ADVOCATEMMMOHAN: Indian Contract Act, 1872 — Ss. 43, 44 & 128 — Joi...

ADVOCATEMMMOHAN: Indian Contract Act, 1872 — Ss. 43, 44 & 128 — Joi...: advocatemmmohan Indian Contract Act, 1872 — Ss. 43, 44 & 128 — Joint promisors and sureties — Distinction — Applicability of S.44 Sectio...

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Indian Contract Act, 1872 — Ss. 43, 44 & 128 — Joint promisors and sureties — Distinction — Applicability of S.44

Sections 43 and 44 of the Indian Contract Act, 1872, operate only in relation to joint promises falling under Chapter IV of the Act. The principle that release of one joint promisor does not discharge the others is confined to contracts where all promisors stand on equal footing with respect to performance of the promise. The said principle cannot be extended to contracts of guarantee governed by Chapter VIII of the Act. A surety does not stand in the position of a joint promisor; his liability is secondary and dependent upon the subsistence of the liability of the principal debtor. Application of Sections 43 and 44 to sureties, without maintaining this statutory distinction, is legally impermissible.
(Paras 26–27, 33–37, 41–44)

Guarantee — Co-extensive liability — Limits

Though Section 128 declares that the liability of the surety is co-extensive with that of the principal debtor, such co-extensiveness operates subject to the provisions governing discharge of surety. Where the principal debtor is discharged by acts or omissions of the creditor, or where the creditor enters into arrangements amounting to composition, giving time, or agreeing not to sue, the surety stands discharged under Section 135.
(Paras 33–37, 41–44)

Execution — Sureties — Selective execution — Limits

While a creditor may choose to proceed against the surety or the principal debtor, such choice does not obliterate the statutory protections available to the surety. Presence of the principal debtor in execution proceedings becomes necessary to examine whether circumstances attracting discharge under Chapter VIII have arisen. In the absence of a contract to the contrary, co-sureties are governed by Sections 146 and 147 and cannot be fastened with the entire liability selectively.
(Paras 41–44)

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CASE DETAILS

M. Venkataramanaiah v. M/s. Margadarsi Chit Fund Limited and Others
Civil Revision Petition No. 5357 of 2007
Decision dated: 15-11-2008
Court: High Court of Telangana 

pasted

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ANALYSIS OF FACTS

1. The 2nd respondent was a prized subscriber in a chit conducted by the 1st respondent. The petitioner and respondents 3 to 7 stood as sureties for payment of instalments.

2. On default by the principal debtor, the 1st respondent obtained a money decree against all defendants.

3. In execution, the decree-holder selectively proceeded against only three judgment-debtors (all sureties), including the petitioner, seeking arrest under Order XXI Rule 37 C.P.C., without effectively proceeding against the principal debtor or other sureties.

4. The executing Court ordered arrest of the petitioner alone, holding that he possessed sufficient means.

5. The petitioner challenged the order contending that:

   • Sureties are not joint promisors;

   • Liability cannot be imposed selectively and wholly on one surety;

   • Acts of the creditor subsequent to the decree had the effect of discharging the sureties.

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STATUTORY FRAMEWORK CONSIDERED

• Chapter IV — Performance of Contracts (Ss. 37–45): Joint promisors (Ss. 43 & 44)

• Chapter VIII — Indemnity and Guarantee (Ss. 126–147): Suretyship

• Section 128 — Co-extensive liability of surety

• Sections 133–135 — Discharge of surety

• Sections 146–147 — Contribution among co-sureties

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RATIO DECIDENDI

1. Joint Promisors v. Sureties — Foundational Distinction (Paras 26–27, 33–37)

The Court held that:

• Joint promisors are bound equally and primarily to perform the contract.

• Suretyship is fundamentally different: the principal debtor bears the primary obligation, and the surety’s obligation is secondary and conditional.

Therefore:

• Sections 43 and 44, which govern joint promisors, cannot be bodily lifted and applied to contracts of guarantee.

2. Inapplicability of Section 44 to Sureties (Paras 33–37, 41–44)

• Section 44 states that release of one joint promisor does not discharge others.

• In contrast, under Chapter VIII:

  • Discharge of the principal debtor, or arrangements such as composition or giving time, automatically discharge the surety.

• The Court held that applying Section 44 to sureties destroys the statutory safeguards expressly enacted for them.

3. Effect of Creditor’s Conduct Post-Decree (Paras 41–44)

• The decree-holder accepted instalments from the principal debtor after decree and collected compound interest.

• Such conduct amounted to an arrangement giving time or composition, attracting Section 135, thereby discharging the sureties.

• Failure to effectively proceed against the principal debtor, particularly when insolvency was pleaded, attracted adverse consequences against the creditor.

4. Co-sureties — No Selective Burden (Paras 41–44)

• Even assuming execution was otherwise permissible, Sections 146 and 147 mandate equal contribution among co-sureties.

• There was no legal basis to saddle the entire decretal liability on the petitioner alone.

5. Procedural Illegality in Execution

• The executing Court failed to follow mandatory safeguards under Order XXI C.P.C. before directing arrest.

• On this ground also, the order was unsustainable.

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FINAL HOLDING

• The Civil Revision Petition was allowed.

• The order directing arrest of the petitioner was set aside.

• No order as to costs.

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DOCTRINAL SIGNIFICANCE

This decision qualifies and limits the broad observations made in earlier cases such as M.G. Brothers Finance Ltd. v. J. Badarinath by restoring the statutory boundary between joint promises (Chapter IV) and guarantees (Chapter VIII). It authoritatively holds that Sections 43 and 44 cannot be applied to sureties, and that selective execution against a surety must always be tested against the discharge provisions and contribution principles embedded in the law of guarantee.

Comparative Table

Aspect	Andhra Pradesh High Court – M.G. Brothers Finance Ltd. v. J. Badarinath (21-08-2006)	High Court of Telangana – M. Venkataramanaiah v. Margadarsi Chit Fund Ltd. (15-11-2008)
Nature of Liability Considered	Treated liability as joint liability of judgment-debtors, including guarantor	Treated liability as suretyship under a contract of guarantee
Primary Statutory Provisions Applied	Sections 43 and 44, Indian Contract Act, 1872	Sections 126–128, 133–137, 146–147, Indian Contract Act, 1872
Conceptual Framework	Joint promisors under Chapter IV (Performance of Contracts)	Principal debtor–surety relationship under Chapter VIII (Guarantee)
Status of Surety	Considered on par with other judgment-debtors for execution purposes	Held distinct from joint promisor; liability is secondary
Applicability of Section 44	Applied — release or non-proceeding against one does not discharge others	Held inapplicable to sureties; confined to joint promises
View on Section 128 (Co-extensive liability)	Used to justify unrestricted execution against guarantor	Applied subject to discharge provisions (Sections 133–135)
Decree-holder’s Right in Execution	Decree-holder has absolute discretion to proceed against any judgment-debtor for entire amount	Creditor’s choice is qualified by statutory protections available to surety
Selective Execution	Permitted; Court cannot dictate sequence or proportion of recovery	Selective fastening of entire liability on one surety impermissible
Role of Principal Debtor in Execution	Not mandatory to proceed first or simultaneously	Presence necessary to examine subsistence of liability and discharge events
Effect of Creditor’s Conduct (post-decree)	Not treated as affecting execution rights	Acceptance of instalments / giving time attracts Section 135 → discharge of surety
Right of Judgment-Debtor / Surety	Only right is contribution from co-judgment-debtors or recovery from principal	Right to discharge + contribution limited by Sections 146–147
Approach to Earlier Case Law	Relied on Indexport Registered to expand execution discretion	Distinguished Indexport; confined its application to mortgage / non-surety context
Final Outcome	Execution against selected judgment-debtor upheld	Execution against single surety set aside
Doctrinal Emphasis	Creditor-centric execution autonomy	Statutory balance between creditor rights and surety protection

ADVOCATEMMMOHAN: Negotiable Instruments Act, 1881 — Ss. 138 & 141 —...

ADVOCATEMMMOHAN: Negotiable Instruments Act, 1881 — Ss. 138 & 141 —...: advocatemmmohan Negotiable Instruments Act, 1881 — Ss. 138 & 141 — Partnership Firm — Dishonour of cheque — Liability of partners Partne...

Negotiable Instruments Act, 1881 — Ss. 138 & 141 — Partnership Firm — Dishonour of cheque — Liability of partners

1. Partnership firm — Not a separate juristic entity — Firm only a compendious name for partners
   Partnership firm has no independent legal personality distinct from its partners; partners collectively constitute the firm and are personally liable for acts of the firm.
   (Paras 7.5–7.6, 7.9–7.11)

2. Section 141 — Inclusion of firm within “company” — Purpose and scope
   Inclusion of firm within the definition of “company” under Explanation (a) to Section 141 is a legal fiction adopted for convenience; such fiction does not equate a partnership firm with a body corporate having separate juristic existence.
   (Paras 9.5–9.7)

3. Liability of partners — Joint and several — Not vicarious
   Liability of partners for dishonour of cheque issued in the name of a partnership firm is joint and several, arising from partnership law; concept of vicarious liability applies to companies and not to partnership firms.
   (Paras 6.9, 9.7–9.9)

4. Non-arraignment of partnership firm — Effect on maintainability
   Where partners of a firm are impleaded as accused, non-arraignment of the partnership firm does not render the complaint under Section 138 non-maintainable.
   (Paras 6.9–6.10, 9.9–9.10)

5. Statutory notice — Notice to partners — Whether notice to firm
   Notice issued to partners of a partnership firm can be construed as notice to the firm itself, as the firm acts only through its partners.
   (Paras 6.10, 10)

6. Aneeta Hada principle — Applicability limited to companies
   Requirement of arraigning the company as an accused for fastening vicarious liability on directors does not apply with the same rigour to partnership firms.
   (Paras 6.2, 6.9)

7. Curable defect — Permission to implead firm
   Even if partnership firm was not originally arraigned, court may permit its impleadment; defect not incurable where partners are already before the court.
   (Paras 6.9–6.10, 10)

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ANALYSIS OF FACTS

The appellant advanced a loan of ₹21,00,000 to the respondents, who were partners of the partnership firm Mouriya Coirs (Paras 2.1–2.2).

A cheque issued in the name of the partnership firm and signed by one partner was dishonoured on presentation (Para 2.2).

Statutory notice under Section 138 was issued to both partners, but not to the firm, and the complaint impleaded only the partners (Para 2.4).

The High Court quashed the complaint holding that failure to issue notice to the firm and to arraign the firm as an accused was fatal, relying upon Section 141 of the Act (Para 2.5).

The complainant challenged the said view before the Supreme Court.

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ANALYSIS OF LAW

1. Legal Nature of a Partnership Firm

The Court reiterated settled jurisprudence that a partnership firm is not a legal person and has no existence independent of its partners; the firm name is merely a collective description of partners carrying on business (Paras 7.5–7.6).

2. Liability of Partners under Partnership Act

Under Sections 25 and 26 of the Partnership Act, partners are jointly and severally liable for acts of the firm done in the course of business (Paras 7.19–7.23).
Such liability is direct and personal, not derivative.

3. Interpretation of Section 141 NI Act

Section 141 employs a deeming fiction by including a firm within the expression “company” (Paras 9.5–9.6).
However, the Court clarified that this fiction cannot obliterate the fundamental distinction between a company and a partnership firm (Paras 9.7–9.9).

4. Distinction from Company-based Vicarious Liability

In a company, liability of directors is vicarious and contingent upon the company being arraigned as an accused (Aneeta Hada).
In contrast, in a partnership firm, partners themselves constitute the firm, and liability is joint and several, not vicarious (Paras 6.9, 9.8–9.9).

5. Effect of Notice and Arraignment

Since the firm acts only through partners, notice issued to partners is sufficient compliance with Section 138 (Paras 6.10, 10).
Non-arraignment of the firm is, at best, a curable procedural defect and cannot justify quashing of proceedings (Paras 6.9–6.10).

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RATIO DECIDENDI

In prosecutions under Section 138 of the Negotiable Instruments Act involving a partnership firm, the liability of partners is joint and several, flowing directly from partnership law; consequently, issuance of statutory notice to partners and prosecution of partners alone is sufficient, and non-arraignment of the partnership firm as an accused does not render the complaint non-maintainable.

ADVOCATEMMMOHAN: Mere registration of documents such as agreement t...

ADVOCATEMMMOHAN: Mere registration of documents such as agreement t...: advocatemmmohan Transfer of Property Act, 1882 — Sections 54 & 53-A — Registered documents — Possession — Title (Paras 14–19, 29–31) Me...

Mere registration of documents such as agreement to sell, General Power of Attorney or even a Will does not confer title to immovable property in the absence of a registered deed of conveyance and delivery or proof of possession; where the claimant is not in possession, registration alone neither transfers ownership nor attracts protection under Section 53-A of the Transfer of Property Act.

advocatemmmohan

Transfer of Property Act, 1882 — Sections 54 & 53-A — Registered documents — Possession — Title

(Paras 14–19, 29–31)
Mere registration of documents such as agreement to sell, General Power of Attorney, affidavit or receipt does not convey title to immovable property. Transfer of ownership can be effected only through a registered deed of conveyance. In the absence of possession, no right, title or interest accrues, nor can protection under Section 53-A of the Transfer of Property Act be claimed.

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Registration — Effect — Whether cures absence of conveyance or possession

(Paras 18–19, 27–31)
Registration by itself does not validate a transaction nor operate as a transfer of ownership when statutory requirements of conveyance and possession are not satisfied. Registration cannot substitute delivery of possession or execution of a sale deed as required under law.

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Will — Registration — Title — Possession

(Paras 23–27)
A registered Will does not operate as a transfer inter vivos and does not confer title merely by registration. Proof in accordance with Section 63 of the Indian Succession Act and Section 68 of the Evidence Act is mandatory, and registration alone does not create ownership or possession.

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Part Performance — Section 53-A — Possession — Mandatory condition

(Paras 29–31)
Protection under Section 53-A is conditional upon the transferee being in possession in part performance of the contract. Where possession is absent, the doctrine of part performance is unavailable, irrespective of registration of the underlying document.

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Suit for possession — Effect

(Para 31)
Filing of a suit for possession itself establishes absence of possession and disentitles the claimant from invoking Section 53-A or asserting title based on registered but incomplete instruments.

ANALYSIS OF LAW AND FACTS

A. Undisputed Facts

1. The suit schedule property admittedly belonged to the father of the plaintiff and defendant No.1.

2. No registered sale deed was executed by the father in favour of the plaintiff during his lifetime.

3. The plaintiff relied upon a set of documents dated 16-05-1996, namely, Agreement to Sell, General Power of Attorney, affidavit, receipt of consideration and a registered Will.

4. On the date of suit, the plaintiff was not in possession of the suit property and had, in fact, sought recovery of possession by filing the suit.

(Paras 11, 17, 29, 31)

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B. Legal Position on Registration and Title

5. Section 54 of the Transfer of Property Act mandates that transfer of ownership in immovable property of value exceeding Rs.100/- can be effected only by a registered instrument of conveyance.

6. An agreement to sell, even if registered, does not create any right, title or interest in the property and merely gives a right to seek specific performance.

7. A General Power of Attorney is an instrument of agency and does not operate as a conveyance or transfer of ownership, irrespective of its registration or recitals.

(Paras 14–19, 18–22)

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C. Registration and Possession — Interplay

8. Registration of documents does not dispense with statutory requirements of conveyance and possession.

9. For invoking protection under Section 53-A of the Transfer of Property Act, possession in part performance is a sine qua non.

10. Absence of possession disentitles the claimant from claiming any equitable protection, notwithstanding registration of the underlying documents.

(Paras 29–31)

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D. Application to the Facts of the Case

11. The plaintiff’s own act of filing a suit for possession conclusively established that he was not in possession of the suit property.

12. Since possession was absent, the plaintiff could neither claim ownership nor invoke Section 53-A of the Transfer of Property Act.

13. Mere registration of documents, including a Will, did not cure the absence of a registered conveyance or possession.

(Paras 17, 27, 29–31)

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E. Consequence

14. In the absence of a valid conveyance and possession, the documents relied upon by the plaintiff did not confer title.

15. Upon failure of proof of the Will, succession opened in accordance with law in favour of Class-I legal heirs.

(Paras 27, 32)

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RATIO DECIDENDI

Mere registration of documents such as agreement to sell, General Power of Attorney or even a Will does not confer title to immovable property in the absence of a registered deed of conveyance and delivery or proof of possession; where the claimant is not in possession, registration alone neither transfers ownership nor attracts protection under Section 53-A of the Transfer of Property Act.

(Paras 14–19, 27, 29–31)

Wishing you all a Happy and Prosperous New Year 2026

Court Fees — Partition Suit — Joint Possession — Exclusion — Pleadings — Determination based solely on plaint averments — Tamil Nadu Court Fees and Suits Valuation Act, 1955, S.37(1), S.37(2). Held: Court fee payable in a suit must be determined solely with reference to the averments in the plaint as a whole, and not on the basis of the written statement or the eventual findings on merits. (Paras 10–11, 26)

Court Fees — Partition Suit — Joint Possession — Exclusion — Pleadings — Determination based solely on plaint averments — Tamil Nadu Court Fees and Suits Valuation Act, 1955, S.37(1), S.37(2).

Held:

1. Court fee payable in a suit must be determined solely with reference to the averments in the plaint as a whole, and not on the basis of the written statement or the eventual findings on merits.
   (Paras 10–11, 26)

2. In a partition suit, mere averment that the plaintiff was not paid income or could not ‘remain in joint possession’ does not amount to a clear plea of exclusion from possession.
   (Paras 12–14, 27–28)

3. Where the plaint consistently asserts joint possession, valuation under S.37(2) of the Tamil Nadu Court Fees and Suits Valuation Act is proper; S.37(1) applies only where there is a clear and specific averment of exclusion.
   (Paras 15–18, 29–31)

4. In law, possession of one co-owner is possession of all, unless ouster or exclusion is specifically pleaded and established; actual physical possession or receipt of income is not determinative.
   (Paras 30–32)

5. Daughters succeeding to coparcenary interest under proviso to S.6 of the Hindu Succession Act, 1956, are entitled to claim partition while being deemed in joint possession in the absence of exclusion.
   (Paras 33–34)

Appeal allowed. Direction to pay court fee under S.37(1) set aside; valuation under S.37(2) restored. 

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ANALYSIS OF LAW

A. Governing Principle for Court Fee Determination

The Supreme Court reiterates the settled rule that court fee must be assessed strictly on plaint allegations, read as a whole, and cannot be influenced by:

• the defence version, or

• findings after trial.

This principle, reaffirmed from S. Rm. Ar. S. Sathappa Chettiar, is applied decisively (Paras 10–11, 26).

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B. Scope and Interpretation of Section 37

• S.37(1) applies only when the plaintiff pleads exclusion from possession.

• S.37(2) governs cases where the plaintiff asserts joint possession, even if not in actual enjoyment.

The Court draws a sharp distinction between:

• non-receipt of income / non-enjoyment, and

• legal exclusion or ouster.

Absence of income ≠ exclusion (Paras 27–31).

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C. Meaning of “Joint Possession” in Law

The Court emphasizes classical co-ownership doctrine:

• Physical possession is unnecessary.

• Receipt of income is unnecessary.

• Legal entitlement and absence of ouster are sufficient.

Unless a clear and specific averment of exclusion appears in the plaint, the presumption of joint possession continues (Paras 30–32).

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D. Error of the High Court

The High Court erred by:

• Isolating one sentence (“could not remain in joint possession”) from Para 12,

• Treating it as an admission of dispossession,

• Ignoring repeated assertions of joint possession in other paragraphs.

The Supreme Court holds that paragraphs must be read harmoniously, not selectively (Paras 12–18).

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ANALYSIS OF FACTS

1. The plaint consistently pleaded:

   • Joint family property,

   • Succession as daughters,

   • Joint possession,

   • Demand for partition to convert joint possession into separate possession.

2. The statement that plaintiffs were not paid income was held to be at best a grievance of management, not exclusion.

3. Even the written statement acknowledged that the suit was framed on joint possession, disputing it only by way of defence — reinforcing that no admission of exclusion existed in the plaint itself.

4. The Trial Court’s reliance on evidence of non-enjoyment was legally irrelevant for court-fee determination.

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LEGAL POSITION EMERGING

• Partition suits must be valued under S.37(2) unless exclusion is expressly pleaded.

• Courts must resist post-trial reasoning to re-characterize plaint averments for court-fee purposes.

• Non-receipt of income or non-occupation does not equal dispossession.