Full Judgment Text
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PETITIONER:
SMT. KAMALA DEVI
Vs.
RESPONDENT:
SETH TAKHATMAL AND ANOTHER
DATE OF JUDGMENT:
21/02/1963
BENCH:
SUBBARAO, K.
BENCH:
SUBBARAO, K.
DAYAL, RAGHUBAR
MUDHOLKAR, J.R.
CITATION:
1964 AIR 859 1964 SCR (2) 152
ACT:
Surety Bond--Construction of--Conditions for enforcement
--If fulfilled--Displaced debtor--Application for adjustment
of debts--Return for want of territorial jurisdiction
--Appeal--Civil Courts ,if must stay execution proceedings
--Code of Civil Procedure, 1908 (Act V of 1908) , s. 145
--Displaced Persons Debts Adjustment) Act , 1951 (LXX of
1951) , ss. 5, 15 .
HEADNOTE:
T filed a suit against M and obtained an order for
attachment before judgment of certain bills due for payment
to M.. The bills, were released from attachment upon M
furnishing sureties including the appellant. Under the
surety bond the appellant bound herself that M "’shall
produce and place at the disposal of the court when
required", the bills or the value of the same and "in’
default of his so doing" to pay a sum of Rs. 12,000, to the
Court. After the passing of the decree, T, without taking
any steps against, M, applied for execution of the decree by
enforcement of the surety bonds. The sureties filed
objections. In the meantime, M applied to the Dehradun
Tribunal under s. 5 of the Displaced persons
(Debt Adjustment) Act, 1951, for adjustment of his debts
and the appellant applied to the executing Court under s.
15 of the Act for staying the proceedings. The Court
refused to stay holding that the Dehradun Tribunal had no
jurisdiction to entertain the application and rejected the
objections to the enforcement of the surety bonds.
Subsequently; the Tribunal also held that it had no
territorial jurisdiction to entertain the application and
returned the same for presentation to the proper‘ Tribunal.
M preferred an appeal against this order. The appellant
contended that the executing Court was bound to stay the
execution proceedings and that the surety bond was not
enforceable as the conditions necessary for its enforcement
had not been fulfilled.
Held, that the executing Court was right in refusing to stay
the proceedings. Under s. 15 of the Act, all proceedings
pending in a Civil Court have to be stayed provided two con-
ditions are satisfied, i. e. (i) that the Tribunal before
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which the application under s. 5 is filed has territorial
jurisdiction to
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entertain it and (ii) that the proceedings arc in respect of
a debt owed by the displaced person. The Tribunal had
returned the application for want of territorial
jurisdiction and the mere filing of the appeal did not
suspend the order of the Tribunal. The effect was that
there was no application under s. 5 pending.
Juscurn Boid v. Kirthichand Lal, (1918) L. R. 46 I. A. 52,
referred to.
Held, further, that the surety bond was not enforceable, A
surety bond had to be strictly construed; it was permissible
to look at the surrounding circumstances only when the
language used was ambiguous. In the present case the langu-
age was clear. A strict construction of the bond led to the
only conclusion that a demand by the Court to M to produce
the bills or their value and a default made by him were
necessary conditions for the enforcement of the bond against
the surety. These conditions were not fulfilled.
Raghunandan v. Kirtyanand A. I. R. 1932 P. C. 131, The Slateof
Bihar v. M. Homi. [1935] 2 S. C. R. 78 and The State ofUttar
Pradesh v. Mohammad Syeed, [1957] S.C.R. 770, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 72 of 1961.
Appeal by special leave from the judgment and order dated
March 12, 1957, of the Madhya Pradesh High Court in Letters
Patent No. 212 of 1956.
G. C. Mathur, for the appellant.
H. N. Sanyal, Additional Solicitor-General of
India and S S. Shakla, for respondent No. 1.
1963. February 21. The judgment of the Court was delivered
by
SUBBA RAO J.-This appeal by special leave raises, inter
alia, the question of construction of the terms of a surety
bond.
The material facts are is follows : On August 26, 1947, Seth
Takhatmal, respondent 1,
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filed Civil Suit No. 9-A of 1947 in the Court of the First
Additional District judge, Jabalpur, against Mulkraj
Malhotra, the second respondent, for dissolution of their
partnership and rendition of accounts. On August 27, 1947,
the first respondent applied for attachment before judgment
of all the bills payable to "M. R. Malhotra and Company",
as per description given in Schedule A attached thereto and
for the issue of an order to C.M.A.S.C., Poona, prohibiting
them from issuing any cheque due to M. R. Malhotra and
Company, and on the same day the Court issued notice of the
said application. On August 28, 1947, the Court issued a
conditional order of attachment before judgment in respect
of the said bills. On September 9, 1947, the second
respondent applied for vacating the order of attachment. On
September 11, 1947, the second respondent offered to give
security if time was granted to him. On October 17, 1947, 5
surety bonds were executed by the appellant and 4 others for
different amounts and presented to the Court. The Court
accepted the bonds and withdrew the order of attachment.
The appellant’s surety bond to the Court was for a sum of
Rs. 12,000/-. Under that bond she agreed, if the second
respondent made a default in producing and pacing at the
disposal of the Court when required the properties specified
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in the Schedule attached thereto or the value of the same or
such portion of the same as may be sufficient to satisfy the
decree, to the Court a sum not exceeding Rs. 12,000/-. On
October 13, 1948, a preliminary decree was made in the said
suit. On August 1, 1951, the second respondent was adjudged
as an insolvent by the High Court at Calcutta. On September
20, 1951, a final decree was passed in the said suit against
the second respondent for a sum of Rs. 1,74,906/4/0 plus Rs.
7868/10/0 as costs. On October 19, 1951, the first
respondent filed an application for execution of the decree
by enforcement of the surety bonds under 145 of the Code of
Civil Procedure. On
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December7, 1951, the appellant filed objections raising
various pleas, inter alia, contending that the decree was
passed without jurisdiction and that the surety bond was
void. On May 28, 1952, the second respondent filed an
application under s. 5 of the Displaced Persons (Debts
Adjustment) Act, 1951 (LXX of 1951), hereinafter called the
Act, before the Tribunal at Dehra Dun for adjustment of his
debts under the provisions of the Act. On July 9, 1952, the
adjudication of the second respondent as an insolvent was
annulled. On August 2, 1952, the appellant filed an
application before the District Court under s. 15 of the Act
for stay of the execution proceedings and for the transfer
of all the records to the Tribunal at Dehra Dun. On August
20, 1956, the Tribunal at Dehra Dun, holding that it had no
territorial jurisdiction to entertain the application filed
by the second respondent under the Act, returned it for
presentation to a proper tribunal. On August 22, 1952, the
executing Court rejected all the contentions of the
appellant. On August 29, 1956, the’ second respondent
preferred an appeal against the order of the Tribunal at
Dehra Dun returning his application filed under s. 5 of the
Act. It is represented to us by the learned counsel for the
respondent on instructions that the said appeal was
dismissed. The appellant preferred Miscellaneous First
Appeal No. 44 of 1952 against the order of the executing
Court rejecting her objections to the High Court of
judicature at Nagpur. That Court, by its Order dated
October 1, 1956, dismissed the appeal. The Letters Patent
Appeal No. 212 of 1956 preferred by the appellant against
the order of the single judge of the High Court was also
dismissed by a Division Bench of that Court on March 12,
1957. The present appeal ha-, be-en preferred by the appe-
llant by special leave.
Mr. Mathur, learned counsel for the appellant raised before
us the following points : (1) The
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executing Court acted without jurisdiction in refusing to
stay the execution proceedings against the appellant
contrary to the express provisions of S. 15 of the Act. And
(2) a surety bond has to be strictly construed and if so
construed it would be obvious on the express terms of the
bond that the necessary conditions for its enforceability
were not fulfilled.
We shall notice the arguments of the learned Additional
Solicitor-General on behalf of the first respondent at
proper places in the course of our judgment.
The first question turns upon the relevant provisions of the
Act and they read :
Section 5. (1) At any time within one year after the date on
which this Act. comes into force in any local area, a
displaced debtor may make an application for the adjustment
of his debts to the Tribunal within the limits of whose
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jurisdiction he actually and voluntarily resides, or carries
on business or personally works for gain.
Section 15. Where a displaced debtor has made an
application to the Tribunal under section 5 or under sub-
section (2) of section 11, the following consequences shall
ensue, namely :-
(a) all proceedings pending at the date of the said
application in any civil court in respect of any debt to
which the displaced debtor is subject (except proceedings by
way of appeal or review or revision against decrees or
orders passed against the displaced
debtor) shall be stayed, and the records of all such
proceedings other than those relating to the appeals,
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review, or revisions as aforesaid shall be transferred to
the Tribunal and consolidated
Under the said provisions if it displaced debtor filed an
application before a Tribunal described under s. 5 of the
Act, all proceedings pending in a civil Court at the date of
the said application in respect of any debt to which the
displaced debtor is subject shall be stayed. The statutory
stay can be invoked only if two conditions are satisfied,
namely, (i) the Tribunal before which the application under
s. 5 is filed shall be one within the local limits of whose
jurisdiction the displaced debtor actually and voluntarily
resides or carries on business or personally works for gain,
that is to say the Tribunal shall be one which has
territorial jurisdiction to entertain the application ; and
(ii) the proceedings shall be in respect of a debt owed by
the said displaced person. From the earlier narration of
facts it is manifest that the Dehra Dun Tribunal held that
it had no territorial jurisdiction to entertain the petition
and returned it to be represented to a proper tribunal. The
application so returned was not represented to the proper
tribunal. The appeal filed against the said order was
dismissed. As there was no application pending before any
Tribunal, the Court was well within its rights in not acting
under s. 15 of the Act.
Learned counsel for the appellant contended that he had no
instructions that the appeal filed in the Allahabad High
Court was dismissed. Assuming that the appeal :is still
pending against the order made by the Tribunal, Dehra Dun,
returning the petition filed by the second respondent under
s. 5 of the Act, the appellant would not be in a better
position. It is not stated that after filing an appeal his
client had obtained any interim suspension of the order of
the Tribunal ; indeed, it is not disputed
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that there was no such order. If so, the legal position
would be that the order of the Tribunal would be in force
till it was modified or set aside by the appellate Court.
The filing of an appeal does not automatically suspend the
operation of an order appealed from unless the appellate
Court stays it or a statute conferring a right of appeal
provides for such a stay. Section 40 of the Act confers a
right of appeal on an aggrieved party against the final
order of a Tribunal to the High Court. The section
conferring the said power does not provide for a statutory
stay of the order of the Tribunal till the disposal of the
appeal. Indeed, Order XLI, r. 5, of the Code of Civil
Procedure, which embodies the general principle of law says
that an appeal shall not operate as a stay of proceedings
under a decree or order appealed from except so far the
appellate Court may order. This principles which applies to
stay of proceedings under an order will apply with greater
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force to a suspension of an order. The judicial Committee,
in Juscurn Boid v. Kirthichand Lal summarized the Indian Law
of procedure thus:
" ......... under the Indian Law and procedure an original
decree is not suspended by presentation of an appeal nor is
its operation interrupted where the decree on appeal is one
of dismissal."
Here, the application filed by the second respondent before
the Tribunal, Dehra Dun, was rejected and the said order
holds the field till it is reversed by the appellate Court.
As the order of the Tribunal was not suspended, the effect
was that there was no application pending in a Tribunal as
defined in s. 5 of the Act. The order of the High Court, in
our view, is correct on this point.
The second question turns upon the interpretation of the
surety bond executed by the appellant
(1)(1918) L. R. 46 I. A. 52, 56.
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in favour of the Court. As the argument turns upon the
terms of the said bond, it will be convenient at the outset
to read the material part of it. It reads :
"Whereas at the instance of Takhatmal, the plaintiff in the
above suit ; Mr. Mulkraj the defendant has been directed by
the Court to furnish security in the sum of Rs. 1,00,000/-
(one lac only) to produce and place at the disposal of the
Court the property specified in the schedule hereunto
annexed ;
Therefore, I Kamla Devi have voluntarily become surety and
do hereby bind myself my heirs and executors, to the said
Court, that the said defendant shall produce and place at
the disposal of the Court, when required, the property
specified in the said schedule or the value of the same, or
such portion thereof as may be sufficient to satisfy the
said decree ; and in default of his so doing, I bind myself,
my heirs, and executors, to pay to the said Court, at its
order, the said sum of Rs. 12,000/- only or such sum not
exceeding the said sum as the Court may adjudge."
Schedule ’A’
x x x x x x x
(ii items)
Approximate grand total...Rs. 1,10,000/-
Learned counsel for the appellant contended that the surety
bond must be strictly construed, that under the terms of the
surety bond the liability of the surety arises only if the
principal debtor is required to produce and place at the
disposal of the Court the said bills or the value of the
same and if he
160
makes a default in, doing so, and that in the present case
it has not been established, and indeed it is not the case
of the respondent, that any such demand was made on the
second respondent and that he made a default in doing so.
Learned Additional Solicitor-General for the first
respondent argued that the said plea was not taken by the
appellant and that she should not be allowed to raise it at
this stage, for, if it was raised, in the pleadings his
client might have been in a position to allege and prove
that the said condition had been fulfilled or at any rate
waived by the appellant. He further contended that on a
fair reading of the terms of the surety bond, having regard
to the circumstances under which it was executed, it would
be manifest that the appellant had accepted the liability to
satisfy the decree debt if the second respondent failed to
do so, upto a sum of Rs. 12,000/-. He would say that, as
the surety bond was executed for raising the attachment, the
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amount for which it was given was clearly intended by the
party to be paid towards the decree amount in case the
judgment-debtor made a default to place at the disposal of
the Court the said bills or their value and that in the said
circumstances a reasonable interpretation of the terms of
the bond without doing violence to the language would
disclose the said intention. It is true that the plea now
raised was not specifically taken in’ the objections filed
by the appellant and it was not specifically advanced before
the learned District judge also. It was rejected by Kotval
J. on the ground that it was not’ raised in the pleadings,
and by the Division Bench on merits. But the question
raised is one of construction of ’a surety bond and all the
facts on which the respondent seeks to rely upon should only
be found in the order sheet. If a demand was made or if the
judgment debtor or the surety waived the fulfilment of a
condition, the order sheet must disclose the issue of a
notice or the facts constituting a waiver. There cannot
possibly be any facts outside the record. The entir
161
order sheet is on the file. The learned counsel is not able
to show any entry therein which will support the fact of a
demand or a waiver. in the circumstances, even if we remand
the case, no useful purpose will be served for the necessary
facts could only be gathered from the order sheet. That
apart, before the Division Bench of the High Court the first
respondent does not appear to have contended that he had
sources other than the order sheet to prove that either a
demand was made or the surety waived the fulfillment of the
condition, and indeed his Advocate appears to have contended
that in view of the subsequent events that happened such a
demand would only be an idle formality. In the
circumstances, we are satisfied that the respondent would
not be prejudiced if the appellant was allowed to argue on
the construction of the surety bond, as she did in the
courts below.
Now coming to the construction of the surety bond, the first
question raised by the learned Additional Solicitor-General
is that the terms of the surety bond should be construed in
the context of the surrounding circumstances,, namely, the
circumstances under which the surety bond came to be
executed. In support of this contention he relied upon the
judgment of the. judicial Committee in Raghunandan
v. Kirtyanand (1). There, the judicial Committee was
asked to construe a surety bond. The question raised was
whether under the terms of the bond the liability undertaken
by the surety was to pay the entire decree amount or to pay
the balance of the amount due under the decree after the
mortgage security was realized, up to the limit of the
amount guaranteed under the bond. The terms of the document
were not clear and unambiguous. In those circumstances,
Lord Tomlin, speaking for the Board, observed :
"The bond must be considered in the light of the order
directing the security to be given.
(1) A.I.R. 1932 P.C. 131, 132-33.
162
what is the meaning of the language employed
in the bond?"
These observations only apply the well settled rule of
construction of documents to a surety bond. Sections 94 to
98 of the Indian Evidence Act afford guidance in the
construction of documents; they also indicate when and under
what circumstances extrinsic-evidence could be relied upon
in construing the terms of a document. Section 94 of the
Evidence Act lays down a rule of interpretation of the
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language of a document when it is plain and applies
accurately to existing facts. It says that evidence may be
given to show that it was not meant to apply to such facts.
When a court is asked to interpret a document it looks at
its language. If the language is clear and unambiguous and
applies accurately to existing facts, it shall accept the
ordinary meaning, for the duty of the Court is not to delve
deep into the intricacies of the human mind to ascertain
one’s undisclosed intention-, but only to take the meaning
of the words used by him, that is to say his expressed
intentions. Sometimes when it is said that a Court should
look into all the circumstances to find an author’s
intention, it is only for the purpose of finding out whether
the words apply accurately to existing facts. But if the
words are clear in the context of the surrounding
circumstances, the Court cannot rely on them to attribute to
the author an intention contrary to the plain meaning of the
words used in the document. The other sections in the said
group of sections deal with ambiguities, peculiarities in
expression and the inconsistencies between the written words
and the existing facts. In the instant case, no such
ambiguity or inconsistency exists as we shall demonstrate
presently. The Privy Council’s case was one of ambiguity
and the surrounding circumstances gave the clue to find out
the real intention of the parties as expressed by them.
163
Bearing, the said principles in mind, let us look at the
document closely. The preamble to the surety bond in clear
terms gives the object of the bond. It says that "the
defendant has been directed by the Court to furnish security
in the sum of Rs. 1,00,000/- to produce and place at the
disposal of the Court the property specified in the Schedule
hereunto annexed". Therefore, the object is to see that the
said direction is properly carried out, and to provide for a
contingency if a default is made by the judgment-debtor in
complying with the said direction. The second paragraph of
the bond binds the surety to Court in that the said
defendant shall produce and place at the disposal of the
Court, when required, the said property or the value of the
same. The words used in this part of the undertaking given
by the surety is clear and unambiguous. The judgment-debtor
shall produce the bills or their value and place them at the
disposal of the Court when required to do so. The
expression "when required" can only mean "when required by
the Court". The obligation undertaken by the surety is that
the judgment-debtor shall produce the said property when
required by the Court. Her obligation does not arise at all
till the Court makes the requisition. In this case there is
no order or entry in the order sheet requiring the judgment-
debtor to produce and place the property in Court; nor even
the execution petition though it describes the judgment-
debtor in one of the columns, asks for any relief against
him. But it is said that the words "when required" must be
confined only to a situation when the bills could be
produced or the value of the same could be paid by the
judgment-debtor; and that in this case, as the bills were
cashed and the money misappropriated by him and as he had
been adjudged an insolvent, it would be an empty formality
to call upon him to do so. It is also said that the
condition could apply only when the money could lawfully be
paid by the judgment-debtor; but,
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as the judgment-debtor had become an Insolvent, neither the
Court could demand of him to pay the amount, nor could he
pay it. The construction of the word "when required"
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suggested by the learned counsel for the respondent, if
accepted, would make those words unnecessary : it would mean
that the judgment-debtor should be required to produce the
property only of he could do so and need not be required to
produce it if he could not do so; in such a case those words
could as well be excluded from the sentence, for they would
not serve any purpose. If the words were retained there to
accept the argument of the learned counsel, they should be
qualified by adding "if the bills could be produced and when
the money could lawfully be paid by the judgment debtor".
But those words are not there and we cannot add them, for
without adding them, full meaning could be given to the
words used in the clause. But whatever ambiguity there may
be--in our view there is none--the words "in default of his
doing so" make it absolutely clear that the surety binds
herself only if the judgment-debtor makes a default when he
is required to produce the document. The intention of the
parties is very clear. The surety undertook that the
judgment-debtor would produce the bills if required by the
Court and that if he made a default, she would be bound to
pay the decree amount up to a particular limit. A court
cannot possibly decide beforehand that the judgment-debtor
would not produce the bills or at any rate the value of the
same if demanded; for ought we know he might have paid that
amount from other sources or he would have taken out an
application to the official Receiver to do so, or on the
events that subsequently happened, i. e., on the annulment
of the adjudication, he could have paid that amount. It is
well settled that a surety bond has to be strictly
construed. In The State of Bihar v, M. Homi (1), this Court
ruled that provisions in a surety bond which are penal in
nature must be very
(1) [1955] 2 S. C. R. 78,
165
strictly construed. This Court again in The State of Uttar
Pradesh v. Mohammed Sayeed (1), applied the strict rule of
construction of a surety bond in that case. In the present
case a strict construction of the bond leads to the only
conclusion that a demand of the Court on the judgment-debtor
and a default made by him were necessary conditions for the
enforcement of the bond against the appellant.
In the result, we set aside the order of the High Court and
dismiss the application for execution filed by the first
respondent against the appellant. But we do not think that
this is fit case for awarding costs to the appellant. She
has failed to raise this objection specifically in her
objections or to place before the learned District judge the
present contention. In the circumstances we direct each
party to bear his or her own costs throughout-