TMI Blog2007 (9) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... -4-1988 leaving D3 and D4 as his legal representatives of his estate in their hands. The 1st defendant received a chit amount of ₹ 32,580/- on 27-10-1987 from the plaintiff and he was due to pay a sum of ₹ 20,000/- as on the date of the chit amount. The defendants 1 to 3 and the deceased-V.Lakshman Raju executed a promissory note on 27-10-1988 agreeing to repay the amount with joint and several liability with interest at 12% per annum. The defendants became due to pay a sum of ₹ 11,500/- with interest thereon. On 12-12-1987, a sum of ₹ 857-75 ps was endorsed on the back of the suit promissory note, which was signed by the borrower and the sureties as they failed to pay the amount. The suit against the 1st defendant was dismissed for default on 31-7- 1990. A petition covered by I.A. No. 210 of 1992 for condoning the delay in filing the application to set aside the dismissal order against the 1st defendant was filed, but the said application was dismissed by the Court on merits on 12-12-1994. 3. The plaintiff did not prefer any revision against the default order. The suit against D3 was also dismissed on 11-6-1990 but on the application of the plaintiff, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , until the instrument is duly satisfied, lays down a principle, with which there can be hardly any quarrel, and the stress which was laid on that point by the learned Counsel for the appellant is of little or no consequence in the adjudication of the case before the Court and the construction will have to be with reference to the joint executant of a particular document accompanied by another document or documents. In which case, it has to be seen whether even if the promissory note is executed more than one person and in the accompanying document of guarantee there is a recital that the rest of the persons were merely guarantors, then in which case the sureties will not be made liable, if the promissory himself defaults. 8. In Chattanatha v. Central Bank of India 1965 SC 1856, the Supreme Court held as follows: That interpreting the language of the promissory note in the context of the other two documents, it was manifest that the status of B With regard to the transaction was that of a surety and not of a co-obligant, that the Bank was a party to the contract of guarantee, namely the letter, which was contemporaneous with the promissory note, that the Bank was also a par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd for non-service of summons to him on 31-7-1990. The appellate Court further observed that Section 137 of the Indian Contract Act would show that mere forbearance on the part of the creditor to sue the principal debtor or to enforce any other remedy against him does not, in the absence of any provision in the guarantee to the contrary, discharge the surety. The appellate Court further observed that on perusal of Sections 128, 133, 134, 135 and 137 of the Contract Act, the liability of the surety is co-extensive with that of the principal debtor and his liability is not discharged on account of the omissions and commissions on the part of the creditor in not suing the principal debtor for the reasons best known to him, except as provided under Sections 133, 134, 135 and 137 of the Indian Contract Act in the absence of a contract to the contrary. From the commentary of the text books on Contract Act even if the creditor fails to sue the principal debtor the liability of the surety is not discharged and in such case, it cannot be said that merely because the suit was filed against the principal debtor was dismissed for non-payment of batta, it cannot be said that the liability of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guaranteed by a surety, the State Financial Corporation need not first proceed against the borrower (Industrial concern) and only when it is unable to recover the dues from the industrial concern, it can enforce the liability of the surety. Section 128 of the Indian Contract Act provides that the liability of the sureties is co-extensive with the liability of the principal debtor unless it is otherwise provided by the contract. It is not necessary for a creditor, before proceeding against the surety to demand payment from the principal debtor or sue the principal debtor, unless it is expressly stipulated for the surety may be proceeded against, without first proceeding against the principal debtor. It cannot be said that the State Financial Corporation should first proceeding against the industrial concern (borrower) and only if it is not able to recover the amount from the principal debtor, the creditor can proceed against the sureties. 15. In State Bank of India v. Indexport Registered and Ors. AIR1992SC1740 , wherein the Supreme Court held as follows: If the composite decree is a decree which is both a personal decree as well as a mortgage decree, without any limitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed for default and the decision became final. Therefore, under law, there is no liability surviving against D1 for realization of the amount due to the creditor. When once the liability of the principal debtor is extinguished, the sureties' liability gets automatically terminated. 17. Therefore, without making the principal debtor liable for payment of the amount to the creditor, the sureties cannot be made liable for recovery of the amount. When once the suit is decreed against the principal debtor and the sureties with joint and several liability, it is the option of the decree holder to go against any one of them irrespective of the fact whether he is principal debtor or a surety. Therefore, I have no hesitation to find that there is perversity in the judgment of the appellate Court in reversing the judgment of the trial Court and I am inclined to set aside the same. The appeal has been preferred only for the purpose of recovery of the suit costs. When the appellate Court exercised the discretion and passed such order, the plaintiff cannot insist that the suit should be decreed with costs. In the cross objections, D3 disputed his liability and this Court accepted his pl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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