SHAHID WAHEED.J This appeal arises out of an execution case. The decree-holder, who is respondent before me, on 6.3.2002 instituted a suit for recovery of Rs.5,400,000/- under Order XXXVII C.P.C. along with 20% damages and cost of the suit. The defendants of the suit filed an application before the learned Additional District Judge, Faisalabad and sought leave to appear and defend the suit. Vide order dated 23.7.2002 leave was granted to the defendants subject to furnishing of surety bonds equivalent to the suit amount. In compliance with said order the present appellants executed two separate surety bonds. The sureties engaged themselves to pay the amount if the Court eventually passed a decree against the defendants. While trial of the suit was in progress the plaintiff entered into compromise with the defendants as a result of which the suit was decreed vide order and decree dated 11.12.2002. Afterwards execution proceedings were taken out by the decree-holder and he sought to proceed against the surety/appellants. The appellants on 9.9.2003 filed a petition raising objection to the execution of decree and sought release of the attached property and person. The said objection petition was contested by the decreeholder/respondent. On consideration of the matter the learned Additional District Judge vide order dated 22.1.2007 dismissed the objection petition being not maintainable. Aggrieved by the said order sureties have come up in appeal before this Court.
2. This appeal was originally filed by Ahmad Ali (appellant No.1) and Muhammad Ali (appellant No.2). Subsequently, the appellant No.2 entered into compromise with the decree- holder/respondent and made a request to this Court for withdrawal of the appeal to his extent. The said request was allowed and vide order dated 22.5.2014 the present appeal was dismissed as withdrawn to the extent of appellant No.2.
3. The question involved in this case is whether the surety's liability under the surety bond continues or has ceased to exist when the surety was not present when the compromise deed was scribed and the consent decree was passed in the case. In my opinion this would not militate against the principle underlying Section 145 C.P.C which provides as under: Sec.145 Enforcement of liability of surety. Where any person has become liable as surety:
(a) for the performance of any decree or any part thereof, or
(b) for the restitution of any property taken in execution of a decree, or (c) for the payment of any money, or for the fulfillment of any condition imposed on any person, under an order of the Court in any suit or in any proceedings consequent thereon, the decree or order may be executed against him, to the extent to which he has rendered himself personally liable, in the manner herein provided for the execution of decrees, and such person shall, for the purposes of appeal, be deemed a party within the meaning of Section 47: Provided that such notice as the Court in each case thinks sufficient has been given to the surety.
A combined reading of different clauses of above cited Section 145 C.P.C clearly indicates that when a person has undertaken as a surety for the due performance of a decree or any part thereof, to the extent of undertaking the surety is personally liable for due performance of the liability of the judgment-debtor to the decree-holder and latter is entitled to proceed against him.
However, as per the cases of Kunj Lal v Batuk Prasad 120 Ind Cal 552 (1), Kabiruddin v Debi Singh (AIR 1935 Nag. 16), Raja Bahadur Dhanvaj Sirji v Raja P. Parthasarthy and others (1963) 3SCR 921), Jatindra Narayan Deb v Gauranga Chandra Dutta Banik and another (AIR 1957 Assam 71), Chakkunny, (Surety) v Viswa natha Iyer, (Decree-holder) AIR 1961 Kerala 312), Amin Lal v Faridabad Auto Industries Private Ltd (1979 (1) ILR (Punjab) 298), Mohan Lal v Suraj Mani and another (AIR 1973 (J&K) 92), Messrs.' Meena Trading Co., Karachi v Abdul Ghani and another (PLD 1972 Karachi 19) and Shahamad Khan v Sh. Muhammad Akbar and others (2005 CLC 641) following are real tests to apply for determining whether a surety stands discharged or continues to be liable under the surety bond.
(a) If the terms of the bond indicate that the surety undertook the liability on the basis that the dispute should be decided on the merits by the Court and not amicably settled, the compromise will effect a discharge of the surety.
(b) If the terms of the bond show that the parties and the surety contemplated that there might be an amicable settlement as well, and the surety executed the bond knowing that he might be liable under the compromise decree, there can be no discharge and the surety will be liable under the compromise decree.
(c) Where the surety bond was executed in favour of Court and by it the surety undertook to pay certain amount of money on behalf of the defendant if decreed by the Court and compromise decree between the parties to the suit introduces complicated provisions or include matters extraneous to the judicial proceedings in which the surety bond was executed, the surety is discharged from his liability.
(d) If there is fraud or collusion or any of the matter on which a contract can be set aside, the surety can claim exemption on these grounds, for consent decree is treated on the same footing as agreements.
(e) Sections 133 to 141 of the Contract Act, 1872 do not in terms apply to the surety bond executed in favour of the Court but their equitable principles apply to it.
(f) Where the plaintiff and defendant have entered into compromise without the consent of the surety by which he is seriously prejudiced and according to which substantial departure is made from the terms of the surety bond under which the surety engages himself to pay the decretal money then of course surety would be discharged.
4. In the present case the appellant contested the execution of the decree to his extent by pleading that principles contained in Section 135 of the Contract Act were applicable; that terms of the surety bond showed that he did not agree that the respondent could enter into a compromise with judgment-debtor; that by terms of the compromise, certain other disputes were also settled between the respondent and judgment-debtor which complicated the matter further; that his liability under the bond had ceased because the decree being installments decree without his consent and on compromise between the decree-holder on one hand and defendant/judgment- debtor on the other hand, he could no longer be liable for payment of amount under the decree in question; and, that decree was obtained through fraud or collusion. It is well established that the question whether a compromise was or was not excluded under the terms of a surety bond is a question of fact in each case. [See Dalip Singh v Kishan Chan (AIR 1937 Lahore 34)]. The learned Additional District Judge neither framed issues nor considered the above said objections of the appellant and dismissed the objection petition being not maintainable vide impugned order dated 22.01.2007. Perusal of impugned order shows that the learned Executing Court had not applied the aforesaid principles to determine the liability of the appellant under the surety bond. This was a clear departure from provisions of law and, therefore, the same cannot be approved.
5. In the afore stated attending circumstances and for order to be proposed in this appeal, I have not touched the merits of the case lest it might not prejudice the case of either of the parties. The appropriate course is to remand the case to the learned Executing Court to decide the appellant's objection petition afresh after framing following issues: (i). Whether the decree in question cannot be executed against the objector on the grounds contained in the objection petition?
(ii). Relief.
6. In the sequel this appeal is allowed, order dated 22.01.2007 passed by the learned Additional District Judge, Faisalabad, is set aside and result would be that the appellant's objection petition shall be deemed to pending before the learned Additional District Judge, Faisalabad, who shall decide the same afresh in accordance with law after framing the afore stated issues. Parties are directed to appear before the learned Additional District Judge, Faisalabad, on 25.6.2015.No order as to costs.