VENKATACHALAIAH, J, J.

( 1 ) THIS appeal by the plaintiff in O. S. 10 of 1967 on the file of the Civil judge at Hubli is directed against that part of the judgment and decree dated 25-2-1972 by which the Court-below, while granting a decree against the principal-debtor, the first defendant in the suit for the sum of Rupees 32,757 negatived the claim against the sureties, defendants 2 and 3 who are respondents 1 and 2 respectively in this appeal.

( 2 ) APPELLANT claiming to be the successor-in-interest of Bank of karnataka Ltd, Hubli, instituted the suit from which this appeal arises, for the recovery of the sum. of Us. 32, 757 against the first defendant as the principal debtor in enforcement of the pronote for Rs. 25,000, Ext. P1, and the hypothecation bond, Extp2, relating to the Truck MYG 3031 and against defendants 2 and 3, on the basis of the surety bond, Ext. P3; the said transactions under Exts. P1, P2 and P3 having been entered into by the defendants with the Bank of Karnataka Ltd, Hubli. Appellant claims that the assets and liabilities of the said Bank of Karnataka are taken over by the appellant on 29-12-1966.

( 3 ) THE defence urged by respondents 1 and 2 in the Court below, inter-alia, was that appellant was not the holder in due course of the negotiable instrument, Ext. P1 and was not competent to maintain the the action thereon; and that the appellant and the Bank of Karnataka from which appellant derives title having allowed the security under the hypothecation bond, Ext. P2, to be impaired and lost owing to their own negligence and defaults and having thereby rendered themselves disabled from, giving to the sureties the benefit of the security, the liability of respondents 1 and 2 as sureties has had to be reduced to the extent of the value of the security so impaired.

( 4 ) ON these pleadings, the Court-below framed the following issues: (1) Whether the Bank of Karnataka Ltd, Hubli with its assets and liabilities, has on 29-12-1966 merged with the plaintiff Bank as alleged? (2) Whether the plaintiff is not entitled to enforce the, suit pronote as alleged by 3rd defendant? (3) Whether the suit is not maintainable as alleged by the defendant? (4) To what reliefs are the parties entitled? additional Issue (5) Whether Defts 2 and 3 are discharged for the reasons mentioned in paras 5 of their respective written statements? Having recorded its findings in the affirmative on issues 2 and 5, the Court-below while granting the decree as prayed for against the principal-debtor dismissed the suit as against the said sureties.

( 5 ) BEFORE we proceed to consider the contentions urged and the propositions arising for consideration in this appeal, it is necessary to advert to certain facts which are not in dispute. The relevant and undisputed facts are that on 30-5-1964, the first defendant borrowed Rs. 25,000 executing the pronote, Ext. P1, in favour of the Bank of Karnataka; that the said loan was secured by the hypothecation of the truck MYG 3031 then owned by the first defendant in favour of the said Bank under the hypothecation-bond, Ext. P2 dated 30-5-1964 and that on the same day defendants 2 and 3, the respondents in this appeal, executed the instrument of guarantee and constituted themselves sureties for the obligations of the principal-debtor. Ext. P2 contemplated re-payment of the loan of Rs. 25,000 along with the stipulated interest thereon in certain instalments, the first of which fell due on 1-7-1964. Cl (6) of Ext. P2, inter-alia, empowers the creditor-Bank to take possession of and sell the security-in this case the Truck - in the event of there being a failure on the part of the borrower to pay 'any one' instalment. It is not in dispute that by the time the suit came to be filed all the instalments had become overdue: and that neither the Bank of Karnataka nor the appellant which claims under the former did anything to exercise their power of seizure of the Truck which was the primary security. It is not al

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