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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
AMIT BORKAR
TJSB Sahakari Bank Ltd. – Appellant
Versus
Amritlal P. Shah – Respondent
| Table of Content |
|---|
| 1. overview of the bank's claim against the guarantor. (Para 1 , 2 , 4) |
| 2. arguments regarding the specifics of the hypothecation agreement. (Para 5 , 6 , 7 , 8 , 9) |
| 3. key principles governing discharge of surety rights. (Para 25 , 26 , 27 , 28 , 29) |
| 4. final decision restoring liability upon the surety. (Para 54 , 55 , 56) |
JUDGMENT:
AMIT BORKAR, J.
1. The petitioner bank challenges the judgment and order passed by the Cooperative Appellate Court. By that order, the Appellate Court discharged respondent No.1 from his liability as a surety under Sections 139 and 141 of the Contract Act.
2. The petitioner is a multi state cooperative bank. It had granted various financial facilities to respondent Nos.2 to 5 who are the borrowers. Respondent No.1 stood as guarantor for these facilities by executing a Hypothecation Agreement dated 2 February 1994. He also executed a Demand Promissory Note dated 31 March 1998.
3. The borrowers defaulted. Hence, the petitioner recalled the facilities by issuing a Demand Notice dated 14 February 2001. Thereafter, the petitioner filed Dispute CC No.433 of 2001 before the Cooperative Court. It was later renumbered as CCT No.327 of 2005. The guarant
A surety is not discharged unless the creditor's wrongful act or negligence can be proven to have caused the loss of security.
The main legal point established in the judgment is that the creditor's act or omission impairing the surety's eventual remedy against the principal borrower can discharge the surety from liability, ....
(1) Liability of Surety – Liability of surety is co-extensive with that of principal-debtor, unless contract of guarantee provides otherwise – Liability of surety extends only to what contract he gua....
The surety's liability persists despite creditor actions that do not impair the security, as established in the guarantee deed.
The liability of sureties remains despite the dismissal of a suit against the principal borrower if the creditor's rights are intact.
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