Gajendragadkar, J. - (1.) That takes us to Civil Appeal No. 345 of 1959 in which the appellant wants liberty to proceed against the surety, respondents Nos. 2 and 3. This claim has been rejected by both the High Court. But the decision of the High Court proceeds on the basis that the appellant was himself a defaulter and so, he could not be permitted to enforce his remedy against the sureties. Since on the question of default, we have come to a contrary conclusion, it becomes necessary to examine whether the appellant is entitled to seek his remedy against the surety.
(2.) In determining this question, it is necessary first to enquire into the nature and extent of the liability undertaken by respondents Nos. 2 and 3 in executing the surety bond. The surety bond was executed on the 29th Sept. 1935. Clause 5 of the surety bond which is relevant provides that the sureties covenant that if the order of the High Court in C.M.A. No. 362/1929 be reversed or varied by the Privy Council and as a result of the said variation or reversal respondent No. 1 becomes liable to pay by way of restitution any amount to the said appellant in the Privy Council, the sureties would pay whatever sum may become payable by the said respondent and that if they failed therein, then any sum payable shall be realised in the manner specified in the said clause. This bond was executed in the favour of the court.
(3.) The appellant contends that as a result of the decision of the Privy Council, the matter was remitted to the trial Court for ascertaining the amount due to the appellant and it was during the pendency of the appeals which were pending in the Madras High Court against the decision of the trial Court on the applications made by the respective parties in the remanded proceedings that the compromise decree was passed between the appellant and respondent No. 1 and so whatever is claimable by the appellant by virtue of the said compromise decree must attract the operative portion of clause 5 of the surety bond. On the other hand, Mr. Sastri for the surety agrees that the surety bond must be strictly construed and it is only if the amount claimed by appellant from respondent No. 1 can be said to be the result of the reversal or variation by the Privy Council of the orders under appeal before it that the surety bond can be proceeded against. Mr. Sastri urges that when disputes were pending between the appellant and respondent No. 1 before the Madras High court, the parties compromised the disputes and the compromise decree which followed acts as a discharge of the liability of the sureties. In support of this argument, reliance is placed on the equitable principles underlying Section 135 of the Indian Contract Act. Mr. Kuppuswamy contests this position and urges that s. 135 is inapplicable to a surety bond executed in favour of a court and he argues that appellants remedy against the surety is not affected by the fact that the dispute between the appellant and respondent No. 1 was amicably settled and terminated in a compromise decree.;