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1994 Supreme(Ker) 439

High Court of Kerala
M.M. Pareed Pillay, J.
P C Ravi - Appellant
Versus
Union Bank of India & Ors - Respondent
S.A. No. 759 of 1993
Decided On : 08-03-1994

The main legal point established in the judgment is that the liability of sureties can be discharged by the acceptance of a new debtor, as well as by any act or omission of the creditor that results in the discharge of the principal debtor, as provided under S.134 of the Contract Act.

Headnote:

Surety - Discharge of Surety - Contract Act - S.134, C.P.C. - S.2(ii) - Ext. A-4 - Failure to implead legal representatives of principal debtor - Liability of sureties - Acceptance of new debtor - Ext. A-4 as additional security - Discharge of sureties

Fact of the Case:

Plaintiff filed suit against defendants 1 to 3 for realization of money from a loan availed by the principal debtor. Third defendant contended that the suit is barred by limitation and that the sureties cannot be held liable due to failure to implead legal representatives of the principal debtor. Plaintiff obtained Ext. A-4 from the first defendant, undertaking the liability to pay the debt of the principal debtor.

Finding of the Court:

The court held that the suit was not barred by limitation as there was evidence of part payment by the principal debtor. Failure to implead legal representatives of the principal debtor did not discharge the sureties, especially when the principal debtor left no estate. Ext. A-4, where the first defendant undertook the liability, discharged the sureties from their liability.

Issues: 1. Whether the suit was barred by limitation. 2. Whether failure to implead legal representatives of the principal debtor discharged the sureties. 3. Whether Ext. A-4 discharged the sureties from their liability.

Ratio Decidendi: The court relied on S.134 of the Contract Act and C.P.C. S.2(ii) to determine the liability of the sureties. It held that failure to implead legal representatives of the principal debtor did not discharge the sureties, especially when the principal debtor left no estate. Ext. A-4, where the first defendant undertook the liability, discharged the sureties from their liability.

Final Decision: The judgment and decree of the first appellate court confirming that of the Trial Court were set aside in so far as the sureties (defendants 2 and 3) were concerned. Decree against the 1st defendant stood confirmed. Second appeal was allowed with no order as to costs.

JUDGMENT

1. Third defendant is the appellant. Plaintiff (first respondent) filed the suit for realisation of money from defendants 1 to 3. Loan of Rs. 15,000 was availed by John Manjooran, the principal debtor, he having executed Ext. A-1 promissory note dated 23rd September 1981. John. Manjooran died on 23rd January 1984. First, defendant voluntarily undertook responsibility to repay the loan amount to the plaintiff-bank. This is evidenced by Ext. A-4 dated 13th April 1985. Ext. A-2 bearing the same date as Ext. A-l is the letter of guarantees given by defendants 2 and 3 to the plaintiff. Plaintiff-bank filed the suit against defendants 1 to 3 asserting that they are liable to pay the amount due to it.

2. Third defendant filed written statement contending that the suit is barred by limitation, that 1 he suit against sureties alone is not maintainable as legal representatives of John Manjooran were not impleaded and that in view of Ext. A-4 executed by the first defendant he (the surety) can no longer be held liable.

3. Though Ext. A-1. promissory note was executed on 23rd September 1981, it cannot be held that the suit is barred by limitation as there is evidence of part payment of the money due to the plaintiff-bank by the principal debtor. Last payment by the principal debtor was on 19th January 1984. Principal debtor had confirmed the debit balance confirmation letter (Ext. A-3) on 11th January 1983. It shows that the outstanding balance amount due to the plaintiff was Rs. 13,762.85. As the suit was filed on 5th November 1986, it cannot be said that it is barred by limitation.

4. Next contention of the appellant is that as the legal representatives of the deceased principal debtor were not impleaded the sureties cannot be saddled with the responsibility of the payment of the amount to the bank. Counsel relied on Nur Din v. Allah Ditta AIR 1928 Lahore 246 for the above proposition. In the above decision while interpreting S.134 of the Contract Act it is held that where the principal debtor is discharged due to failure to bring his representatives on record the surety for the debtor is also discharged. Learned counsel for the plaintiff (1st respondent) submitted that the principal debtor died as a bachelor and as he left no estate the above contention is not tenable.

5. Failure to implead the legal representatives of the principal debtor cannot be taken as a ground to dismiss the suit filed against the sureties in a case where the former has not left any estate. S.2(ii) of the C.P.C. defines legal representative as a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate - devolves on the death of the party so suing or sued. As the appellant has no case that the principal debtor died leaving any estate, his contention that the suit is not maintainable as the principal debtor's legal representatives were not impleaded is untenable. As the surety's liability is co-extensive with that of the principal debtor they cannot be absolved of their liability merely on the ground that the principal debtor's legal representatives were not impleaded in the suit. The position would be different if the deceased principal debtor left no estate and his legal representatives were not Impleaded in the suit and only against the sureties action is pursued. In a case where the creditor failed to bring the legal representatives of the principal debtor on record, the consequence of the omission is that the creditor would-be left without any remedy against them. The resultant position is that they stand discharged. In that case, it can certainly be held that on account of the omission of the creditor the legal consequence is the discharge of the principal debtor. If that be so, die surety also stands discharged. S.134 of the Contract Act makes the position clear. So far as the case in







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