D.MURUGESAN, J.
The appeal is directed against the judgment and decree dated 27.3.2006 made in Application No.1039 of 2006 in C.S.No.1622 of 1992.
2. For convenience, the parties will be referred to as arrayed in the suit and the appeal arises under the following circumstances:
The plaintiff is engaged in finance business and granting loans on securities and also extending hire purchase and leasing facilities for vehicles and machineries etc. The first defendant approached the plaintiff for a loan of Rs.20,00,000/- and an agreement was also entered into on 11.1.91. The first defendant created an equitable mortgage of deposit of title deeds of the property for the value of Rs.20,00,000/- and the second defendant stood as a guarantor. As the first defendant failed to pay the first instalment, the plaintiff issued legal notices dated 21.9.91 to both the principal debtor and the guarantor namely, the defendants and the legal notice sent to the second defendant was acknowledged on behalf of him on 27.9.91. However, the legal notice sent to the first defendant was not served. Thereafter, the appellant/plaintiff-M/s The Motor and General Finance Limited filed a suit in C.S.No.1622 of 1992 under Order XXXVII Rule 1 of Original Side Rules and Order IV Rule 1 of Original Side Rules read with Order XXXIV Rule 1 and Section 26 of Civil Procedure Code for a judgment and decree directing the defendants to pay to the plaintiff the sum of Rs.26,45,000/- together with further interest at the rate of 2.5% per month from the date of plaint till the date of realisation on the sum of Rs.23,00,000/- within the time stipulated by this Court and in the event of default by the defendants of the payment of the amount, the property set out in the schedule to be brought to sale after defraying the expenses and appropriate the sale proceeds towards the amount decreed and should there be any deficiency, directing the defendants to pay such deficiency personally and also to pay costs.
3. Both the defendants were set ex parte on 7.10.2002. Evidence was taken on 10.10.2002 and the suit was decreed ex parte against both the defendants. The decree was transferred to the Court of the City Civil Judge, Bangalore for execution and the executing Court ordered attachment of the mortgaged property on 27.2.2006.
4. The second defendant filed Application Nos.1039 and 1040 of 2006 in C.S.No.1622 of 1992 before this Court to set aside the ex parte decree and to stay the decree pending the said applications. By order dated 27.3.2006, the learned Judge set aside the ex parte decree against both the defendants with a condition that the second defendant should deposit a sum of Rs.15,00,000/- within a period of eight weeks. The said order is questioned in this appeal.
5. We have heard Mr.T.K.Seshadri, learned senior counsel appearing for the plaintiff and Mr.AR.L.Sundaresan, learned senior counsel appearing for the second defendant.
6. The challenge to the order under appeal is mainly on the following grounds:
(i) The ex parte decree was passed on 10.10.2002. Even though the second defendant was served with the lawyer's notice dated 21.9.91, the subsequent summons could not be served as he has shifted his place of residence without informing the plaintiff and therefore substituted service was taken on 7.10.2002 and the publication was effected and in spite of the paper publication, both the defendants did not appear and therefore the ex parte decree came to be passed on 10.10.2002. As both the defendants were served and they had the knowledge of the suit, in the absence of any application for condonation of delay, the application filed by the second defendant to set aside the ex parte decree dated 10.10.2002 ought not to have been entertained and should have been rejected.
(ii) Inasmuch as the decree is joint and severable, it could be executed against any one of the defendants in terms of the proviso to Order IX Rule 13 of Civil Procedure Code, the learned Judge ought not to have set aside the decree in respect of both the defendants.
(iii) The plaintiff, being entitled to abandon the suit against any of the defendants, had filed a memo to withdraw the suit against the second defendant in terms of Order XXIII Rule 1 of Civil Procedure Code read with
Sections 43 and
44 of the Indian Contract Act, 1872 and hence the second defendant cannot claim that such a suit cannot be now withdrawn and in the event the suit is withdrawn against the second defendant, the decree in favour of the first defendant could be enforced and therefore the ex parte decree against the first defendant ought not to have been set aside.
7. On the other hand, it is the case of the second defendant that he came to know of the ex parte decree only on 1.3.2006 when the attachment of the property was sought to be made with police protection pursuant to the orders of the learned City Civil Judge, Bangalore and the said attachment was to be made by 8.3.2006 itself and the society, having been in possession of the property, brought to the knowledge of the defendants only on 3.3.2006 as to the decree, and the applications were filed on 6.3.2006. Hence there is no delay as, in terms of the proviso to
Article 123 of the Limitation Act, 1963, the applications were filed within 30 days from the date of knowledge. So far as the second contention is concerned, it is the case of the second defendant that by virtue of
Sections 91 and
92 of the Transfer of Property Act, 1882, the second defendant is entitled to redeem the property in question and the decree is not severable and the liability of both the defendants is co-extensive. Hence in the wake of the right of the surety to redeem the property, the learned Judge is right in setting aside the decree against both the defendants. Insofar as the last contention relating to the abandonment of the suit in respect of the second defendant alone, it is submitted that the provision of Order XXIII Rule 1 of Civil Procedure Code relating to the abandonment of the suit against one or other defendants cannot be accepted, in view of the right of the second defendant to redeem the property.
8. Point No.(i): The plaint was laid on 16.12.92. The statement of details of service filed by the second defendant shows that the first summons were issued on 17.2.93 and the same were returned as 'no such person'. Hence fresh summons were ordered subsequently on three occasions and those summons could not be served. On 27.2.2002, private notices were ordered which were also returned as 'party left'. Thereafter, paper publication was ordered on 30.9.2002 and the same was effected on 7.10.2002 and in three days time, the matter was listed and the evidence was taken and the ex parte decree was ordered on 10.10.2002. From the above narration of events, it is clear that no summons were served on the second defendant except the effecting of paper publication on 7.10.2002.
9. Mr.T.K.Seshadri, learned senior counsel appearing for the plaintiff would submit that even prior to the filing of the suit, a lawyer's notice dated 21.9.91 was sent on behalf of the plaintiff and the same was acknowledged and therefore in the absence of change of address intimated to the plaintiff, summons were taken to the erstwhile address of the second defendant and therefore he cannot claim that he has not been served. In this context, it is to be seen that even in the counter affidavit filed in the application, the plaintiff has stated in paragraph-8 that the legal notice sent to the second defendant was only acknowledged on behalf of the second defendant, evidencing thereby that the said lawyer's notice was not served on the second defendant. Service of summons means service on the person to whom it was intended. Though the second defendant was a guarantor and the first defendant was the principal debtor, it is possible for the first defendant to acknowledge both the summons and keep quiet in not informing the guarantor, making the second defendant also to face the litigation in future without himself opposing the suit. Hence the notice acknowledged on behalf of the second defendant cannot be considered to be a proper service of legal notice to contend that the second defendant was aware of the failure on the part of the first defendant to pay the instalments. Even for the sake of arguments, the said acknowledgement of the notice on behalf of the second defendant is accepted, the same cannot be considered to be a notice in the suit, as it was prior to filing of the suit. In the absence of service of notice, the argument of the learned counsel for the plaintiff that the second defendant had failed to inform the change of address is not acceptable.
10. This leads us to the next question as to whether after the suit was laid, the second defendant was served. In fact paper publication was effected on 7.10.2002 and within a period of three days, the suit was decreed ex parte i.e., on 10.10.2002. This ex parte decree was not within the knowledge of the second defendant, as it is not the case of the plaintiff even. The said ex parte decree was transferred to the Court of the City Civil Judge, Bangalore for execution and the attachment was ordered on 27.2.2006. It is also not the case of the plaintiff that the summons under the execution petition were also served on the defendants. On the other hand, it is seen that both the summons were returned unserved leading to the order of attachment. In the application to set aside the ex parte decree, the second defendant has specifically stated that the property was leased out to an organisation by name M/s Bright Society which was running an orphanage in the said place for Srilankan refugee children. It appears that when the officers of the Court inspected the place of the property on 18.2.2006, the society came to know of the ex parte decree for sale of the property and therefore it had filed an obstruction petition and by order dated 1.3.2006, the City Civil Court, Bangalore ordered attachment of the property by 8.3.2006. The society thereafter informed the second defendant on 3.3.2006 and the application to set aside the ex parte decree on 6.3.2006 was filed. In the wake of the said explanation, it cannot be said that the second defendant had the knowledge of the ex parte decree till 3.3.2006.
Article 123 of the Limitation Act , 1963 provides 30 days period for an application to be filed to set aside a decree passed ex parte from the date of the decree or where the summons or notice were not duly served when the applicant had the knowledge of the decree. Admittedly, in this case, summons or notices were not served and the applicant had the knowledge of the decree only on 3.3.2006. In this context, the explanation to
Article 123 is also referable. By that explanation, the substituted service under Order V Rule 20 of Civil Procedure Code shall not be deemed to be due service. Hence, in our opinion, the substituted service dated 30.9.2002 is also not of any assistance in this case and the application filed on 6.3.2006 made within 30 days of the knowledge of the ex parte decree is maintainable and the argument of the learned senior counsel appearing for the plaintiff that the application for setting aside the ex parte decree ought not to have been entertained without there being any application for condonation of delay cannot be therefore accepted. Accordingly, we reject the first challenge to the impugned order.
11. Point No.(ii): The next contention is whether in terms of the proviso to Order IX Rule 13, an ex parte order could be set aside against both the defendants. Law on this is now well settled by the Apex Court in the recent judgment in Bank of India v. M/s Mehta Brothers & Others, 2009 (1) MLJ 81. It is the submission of the learned senior counsel for the plaintiff that in view of the said judgment, only if the decree is of such a nature that it cannot be set aside only against one defendant, it can be set aside against all the defendants. Inasmuch as the decree in question is joint and several, the learned Judge ought not to have set aside the decree against both the defendants. In this context, the learned senior counsel also relied upon
Section 43 of the Indian Contract Act, 1872 and contended that when two or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any (one or more) of such joint promisors to perform the whole of the promise. When the plaintiff is entitled to compel the performance by one of the defendants, the decree ought not to have been set aside against the first defendant as well at the instance of the second defendant alone.
12. To find out as to whether by virtue of the proviso to Order IX Rule 13 of Civil Procedure Code, an ex parte decree against both the defendants could be set aside, we must first consider whether the decree is joint and several or it is otherwise. In a suit relating to mortgage of property, the plaintiff could file a suit to bring the property for sale and equally he is entitled to sue for recovery of money against the guarantor as well. To test whether the decree could be enforced only against one defendant at the choice of the plaintiff, the case put forth by the plaintiff and the nature of the decree are relevant. In this context, firstly the lawyer's notice dated 21.9.91 is referable. In the said notice addressed to both the defendants, the plaintiff had stated that both the defendants executed a demand promissory note and both of them are borrower and guarantor and the second defendant, being the guarantor, is jointly and severally liable for due repayment of the loan. Therefore the plaintiff had called upon both the defendants to pay the sum with interest. With the same averments in the plaint, a judgment and decree was also prayed against both the defendants for payment of the amount with interest and in default to bring the property for sale. The learned senior counsel for the plaintiff would contend that the suit being one for sale of the property and not a suit for redemption, the provisions of
Sections 43 and
44 of the Indian Contract Act alone would apply and in such case, the plaintiff would be entitled to proceed against any one of the defendants for recovery of the amount. In our opinion, the said contention holds no merit. As referred to earlier, the suit was laid, among other provisions, under Order XXXIV Rule 1 of Civil Procedure Code as well. Order XXXIV of Civil Procedure Code refers to suits relating to mortgage of immovable property. Rule 1 of the said Order contemplates that all persons having interest either in the mortgage and security or in the right of redemption shall be joined as parties to any suit relating to the mortgage. In the event such a suit is laid against the guarantor as well, certainly it would be open to the guarantor to settle the plaintiff by paying the amount due and in view of such payment, would redeem the property and proceed with the property to make good the loss. In this context, we may also refer to
Sections 91 and
92 of the Transfer of Property Act, 1882.
Section 91(b) of the said Act empowers any surety for the payment of the mortgage-debt or any part of that to redeem the mortgaged property. By virtue of such right, if once the mortgage is redeemed, then he has got a right of subrogation under Section
92. A combined reading of Order XXXIV Rule 1 of Civil Procedure Code and
Sections 91 and
92 of the Transfer of Property Act would show that the right of a mortgagee to defend the case is co-extensive with the principal debtor as well as the guarantor. In this context, we may also refer to
Section 128 of the Indian Contract Act, 1872 relating to the surety's liability. That section contemplates that the liability of a surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract. As we have already referred to, it is the case of the plaintiff that both the principal debtor and the guarantor had jointly entered into the agreement and also executed a promissory note and there is nothing placed on record to show that the contract provided otherwise.
Section 140 of the said Act contemplates a right of the surety on payment or performance. As per the said section, where a guaranteed debt has become due or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.
Section 141 of the said Act again contemplates that a surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship was entered into. Therefore, the decree relating to the mortgage cannot be considered to be severable, as the right of the principal debtor and the guarantor is co-extensive.
13. In this context, we may usefully refer to the judgment of the Apex Court in Bank of India v. M/s Mehta Brothers and others, 2009 (1) MLJ 81. That was a case where the Bank of India issued an irrevocable letter of credit for certain sum in favour of one M/s Bentrex and Company, Singapore, one of the defendants. The beneficiary drew a site draft for a certain amount and presented the same to one Deutsche Bank Asia, which was arrayed as the sixth defendant in the said suit. A suit was filed not only against the Bentrex and Company, Singapore and others as well as the sixth defendant. An ex parte decree was passed against the sixth defendant and the suit was dismissed against the other defendants 1 to 5. An application was taken out by the sixth defendant to set aside the ex parte decree and the learned single Judge of the High Court set aside the ex parte decree passed against the sixth defendant. By the same order, the learned Judge set aside that portion of the decree whereby the suit against the other defendants was also dismissed. That order was questioned in appeal before a Division Bench and the Division Bench set aside the order of the learned single Judge insofar as setting aside the ex parte decree against the defendants 1 to 5 and affirmed the order setting aside the ex parte decree against the sixth defendant. When the matter came up before the Apex Court, the question raised was whether by virtue of the proviso to Order IX Rule 13 of Civil Procedure Code the Court could set aside the decree in its entirety. Having referred to the provisions of Order IX Rule 13 which existed under the Code of Civil Procedure, 1882 and the provisions after the amendment, ultimately, the Apex Court found that under the said provision, an ex parte decree could ordinarily be set aside only against the defendant against whom the decree was ex parte and the suit could be revived only qua the said defendant applying for setting aside the ex parte decree. It is also held that in cases where the decree is of such a nature that the same cannot be set aside only as against the defendant applying for setting it aside, the decree could also be set aside against any or all of the other defendants. The proviso to Order IX Rule 13 therefore empowers the Court to set aside ex parte decree against all the defendants in an application filed by one of the defendants in the event the decree is of such a nature which could be either executed against both the defendants or any one of the defendants by getting the ex parte decree set aside may exercise his right of redemption over the property. If the ex parte decree in question is viewed from that angle, in our considered view, the decree could be set aside against all the defendants thereby paving a way for the second defendant to contest the suit and in the event a decree is passed for payment of money, he may honour the same and proceed against the principal debtor. On the facts of this case, as we have found that the decree in question is enforceable against both the defendants and the right conferred on the guarantor to redeem the property, the guarantor is entitled to either defend the suit or to submit to the decree for the purpose of payment of the claim of the plaintiff and to redeem the property. Hence the ex parte decree is liable to be set aside against both the defendants and we find no infirmity in the order of the learned single Judge in setting aside the decree against both the defendants.
14. Point No.(iii): Lastly it is contended that the plaintiff would be entitled to abandon the suit against the second defendant only in view of Order XXIII Rule 1 of Civil Procedure Code. By that provision, the plaintiff may against all or any of the defendants abandon the suit or abandon a part of the claim at any time after the institution of the suit. That question does not arise in an appeal questioning the order of the learned single Judge in setting aside the ex parte decree. In our considered view, the memo filed by the plaintiff at the appellate stage seeking to abandon the suit in respect of the second defendant would be outside the scope of the consideration of the order under appeal and hence we are not inclined to go into the said question.
15. For all the above reasons, we find no merit to interfere with the order under appeal. Accordingly, the original side appeal fails and the same is dismissed. No costs.