceedings and accordingly, the learned executing court held that the liability of surety being executable, judgment and decree passed against the surety cannot be set aside. 15. However, in this respect, the facts of the suit reflect otherwise. It may be true that by pursis filed at Exhibit­12 plaintiff had informed the court on 22/3/2002 that defendant no.1 has died without leaving any successor and his name be struck down/deleted from the suit. Accordingly the name of defendant no.1 also appears to be deleted by passing an order to that effect was passed on 10/10/2004. 16. However record of the suit shows that there was one more application which was filed at Exhibit­15 by the plaintiff which is produced in this revision application at page­32. The said application was for grant of permission to make New India Assurance Company as party to the suit. In para­1 of the said application, it was stated that defendant no.1 had died; he was employee of New India Assurance Company Ltd. and after his dea....
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..... 22. This legal position is also reflected in the various other judgments relied upon by the learned counsel for applicant. One such judgment is of the Hon'ble Supreme Court in the case of Shri Chand and others v/s M/s Jagdish Pershad Kishan Chand and others AIR 1966 SC 1427. Therein the Apex Court was pleased to consider the liabilities of the sureties in the light of various provisions of Indian Contract Act. The principal question raised before the Apex Court for consideration was whether the surety bond can be enforced if the decree holder had committed an act, by which the remedy of the sureties against the judgment debtor, had been impaired and therefore the sureties stood discharged? While answering this question, in para­7 of the judgment, the Apex Court has relied upon its earlier decision in the case of State of Punjab V/s Nathu Ram (1962) 2 SCR 636, explaining the tests applicable, in considering whether an appeal abates in its entirety when it has abated qua one of the respondents ? In that context it was held that, "abatement of an appeal against the deceased respondent means not only that the decree between appellant and the deceased respondent has become fina....
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....ings, notices issued by the court revealed that defendant no.1 has expired and consequently the suit came to be abated against defendant no.1. The question which arose for consideration was whether the suit has abated as a whole i.e. against the defendant no.2 as well? Then, after considering the provisions of Section 134 of Indian Contract Act, referred above, it was held by Delhi High Court that, "admittedly in the instant case joint claim had been preferred against two defendants, of whom one having died, the suit stood abated against him. Since the suit proceedings abated against the principal debtor, the question of continuance of the suit against guarantor would not arise. Claim against the guarantor was not divisible". 25. In this judgment of the Delhi High Court, reliance was also placed on the said decision of Apex Court in the case of Sri Chand and others v/s M/s Jagdish Pershad Kishan Chand (supra) and others and it was held that, "once the suit had abated against the defendant no.1 result would be that the suit is dismissed against him and if the claim is decreed against the defendant no. 2, there would be conflict between the decree of dismissal passed against the d....
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....uted 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. 30. In so far as the authorities relied by the counsel for respondent­Plaintiff herein, namely Infrastructure Leasing and Financial services Ltd., Mumbai V/s Vijaya V. Prabhu AIR 2010 Bombay 72 and Sicom Limited V/s Padmashri Mahipatrai J. Shah and others 2005(3) Mh.L.J.,125, there cannot be any dispute as to the legal propositions laid down therein on the basis of provisions of Section 126 and 128 of Indian Contract Act, that liability of the surety is coextensive with that of the principal debtor and therefore the suit for recovery of the amount can be filed by the creditor only against the guarantor also. The liability can be as against guarantor even without initiating any proceedings as against principal debtor. There can also be no dispute about the principles of law laid down in the judgment of Industrial Investment Bank of India Ltd., V/s Biswanath Jhunjhunwala (2009) 9 SCC 478 relied upon the ....
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....Sri Kali Nath AIR 1962 SC 199, clearly held that, "the validity of the decree can be challenged in the execution proceeding on the ground that the court which passed decree was lacking inherent jurisdiction in the sense that it could not have seized of the case because the subject matter was wholly foreign to its jurisdiction or that defendant was dead at the time when suit was instituted or decree passed, or some such other ground which could have the effect of rendering the court entirely lacking in jurisdiction in respect of the subject matter of the suit." (emphasis supplied) 34. Here in this case, evidence on record shows that defendant no.1 had died in the year 1999 itself, even before institution of the suit. His legal heirs, though in existence as per plaintiff's own statement on oath, were not brought on record during pendency of the suit. In such situation, when the decree is passed against the sureties, then such decree can be challenged in the execution proceeding, it being unexecutable. 35. One additional submission advanced by learned counsel for applicant is to the effect that the decree passed in the present matter is obtained by playing fraud on the court as ....