TMI Blog1947 (9) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... m this date until realisation. In 1939 Balakrishna Reddi applied under Section 4 of the Madras Debt Conciliation Act (XI of 1936) to the Debt Conciliation Board of Nellore (hereinafter referred to as the Board ), for the settlement of his debts including the one due to the bank under the award aforesaid. The bank was served with a notice under Section 10(1) of that Act calling upon it to submit a statement of debts owed to it, but it failed to do so within the time fixed, with the result that the Board in its, proceedings dated the 21st April, 1939, recorded that the debt due to the bank will be deemed to have been discharged. The bank took no steps to get the debt revived under Sub-section (3) of Section 10. 4. The bank attempted to recover the amount under the award from the respondent by filing an execution application on the 12th August, 1940, before the Deputy Registrar of Co-operative Societies, Nellore, for attachment and sale of certain, moveable properties of the respondent, and it was sent to the sale officer, North Nellore, for effecting the attachment and sale. Thereupon the respondent preferred a claim petition before that officer on the 9th June, 1942, ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chment and sale of the property of the defaulter which expression includes any person against whom an award has been obtained. Prima facie, therefore, the respondent is a defaulter, and by attachment and sale of his property the bank is entitled to recover the amount due under the award from him. The question: is whether Section 10, Sub-section (2) of the Debt Conciliation Act relied on by the respondent in the Court below or Section 134 of the Indian Contract Act which his learned counsel Mr. Ramachandra Rao relied on before us as an additional ground of exoneration operates to effect a valid discharge of the respondent's liability under the award. 6. Section 10(2) provides: Subject to the provisions of Sub-section (3), every debt of which a statement is not submitted to the board in compliance with the provisions of Sub-section (1) shall be deemed for all purposes and all occasions to have been duly discharged. It was argued on behalf of the respondent, and the argument found favour with the learned District Judge, that the debt due by the principal debtor is the foundation of the surety's liability to the creditor who, in enforcing his remedy against the sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion that it is not. This is, however, not to say that once a decree is passed against the principal debtor and the surety, all the provisions of the Indian Contract Act defining the rights and liabilities of the parties to a contract of guarantee cease to have operation. The effect of a decree, and the award passed by a competent authority under a special statute such as we have here stands on the same footing, is to determine conclusively the rights and liabilities as between the decree-holder and the judgment-debtor, and such rights and liabilities cannot be altered save by procedure known to law such as appeal, review, etc., or by special statutory provisions such as Section 10(2) expressly affecting decrees. The decree must rule with regard to matters, which are the subject of adjudication, but all outside the scope of the adjudication is still governed by the general law. If, for instance, the decree directs the judgment-debtors jointly and severally to pay unconditionally a certain sum of money to the decree-holder, the liability as determined by the decree cannot thereafter be modified by anything, which the decree-holder may do or omit to do. Accordingly it was held in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the creditor's rights against principal debtor and surety that cease to operate so far as to affect such rights after they are determined and declared by a decree for they alone are the subject of adjudication. Section 135 of the Indian Contract Act is one such rule and Section 134 is another. But, as the decree does not purport to determine the rights and liabilities as between the principal debtor and the surety these will remain unaffected, and the provisions, such as Section 141 which govern such rights and liabilities will operate in full force. 7. The decision in Zibal v. Rqinachandra (1939) N.L.J. 402 to which our attention has been drawn exactly covers the present case. There Niyogi J., refused to apply Section 134 to the case of a surety who resisted execution of a decree passed against him and the principal debtor, on the ground that the decree debt was discharged against the principal debtor by reason of the decree-holder having failed to submit a statement of his debt under Section 8(2) of the Central Provinces Debt Conciliation Act which is in the same terms as Section 10(2) of the Madras Act. Distinguishing his earlier decision in Babu Rao v. Babu Manaklal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such circumstances. We fail to see how the respondent's right of reimbursement against the principal debtor can be regarded as a condition of the bank's right as a decree-holder to enforce the unconditional liability of the respondent under the award. Apart from this, the argument proceeds on a misconception. Under Section 145 of the Contract Act, the respondent would, on payment to the bank, be entitled to recover the amount from the principal debtor, and the discharge of the latter's liability to the creditor cannot affect his obligation under the implied covenant to indemnify the respondent. It was then said that if the bank could recover the amount due under the award from the respondent and the latter in his turn could recover it from the principal debtor by way of reimbursement, the bank would, in effect, be recovering indirectly the debt which the statute says shall be deemed for all purposes and all occasions to have been discharged , and the object which the statute has in view would be defeated. We see no force in this argument. The liability of the principal debtor to pay to the respondent whatever sum the latter has rightfully paid under the guarantee wil ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
