Silva and Wickremesinghe.
1943Present: Hearne and Keuneman J-J.
SILVA, Appellant, and WICKREMESINGHE, Respondent.
100—D. C. Matara, 6,787.
Decree—Agreement between judgment-creditor and debtor—Application to haveadjustment of decree recorded—Application for writ—Civil ProcedureCode, s.s. 344 and 349.
Where an agreement is entered into between the judgment-creditorand the judgment-debtor, which is intended to govern the liability of thelatter under the decree and to have effect on the time and mannerof its enforcement,—
Held (on an application for writ by the judgment-creditor), that theterms of the agreement should be considered by the executing Courtunder section 344 of the Civil Procedure Code, apart from the questionwhether it amounts .to an adjustment of the decree within the meaningof section 349 or not.
HIS was an action on a mortgage bond which was signed by the1st and 5th defendants as principals and the 6th defendant
as surety. Decree was entered and at the sale plaintiff’s son-in-lawbecame the purchaser. A balance was outstanding and the plaintiffand the 6th defendant reached an agreement, the terms of which wererecorded in. Court and which are fully set out in the judgment. Sub-sequently, a memorandum of agreement was signed outside Court by theplaintiff and the 6th defendant. Thereafter two applications were madeto Court (1) by plaintiff for writ and (2) by the 6th defendant to haveadjustment of decree recorded as certified. The former was allowedand the latter dismissed. 6th defendant appealed.
H. V. Perera, K.C. (with him S. J. V. Chelvanayagam and S. W.Jayasuriya), for 6th defendant, appellant.—The question here is whethera party who had made an agreement regarding a mortgage decree mayrecede from that agreement. An agreement relating to a decree isvalid unless it extinguishes the decree. The right to contract is nottaken away by a rule in the Civil Procedure Code. There may be acontract, not amounting to an “ adjustment”, which must be given effectto in execution proceedings under section 344 of the Civil ProcedureCode. The corresponding section in the Indian Code is section 47.The Privy Council,,in the Indian case reported in (1939) A.I.R. at p. 80,held that the terms of an agreement between a judgment-creditor and ajudgment-debtor must be considered by the execution Court under44/19
HEARNE J.—Silva and Wickremesinghe.
section 47 of the Indian Code. The local decision (Hunter v. Silva') wasgiven before the Privy Council judgment in the Indian case becameavailable. Even if the Judge was right in holding that there had beenno “adjustment” which could be recorded under section 349, he shouldhave considered, under section 344, whether the plaintiff’s right toexecution was affected by the agreement.
N. Nadarajah, K.C. (with him G. P. J. Kurukulasuriya and G. P. A.Silva), for plaintiff, respondent.—If the agreement when recorded is stillexecutory, there being no adequate -provision for default, then it is noteffective. In the Privy Council decision only a specific instance—viz.,the granting of further time for payment in consideration of a higherrate of interest—was considered. It is not every decree which could besuperseded—Ponnamperurna v. Wickremanayake ~;(1930) A. I. R.
(Madras) 410; (1925) A. I. R. (Madras) 206; varying the mode ofenforcement or the time of enforcement is not an “ adjustment of thedecree ”—Chettinad Corporation v. Raman Chettiar3; Caruppen Chettyv. Abeyratne A promise to pay alone without proof of satisfactionis also not sufficient—Muttiah Chetty v. Ibrahim Saibor;
H. V. Perera, K.C., replied.
,Cur. adv. vult.
February 12, 1943. Hearne J.—
The plaintiff filed an action on a bond “ which was signed by 1st to 5thdefendants as principals and the 6th defendant as surety ”. Decreewas entered and at the mortgage sale the plaintiff’s son-in-law becamethe purchaser. A large balance was still outstanding and the plaintiffand the 6th defendant reached an agreement, the terms of which wererecorded in Court—X 10 dated August 14, 1936—which reads asfollows: —
The plaintiff undertakes to obtain a retransfer of the two properties
sold under the mortgage decree in this case in favour of the6th defendant, the vendor not warranting and defending title.
The 6th defendant undertakes to mortgage the said two properties
together with all the buildings and his rights in the residingland free from the existing lease and other encumbrances, ifany, created by the 6th defendant.
The expenses involved in the said retransfer and mortgage are to
be borne by the 6th defendant.
The mortgage of the 3 lands aforesaid is to secure the Rs. 2,000
together with interest at the rate of 15 per cent, per annumon the said Rs. 2,000. Interest is to be paid half yearly and indefault of payment of any half yearly payment of interest,the mortgagee is at liberty to put the bond in suit, interest torun from the date of retransfer.
If the interest is paid regularly the mortgagee agrees not to put
the bond in suit for 18 months from this date.
On execution and registration of the-said mortgage in favour of the
plaintiff, the satisfaction of decree in this case is to be'entered.
(1939) ;11 N. L. R. no.3 (1937) 10 C. L. TV. 58.
(1942) 43 N. L. R. 97.4 (1929) 30 N. L. R. 444.
(1904) 3 Bal. Rep. 142.
HEAHNE J.—Silva and Wickremesinghe.
Subsequently, on June 15, 1937, a Memorandum of Agreement ” (A)was signed outside Court by the plaintiff and the 6th defendant.
In March, 1941, two applications were dealt with : (1) an applicationby the plaintiff for writ and (2) an application by the 6th defendant tohave “adjustment of the decree arrived at on August 14, 1936 (X 10),recorded as certified The former was allowed and the latter dismissed.The 6th defendant now appeals.
In his order the Judge held that X 10 had been superseded by A andthat this in itself was fatal to the 6th defendant’s application. He alsoheld, on the authority of two Indian cases, that an adjustment whichdoes not extinguish a decree in whole or in part does not come withinsection 349 of the Civil Procedure Code. Having eliminated X 10 or,alternatively, having found against the 6th defendant on the basis of X 10,he allowed the plaintiff’s application.
Independently of whether the terms of a bargain between a judgment-creditor and a judgment-debtor amounts to an adjustment, the termsof the bargain require to be considered by the executing Court ‘ undersection 47 of the Indian Code ”. This view rests upon the authorityof the Privy Council in a case to which I shall presently refer. Section 47corresponds with section 344 of our Code. Even, therefore, if theJudge was right in holding that there had been no adjustment whichcould be recorded under section 349 of the Civil Procedure Code, it wasstill necessary for him to consider under section 344 of the Civil ProcedureCode whether the plaintiff’s right to execution was controlled and if soto what extent and in what manner, by X 10 or by A, if A had super-seded X 10.
Counsel for the respondent (plaintiff) argued that if A was legallyeffective (it was not notarially executed) it merely ousted X 10 but did not,supersede it in the sense that it did not take its place, so that it did notfall for consideration itself. I am unable to follow this argument.Alternatively, he appeared to rest his client’s case on X 10 for be, thereafter,referred exclusively to the terms of that document and ignored those ofA. A., in point of fact, is more favourable to the appellant than X 10.It is, however, on X 10 that he relied and it is, in reference to it, that thisappeal is being decided.
Before dealing with its terms it will be convenient to refer to the casedecided by the Privy Council. It is reported in (1939) A. I. R. (P. C.)at page 80.
Line of the questions decided was that where in consideration of the. judgment-debtor agreeing to pay a higher rate of interest than was provi-ded for in the decree, the judgment-creditor gives the judgment-debtortime to pay the judgment debt, “ such a bargain has its effect upon theparties’ rights under the decree and the executing Court under section 47has jurisdiction to ascertain its legal effect and to order accordingly ”.It was expressly said that “ it may or may not be that any and everybargain which would interfere with the right of the decree holder to haveexecution according to the tenor of the decree comes under the termadjustment ”. For the purpose of deciding the case it was consideredunnecessary to pronounce on that. The underlying "principle on whichit was decided was that the Code contains “ no restriction of the parties’
HEARNE J,—Silva and Wickremesinghe.
liberty of contract with reference to their rights and obligations underthe decree, and if they do contract upon terms which have referenceto the execution, discharge or satisfaction of the decree, the provisionsof section 47 involve that questions relating to such terms may fall to bedetermined by the executing Court”. In another passage it was statedithat “ if an agreement is intended to govern the liability of -the debtorunder the decree and to have effect upon the time or manner of its enforce-ment, it is a matter ~to be dealt with under section 47”. And again‘ Their Lordships see nothing in. the Code requiring them to hold thathad the judgment-debtor paid the agreed instalments punctually (i.e.,with interest at the higher rate) the appellants could have executed thedecree for the whole sum outstanding, contrary to the terms of thecompromise ”.
It .may well bs argued that, ais X 10 remained executory, nothing hadbeen done either by the plaintiff or 6th defendant—it was not an agree-ment which extinguished the decree but, on the contrary, was only onewhich would have extinguished the decree if carried into effect. That,however, does not mean that the plaintiff’s application automaticallysucceeded. As I have said it remained to be considered under section 344and in the light of the terms of X 10.
In my opinion, X 10 was intended to govern the liability of the6th defendant under the decree and to have effect upon the time and mannerof its enforcement. As to the manner of enforcement it was intendedthat, upon the transfer to the 6th defendant of the two properties pur-chased by the plaintiff’s son-in-law, the 6th defendant was to mortgageto the plaintiff these properties and his rights in his own residing land “ freefrom the existing lease, &c. ”, for Rs. -2,000, on which interest at 15 percent, per annum was payable. He was to register the mortgage and withthe Rs. 2,000 obtained he was to discharge the balance of the debt under- the decree. As to the time of payment it was intended, as I construe X 10,that the 6th defendant was to effect the mortgage referred to and pay theRs. 2,000 concurrently with the “ transfer ” to him by the plaintiff’s som' in-law “ of the two mortgaged premises”. I do not think it was intendedthat he was free to choose his own time after “ the transfer ”.
It was argued by Counsel for the respondent that X 10 provided for‘‘ the. satisfaction of the decree to be- entered ” on the execution andregistration of the mortgage in favour of the plaintiff. It did not providefor the eventuality of non-execution and non-registration. As neitherhad takeh place when the plaintiff’s application for writ was before theCourt, it must necessarily be allowed.
This argument implies, and on it being put. to Counsel for the respondent(plaintiff) he admitted it did imply, that even if the plaintiff was indefault in regard to what he undertook to do, even if his position wasthat he had changed his mind, he was entitled to proceed to execution.
To this I cannot accede. It would mean that the Court would besetting the seal of approval on unconscionable conduct, it would be allow-ing the plaintiff to break faith merely because it suited his purpose orfor no reason at all.
The Judge has notpronounced on 'the facts, and I would, in thesecircumstances, make the following order. If, on a review of the evidence
The King v. Sunderam.
or of any further evidence he may desire to take in consequence of theview regarding the law which I have stated, he is of the opinion that thedeadlock in carrying through the terms of X 10 was due to the plaintiff'sdefault, he should hold that he was not, on the application before theCourt, entitled to writ. If, however, he is of the opinion that, althoughthe plaintiff had not done what he had undertaken to do, he was legallyjustified, by reason of what the 6th defendant had done or had not done,or otherwise in repudiating X 10, then he should allow the application.
The appeal is allowed and the costs of appeal will abide the result.All costs in the lower Court, prior and subsequent to this order, will bein the discretion of the Judge.
Keuneman J.—I agree.