TMI Blog1987 (5) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... t against the company Modern Stores (India) Ltd., a company incorporated under the Companies Act, 1913, the defendant No. 1 in the suit and the other defendants. The defendant company had a current account with one Comilla Banking Corporation. At the request of the defendant No. 1 the said Comilla Banking Corporation agreed to allow the overdraft on the terms and conditions contained in an agreement entered into by and between the company the defendant No. 1 in the suit and the predecessor-in-interest of the plaintiff, the Comilla Banking Corporation Ltd. The other defendants, namely, defendants Nos. 2 to 9 in consideration of the Comilla Banking Corporation agreeing to lend and advance to the defendant company's moneys on the overdraft account guaranteed the repayment by the defendant No. 1 of the amounts of the overdraft up to limit allowed by the Bank. 3. The plaintiff appellant came to know that sometime after the institution of the above suit the defendant company went into voluntary liquidation and one Mr. N. Sanyal, a Chartered Accountant was appointed liquidator. The plaintiff appellant further ascertained by an enquiry that the defendant company was dissolved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiff could proceed against the surviving guarantors who were the defendants in the suit The learned Judge as indicated above rejected such submission of the plaintiff appellant by holding, inter alia, that if the suit against the one of the co-guarantors is allowed to be dismissed then the suit against other co-guarantors should also be dismissed. The learned Judge also held that if the plaintiff had allowed the principal debtor the defendant No. 1 to escape from this case and by doing this the plaintiff has released the co-guarantors from their liability and as such the suit could not proceed against the other defendants being the guarantors. 8. Two contentions were raised by the defendants before the trial court, namely, (i) that once a suit against the principal debtor was allowed to be dismissed then Section 134 of the Contract Act came into play because the plaintiff had discharged the principal debtor and the guarantors were, therefore, completely released and (2) that the suit against some of the co-guarantors being dismissed then the right of contribution under the Contract Act against some of the sureties was lost and the other sureties, therefore, could not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jee further contends that even if it is assumed that the plaintiff had allowed the suit to be dismissed against the defendant company, the principal debtor, even then the plaintiff would be at liberty to proceed against the guarantors or the sureties. It is his contention that mere omission even if it is so in a suit by the creditor against the principal debtor, a surety is not discharged as the debt is not released, only the remedy against the principal debtor is barred. Dr. Banerjee contends that under Section 128 of the Contract Act the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract. Dr. Banerjee in this connection has also referred to Clause 11 of the agreement entered into by and between the plaintiff and each of the guarantors which provides that nothing done or omitted by the plaintiff in pursuance of any of the powers, provisions, authorities or permissions contained in this guarantee shall in any way affect or discharge surety's liability under the agreement. Therefore, it is the submission by Dr. Banerjee that Section 134 has no application at all to the facts of the present case, as there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plated under Section 146 of the Contract Act is an independent right and it is not affected in any way by the creditors releasing the principal debtor or some of the sureties or guarantors. 12. Referring to Section 145 of the Contract Act Dr. Banerjee submits that the implied promise by the principal debtor to indemnify the surety being an independent right cannot by any event affect the right of surety not proceeded against. 13. Finally, it is the submission of the learned counsel appearing for the appellant that the conclusion arrived at by the learned trial Judge that the plaintiff having allowed the principal debtor, the defendant No. 1 to escape from this case released the co-guarantors from their liabilities is directly contrary to the provisions contained in Sections 137 and 138 of the Contract Act, Similarly, the learned Judge's conclusion that if the suit against one of the co-guarantors is allowed to be dismissed then the suit against the other co-guarantors should also be dismissed is again contrary to this specific provision contained in Section 138 of the Contract Act that the release of one co-surety does not discharge others. 14. Dr. Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the principal debtor and therefore, the guarantors were completely released. Therefore, the question involved in this appeal is if the principal debtor is allowed to be discharged then whether that would release the guarantors as well In this case, as has already been indicated that the defendant No. 1 in the suit being the principal debtor during the pendency of the suit went into voluntary liquidation and Mr. Sanyal was appointed as liquidator. Necessary amendment of the plaint was made impleading the said liquidator as a party in the suit It is also not in dispute that the defendant No. 1 principal-debtor was dissolved on 1st March, 1961 and also during the pendency of the suit the defendants Nos. 2, 4 and 9 died. The appellant after ascertaining these facts took out Master's Summons for an order, the death of defendants Nos. 2, 4, 6, and 9 and the dissolution of the defendant company, the defendant No. 1 be recorded, the abatement, if there is any be set aside and substitution of Prabuddha Chatterjee as heir and legal representative of the defendant No. 6 and impleading him in the suit. According to the appellant, as the principal debtor stood discharged by operation of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o proceed against the principal debtor or had released the principal-debtor, the guarantors were also thereby released. It is settled law that the discharge of the principal-debtor by operation of law does not operate as the discharge of the sureties. It is also held by the Supreme Court in the case of Maharashtra State Electricity Board v. Official Liquidator, that dissolution of the principal-debtor would not release or discharge the sureties. Further, we are of the view that in the instant case there has not been any act or omission on the part of the appellant in not proceeding against the defendant No. 1 or releasing the defendant No. 1. In the present case the principal debtor, the defendant No. 1 is discharged by operation of law. Therefore, nothing has been done by the appellant, the result of which is discharge or release of the principal-debtor. It is also pointed out by Dr. Banerjee appearing for the appellant, that in each of the agreement it is provided that nothing done or omitted by the appellant in pursuance of any of the powers, provisions, or authorities contained in this guarantee shall in any way, affect or discharge the liability of the surety. It is also settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lia, as all the contracts which might be applicable to the defendant No. 1, the principal debtor, declared to be a relief undertaking, had been suspended, the cause of action against the guarantor had also remained suspended. This Court held that the cause of action, as it is well settled, against the guarantor is though co-existent with a cause of action against the principal-debtor was independent and separate. Therefore, according to this decision, the discharge of a principal debtor by operation of law does not discharge the surety. 23. The learned trial Judge in dismissing the suit has also observed that having brought the suit against all the guarantors and the principal-debtors and having allowed the suit against some of the guarantors to be dismissed the plaintiff has destroyed the rights of co-guarantors or co-sureties from their right of contribution against those discharged sureties because the claim would be barred by the principles of res judicata and the principles analogous thereto. Under Section 138 of the Contract Act it is provided that where there are co-sureties, a release by the creditor one of them does not discharge the others, neither does it free t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
