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Checking relevance for Lalit Kumar Jain VS Union of India...
2021 0 Supreme(SC) 254 : The discharge of a surety (or guarantor) does not occur automatically upon the release or discharge of the principal debtor from debt through an involuntary process such as insolvency, liquidation, or operation of law. The liability of a personal guarantor remains enforceable under the independent contract of guarantee, even after the approval of a resolution plan under Section 31 of the Insolvency and Bankruptcy Code, 2016. The court held that the approval of a resolution plan does not ipso facto discharge the personal guarantor’s liabilities, as the guarantor’s obligation arises from a separate and independent contractual relationship with the creditor.Checking relevance for Industrial Finance Corporation Of India LTD. VS Cannanore Spinning And Weaving Mills LTD. ...
2002 3 Supreme 427 : Under Section 141 of the Contract Act, 1872, a surety is discharged from liability if the creditor voluntarily parts with or loses the securities held by them, provided such loss is attributable to the creditor''''s act or omission and not due to a fortuitous event beyond their control. The discharge occurs to the extent of the security lost or dissipated. The surety''''s liability is strict, and it is not discharged merely because the principal debtor is discharged unless such discharge results from the creditor''''s act without the surety''''s consent. The creditor''''s right to proceed against the surety is preserved unless the discharge is caused by the creditor''''s deliberate action. The doctrine of frustration under Section 56 of the Contract Act does not apply in cases of nationalisation or statutory transfer of assets, as the liability of the principal debtor and surety continues despite the change in ownership or mode of recovery. The liability of the surety is not discharged by operation of law, such as nationalisation under the Sick Textile Undertakings (Nationalisation) Act, 1974, as the Act does not discharge the principal debtor''''s liability, nor does it affect the guarantor''''s obligation.Checking relevance for MAHANT SINGH VS UBAYI...
1939 0 Supreme(SC) 13 : A surety is discharged from liability if the creditor, without the surety''''s consent, releases the principal debtor or enters into a binding arrangement with the principal debtor to give them time. The discharge occurs because the surety''''s right to pay the debt and then sue the principal debtor in the creditor''''s name is interfered with. However, if the creditor does not actually release the debt but merely refrains from suing the principal debtor (forbearance), the surety is not discharged unless there is an agreement to that effect. The creditor may preserve their rights against the surety by notifying the principal debtor of such reservation. This reservation is effective even when the creditor agrees not to sue the principal debtor, provided the right to sue the surety is reserved. The surety is also discharged if the creditor''''s act or omission impairs the surety''''s eventual remedy against the principal debtor. The mere withdrawal of a suit against the principal debtor without permission under Order XXIII, Rule 1 of the Code of Civil Procedure does not discharge the surety if the creditor continues to pursue the surety, as this constitutes a reservation of rights. A contract that becomes unenforceable due to procedural rules (e.g., limitation period or procedural defects) does not become void under Section 2(j) of the Indian Contract Act, which only applies to contracts unenforceable by substantive law (e.g., illegal contracts). Therefore, the surety''''s liability remains intact as long as the debt is not actually released.Checking relevance for State Bank Of Saurashtra VS Ghitranjan Rangnath Raja...
1980 0 Supreme(SC) 242 : A surety is discharged from liability if the creditor loses or parts with the security held by it, particularly when the surety was entitled to the benefit of that security. This principle is grounded in the doctrine that a surety, upon payment of the debt, is entitled to all securities held by the creditor, whether known or unknown, and if the creditor loses or permits the security to fall into the possession of the debtor, or fails to make it effectual through proper notice, the surety is discharged to the extent of such security. This rule is reflected in Section 141 of the Indian Contract Act and is supported by English law, as cited in Wulff v. Jay (1872) 7 QB 756 and Ress v. Barrington. The discharge occurs when the creditor''''s actions (such as negligence leading to loss of pledged goods) prevent the surety from recovering through the security. However, this discharge may be excluded by express contractual terms in the guarantee, such as clauses that allow the creditor to vary credit, release securities, or take other securities without affecting the surety’s liability. In this case, clauses 5, 7, and 13 of the letter of guarantee were examined but found not to override the surety’s right to claim discharge under Section 141, as they do not cover loss due to negligence or failure to preserve security.Checking relevance for Amar Chand VS Bhano...
1994 0 Supreme(SC) 1215 : A surety is discharged from liability when the decree-holder compromises with the principal judgment-debtor without reference to the surety. The compromise, by the decree-holder, constitutes a full satisfaction of the decree and releases the surety from further obligation. The liability of a surety is co-extensive with that of the judgment-debtor, and when the decree-holder discharges the principal debtor through compromise, the surety is relieved from liability. This discharge occurs automatically when the compromise is made without the surety''''s consent or knowledge, and the decree-holder cannot thereafter seek recovery from the surety. Thus, the ground for discharge of a surety is a compromise by the decree-holder with the principal judgment-debtor without reference to the surety, resulting in full satisfaction of the decree.
