This appeal has been preferred by the above named appellant-bank against a part of the judgment and order passed by the then Presiding Officer, D. R. T. , Jabalpur in Original Application No. 207/2000 dated 18th June, 2002, whereby and whereunder the claim of the appellant-bank against defendant- respondent No. 2 Smt. Shahjehan Begum has been dismissed on the ground of discharge of liability as contemplated under Section 139 of the Contract Act, 1872.

2. The brief facts of the case are as follows:

The defendant-respondent No. 1 - Abdul Wahid was engaged in the business of passenger Transport. At his request the appellant- bank sanctioned Rs. 6. 50 lacs to defendant-respondent No. 1 for purchase of Chasis of Tata Bus and for its body building. In consideration of such sanction of loan, defendant- respondent No. 1 executed banking documents and also agreed to pay interest as per prevailing rate.

Defendant-respondent Nos. 2 and 3 executed guarantee agreement to secure the term loan sanctioned to the defendant-respondent No. 1. They also created equitable mortgage over their respective immovable properties, details of which were given in the plaint submitted by the appellant-bank. After availing of term loan the defendant-respondent No. 1 did not satisfactorily maintain the accounts. When the defendant failed to liquidate the loan account despite legal notice on 27th August, 1999, the applicant-bank filed recovery application claiming Rs. 10,11,800/- with future and pendente lite interest mentioning that all the defendants-respondents were liable jointly and severally to pay the claimed amounts. On notices being served, only the defendant No. 2 had filed reply and contested by adducing evidence. The defendant-respondent No. 2 Shahjehan Begum in her reply raised the defence that due to negligence of the bank, the applicant-bank has lost the hypothecated property. Thus the failure of the applicant-bank to take appropriate steps at appropriate stage to take possession of the hypothecated property or to sell it caused impairment of the eventual right of the guarantor-defendant No. 2. According to her, when wrote a letter on 12th March, 1998 (Annexure R-1) addressed to the Branch Manager of the applicant-bank that the defendant No. 1 was making mischievous attempts to transfer the hypothecated bus. She also wrote the similar letters on 7th May, 1998 (Annexure R-2) and 2nd July, 1998 (Annexure R-3), but when no action was taken, then she wrote a letter to the General Manager (Personnel), Banking Division of Canara Bank, Head Office, Bangalore and that due to such delay in taking action by the appellant-bank, defendant-respondent No. 1 had managed to dispose of the hypothecated property and as such she remained not liable for the outstanding dues of the defendant- respondent No. 1 towards the applicant-bank.

In reply to such averments being made by the defendant-respondent No. 2, the applicant bank had filed rejoinder in the form of counter-affidavit to the effect that in the month of September i. e. on 8th September, 1998 the seizure agent of the bank tried to trace out the bus, but was informed that the said bus was shifted to Ajmer and defendant No. 1 had also left the place and remained un traceable.

On the basis of the pleadings and the evidence both oral and by way of affidavit and documentary, learned D. R. T. decreed the claim of the appellant-bank against the defendant-respondent Nos. 1 and 3, but dismissed the claim against defendant No. 2 holding that her liability as surety have been discharged because of the inaction/negligence on the party of the appellant-bank. Against this part of the dismissal of the claim against the defendant- respondent No. 2, the present appeal has been preferred.

3. Only point for determination in this appeal is; whether the learned Tribunal i. e. D. R. T. , Jabalpur had committed error in dismissing the claim of the appellant-bank against defendant- respondent No. 2 is erroneous or not