Introduction:

Two employees stand surety to each other's loan. They default on the repayment. The employer, acting as a guarnishee, deducts the borrowers' terminal benefits and remits the amounts to the creditor. Because of some mix-up, the amount deducted from one borrower's terminal benefits goes to a wrong department of the creditor. That amount, with interest, once again gets deducted from the other borrower's, the surety's, account. The surety demands return of that amount. But the creditor refuses: it asserts that the other borrower stood surety to some other defaulted loans, and the amount was adjusted to those accounts. Can the surety demand refund of amount deducted from his account? The answer: yes.

Facts:

2. K.P. Kunjan, the petitioner, and one P.K. Thankappan worked in the Kerala State Road Transport Corporation ("the Employer"), the 4th respondent. While both were in service, they obtained loans of Rs.50,000/- each from the Kerala State Financial Enterprises Ltd. ("KSFE"), the second respondent. After standing guarantee to each other's loan, both defaulted