A guarantor is liable to guarantee repayment of the loan under the original agreement, even if there is a novation of contract between the borrower and the lender.

JUDGMENT

(Prayer: Appeal Suit filed under Order 41, Rule 1 and Section 96 of C.P.C., against the decree and judgment dated 14.02.1992 in O.S.No.193 of 1989 by the learned Principal Subordinate Judge, Coimbatore.)

1. This Appeal Suit had been filed against the judgment and decree dated 14.02.1992 made in O.S.No.193 of 1989, on the file of the Principal Sub-Judge Coimbatore.

2. For the sake of convenience, the parties are referred to herein, as per their rank before the Trial Court.

3. Brief facts, leading to the filing of this Appeal Suit, are as follows:

The first defendant has availed a sum of Rs.1,50,000/- from the plaintiff bank, for the said amount the first defendant had executed promissory notes. The second and third defendants stood as guarantors and have pledged their National Savings Certificates with the plaintiff bank. Thereafter, the first defendant had defaulted in repayment and committed irregularities in operating the accounts. The plaintiff bank has sent repeated notices but the first defendant did not take any steps to repay the same. Later on, the plaintiff bank has called upon the second and third defendants to repay the same as they stood as guarantors but they did not turn around to repay the amount. Hence, the plaintiff bank has filed a suit for realisation of the money lended and the suit was partly decreed as the trial court had directed the first and second defendant to repay a sum of Rs.2,02,408.91 and further the first defendant was directed to pay a sum of Rs.19,333.50 as the cost of the suit and as against the third defendant, the suit was dismissed. Challenging the same, the plaintiff bank has filed the present appeal.

4. The third defendant had entered appearance and filed his written statement in the Trial Court, the contention of the third defendant before the Trial Court is that, the third defendant knew the first defendant only two years prior to the contractual transactions between the plaintiff bank. The third defendant was one of the guarantors for the loan availed by the first defendant, for which he had pledged his National Savings Certificates as a security for the loan availed by the first defendant. The first defendant had assured that the securities would be returned on or before 31.07.1988 and would relieve the third defendant from the liability, as the business stock of the first defendant was valued at about Rs.3,00,000/- and more, that itself would be the main security for the loan amount availed and in case of default such business stock will be proceeded against and that the security offered by the third defendant would only be an additional one to that.

5. It was the further case of the third defendant on 15.06.1988, the first defendant wrote a letter to the third defendant stating that he had disposed of his stock in trade at Cross-cut Road and in Periaswamy road and another shop was set up in M.R.Complex, R.S.Puram, Coimbatore for which the first defendant has stated that he has obtained the consent of the plaintiff bank for sale of the properties mentioned in ''C'' Schedule of the suit. The third defendant had written a letter dated 10.08.1988 to the plaintiff bank enquiring the alleged sale of ''C'' schedule property by the first defendant, for which the plaintiff bank had replied stating that the first defendant has sold the hypothecated property and has denied the personal knowledge of the bank on such sale done by the first defendant.

6. It is further stated that the third defendant had also issued a legal notice dated 13.08.1988 to the first defendant as well as to the plaintiff bank complaining about the irregular and illegal acts done by the first defendant, for which the first defendant had not chosen to reply and the plaintiff bank has sent a belated reply and has filed a suit against the third defendant. It is the further grievance of the third defendant that the plaintiff bank has allowed the first defendant to dispose of the primary security, without the c