Legal heirs of a deceased surety can recover amounts paid to discharge surety obligations under Sections 140 and 141 of the Indian Contract Act.

JUDGMENT

This appeal arises out of the judgment and decree rendered by the Sub Court, Pala, in A.S. No.29 of 2021, by which the judgment and decree passed by the Munsiff Court, Kanjirappally, in O.S. No.252 of 2017 was partly modified.

2. The appellant herein is the defendant in the aforesaid suit for recovery of money instituted by the legal heirs of a surety. The appellant, as a principal borrower, availed a loan of Rs.5,00,000/- (Rupees Five Lakhs only) from the Kottayam District Co-operative Bank, Pathanad Branch, with one Varghese, his brother, as guarantor and by offering an extent of 95.96 Ares of property of Varghese as collateral security. On 14.02.2012, Varghese expired, and his rights over the property were devolved upon his legal representatives. On 31.07.2016, an amount of Rs.5,78,147/- (Rupees Five Lakh Seventy Eight Thousand One Hundred and Forty Seven only) was due under the loan account, and the bank initiated measures under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). At that point of time, the legal heirs of the surety, the plaintiffs, went ahead and discharged the loan by remitting a sum of Rs.5,79,808/- (Rupees Five Lakh Seventy Nine Thousand Eight Hundred and Eight only) on 12.8.2016. On the above allegations, the legal heirs of the surety instituted O.S. No.252 of 2017 before the Munsiff Court, Kanjirappally, seeking a decree for realisation of a sum of Rs.6,49,385/- (Rupees Six Lakh Forty Nine Thousand Three Hundred and Eighty Five only) with interest at 12% per annum. Before the trial court, the appellant/defendant did not adduce any oral evidence, but only documentary evidence was produced. Based on the evidence adduced by the parties, the trial court came to the conclusion that the plaintiff is entitled to realise a sum of Rs.6,49,385/- (Rupees Six Lakhs Forty Nine Thousand Three Hundred and Eighty Five only) pendente lite interest at 12% per annum and post decree @ 6% per annum for Rs.5,00,000/- (Rupees Five Lakhs only) till the date of the payment or realisation as the case may be from the defendant and his assets. Aggrieved, the defendant preferred A.S. No.29 of 2021 before the Sub Court, Pala. The first appellate court, on reappreciation of the evidence, found that the appellant is entitled to a limited relief of deduction of a sum of Rs.1,42,097/- (Rupees One Lakh Forty Two Thousand and Ninety Seven only) which was expended for the benefit of the plaintiffs’ predecessor. This amount was found to have been transferred to the account of the plaintiffs’ predecessor going by Exts.X1(b) and X1(c) documents. Accordingly, the judgment and decree of the trial court was modified, and the defendant was directed to pay a sum of Rs.5,07,288/- (Rupees Five Lakh Seven Thousand Two Hundred and Eighty Eight only) with interest at the rate of 6% per annum on Rs.3,57,903/- (Rupees Three Lakh Fifty Seven Thousand Nine Hundred and Three only) from the date of suit till realisation. Hence, the present second appeal.

3. Heard Sri. Abdul Lathief T.M., the learned counsel appearing for the appellant and Sri. Liji J. Vadakkedom, the learned counsel appearing for the respondents.

4. The learned counsel for the appellant contended that, going by the provisions of Sections 140 and 141 of the Indian Contract Act, 1872 , the benefit is conferred only to a surety who discharges the debt on account of the principal debtor. In the scheme of the provisions of the Indian Contract Act, it is not possible to envisage a situation where the legal heirs of the surety step into the shoes of the surety and claim recovery of money paid by them towards discharge of t