A guarantor's liability persists unless expressly discharged or consented to changes in the obligation of the principal debtor; a settlement with the principal debtor does not automatically extinguish the liability of a guarantor.

ORDER :

V.SRISHANANDA, J.

Heard S.Krishnaswamy, learned counsel for the petitioner and Sri G.Krishnamurthy, learned Senior Counsel for the respondent No. 2.

2. Plaintiff in OS No.8468/2001 is the revision petitioner, challenging the order on memo dated 05.02.2010.

3. The facts in the nutshell are as under:

Plaintiff filed the suit for recovery of money from the defendants. Plaintiff being the company registered under the Companies Act, wholly owned by the Government of India, had extended the facility of bill discounting to the first defendant for the supply of goods to be made by the second defendant in favour of the first defendant. As and when such materials are supplied by the second defendant, the bill discounting facility could be adjusted and bill discounting facility was for a fixed sum.

4. First defendant had agreed for the said facility and on account of non-payment of the amount by the first defendant in respect of the bill discounting facility, suit came to be filed.

5. During the pendency of the suit, a memo came to be filed on 05.02.2010. Contents of the memo is extracted, which reads as under:

“1) It is submitted that the Plaintiff-NSIC filed 14 civil suits against M/s Mysore Lamp Works Ltd and others for Rs. 1,60,88,558/ together with further interest @ 19.5% p.a (including additional interest@ 3% p.a) and service charges at 0.08% for every block of one week from the date of suit till realization with cost of the suit.

2) The following are the 14 suits - 1) O.S.7838/2001, 2) O.S.7869/2001, 3) O.S.7870/2001, 4) O.S.7915/2001, 5) O.S.7924/2001, 6) O.S.8254/2001, 7) O.S.8257/2001, 8) O.S. 8279/2001, 9) O.S.8280/2001, 10) O.S.8325/2001, 11) O.S.8326/2001, 12) O.S. 8433/2001, 13) O.S.8468/2001, 14) O.S 8444/2001.

3) That in the proposal submitted by the defendant- M/s Mysore Lamp Works Ltd, the proposal which was considered by the Plaintiff-NSIC under the specific terms and conditions stipulated as under:

a) The Mysore Lamp Works Ltd shall pay Rs.1,07,00,000/- (Rupees One Crore Seven Lacs Only) towards full and final settlement of the liability of Mysore Lamp Works Ltd only and the other defendants shall be liable to pay the balance amount together with interest till realization.

4) In terms of the settlement, M/s Mysore Lamp Works Ltd has paid Rs. 1,07,00,000/- (Rupees One Crore Seven Lacs Only) towards full and final settlement against them with liberty to the Plaintiff- NSIC to continue its suits against the remaining defendants for the balance outstanding and further interest accrued thereon till realization along with cost.

5) Since M/s Mysore Lamp Works Ltd has paid the settled dues in terms of settlement, they approached the Plaintiff to withdraw the suit against the defendant no-1, ie Mysore Lamp Works Ltd only and continue the suits against remaining defendants.

6) The proportionate amount received in this case is Rs. 18,55,109/-(Rupees Eighteen lakhs fifty-five thousand one hundred and nine only) and therefore the Plaintiff prays leave of this Hon'ble Court to continue the suit against the other defendant/s to recover the balance with cost of the suit.

It is therefore prayed that the Hon’ble Court be pleased to dismiss the suit against defendant No-1 and permit the plaintiff to continue the suit against defendant No-2 in the interest of equity and justice.”

6. Learned trial judge, after hearing the parties, passed the order allowing the memo in part and rejected the same insofar as continuation of