A surety is discharged from his liability to the extent of the value of the security lost or parted with by the creditor without the consent of the surety.

1. This second appeal has been filed by the State Bank of India, Batala plaintiff, against the judgment and decree of the IInd Additional District Judge, Gurdaspur (Smt. Bimla Gautam).

2. Briefly, the case of the plaintiff is that Avtar Singh, defendant No. 2, was the sole proprietor of M/s. Quality Bread Factory, at Batala, defendant No. 1. He approached the Branch Manager of the plaintiff Bank for the grant of cash credit facility to the tune of Rs. 5,000.00 on 16th May, 1975. The Bank agreed to grant that facility to defendants Nos. 1 and 2, who agreed to pay interest at the rate of 4 per cent per annum below the State Bank advance rate with minimum rate of 10 per cent per annum in respect of the monies advanced. It is alleged that defendants Nos. 1 and 2 also agreed to pledge the machinery, namely, mixer, moulder, slicer and sealer, which were lying in the factory premises situated at Jullundur Road Batala. Accordingly, defendants Nos. 1 and 2 executed in favour of the plaintiff an agreement for cash credit facility on security of pledge of mixer, moulder, slicer, sealer, produce and merchandise on the same day and pledged the said things. They also executed a demand promissory note in the sum of Rs. 5,000.00 in favour of Gurbachan Singh, defendant No. 3, and he delivered the same, duly endorsed in favour of the plaintiff as security for the said amount. It was agreed that defendants Nos. 1 and 2 would pay the amount due from them with interest to the plaintiff on demand and in case of default the plaintiff could recover the same by public auction or private sale of the pledged goods, produce, merchandise etc.

3. The case of the plaintiff further is that defendant No. 3 in consideration of the plaintiff having agreed to advance in defendants Nos. 1 and 2 the cash credit facility guaranteed the repayment of the loan advanced to them from time to time together with interest thereon.

4. Defendants Nos. 1 and 2 started operating their cash credit account and withdrew various amounts for their business on various dates and an amount of Rs. 3.275-20 was outstanding against them, Consequently, the plaintiff filed a suit for recovery of the said amount with future interest from the defendants by sale of the pledged goods and other properties of the defendants.

5. Defendants Nos. 1 and 2 did not contest the case and were proceeded against ex parte. Defendant No. 3 controverted the allegations of the plaintiff. He inter alia pleaded that subsequently another agreement was executed between the plaintiff and defendant No. 3 on 26th May, 1975, by virtue of which he paid Rs. 2,500.00 to the Bank and agreed to pay the balance amount of Rs. 2,500.00 in case the Bank handed over the pledged goods lying in the premises of defendant No. 1 worth about Rupees 30,000.00 to him. He averred that the key of the factory was with the Bank, which had not been handed over to him. It is also pleaded by him that he mortgaged his land by equitable mortgage with the Bank but the guarantee came to an end with the execution of fresh agreement dt. 26th May, 1975, He, therefore, pleaded that he was not liable to pay any amount to the Bank.

6. The learned trial Court held that it was net clear as to how the plaintiff dealt with the articles pledged with it and that the plaintiff had failed to show that the amount of Rs. 3,275-20 was payable by the defendants. It further held that no oral compromise dt. 26th May, 1975, was proved and, therefore the property of defendant No., 3. remained mortgaged with the Bank. In view of the aforesaid findings, the suit of the plaintiff was dismissed. On appeal, the Additional District Judge held that the plaintiff had proved that the amount of Rupees 3,275-20 was payable by the defendants. He further held that the plaintiff had not cared to recover the loan from the goods pledged with it and that it failed to prove that these were insufficient for recovery of the amount. He concluded that the plaintiff could recover t