{"id":295285,"date":"2023-06-23T15:00:00","date_gmt":"2023-06-23T09:30:00","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=295285"},"modified":"2023-06-23T14:48:28","modified_gmt":"2023-06-23T09:18:28","slug":"rented-shop-belonging-to-third-party-cannot-be-accepted-as-security-sc-legal-news","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2023\/06\/23\/rented-shop-belonging-to-third-party-cannot-be-accepted-as-security-sc-legal-news\/","title":{"rendered":"Rented Shop belonging to Third Party cannot be accepted as Security by surety: Supreme Court"},"content":{"rendered":"
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Supreme Court:<\/b> In a civil appeal filed against the Judgment of the Allahabad High Court, wherein the writ petition of the appellants was dismissed, and the High Court found that no application for dispensing with surety was filed, the Division Bench of K.M. Joseph<\/b>* and Hrishikesh Roy JJ., dismissed the appeals and said that the security furnished by the appellants in the form of the rented shop belonging to a third party cannot be accepted as security in law.<\/p>\n

Background<\/b><\/p>\n

In the matter at hand, an ex-parte decree for ejectment and recovery of arrears of rent, taxes, and damages, etc., was obtained against the appellants by the respondents on 18-10-2012. The appellants filed an application under Order IX Rule 13 read with Section 151<\/a> of the Code of Civil Procedure, 1908<\/a> (‘CPC’) on 06-05-2014 claiming knowledge of the Decree on execution proceeding on 05-04-2014. An application was also filed under Section 17<\/a> of the Provincial Small Cause Courts Act, 1887<\/a> (‘the ‘Act’). Subsequently, another application was filed on 12-05-2014, with a prayer that the security in the form of a rental shop owned by the Nagar Nigam may be taken on record. The said application was allowed, however, the Trial Court dismissed the application filed under Section 17<\/a> of the Act<\/a>. The High Court while hearing a revision petition of the said Order of the Trial Court, opined that that once the surety has been accepted by the Court below, the matter may be directed to be decided expeditiously. The Trial Court thus, on basis of the High Court’s Order found that the appellant had complied with Section 17(1)<\/a> of the Act<\/a> in relation to depositing the decretal amount and that the surety submitted by the appellants was also sufficient.<\/p>\n

Subsequently, the said Order was challenged before the Additional District Judge, Kanpur, (‘ADJ’) wherein it was set aside. Thereafter, the Trial Court rejected the application filed under Section 17<\/a> of the Act<\/a> and the surety provided by the appellants was also rejected. The ADJ had confirmed the said Order. The appellants aggrieved by the Order of the ADJ, challenged it before the High Court along with the eviction Order of the appellants based on the ex-parte decree. The High Court by the impugned Order dismissed the said writ petition and found that no application for dispensing with surety was filed and the requirement of Section 17 is mandatory and filing of application without furnishing surety and making no prayer for dispensing would be read against the appellants.<\/p>\n

Analysis, Law and Decision<\/b><\/p>\n

The Court said that when a Decree is passed by a Court of Small Causes, ex-parte under the proviso to Section 17<\/a> of the Act<\/a>, the applicant, who files an Application to set aside the ex-parte Decree is bound to do the following:<\/p>\n

i. The amount due under the Decree must be deposited in the Court,<\/p>\n

ii. In the alternative, he should give security for the performance of the Decree ‘on a previous Application’ made by him in this behalf;<\/p>\n

Referring to Kedarnath<\/i> v. Mohan Lal Kesarwari<\/i>, (2002) 2 SCC 16<\/a>, the Court said that the words ‘on a previous application’ in proviso to Section 17, are understood to be an application, which may be made along with the application under Order IX Rule 13<\/a> of the CPC<\/a>. The Court noted that the appellants had filed an application under Order IX Rule 13<\/a> of the CPC<\/a> and Section 17<\/a> of the Act<\/a> and said that if the Application under Section 17 was accompanied with a cash deposit, then, the Application under Order IX Rule 13 would have indeed been maintainable. The Court also said that the appellants did not comply with the mandatory requirement of Section 17. The Court observed that Section 17<\/a> of the Act<\/a> contemplates in the proviso, that the applicant seeking to set aside an ex-parte decree, must either make a deposit of the amount in question or give security. Further the Court said that it was laid down in Kedarnath (supra) that the provision as to deposit can be dispensed with by the Court. The applicant can seek a dispensing with of the deposit and seek leave for furnishing such security as the Court may direct.<\/p>\n

Therefore, the Court said that the High Court was not correct in proceeding on the basis that appellants did not make any application for dispensing with surety. The Court also said that no doubt, the High Court, at one place had stated that there was no prayer for dispensing with the surety or the amount sought to be deposited by way of security. The prayer of the appellants was to permit deposit\/furnishing surety of Rs. 50000\/- which was part of the decretal amount. This could be treated impliedly as seeking a direction within the meaning of Section 17. An applicant could no doubt also propose the security which he wishes to give. The Court stated that in fact, ordinarily, an application for dispensing with the cash deposit and for direction to furnish security should be made prior to application under Order IX Rule 13<\/a> of the CPC<\/a>.<\/p>\n

The Court further said that when the appellants sought for permission to furnish security, if the permission was granted and a direction to furnish security was given on the same date and it had been complied with within the time, then the appellants would have been compliant with Section 17, however, no orders were passed on the application under Section 17 dated 06-05-2014, within 6 days, on 12-05-2014, the appellants had on their own purported to furnish the security. The Court noted that the Security was a ‘shop’, which was not owned by the surety, but the Municipal Corporation, Lucknow was the owner. The surety was a tenant. The Court said that a security provided under Section 17 by a surety is to be enforced under the provisions of Section 145<\/a> of the CPC<\/a> as contemplated in Section 17(2)<\/a> of the Act<\/a>. Section 145<\/a> of the CPC<\/a> provides that the security provided by a surety can be enforced by effecting sale of the property. The Court noted that it was held that the security provided by the appellants through the surety was not acceptable in law having regard to Section 17(2), as the shop belonged to the Municipal Corporation, Lucknow and it could not be sold for enforcing the surety. The Court said that it was in agreement with the view of the Courts below that the security furnished by the appellants in the form of the rented shop belonging to a third party cannot be accepted as security in law.<\/p>\n

Therefore, the Court dismissed the appeal as it found no merits in the appeal.<\/p>\n

[Arti Dixit v. Sushil Kumar Mishra, 2023 SCC OnLine SC 649<\/a>, Decided on 18-05-2023<\/span>]<\/p>\n

*Judgment Authored by: Justice K.M. Joseph<\/span><\/strong><\/p>\n

Know Thy Judge| Justice K.M. Joseph<\/a><\/p><\/blockquote>\n