Back
High Court Of Calcutta
R. N. PYNE, PRABIR KUMAR MAJUMDAR
UNITED BANK OF INDIA - Appellant
Versus
MODERN STORES (INDIA) LTD. - Respondent
A. F. O. O. 396 Of 1976
Decided On : 05/13/1987
CONTRACT ACT - S. 134 - DISCHARGE OF SURETY - PRINCIPAL DEBTOR - LIABILITY OF SURETIES - INTERPRETATION - S. 137 - FORBEARANCE TO SUE PRINCIPAL DEBTOR - EFFECT - S. 138 - CO-SURETIES - RELEASE OF ONE SURETY - EFFECT ON OTHERS - RIGHT OF CONTRIBUTION - S. 145 - IMPLIED PROMISE OF PRINCIPAL DEBTOR TO INDEMNIFY SURETY - EFFECT ON SURETY NOT PROCEEDED AGAINST.
Fact of the Case:
The plaintiff, United Bank of India, instituted a suit against a company, Modern Stores (India) Ltd., and other defendants, including guarantors of the company's overdraft account. During the pendency of the suit, the company went into voluntary liquidation and was dissolved, and some of the guarantors died. The plaintiff applied for substitution of the legal representative of one of the deceased guarantors and for setting aside the abatement of the suit. The trial court rejected the application and dismissed the suit, holding that the plaintiff had released the principal debtor and, therefore, the guarantors were also discharged.
Finding of the Court:
The High Court allowed the appeals filed by the plaintiff and set aside the trial court's judgment and order. The court held that the discharge of the principal debtor by operation of law did not operate as a discharge of the sureties. The court also held that the plaintiff's mere forbearance to sue the principal debtor did not discharge the sureties. Further, the court held that the release of one co-surety by the plaintiff did not discharge the other co-sureties or affect their right of contribution against the discharged surety.
Issues: Whether the discharge of the principal debtor by operation of law operates as a discharge of the sureties?
Ratio Decidendi: The court held that the discharge of the principal debtor by operation of law does not operate as a discharge of the sureties. The court relied on Section 134 of the Contract Act, which provides that the surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. The court held that in the present case, there was no contract between the plaintiff and the principal debtor whereby the principal debtor was released, and there was no act or omission on the part of the plaintiff that resulted in the discharge of the principal debtor. Therefore, the court held that the sureties were not discharged.
Final Decision: The High Court allowed the appeals filed by the plaintiff and set aside the trial court's judgment and order. The court also held that the plaintiff's mere forbearance to sue the principal debtor did not discharge the sureties. Further, the court held that the release of one co-surety by the plaintiff did not discharge the other co-sureties or affect their right of contribution against the discharged surety.
( 1 ) THESE two appeals are against the judgement and order dated 11th Sept. 1975 passed by a learned single Judge of this court. The plaintiff is the appellant before us. The plaintiff has taken out a Master's Summons claiming, inter alia, that the death of respondent Nos. 2, 4, 6 and 9 and the dissolution of the defendant No. 1 be recorded, and the heir and/or legal representative of the defendant No. 6 be substituted and made a party to the suit and setting aside of the abatement of the suit, if any. The learned Judge rejected the said application for substitution and also dismissed the suit on a preliminary paint taken by the defendants that as the suit could not be proceeded against the defendants Nos. 1, 2, 4, 6 and 9 the plaintiff cannot proceed against the remaining guarantors.
( 2 ) THE plaintiff United Bank of India Ltd. as the successor of Comilla Banking Corporation instituted a suit 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 on 1st March, 1961.
( 4 ) IT was also ascertained by the plaintiff that the defendants Nos. 2, 4, 6 and 9 died during the pendency of the above suit. The plaintiff appellant, however could not discover the dates of death of the defendants Nos. 2, 4 and 9 and the names and identity of their respective heirs. About the defendant No. 6, Pritinath Chatterjee the appellant had come to know that the said defendant died on 30th Oct. , 1968. After ascertaining that one Prabuddha Chatterjee was the only heir and legal representative of the defendant No. 6 Pritinath Chatterjee, the appellant took out the Masters Summons for recording the dates of defendants Nos. 2, 4 and 9 and also dissolution of the defendant company and substitution of the said Prabuddha Chatterjee in place and stead of the defendant No. 6.
( 5 ) THE appellant affirmed the affidavit in support of the Master Summons on 30th Jan. , 1969. The time for making application for substitution of the defendant No. 6 was due to expire on Jan. 30, 1969. The appellant affirmed the petition being the grounds in support of the Master's Summons dated 30th Jan, 1969. The appellant Bank's Advocate on record, however, took out the Master's Summons on 4th Feb, 1969. According to the appellant, there has been a delay of 3/4 days in taking out the Master's Summons as the Master's Summons due to inadvertence could not be taken out before the expiry of the prescribed period and the abatement of the suit took place at a slender margin of 4/5 days. The appellant in the said Master's Summons made prayer for setting aside the abatement.
( 6 ) AS indicated above the learned judge rejected the said application for substitution and by the same judgement and order also dismissed the suit on the ground that after leaving out the principal debtor and also some of the guarantors the plaintiff appellant could not p
AI
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
