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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  153 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, 154 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  155 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 156 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, 157 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 158 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.  159 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, 164 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-