The liability of a guarantor under a separate contract of guarantee is not suspended by the suspension of the principal contract under Section 4 (b) of the Tamil Nadu Relief Undertaking (Special Provisions) Act 1969.

P. GOVINDAN NAIR, C. J. (1-8-1977) :- We propose to dispose of these appeals by a common judgment, because the main questions involved in these appeals centre round the interpretation we have to place on Sec. 4 (b) of the Tamil Nadu Relief Undertaking (Special Provisions) Act 1969 (Tamil Nadu Act 21 of 1969) (hereinafter referred to as the Act), and S. 128 of the Indian Contract Act, 1872.

2. The appeal in O. S. A. 48 of 1975 is from the order of Sethuraman J. in Appln. No. 1849 of 1973 in C. S. 155 of 1973, on the file of this Court dismissing the suit filed against a relief undertaking as defined in S. 2 (4) of the Act and against the sureties who guaranteed the debt due from the relief undertaking.

3. O. S. A. No. 68 of 1976 is an appeal by the guarantor of a debt due from a relief undertaking against whom insolvency proceedings were commenced to adjudge him as insolvent by the creditor. Suryamurthy J. held that the petitioning creditor seeking to adjudge the guarantor is not seeking to recover a debt and therefore S. 4 (b) of the Act has no application. The learned Judge on the preliminary point raised by the guarantor held that the insolvency petition taken against him was maintainable. It is as against this order, the latter appeal has been preferred by the guarantor.

4. The first question we will consider is about the interpretation of S. 4 (b) of the Act. The section is in these terms :-

" The Government may, if satisfied that it is necessary or expedient so to do for the purposes specified in S. 3, direct by notification, that all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which any relief undertaking is a party or which may be applicable to any relief undertaking, immediately before the date with effect on and from which the relief undertaking was declared a relief undertaking, shall be suspended in operation or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall be suspended or be enforceable with such modifications and in such manner as may be specified is such notification."

It was contended on behalf of the appellant in O. S. A. 68 of 1976 and by the respondents in O. S. A. 49 of 1975, that on the basis of the words in S. 4 (b) of the Act that the Government by notification may direct the suspension of the contracts- one of the matters mentioned in the section-and since the contract is suspended, the sureties who are contended to be parties to the contract could also get the benefit of the suspension of the contract. In other words, it was submitted that a plain reading of the section would mean that the very foundation of the contract has ceased to exist, though temporarily, and on the basis of that contract, no action can be taken against the guarantor. Counsel relied on two decisions of the Supreme Court in support of the contention that the words used in the material provisions of the statute must be interpreted according to their plain meaning and it is only when such words are capable of two constructions that the question of giving effect to the policy or object of the Act can arise.

We shall now extract the the judgment in Kanailal v. Paramnidhi, AIR 1957 SC 907. At p. 910, the learned Judges have observed as follows-

" Mr. N. C. Chatterjee, for the appellant, has contended that the object in enacting the relevant Thika Tenancy Acts and Ordinances is absolutely clear. It is a piece of welfare legislation and as such its operative provisions should receive a beneficent construction from the Courts. If the scheme of the Act and the object underlying it is to afford full protection to the Thika tenants, says Mr. Chatterjee, courts should be slow to reach the conclusion that any class of Thika tenants are excluded from the benefit of the said Act."

Counsel also relied on the observations of Barons of the Exchequer in the famous Heydon' s cas