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, as provided in Section 139 and Section 141 of the Jammu and Kashmir Contract Act.

JUDGMENT :

1. This appeal is directed against the judgment and decree dated 27.04.2010 passed by the learned Additional District Judge (Bank Cases), Jammu (hereinafter to be referred as ‘the trial court’), whereby the suit for recovery for an amount of Rs. 5,53,336.58/- (Rupees Five Lacs Fifty Three Thousand Three Hundred Thirty Six Fifty Eight Paisa Only) filed by the respondent No. 1 has been decreed in favour of the respondent No. 1 and against the appellant as well as respondent Nos. 2 and 3 along with interest at the rate of 2% above SBAR with a minimum of 14% per annum with quarterly rests along with costs.

2. This appeal has been filed by the appellant on the ground that the judgment and decree dated 27.04.2010 passed by the trial court is not sustainable in law, as the learned trial court while dealing with the issue No. 2 has concluded on facts that it was incumbent on the part of the respondent No. 1 to get its lien marked over the mortgaged property in the revenue record and there was no denial that the respondent No. 2 took an advantage of this omission on part of the bank and thus, created third party interest by selling the mortgaged property. Thereafter, the learned trial court arrived at the conclusion that the appellant was not entitled to be discharged but no reason whatsoever has been assigned by the trial court to come to the conclusion in respect of lapse on the part of the bank to secure the mortgaged property by getting the lien marked in its favour and allowing the sale of the mortgaged property by the borrower to third person, held the appellant liable to pay the loan. While arriving at this finding, the learned trial court has shown complete ignorance of the settled provisions of law and the provisions contained in the Contract Act, more particularly, the provisions of Section 139 read with Section 140 of the Contract Act. It is also stated that the finding on the facts and law returned by the learned trial court that the Guarantee Deed nowhere reflected that the liability of the guarantor would arise only after the failure on the part of the respondent to recover its amount by sale of hypothetic stocks and mortgaged property, as such, the appellant was not entitled to claim discharge from the surety, is totally erroneous.

3. Mr. Rahul Pant, learned senior counsel for the appellant submitted that once the learned trial court had come to the conclusion that respondent No. 1-bank failed to secure the mortgaged property by getting the lien marked in its favour in the revenue record, the learned trial court was required to discharge the appellant from its liability arising out of the guarantee in terms of Section 139 of the Jammu and Kashmir Contract Act, 1977.

4. Ms. Monika Kohli, learned counsel for respondent No. 1-bank submitted that as per guarantee, even if there was default on part of the bank in securing the mortgaged asset, still the liability of the appellant was not impaired and continued thereafter.

5. Heard and perused the record.

6. Brief facts necessary for the disposal of this appeal are that the respondent No. 1 filed a suit for recovery against the appellant and the respondent Nos. 2 and 3 on the ground that the respondent No. 1 on the request of respondent No. 2, sanctioned the cash credit limit for an amount of Rs. 5,00,000/- (Rupees Five Lacs Only) in favour of the respondent No. 2 with interest @2% above SBAR with a minimum of 14% per annum with quarterly or other rests according to the practice of the respondent No. 1. The respondent No. 2 executed an arrangement letter dated 30.03.2001, promissory note dated 30.03.2001, DP note, delivery letter dated 30.03.2001 and agreement for hypothecation dated 30.03.2001. In addition, the respondent No. 2 also mortgage a plot of land measuring 09 marlas comprising Khasra No. 697 min, Khewat No. 25 and Khata No. 122 min situated at Channi Himmat and executed a mortgaged deed dated 28.03.2001 in favour of the respondent No. 1. The appellant and respo