Substitution, alteration or rescission of the new one in the contract with the agreement of parties.

BAKTHAVATSALAM

The defendants appeal from a common Judgment of Shanmukham, J., in C.S. Nos. 31 and 33 of 1974.

2. Originally these suits were instituted in the City Civil Court, Madras, and were transferred to this Court. C.S. No.31 of 1974 is a suit for a declaration that the debt or debts in respect of which the respondents/ plaintiffs stood liable as sureties or otherwise in respect of the loan to Shree Bharathy Mills Limited, Pondicherry, for the appellant defendant is/are no longer in existence, for a declaration that the arrangement between the appellant/defendant and the principal debtor, Shree Bharathy Mills Ltd. represented by its Authorised Controller on 7-1-1967 and 23-1-1967 discharged the respondents/plaintiffs from all or any liability to the appellant/defendant bank as it, extinguished the original debt in respect of which the respondents/ plaintiffs undertook liability whether as sureties or otherwise, and for a direction to the appellant/defendant bank to handover to the respondents plaintiff all the documents of title to property, share certificates and life insurance policy. C.S. No.33 of 1974 is a suit for a declaration that respondents/plaintiffs liability to the appellant/defendant on the over draft account on pledge of shares came to an end on 3-8-1967, when the respondents tendered Rs. 10,000/- to the appellant and that the appellant had no right to retain the shares pledged, and for return of all the shares and documents of title to shares namely 120 ordinary Mettur Industries Ltd., shares, 55 ordinary Mettur Industries Ltd., shares, 3396 ordinary Cauvery Spinning and Weaving Mills shares, 32 preference shares in Cauvery Spinning and Weaving Mills Ltd. and 4350 ordinary shares in India Cements Ltd. all belonging to the respondents.

3. It is necessary to set out the facts in C.S. Nos. 31 and 33 of 1974:-

The appellant/defendant bank gave certain financial facilities to Shree Bharathy Mills Limited, Pondicherry such as key loan and open loan, cash credits, F.X. Loan, overdraft facilities, documentary bills purchase and negotiation of foreign bills. In respect of such loans and facilities extended by the bank to the said Shree Bharathy Mills Limited Pondicherry, the respondents/ plaintiffs acted as sureties, and deposited documents of title to immovable property belonging to the second respondent/ second plaintiff, life insurance policy belonging to the first respondent/ first plaintiff and shares in India Cements Limited, Cauvery Spinning and Weaving Mills Ltd., and Vanguard Insurance Company Limited belonging to the respondents/ plaintiffs as security in their capacity as sureties. The original agreement between the appellant bank and Shree Bharathy Mills Limited continued from early 1960 till about 1965; thereafter, the respondents had not signed any documents, nor had they renewed their undertaking or liabilities. In November, 1965, the Principal debtor Shree Bharathy Mills, Pondicherry, was notified under the Industries (Development and Regulation) Act, 1951 by the Government of India and on 5-5-1966, the Authorised Controller took control of the said Principal debtor. In 1965, the appellant bank seems to have discovered a short fall of Rs.19 1/2 lakhs in the key loan, cash credit account, that is to say, there were not enough stocks in the godown for which the keys were with the bank agent, even though the accounts showed the stocks as available. These facts were never made known to the respondents/plaintiffs, who were sureties. The appellant bank by way of additional security, took a second mortgage from the principal debtor, viz. Shree Bharathy Mills Limited, Pondicherry, for RsTwenty lakhs on 26-11-1965. This was done without the knowledge and behind back of the respondents. The appellant had also taken a letter from the persons in management of the principal debtor, authorising the bank to sell all the pledged goods and textiles at the best possible price and adjust the sale realisation