TMI Blog1982 (10) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... and the judgment of the Division Bench in appeal are, therefore, liable to be set aside and they are accordingly set aside. - 3182 OF 1982 - - - Dated:- 13-10-1982 - E.S. VENKATARAMIAH AND V. BALAKRISHNA ERADI, JJ. B.S. Bhasme and H.S. Parihar for the Appellant. K.N. Bhatt for the Respondent. A.S. Nambiar for the Intervener. JUDGMENT Venkataramiah, J. This is an appeal by special leave under article 136 of the Constitution against the judgment and order dated November 13, 1978, of the High Court of Kerala in M.F.A. No. 145 of 1976. The facts leading to this appeal may be briefly stated thus : The appellant is the Maharashtra State Electricity Board (hereinafter referred to as "the Electricity Board"). Cochin Malleables (P.) Ltd. (in liquidation) (hereinafter referred to as "the company in liquidation"), used to enter into contracts with the Electricity Board before it was ordered to be wound up by the High Court of Kerala to supply goods to the Electricity Board pursuant to tenders which were being issued from time to time. One of the terms usually found in such tenders was that the intending supplier of goods should pay as earnest money an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the bank guarantee amount, the Electricity Board could deal with it in accordance with the terms of the contract as if the said amount had been deposited with it in cash on the date of the bank guarantee. The liability of the bank which gave the bank guarantee under these terms was unconditional and did not vary, according to the number of tenders offered, the value of the goods offered for sale under those tenders, and the defaults, if any, committed by the tenderer in the supply of goods. Pursuant to the above term, the company (in liquidation), offered on September, 1, 1966, a bank guarantee for a sum not exceeding Rs. 50,000 given by the Canara Bank Ltd. (now known as Canara Bank and hereinafter referred to as "the bank"). The relevant part of the said guarantee was as follows : " 'The Canara Bank Ltd.', hereby agrees unequivocally and unconditionally to pay, within 48 (forty eight) hours, on demand in writing from the Maharashtra State Electricity Board or any officer authorised by it in this behalf, of any amount up to and not exceeding Rs. 50,000 (rupees fifty thousand only) to the said Maharashtra State Electricity Board, Bombay, on behalf of M/s. Cochin Malleables ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company in liquidation, it was not open to the Electricity Board to claim the amount of guarantee from the bank except as a creditor in the winding-up proceedings. An appeal filed by the Electricity Board before the Division Bench of the High Court was dismissed. This appeal is filed by the Electricity Board against the order of the Division Bench. After the petition for special leave was filed in this court in July, 1979, notice was issued to the official liquidator. He has written a letter to this court stating that the High Court of Kerala has since sanctioned a scheme for the reconstruction of the company in liquidation by an order dated November 6, 1979, subject to certain conditions and that the winding-up proceedings are directed to be kept in abeyance till December 31, 1982. He has further stated that he has handed over all the assets of the company in liquidation to the new management as per the directions of the High Court and that he has no funds to participate in these proceedings. The managing director of the company in liquidation has entered appearance as an intervener and is represented by a counsel. The learned counsel for the intervener has been heard in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company in liquidation. The liability is absolute and unconditional. The fact that the company in liquidation, i.e. , the principal debtor, has gone into liquidation also would not have any effect on the liability of the bank, i.e. , the guarantor. Under section 128 of the Indian Contract Act, the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract. A surety is no doubt discharged under section 134 of the Indian Contract Act by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. But a discharge which the principal debtor may secure by operation of law in bankruptcy (or in liquidation proceedings in the case of a company), does not absolve the surety of his liability [See Jagannath Ganeshram Agarwala v. Shivnarayan Bhagirath [1941] 11 Comp. Cas. 11 ; AIR 1940 Bom. 247. See also In re Fitzgeorge : Ex parte Robson [1905] 1 KB 46 2 (KB)]. In view of the unequivocal language of the letter of guarantee, no reliance can be placed by the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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