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1968 (4) TMI 91 - SC - Indian Laws

Issues Involved:
1. Variation in contract terms between principal debtor and creditor.
2. Giving time to principal debtor to make up the deficit in pledged goods.
3. Loss or parting of security by the creditor without the surety's consent.

Issue-Wise Detailed Analysis:

1. Variation in Contract Terms Between Principal Debtor and Creditor:
The appellant contended that there was a variation in the terms of the contract between the principal debtor and the creditor, which discharged him from liability under the contract of guarantee as per Section 133 of the Indian Contract Act. The appellant argued that the credit limit was reduced from Rs. 1,00,000 to Rs. 50,000 and then raised back to Rs. 1,00,000 without his consent. However, the court found no written agreement evidencing this variation and concluded that the entries in the bank's account books could not substantiate the claim. The court held that the High Court was correct in concluding that there was no variation of the contract without the appellant's consent, and thus, Section 133 was not applicable.

2. Giving Time to Principal Debtor to Make Up the Deficit in Pledged Goods:
The appellant argued that the bank's act of giving the principal debtor time to make up the deficit in pledged goods absolved him of liability under Section 135 of the Indian Contract Act. The court noted that the bank discovered a shortage of goods valued at Rs. 35,690 and requested the principal debtor to make up the deficit within a month. Despite the extension of time, the deficit was not made up. The court held that giving time to make up the quantity of goods did not constitute a "promise to give time" for payment of money under Section 135. The court clarified that giving time to make up the quantity of goods pledged is not equivalent to extending the time for payment of the debt, and thus, Section 135 did not apply.

3. Loss or Parting of Security by the Creditor Without the Surety's Consent:
The appellant contended that the bank lost a portion of the security (goods) without his consent, discharging him from liability to the extent of the value of the lost security as per Section 141 of the Indian Contract Act. The court found that there was indeed a shortage of goods valued at Rs. 35,690 due to the bank's negligence or other reasons. The court held that the appellant did not waive his right under Section 141 through Clause 5 of the guarantee agreement (Ex. P-4). The court concluded that the appellant was entitled to the benefit of the security and that the bank's loss of the security discharged the appellant to the extent of Rs. 35,690. Therefore, the appellant's liability was reduced to Rs. 5,243.58 from Rs. 40,933.58.

Conclusion:
The appeal was allowed to the extent that the appellant's liability was reduced to Rs. 5,243.58, and the decree of the High Court was modified accordingly. The parties were ordered to bear their respective costs in the Supreme Court.

 

 

 

 

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