The surety's liability persists despite creditor actions that do not impair the security, as established in the guarantee deed.

1. In this somewhat unusual suit, under O.37 of the Code of Civil Procedure, 1908 , the plaintiff, Citibank N.A., seeks a decree for Rs. 77,10,733.67, against the defendant Juggilal Kamlapat Jute Mills Co. Ltd. (for short 'Jute Mills').

2. J.K. Manufacturers Ltd. (for short 'Manufacturers Ltd,') has a cotton textile manufacturing unit in Kanpur. This company was incurring heavy losses. In order to render the said textile unit into an economic, profitable and efficient unit and for the purpose of modernising and / or equipping it with additional plant etc., Manufacturers Ltd.' agreed to grant to 'Jute Mills' licence to use the said textile unit on terms and conditions as contained in the licence deed dated Sept. 25, 1971 (Annexure - 1 to the plaint). The licence was granted initially for a period of five years commencing from Oct. 1, 1971 on payment of licence fee of Rs. 50,000.00 per month or a sum equal to 50% of the net profits earned by Jute Mills in the textile unit in each year whichever was higher. A supplementary agreement was executed between 'Manufacturers Ltd.' and 'Jute Mills' on Oct. 3, 1973 making some modifications in the original agreement.

3. On July 2, 1973, the plaintiff sanctioned a term loan facility of Rs. 60 lacs in favour of 'Manufacturers Ltd.' repayable by twelve six - monthly instalments of Rs. 5 lacs each. Besides the principal amount, the bank was also entitled to be paid interest at 3 per cent over the Reserve Bank of India rate subject to a minimum of 12.5 per cent per annum. In the event of default in any payment of the principal or commitment fee / charge or of interest on the loan, the entire amount remaining due and unpaid on the date of the said default was to become due and payable to the plaintiff immediately. The term loan agreement was executed between the bank and 'Manufacturers Ltd.', on Nov. 21, 1973. On Nov. 22, 1973 'Manufacturers Ltd.', also deposited the documents of title relating to their textile unit at Kalpi Road, Kanpur, and thereby mortgaging to the plaintiff all the properties of tha textile unit to secure repayment of the aforesaid loan of Rs. 60 lacs. On Nov. 21, 1973, the 'Jute Mill's' executed in favour of the plaintiff a guarantee (Ext. P - 14). This was to be considered a continuing guarantee for the purpose of securing the ultimate balance due, or that may be due from time to time, and at any time from the 'Manufacturers Lid.', to the plaintiff. On Nov. 22, 1973, the 'Jute Mills' also deposited with the bank at New Delhi various documents relating to their industrial unit situate at Kalpi Road, Kanpur, and thereby created a first and continuing mortgage charge over the said properties in favour of the plaintiff to secure repayment of the aforesaid sum of Rupees 60 lacs.

4. The 'Manufacturers Ltd.' paid the first instalment of Rs. 5 lacs. It defaulted to make payment of any other instalment and consequently in Oct., 1976, the plaintiff served a legal notice calling upon them to repay Rs. 56,39,791.66 being the amount outstanding under the aforesaid loan as on Oct. 21, 1976. A similar notice was issued to the 'Jute Mills' also which was duly served on it on Oct 31, 1976.

5. No payment having been made either by the 'Manufacturers Ltd,' or the 'Jute Mills', the plaintiff on or about July 21, 1977, filed a suit (No.315 of 1977) in the Court of the Second Civil Judge, Kanpur, for a mortgage decree against the 'Manufacturers Ltd.' only, for recovery of Rupees 55,27,570.01 being the loan outst