Legal representatives of a deceased debtor are liable for debts only to the extent of property inherited from the deceased, reinforcing the surety's right to indemnification under the Indian Contract Act.

JUDGMENT :

(R. NATARAJ, J.)

This regular first appeal is filed by one of the legal heirs of the deceased defendant challenging the judgment and decree dated 17.09.2018 passed by the III Additional Senior Civil Judge, Belagavi (hereinafter referred to as the ‘trial Court’ for short) in O.S.No.49/2014, by which the suit was decreed and the legal representatives of deceased defendant were held jointly and severally liable to pay a sum of Rs.33,40,000/- to the plaintiffs along with interest at the rate of 12.5% per annum from the date of suit till realization.

2. The parties shall henceforth be referred to as they were arrayed before the trial Court.

3. The suit in O.S.No.49/2014 was filed by a guarantor/surety to recover a sum of Rs.38,17,600/- from the principal debtor/defendant along with interest at the rate of 18% per annum from 31.12.2013 till realization. The plaintiffs claimed that plaintiff No.1 being a partner of M/s. Century Fine Chemical Works raised a loan from State Bank of Mysore, Raviwar Pet Branch, Belagavi in the year 1998. The plaintiff No.2 who established business of Belgaum Construction Works had raised a loan from State Bank of Mysore, Raviwar Pet Branch, Belagavi. The defendant was the proprietrix of M/s. Kalyani Pharmaceuticals and that she had also applied for a loan from State Bank of Mysore, Raviwar Pet Branch, Belagavi and that the plaintiff No.1 had offered his property as surety for the loan raised by the defendant. The plaintiff No.1 executed prescribed documents in favour of State Bank of Mysore, Raviwar Pet Branch, Belagavi as surety for the loan sanctioned to the defendant. Later, the loan account of the defendant became a non-performing asset. The plaintiff No.1 was served with notices by the State Bank of Mysore, Raviwar Peth Branch, Belagavi for recovery of the dues which was followed by proceedings under the recovery of money due to Banks and Financial Institutions Act, 1993 before the Debt Recovery Tribunal, Bengaluru (for short ‘DRT’) in O.A.No.184/2005. This proceeding was in respect of the loan raised by plaintiffs No.1 and 2 as well as the surety offered by plaintiff No.1 for the loan raised by the defendant. The DRT issued a recovery certificate dated 18.07.2008 ordering the recovery of a sum of Rs.40,30,403/- with interest at the rate of 12.5% per annum. Thereafter, the bank issued a notice under SARFAESI Act to recover the amount decreed under the recovery certificate and to proceed to recover it from the property offered by the surety/ plaintiff No.1. The plaintiffs claimed that the defendant was also served with the notice but she did not make any efforts to repay the dues and later died on 27.08.2011. The plaintiffs claimed that they thereafter held discussions with the bank for a ‘One Time Settlement’ of the dues in all the three accounts and paid a sum of Rs.1,05,00,000/- of which a sum of Rs.33,40,000/- was appropriated towards the dues of the defendant. The plaintiffs claimed that they were compelled to pay off the dues to the bank by selling off their house property. They contend that since defendant died, her legal representatives were liable to pay the amount to them. Therefore, plaintiff No.1 caused a notice to the legal representatives of the deceased defendant on 31.07.2013 calling upon them to pay a sum of Rs.33,40,000/-. However, the legal representatives of the defendant failed to pay the amoun