The liability of guarantors and the rights of the creditor against the principal debtor are governed by the provisions of the Indian Contract Act, specifically Section 139, Section 140, and Section 145.

Anjuli Palo, J.

This appeal has been filed by the appellant/plaintiff under section 96 of the Code of Civil Procedure, against the judgment and decree dated 03.09.1998, passed by the District Judge Sehore, in Civil Suit No. 6B of 1995, whereby the claim for recovery of Rs. 2,05,582/- was disallowed.

2. During the trial, learned Trial Court proceeded ex-parte against respondent No.1, who is the main borrower.

3. In short, appellant/plaintiff’s case is that respondent No.1 having taken loan of Rs.1 lakh from the appellant/Bank on 14.4.1984 for purchasing a Mini Bus. For this transaction, many documents have been executed by the respondents. They have taken joint liability to repay loan account. Respondent No. 3 and 4 were the guarantors. They also executed the guarantee letter in favour of appellant/plaintiff/bank. The respondent no. 1 and 2 were the defaulters in regular payment. Therefore, notice were issued by the appellant to the respondents. The respondents failed to repay the loan. Therefore, the appellant/Bank filed the civil suit.

4. Respondents no. 3 and 4 in their written statements denied their liability. They have stated that bank is entitled to recover its loan by selling the aforesaid minibus for which loan has been taken by the respondent no. 1 but the appellant had not proceeded against the respondent No. 1 to recover the entire amount in lumpsum. Therefore, the agreement with respondents no. 3 and 4 as guarantor has become ineffective. They are not responsible to repay the loan amount and bank is not entitled to recover the loan amount from them.

5. Learned trial Court found that the respondent No. 1 had taken loan from the appellant/Bank for purchasing a Mini Bus on 14.4.1984 and the respondents No. 2 to 4 undertake the guarantee for repaying the aforesaid loan along with the respondents No. 1. The learned trial Court has not appreciated that being a guarantor of respondent No. 1, liability of the respondents No. 2 to 4 co-existed with the principal borrower and holding that the respondents No. 3 and 4 have no liability to pay the amount because their guarantee has been ineffective. Decree has been passed only against the respondents No. 1 and 2 for recovery of Rs. 2,06,582/- with interest @ 12.5% per annum.

6. The appellant/Bank has challenged the above findings on the grounds that learned trial Court has erred in arriving the findings that agreement of the respondents No. 3 & 4 has come to an end without any cogent and reliable evidence. The condition of the contract between the parties cannot come to an end unilaterally without the consent of other parties and the respondents No. 3 & 4 have executed the guarantee deed in favour of the appellant/Bank. They cannot absolve from their liability to repay the entire loan amount. Therefore, the appellant has prayed to modify the judgment and decree against the respondent No. 3 and 4 and liability be imposed against them along with the respondents No. 1 and 2.

7. Having heard learned counsel for the parties, perused the record and impugned judgment.

8. In para 4 of the impugned judgment, learned trial Court has framed issues No. 3 (d) 3([k) which reads as under:-

^^3 ¼d½ &Dk izfroknh Øekad 2 ls 4 us mDr feuh cl gsrq fn;s tkus okys _.k ds ckjs esa tekur i= laikfnr djus dk opu fn;k Fkk\

[k & ;fn gka rks D;k izfroknh dzekad 2 ls 4 us fnukad 14-04-1984 dks lrr~ izR;kHkwfr i= laikfnr dj oknh dks lkSai fn;k FkkA^^

9. It is important to note that with regard to above issue findings are affirmative against the respondents No. 2 to 4 because they were guarantor in the disputed loan. Even then, learned trial Court exonerated them from the liability to repay the loan along with respondents No. 1 and 2.

10. Para 7 of the judgment is important that, learned trial Court has held that the respondents No. 2 and 4 undertake the guarantee of the respondent No. 1, to repay the loan and executed guarantee deed Ex.P/7. They have also admitted their signatures in the guarantee deed Ex.P/