Note On Joint and Several Liability In India

Joint and Several Liability

Joint liability, several liability and joint and several liability are concepts that are all used by courts in cases where there are more than two parties to a contract. These concepts essentially establish who is responsible for what act or omission, or as in case of joint liability all promisors, will be held liable together.

If parties have joint liability, then they are each liable up to the full amount of the relevant obligation. If one party dies, disappears or is declared bankrupt, the other remains fully liable

The converse is several liability, and it arises when two or more persons make separate promises to another, under a single or different instrument.

Joint and several liability is “liability that may be apportioned either among two or more parties or to only a few select members of the group at the adversaries discretion. Thus each liable party is individually responsible for the entire obligation, but a paying party may have a right of contribution and indemnity from non paying parties.[1]”In this two or more persons in the same instrument, promise jointly to do the same thing, and also make separate promises to do the same thing. It gives rise to one joint obligation and as many several obligations, as there are joint and several promisors. As in joint liability the performance by one discharges all.

Briefly looking into section 42 of the Indian contract Act, 1872, that states,

‘When two or more persons have made a joint promise, then unless a contrary intention appears by the contract , all such persons during their joint lives, and , after the death of any of them, his representative jointly with the survivor or survivors, and after death of the last survivor, the representatives of all jointly must fulfill the promise.’

Section 42 of the Indian Contract Act, 1872, as the next Section, makes the liability of joint promisors, joint and several. All promisors in this case are bound to perform the promise and in case of death of any promisor, the promise must be performed by the surviving promisors along with the legal representatives of the deceased promisor.

Section 43 of the Indian Contract act, 1872, states that:

“Anyone of joint promisors may be compelled to perform – when two or more persons make a joint promise, the promise may, in the absence of express agreement to the contrary, compel any such of such joint promisors to perform the whole promise.

Each promise may compel contribution – Each of two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract.

Sharing of loss by default in contribution – If any one of the two or more joint promisors makes default in such contribution, the remaining joint promisors must bear the loss arising from such default in equal shares.”

Section 43 entitles the promisee to claim performance from anyone, or, more of the promisors. It also provides for a right of one or more promisors to compel contribution from the others, and the sharing of loss in the event of default in contribution. These provisions though can be altered by providing the contrary in the contract.

The above section makes all joint contracts joint and several. Where Debts are jointly incurred, each promisor is liable for the whole amount.[2] A joint contract unenforceable against one of the joint promisors on the ground of lack of signature or his not having agreed at all, can be enforced only against the one who signed it.[3] It has also been held that neither the minority[4] nor insolvency[5] of one of the joint promisor affects the liability of the others.

If one of the joint promisors dies pending suit, the suit can be instituted against the other defendant promisors without bringing his legal representatives on record.[6]

A slightly different view was taken in Kedar Nath Vs. L Manak Chand[7],

In this case the plaintiff, who was an advocate, brought a suit for the recovery of the sum 1,700/- against Ganesh Dass and Sanwal Dass proprieters. The amount claimed was in respect of professional fees which remained unpaid by the defendants who had engaged the plaintiff as their counsel in the year 1941. The present suit was instituted in 1949-1950. Ganesh Dass died in 1952. An application to bring his legal representatives on record was made after the period of limitation. Sanwal Dass also died during the pendency of the suit. The question before the court was whether only Sanwal Dass or his legal representatives could be held liable without bringing Ganesh Dass to the suit. The court referring to section 43 and section 44 of the Indian contract, 1872 act held that Ganesh Dass and Sanwall Dass were jointly and severally liable. The plaintiff demanded only half the fee against the legal representatives of Sanwal Dass.

Denying the appeal the court held that, the appellant can not prosecute an appeal only against Sanwal Dass having renounced his claim against Ganesh Dass. Thus the principle applied in this case was that when a suit against a number of joint promisors has been dismissed, the plaintiff cannot prosecute an appeal against only some of them, renouncing his claim against the rest.

The Code of Civil Procedure 1908, O I, r 6, provides:

‘The plaintiff may, at his option, join as parties to the same suit all or any of the persons severally, or jointly and severally, liable on anyone contract, including parties to bills of exchange , hundis and promissory notes.’

This when read along with section 43 of the Indian Contract Act, 1872, makes the affect of joint liability arising out of a contract, the same as where the liability is joint and several. Under this section the lender may sue all or any of the joint promisors as he may choose.[8]

This section allows the promisee to sue such one or several joint promisors as he chooses, and excludes the right of a joint promisor to be sued only along with his co-promisors.[9] If a party is being sued severally, separate from his co-contractors, he may apply to the court, for his co-contractor to be joined in the suit, not because such co-contractor ought to be party to the suit, but if the court considers it necessary to do so.

Cases on promissory notes

In the case of Joint Family of Mukundas Raja Bhagwandas & Sons Vs. State Bank Of Hyderabad,[10]

A bank filed a suit on a promissory note against the defendants where the liability was joint and several. The High Court on equitable grounds directed that the decree must first be realized from one defendant and for the balance, if any the execution was to be taken against the other defendant. The Supreme Court held that such a decree requiring one of the joint promisee’s to pay in the first instance in the first instance and then to proceed against the others, was bad in law, there being no such equitable principle or statutory provision and it converted the decree to a joint and several one against all the defendants.

There is considerable difference of opinion among about the effect of a decree against only some of the joint promisors, where a judgement has been obtained against one or only some of the joint promisors. The Calcutta High Court Held that a decree obtained against one of the several joint makers of a promissory note is a bar to subsequent action against the others.[11]

In the case of T Radhakrishna Chettiar Vs. K.V. Muthukrishnam Chettiar[12],

A case based on equitable mortgage, the appellant filed a suit as the respondent did not pay his share of mortgage on land that they had taken for their company for which they were running jointly. The name of the company was ‘Central Brokers’. Appellant had taken a promissory note from the bank for the company. The defendant knew that the appellant had taken such a promissory note on behalf of the company, but claimed that as the appellant had taken the note, he had no personal liability towards the promissory note. Due to this, the appellant was sued for the promissory note. The Allahabad high court viewed the appellant and respondent had joint and several liability as per section 43 of the Indian Contract Act, 1872. Thus the respondent and the appellant were both required to pay and discharge their respective obligations. The principle used in this was opposite to the Calcutta High Court Judgement.[13] The principle applied was that if the decree against some only of the joint promisors remained unsatisfied, a second suit against other joint contractors was not barred.

The above judgment was also earlier applied by the Allahabad high court, that a judgement obtained against some of several mortgagors remaining unsatisfied, was no bar to another suit against joint mortgagors.[14]

This reasoning seems to be conclusive, but until it has been adopted generally by other high courts, or confirmed by the Supreme Court, the point must be regarded as open.

When a contract is concluded with a joint venture group, all members are made jointly and severally liable, even if only one is capable of rendering the service in question.[15] Each of a number of co-tenants under section 43 of the Indian Contract Act, 1872, separately liable to the landlord for the whole rent[16], and a suit is maintainable also against all the heirs of one deceased co–tenant without making the other co–tenants a party.

Partnership

In the case of Baria Guman Hamji and Anr. Vs. Rajanikant J. Shah[17],

The family of a deceased labourer brought a suit against the employer, as the labourer had died due to injuries sustained in the course of employment. It was submitted by the plaintiff party that, the deceased was their only son and bread winner for the family and hence they demanded compensation. The defendant contended that since he was in a partnership, with another company he could not be held liable. The court opined that such a partnership fell under the purview of the section 43 of the Indian Contract Act, 1872. Both the partners were joint and severally liable, and the plaintiff party could just take action against the defendant in this case without adding the defendant’s partner to the suit.

Section 43 speaks about parties making a joint promise and it has no application where parties are jointly interested by operation of law in a contract made by a single person.[18] Hence the section does not apply to the case of several heirs of the original debtor, and they all must be joined as parties to the suit.

Whether a sale deed by a number of vendees makes all vendees jointly liable or makes each vendee responsible for his own share only, would be a question of fact depending on the intention of the parties.[19] The burden of showing that under the contract, each promisor is not separately liable lies on that joint promisor who wished to resist such a suit on this ground.[20]

Contribution

Section 43 of the Indian Contract Act, 1872, includes the word ‘contribution.’ This basically implies under section 43 that if the claimant pursues one defendant and receives payment, that defendant must then pursue the other obligors for a contribution to their share of the liability. Contribution in joint and several liability can be defined as ‘the right that gives one of the several persons who are liable on a common debt the ability to recover ratably from each of the others when that one person discharges the debt for the benefit of all.[21]’ Contribution is between persons equally bound and signifies payment by each of the parties interested of his share in any common liability. Section 43 gives a promisor compelled to perform a promise a right to compel his co-promisors to make a contribution.[22] This contract of contribution is independent of any contract as between the joint promisors and the promisee’s and the latter can not absolve in anyway the joint promisor from his liability of contribution towards other joint promisors, who may have performed the promise.[23]

In order to claim contribution, one joint promisor must have made payment or, performed or omitted to perform an act as given in the contract, to the promise either under compulsion or voluntarily. The fact that the promisor claiming contribution, made the contribution without consulting his co–promisor, does not affect his right to contribution.[24]This liability of joint contributors is primarily to contribute to the performance of the promise.

In the case of Gopendra Narayan Bagchi And Ors. Vs. Golokendra Kumar Chaudhury[25],

The plaintiff and the defendant were co-sharers of a patni–tenure. Both plaintiff and defendant had different proportion of shares in such tenure. There was a common manager for such an estate. For 2 years the land rent fell into arrears, and the landlord instituted a suit for the recovery of the same, against the common manager. The land was to be put up for sale, but the complete payment was made by the plaintiffs to avert the sale. After the payment was made, a suit was instituted against the defendant for the recovery for the payment made by the plaintiff for the defendants share. It was claimed by the defendant, that as he was not a party to the decree in the rent suit, his interest could not have been affected by the sale in execution of the decree passed therein and that, therefore, he was not in any way benefited by the payment made even if it was taken to have been made by the plaintiffs. It was accordingly, pleaded that no claim for contribution could lie in the present case. This defence succeeded in both the courts below and hence the present second appeal by the plaintiff. This court held that the plaintiffs claim was sustainable under section 43 of the Indian Contract Act, 1872. Clearly in this case the defendant along with the plaintiff was liable to pay the arrears for two years. It was a case of joint and several liability and their position was as that of joint promisors under that section. When the plaintiffs made the payment they discharged the liability of their co-promisors as well and became entitled to contribution from them, in respect of that payment, the cause of action arising on the date of such payment. The fact that at that date the claim for rent was barred against the defendant would not be relevant for the purpose of Section 43 of the Indian Contract Act, 1872. The plaintiffs have made the payment and discharged the common liability of themselves and the defendant. Thus the plaintiff is entitled to contribution under section 43 of the Indian Contract Act, 1872. The principal applied in this case was that a joint promisor can sue another joint promisor for contribution, even though the claim of the creditor against the latter was barred by limitation, or was otherwise barred.

In a landmark case decided before the enactment of the Indian Contract Act, 1872, it was held that the mere existence of a decree against one of several joint debtors did not afford ground for a suit for contribution against other debtors, until he has discharged that which he says ought to be treated as a common burden, or at any rate done something towards the discharge of it, he cannot say that there is anything of which he has relieved his co-debtors, and which he can call upon to share with him.[26] This principle has been applied in many cases that followed. One is briefly discussed below.

In the case of Rangoti Mangarao Vs. Chinnadi Kishan Rao[27],  

Venkatarama Reddy, who had an abkari contract, entered into an agreement with the present plaintiff and defendants 1-3, for the sublease of the contract to the latter. On the basis of this agreement Venkatarama Reddy filed a suit for recovery of a sum with interest against the plaintiff and the defendant. This claim was contested by the present plaintiff as well as the defendants, inter alia, on the defence that the suit agreement was not executed by them. The High Court of Hyderabad, before whom the matter went up to in the second appeal, held that the agreement was executed by all the four parties i.e., the present plaintiff and defendants and that the plaintiff's claim was enforceable. However, a decree was given only against the present plaintiff and no relief was granted against the other defendants as the plaintiff therein had not carried any appeal against the judgment of the trial court dismissing the suit against them. The present plaintiff then laid the action giving rise to this appeal in the court of the Subordinate Judge, Karimnagar, against the defendants for contribution of their share of the amount of the decree passed against him. Originally, the 2nd defendant remained ex parte; the suit was defended only by defendants 1 and 3 on the plea that they were not liable to contribute the responsibility to discharge the debt in question resting only on the plaintiff. The trial court held in favour of the defendants and rejected the plaint on the ground that there was no cause of action as against the defendants. The plaintiff appealed the decision. Again the court held that that the suit was not maintainable for the reasons that there was no proof that the defendants had enjoyed the benefits of the agreement referred to above along with the plaintiff, that the plaintiff took the entire liability on his own shoulders, secondly that there being no joint decree against him and defendants 1 and 3 and finally that the plaintiff had not established that he had paid that amount in respect of which contribution was sought. During this appeal, the second defendant had written a letter stating that the plaintiff had not paid the amount due under the decree until the date of the institution of a suit, he had no cause of action, which could form the basis of a suit and the suit was therefore liable to be dismissed.

Once again an appeal was made by the plaintiff. One of the questions before the court was the point whether the plaintiff had satisfied the decree and whether he could get any relief in the suit without discharging the debt before the institution of the suit. The question falls under two heads. One is whether the plaintiff had established that he had discharged the common burden and the other is whether he could claim contribution, if he had discharged the liability subsequent to the institution of the suit and not earlier. In order to attract the obligation of a co-promisor to contribute towards the joint debt, it must be shown that he had paid off that decree. In this case, there is not difficulty in finding that the plaintiff did satisfy the decree granted against him. It is beyond dispute that full satisfaction of the decree was recorded in the execution levied by the said Venkatarama Reddy. There is no reason why the decree-holder should have full satisfaction recorded without receiving the amount due to him. It was also contended that the plaintiff the amount due under the said decree till the date of the institution of a suit. Taking all these facts into consideration the court held that the plaintiff had discharged the joint liability and could therefore seek contribution from the defendants who are co-promisors within the terms of section 43 of the Indian Contract Act, 1872. The court recognized that there was no joint decree against the defendants 1-3, but the defendants, who are jointly responsible for the discharge of the debt due to Venkatarama Reddy, are liable to contribute and cannot escape liability notwithstanding their having been exonerated in the prior proceedings. Thus the basic principle applied in this case which has been applied on in many other cases is that co-promisors are liable to contribute to the co-promisor satisfying the decree, even though they were exonerated in prior proceedings and also a co-promisor can seek contribution from other co-promisors only after he has satisfied the joint decree.

Also in a case where two out of three judgement debtors were discharged from their debt under a statute giving them debt relief and the decree was executed against the remaining debtor, the latter was nevertheless entitled to contribution from the other two.[28]

Partnership & Contribution

In the case of Karnail Singh Randhawa Vs. Jagir Kaur & Ors.[29],

Randhawa Rice and General Mills was a partnership firm comprising of Karnail Singh, Bharpur Singh and Harjinder Singh and partners. The firm had applied for a loan from Punjab and Sind bank. The firm was later dissolved and one partner Harjinder Singh was absolved of all his liabilities by a court order. The liability of the loan was taken over by remaining partners and guarantors. They failed to pay the loan and the bank in their capacity sued the partners and guarantors for its recovery. A preliminary decree was passed by the lower court but the loan was still not paid. Subsequently a final decree was passed. The loan was still not paid and the bank filed an execution petition, against Bara Singh one of the guarantors, to acquire and sell his land. During the pendency of the suit Bara Singh died and his legal representatives, the plaintiffs were sued. As the plaintiffs inherited the land of Bara Singh they were required to satisfy the decree passed against him to recover the land. The plaintiffs satisfied the decree and the land was returned to them. They filed a suit against the remaining partners for recovery of the amount paid by them for satisfying the decree. Section 42, 43 & 44 of the Indian Contract Act, 1872, were applied and it was held that the plaintiffs, heirs of Bara Singh, were entitled to recover contribution from the remaining partners, defendants in this case. Section 42 imposed obligation on joint promisors to fulfill the promise. Section 43 further holds that anyone of the joint promisors may be compelled by the promisee to perform the promise. It also envisages that when one of the joint promisors, executes the promise on his own, he is entitled to claim contribution from the remaining promisors. Thus it was held by the trial court that the plaintiffs were entitled to recover the amount from the defendants with interest, as they had satisfied the whole amount. The Punjab-Haryana high court upheld this decision and the appeal by the defendants were dismissed.

The principle involved in the above is, a decree holder (promisee) can recover his decretal debt form one or more or any of the judgement debtors (joint promisors) and the latter can compel contribution from the other judgement debtors, who have not been compelled to pay.[30]

Where a decree for costs does not indicate in any proportion in which they are to be borne, the decree as a rule imposes a joint and several liability on all the judgment debtors.[31]

In the case of Meyappa Chettiar Vs. Murugappa Chettiar & Sons[32],

By a decree in a partition suit, the properties were allotted in equal shares to 25 persons, but no arrangement was made to discharge a money liability imposed by a previous final decree. This liability was enforced against the alotteess of the properties and some had to pay more than their due share. In a suit by these allottees were bound to contribute, not on the principle of common ownership of property but the principal which prescribes equality of burden and benefit and which creates a right of contribution.

Joint Promisors are liable to contribute equally unless a contrary intention appears from the contract. If one of the persons liable to contribute is not in a position to pay his share, then that amount should be divided between the others equally under the section; but it has been held that the amount may be divided in the proportion of benefit each has received.[33]

Briefly taking up Section 44 of The Indian Contract Act, 1872, that states,

‘Where two or more persons have made a joint promise, a release of one such joint promisors by the promisee does not discharge the other joint promisor or joint promisors; neither does it free the joint promisors so released from the responsibility to the other joint promisor or joint promisors.’

In the case of Devilal Vs. Himatram & Ors.[34],

All defendant parties had taken had jointly taken a contract for construction of a Town Hall of Udaipur as partners even though the contract was sanctioned by the City Corporation of Udaipur in the names of defendants Himmatram and Narottam Swaroop only. Further allegations were that while entering into a subcontract with the plaintiff-appellant Devilal, the defendant Kanaiyalal acted as an agent for the rest of the partners. In the relief clause the plaintiff claimed relief that a decree be passed. The trial court passed the decree but for a less amount than asked and the amount was reduced further by the district judge. The plaintiff Devilal, therefore, filed this second appeal. Himmat Ram died during the pendency of the suit, but the surviving defendants were his partners. The plaintiff has claimed a money decree against all the defendants jointly and severally for the amount which may be found due to the plaintiff from the partnership. In view of section 44 of the contract act, the discharge of one of the promisors from, in this case Himmat Ram due to his death does not imply that the rest of the defendants are also discharged from performing their promise. The appeal was allowed and the suit did not abate. The principal in this case was that abatement of an appeal against one joint debtor or deathof one joint promisor does not release the other joint promisors.

The same principle has been applied to judgment debtors, and a release by a decree holder of some of the joint judgment debtors from the liability under the decree, does not operate as a release of the other judgement debtors.[35]It also applies to co-mortgagors jointly and severally liable.[36]

In comparison to English the law the principles applied in these sections are different. In English law, joint promisors are all jointly liable to pay the whole debt. If the promisee sues one of the joint promisors, it is at the option of this promisor whether to bring his other co-promisors to the suit or not. Whereas in Indian law, the promisee may sue joint promisors, at his option, jointly or individually. Also the promisor being sued does not have the option of involving his co-promisors in the suit instituted against him. The court may call upon, the other co-promisors if it feels it is required.

Thus section 42 & 43 of the Indian Contract Act, 1872, deal with contracts when two or more parties are on one side in a contract. It bifurcates all joint promisors liability, and makes joint liability joint and several. It provides relief to one of the joint promisors, in case the others are not party to the suit and sets out a scope for all joint promisors to demand contribution from their co-promisors. This section also sets out a procedure for contribution in case of death or insolvency of any of the co-promisors. Section 43 also highlights that in case of inability of one of the joint promisors to discharge obligations, the other joint promisors, jointly discharge the liability of the co-promisor unable to perform his obligation. They divide the liability of the co-promisor unable to discharge it, and discharge it equally. It should also be noted that, if the promisee is taking action against one of the joint promisors, and that action is dismissed by the courts, the promisee cannot take action against the other co-promisor, as the same case has been dismissed against against the first co-promisor. Though the reasoning on such a point is very clear, different courts have interpreted this point differently and until the Supreme Court or any other such legislation, defines the matter, such a point remains relatively open for interpretation. Section 43 has also been applied to partnerships where the liability has been joint and several.

While taking up section 44 of the Indian Contract Act, 1872, we can see that the promisee can release any one of the joint promisors from their obligation. This will not affect the liability of the co-promisors as they may continue to be fully liable to the promisee. The promisee may take action against any of the co-promisors who have not been released by him/her.

Hence section 42, 43 & 44 are an integral part of the Indian Contract Act, 1872 in case of contracts where there are joint promisors on either side.