G. C. JAIN ( 1 ) IN this somewhat unusual suit, under Order 37 of the Code of Civil Procedure, 1908, the plaintiff, Citibank 1. 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 the textile unit to secure repayment of the aforesaid loan of Rs. 60 lacs. 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 the textile unit to secure repayment of the aforesaid loan of Rs. 60 lacs. On Nov. 21, 1973, the jute Mills 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 Ltd. , 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 outstanding as on date plus interest. In those proceedings, the bank filed an application under O. 2, R. 2, Civil Procedure Code praying for leave to subsequently file a suit in respect of this loan amount against the jute Mills which is stated to have been allowed on Oct. 15, 1977 (admittedly without notice and without hearing the jute Mills ). ( 6 ) IN the Kanpur suit, the parties, i. e. the plaintiff here and the manufacturers Ltd. , filed an application dated Oct. 15, 1977, under 0. 23, R. 3, Civil Procedure Code, for recording a compromise. 15, 1977 (admittedly without notice and without hearing the jute Mills ). ( 6 ) IN the Kanpur suit, the parties, i. e. the plaintiff here and the manufacturers Ltd. , filed an application dated Oct. 15, 1977, under 0. 23, R. 3, Civil Procedure Code, for recording a compromise. Under the terms of the compromise, it was agreed that a final mortgage decree for Rs. 55,27,570. 00 with future interest at 12. 5 per cent per annum and costs be passed in favour of plaintiff against the ( manufacturers Ltd. ). It was further agreed that Mr. S. K. Kapoor, District Govt. Counsel (Civil), be appointed receiver to take immediate possession of the manufacturers Ltd. s properties, including land, building, plant and machinery at Kamlapat Road, Kanpur, which was the subject matter of the mortgage. The Receiver was directed and empowered to take appropriate steps at the earliest to dispose of the mortgaged property in one or more lots and to pay the sale proceeds of all assets so disposed directly to the plaintiff- Bank towards satisfaction of the decretal amount. No sale was, however, to be effected without the prior consent of the plaintiff. It contained certain other terms which are not very relevant. A copy of the application is Ext. D-8. A decree in terms of the compromise was passed by the learned IInd Civil Judge, Kanpur, on Oct. 15, 1977 (Exhibit D-4 ). The Receiver admittedly sold the plant and machinery of the manufacturers Ltd. for a sum of Rs. 45,50,101. 00 in favour of M/s. C. Patel and Co. (P.) Ltd. The sale was admittedly confirmed by the Court. A sum of about Rs. 8 lacs is stated to have been deposited by the auction-purchaser with the Receiver. The learned Und Civil Judge, Kanpur, vide his order dated Dec. 4, 1978, directed the Receiver to deliver the aforesaid plant and machinery to the auction-purchaser. Necessity for direction, it appears, arose because the permission of the Textile Commissioner, which was necessary for effecting delivery, was not forthcoming, and the Court, in the circumstances that no reply was being received from the Textile Commissioner, passed the said order. A writ petition filed by the Textile Commissioner in this behalf was dismissed by the Allahabad High Court on May 8, 1979. A writ petition filed by the Textile Commissioner in this behalf was dismissed by the Allahabad High Court on May 8, 1979. A special leave petition against the dismissal of the writ petition by the High Court was also dismissed by the Supreme Court on Dec. 20, 1979 (Ext. D-5 ). ( 7 ) HOWEVER, in Company Petition No. 2 of 1980, the Allahabad High Court was pleased to order on March 10, 1980, that the Receiver appointed by the Civil Court shall deliver the machineries sold to the auction-purchaser upon realising sale proceeds but retain the said amount until further orders of the Court. The amount so realised was directed to be deposited in a Nationalised Bank or scheduled Bank to earn interest. The sale of land and building was stayed in the meantime. ( 8 ) HAVING thus failed to realise any amount in execution of the mortgage decree passed by the Kanpur Court, the plaintiff- Bank has brought the present suit for recovery of Rs. 77,10,733. 67 Rs. 55,27,570. 00 towards unpaid principal (Rs. 55 lacs) and interest for which the suit was filed against the manufacturers Ltd. at Kanpur; Rupees 15,46,583. 63 towards interest at 12. 5% per annum on Rs. 55 lacs with effect from July 22, 1977, till date, and Rs. 6,36,580. 00 towards costs incurred in the Kanpur suit. ( 9 ) THE allegations are that both the jute Mills and the manufacturers Ltd. approached the bank for the grant of term loan facility of Rs. 60 lacs. Both of them represented that the said loan would be duly repaid to the plaintiff along with interest and bankers charges. They further represented that the repayment of the said loan would be duly secured by a first charge over the fixed assets of both the companies. The loan was sanctioned to both of them though in the name of the manufacturers Ltd. only. In the guarantee deed executed by the jute Mills on Nov. They further represented that the repayment of the said loan would be duly secured by a first charge over the fixed assets of both the companies. The loan was sanctioned to both of them though in the name of the manufacturers Ltd. only. In the guarantee deed executed by the jute Mills on Nov. 21, 1973, inter alia, it was agreed that their obligation to pay was to arise first when notice in writing was given to them by the bank requiring them to pay and any such notice could be given by the bank and the bank could proceed to enforce the obligations and liabilities of the jute Mills under the guarantee deed without first proceeding, or resorting to all or any of the plaintiff s remedies against the principals. The jute Mills further agreed that between the plaintiff and the jute Mills the latter was to be considered as principal debtor to the plaintiff to the extent mentioned in the guarantee deed, i. e. Rs. 60 lacs, in respect of all advances made and to be made and of all facilities granted and to be granted by the bank to the manufacturers Ltd. . The jute Mills also waived their rights of suretiship which were in any way inconsistent with the provisions contained in the guarantee deed. For all these reasons, the plaintiff was entitled to the amount claimed with future interest at 12. 5% per annum. It was also averred that Mr. Naresh M. Bahl, an Assistant Manager of the Bank, had signed and verified the plaint. He was the principal officer of the plaintiff at New Delhi branch and he was also a duly constituted attorney of the plaintiff and was authorised to sign, verify and file suits and other pleadings for and on behalf of the plaintiff. ( 10 ) LEAVE to defend having ultimately been granted, the jute Mills filed a written statement resisting the suit. The allegations that the jute Mills also approached the plaintiff for a term loan facility of Rupees 60 lacs or made representation that the said loan would be duly repaid to the plaintiff with interest etc. were denied. It was averred that the loan was admittedly advanced to manufacturers Ltd. and the averments now made by the plaintiff were contrary to and inconsistent with the stand taken by it in the suit filed in the Kanpur Court. were denied. It was averred that the loan was admittedly advanced to manufacturers Ltd. and the averments now made by the plaintiff were contrary to and inconsistent with the stand taken by it in the suit filed in the Kanpur Court. It was, however, admitted that the defendant- jute Mills executed the deed of guarantee dated Nov. 21, 1973, and also deposited with the plaintiff certain documents of title relating to jute Mills industrial unit situate at Kanpur pursuant to the guarantee. The provisions of the deed of guarantee dated Nov. 21, 1973, including, inter alia, CIs. 4,10 and 13 thereof, in so far as they purported to provide for waiver and/or of taking away and/or impairing and/or giving up of defendant s statutory right of redemption and/or the rights conferred by Ss. 134, 135, 140 and 141 of the Contract Act, were illegal, invalid, void and inoperative in law and could not be enforced against the defendant. It was next averred that the liability of the jute Mills the surety, stood discharged in view of the provisions of S. 141 of the Contract Act on account of the acts and omissions of the plaintiff, namely (1) by filing Suit No. 315 of 1977, in the Court of the IInd Civil Judge, Kanpur, without impleading the defendant- jute Mills therein as a party and further by entering into a compromise with the manufacturers Ltd. without the concurrence of the defendant and obtaining a consent decree dated Oct. 15, 1977, (2) By getting a Receiver appointed by consent of the parties in the said suit of the properties. of manufacturers Ltd. and agreeing to sale/disposal by the Receiver of the security that had been offered by manufacturers Ltd. , and (3) because security having already been out to sale and sold by the Receiver pursuant to the said court decree dated Oct. 15, 1977 for a sum of Rs. 45,50,101. 00. The plant and machinery of the manufacturers Ltd. , it was alleged, were sold with the consent of the plaintiff and the Receiver had received an advance of Rs. 8,50,101. 00 from the auction-purchaser. The sale had been confirmed by the lind Civil Judge, Kanpur, and had become absolute, and the claim of the plaintiff against the defendant thus stood satisfied to the extent of Rs. 45,50,101. 00. 8,50,101. 00 from the auction-purchaser. The sale had been confirmed by the lind Civil Judge, Kanpur, and had become absolute, and the claim of the plaintiff against the defendant thus stood satisfied to the extent of Rs. 45,50,101. 00. The acts done by the plaintiff, it was alleged, were inconsistent with the rights of the defendant- jute Mills as surety or guarantor. The plaintiff had failed and neglected to take effective steps for realisation of the price of the plaint and machinery after the sale thereof which had been confirmed and that the plaintiff was not entitled to receive from the defendant- jute Mills the amount of the consent decree or the costs of that suit. It was also averred that this Court had no territorial jurisdiction to try the case because the plaintiff while obtaining leave under O. 2, R. 2, Civil Procedure Code in the Kanpur suit, had represented that the suit on the basis of the mortgage would be instituted, if at all, against this defendant in that Court only. It was also pleaded that the plaint did not disclose any cause of action for claiming the amount of costs. It was also averred that according to averments made in paras 7, 8, 9 and 10 of the plaint, the defendant was a co-obliger with manufacturers Ltd. and therefore, the suit was misconceived and not maintainable. ( 11 ) ON the pleadings of the parties, the following issues were settled: (1) Whether the plaint has been signed, verified and the suit has been filed by a duly authorised person? OPP (2) Whether the plaint docs not disclose any cause of action for the claim with regard to the costs amounting to Rupees 6,36,580. 00 and there is no right of action, basis or justification for this claim? OPD (3) Whether the suit of the plaintiff against the defendants as a surety is misconceived and not maintainable? OPD (4) Whether defendant stands discharged from its liability as a surety on account of the acts of omission and/or commission on the part of the plaintiff as alleged in para 5 of the preliminary objections contained in the written statement? OPD (5) Whether this Court has no. jurisdiction to try this case as alleged in para 28 of the written statement? OPD (5) Whether this Court has no. jurisdiction to try this case as alleged in para 28 of the written statement? OPD (6) Whether defendants are not liable to pay amount of loan sanctioned by the plaintiff in the name of M/s. J. K. Manufacturers Ltd. , as a principal debtor or co-obliger ? OPD (7) What is the effect of the sale of the properties of J. K. Manufacturers by the Receiver in pursuance of the decree obtained by the plaintiff against M/s. J. K. Manufacturers on the liability of the defendant? (8) Whether the plaintiff is entitled to recover from the defendant the costs incurred by the plaintiff inthe suit filed by it against M/s. J. K. Manufacturers in the Court of IInd Civil Judge, Kanpur? If so, to what amount ? (9) Whether the suit is barred in view of the previous suit filed by the plaintiff against M/s. J. K. Manufacturers Ltd. , in the Court of IInd Civil Judge, Kanpur? (10) Whether the amount for which the decree has been passed by Kanpur Court can be claimed in this suit by the plaintiff ? OPP (11) Whether the loan was sanctioned both to the defendant and M/s. J. K. Manufacturers ? (12) In case it was proved that the loan was not sanctioned in favour of the defendant, what is its effect on the maintainability of the suit? (13) To what amount, if any, is the plaintiff entitled? (14) Whether the defendant has no right to the benefit of the securities held by the plaintiff and furnished to it by M/s. J. K. Manufacturers Ltd. because of the agreement dated 25th Sept. , 1971, as modified on 3rd Oct. , 1973, and in view of the term of the guarantee executed on 21st Nov. , 1973 OPP (15) Relief. Issue No. 1 : Mr. N. M. Bahl, as P. W. 1, deposed that the plaint had been signed and verified by him. He was a duly constituted attorney of the bank of virtue of a power of attorney executed in his favour by Mr. A. H. Williams. He had brought the original power of attorney with him. Ext. P-40 was its photo-copy. He also produced Exhibit P-41, photo-copy of the power of attorney in favour of Mr. A. H. Williams duly authenticated by the Notary Public. A. H. Williams. He had brought the original power of attorney with him. Ext. P-40 was its photo-copy. He also produced Exhibit P-41, photo-copy of the power of attorney in favour of Mr. A. H. Williams duly authenticated by the Notary Public. Later on, the original power of attorney in favour of Mr. A. H. Williams was produced on record. It was exhibited as Ext. P-42/a. In cross-examination, he stated that he did not remember as to who executed the power of attorney in favour of Mr. Williams. He did not know the procedure prescribed under the articles for the purpose of delegating the authority on behalf of the bank. He did not know whether any resolution had been passed by the Board of Directors to execute a power of attorney in favour of Mr. Williams. He did not know what was the quorum required for a meeting for passing such a resolution. It was suggested to him that no resolution was ever passed for executing the power of attorney in favour of Mr. Williams and, in reply, he stated that there must have been a resolution, but he had no knowledge about it, not had he seen it nor could he give its particulars. ( 12 ) EXT. P-40 is a photo-copy of the power of attorney executed by Mr. A. H. Williams in favour of Mr. N. M. Bahl conferring on him various powers including powers to represent and defend the bank and its interest before any or all Judges and Courts of all classes and jurisdictions in any action, suit or proceeding in which bank may be a party or may be interested, in administrative, civil criminal contentions whether as a plaintiff or defendant, with power to institute actions etc. Thus, under the power of attorney Mr. N. M. Bahl has been duly authorised by Mr. Williams to file suits and to sign and verify the pleadings on behalf of the bank. The power of attorney is duly authenticated by a notary public Mr. Damodar Devji Damodar. Therefore, under S. 85 of the Evidence Act, its due execution and authentication shall be presumed. This was not disputed. Thus, it has been proved that Mr. Williams had executed the power of attorney, copy Exhibit P-40, in favour of Mr. The power of attorney is duly authenticated by a notary public Mr. Damodar Devji Damodar. Therefore, under S. 85 of the Evidence Act, its due execution and authentication shall be presumed. This was not disputed. Thus, it has been proved that Mr. Williams had executed the power of attorney, copy Exhibit P-40, in favour of Mr. N. M. Bahl, who has actually signed and verified the plaint and filed the suit, empowering him to sign and verify the plaint and file the suit. ( 13 ) EXHIBIT P-42-A is the original power of attorney executed by Mr. Walter R. Humphrey (Executing Officer) and Mr. Carl W. Desch (Cashier) for First National City Bank. It bears the seal of the bank. By this power of attorney, the bank conferred power on Mr. Williams including the powers of filing suits on behalf of the bank etc. He was also empowered to substitute or delegate this power of attorney in whole or in part in favour of such one or more employees of the bank, he may deem advisable, but without divesting himself of any of the powers granted to him by this power of attorney, and to grant and execute in favour of anyone or more such employees, powers of attorney containing all or such authorisation as he may deem advisable. ( 14 ) THIS power of attorney has been authenticated by John R. A. Beatty, Notary Public, State of New York, and bears his leal. Mr. Norman Goodman, Country Clerk and Clerk of the Supreme Court of the State of New York, in and for the country of New York, has certified that Mr. John R. A. Beatty, was Notary Public in and for the State of New York, duly commissioned, sworn and qualified to act as such. The seal of the Clerk of the Country of New York, State of New York, United States of America, bears the certificate of Vice-Counsul, Consulate General of India, New York, for the legalization only of the teal of the Clerk of the Country of New York, State of New York, United States of America. The authentication by the aforesaid Notary Public reads as under : "in the City Country and State of New York, United States of America, on this 27th day of Feb. The authentication by the aforesaid Notary Public reads as under : "in the City Country and State of New York, United States of America, on this 27th day of Feb. , 1976 before me a Notary Public in and for the State and country of New York, United States of America, and the undersigned resident witnesses, legally qualified and personally known to me, appeared: (1) WALTER R. HUMPHREY (hereinafter referred to as the "executing Officer") a Banker domiciled in Central Islip, New York, and holding the office of Vice-President in FIRST NATIONAL CITY BANK (hereinafter referred to as the "bank"), a national banking association duly constituted, registered and in existence in accordance with the laws of the United States of America now in force and (2) CARL. W. DESCH, a Banker domiciled in Garden City, New York, the Cashier of the Bank (hereinafter referred to as, and in his capacity of, "cashier" ). I, the Notary Public, being as Attorney- at-law, as hereinbelow stated, do hereby CERTIFY AND ATTEST: A. That the Executing Officer and the Cashier are of full age, competent to act in the premises to me personally known and that they are authorized to execute this instrument in virtue of the powers granted to them by and under the By-Laws of the bank and the laws of the United States of America, and that the Executing Officer said that he on the one hand hereby revokes and cancels any instrument of power of attorney previously executed, with the exception of that certain instrument executed on Feb. 27, 1976, on behalf of the Bank in favour of ALLAN HENRY WILLIAMS (hereinafter referred to as the "attorney-in-fact") of legal age, Banker, and now residing in India, and that he (the Executing Officer) on the other hand, does hereby authorize and empower the Attorney-in-fact, acting in the name or on behalf of the Bank, or any of its Branches, or any interest it or they may have or represent, as follows: XX XX XX XX" It also contains the following recitals: B. That the Executing Officer also said that the Bank hereby ratifies and confirms all that the Attorney-in-fact may or shall lawfully do or cause to be done within the powers conferred upon him by virtue of this instrument, including that which he may do or cause to be done after the revocation of the said powers but before notification of such revocation. C. That the Cashier is the Secretary of the Board of Directors of the Bank and that he exhibited to me the Minute Book of the Bank which verifies each of the following to be true and correct: The Bye-laws of the said Bank, as now in force, contain among others the following provisions: "article IV""officers AND AGENTS" "section 9. CASHIER. The Board of Directors shall appoint a Cashier, who shall be the Secretary of the Board and of the Executive Committee, and shall keep accurate minutes of their meetings. He shall attend to the giving of all notices required by these Bye-laws to be given. He shall be Custodian of the corporate seal records, documents, and papers of the Association. He shall have and may exercise any and all other powers and duties pertaining by law or regulation to the office of Cashier, or imposed by these Bye-laws. He shall also have such further powers and duties as may from time to time be assigned to him by the Board of Directors, the Chairman, the President, or the Chairman of the Executive Committee. * * * "section 12. VICE-PRESIDENTS. . . . . . Each Vice-President shall. . . . . . . . also have such further powers and duties as may from time to time be assigned to him by the Board of Directors, the Chairman, the President, or the Chairman of the "executive Committee". 2. * * * "section 12. VICE-PRESIDENTS. . . . . . Each Vice-President shall. . . . . . . . also have such further powers and duties as may from time to time be assigned to him by the Board of Directors, the Chairman, the President, or the Chairman of the "executive Committee". 2. The Board of Directors of the Bank, at its organization meeting, duly held with a legal quorum on March 18, 1975 elected the Executing Officer as a Vice-president and the Cashier as such, of the Bank, and such elections have continued, and are now in full force and effect 3. That the Cashier stated to me that under Art. IV, Sec. 12 of the Bye-laws of the Bank as hereinbefore in "c" set forth, the Executing Officer has had duly conferred on him the power to execute this power of Attorney. D. That the Bank exists in perpetuity in accordance with the laws of the United States of America. E. That I am a Notary Public in the State of New York, residing in New York country of that State, and as such Notary Public are duly authorized to act as such in the country of New York, that I am also an Attorney-at-Law, duly authorized to practice as such in the State of New York and that I have my office at No. 399, Park Avenue in the City and County of New York, that the Executing Officer and the Cashier are now 'in the exercise of their respective offices as hereinbefore stated, and that the Executing Officer and the Cashier have declared before me under their most absolute responsibility that the particulars contained herein are in full force. F. That this document is executed after I had made to the Executing Officer and the Cashier all the legal admonitions and after they had read this instrument; that it is executed in accordance with the laws of the United States of America and of the State of New York, United States of America, and with the extrinsic requisites and formalities that said laws require in order to constitute the same a public document. For FIRST NATIONAL CITY BANK SD/- Walter R. Humphrey (Executing Officer) Witnesses: ( 15 ) THE contention of Mr. For FIRST NATIONAL CITY BANK SD/- Walter R. Humphrey (Executing Officer) Witnesses: ( 15 ) THE contention of Mr. Anil Divan, learned counsel appearing for the defendant, is that there was no oral or documentary evidence to prove that the said two officers, namely, Mr. Walter R. Humphrey and Mr. Carl W. Desch, were duly authorised by the Bank by means of a resolution to execute this power of Attorney in favour of Mr. Williams. Power of Attorney was a document meant to identify as to who was the principal, i. e. the donor of the powers, who was the donee, and what was the extent of the powers subject matter of donation. All that could be presumed under Sec. 85 of the Evidence Act was that these two officers put their signatures on the power of Attorney, that they were duly identified and were genuine persons and further that the power of Attorney contained authentication by the Notary Public, which in other words, meant that it contained genuine signatures of the Notary Public, proving the act of authentication, and nothing more. According to the learned counsel, no presumption could be raised that the said two officers were competent to execute the power of Attorney on behalf of the plaintiff-Bank. ( 16 ) ON the other hand, Mr. Rajiv Sawhney, learned counsel appearing for the plaintiff, contended that under S. 85 of the Evidence Act, there is a presumption that a power of Attorney duly authenticated was executed by the person executing it, the person, it was argued, would include a natural person as well as legal person like a corporate body. Exhibit P-42/a was executed by the plaintiff-Bank. The two officers signed on it for the plaintiff-Bank. It contained the seal of the Bank and it would thus be presumed that it was executed by the plaintiff-Bank. He also contended that there was a lot of difference between 'authentication' and 'attestation'. 'authentication' was a step forward than 'attestation'. The former meant that the power of Attorney was in proper form of law which would mean that the officers executing it on behalf of the Bank were duly authorised to do so. Section 85 of the Evidence Act reads as under: __ "presumption as powers of Attorney. 'authentication' was a step forward than 'attestation'. The former meant that the power of Attorney was in proper form of law which would mean that the officers executing it on behalf of the Bank were duly authorised to do so. Section 85 of the Evidence Act reads as under: __ "presumption as powers of Attorney. The Court shall presume that every document purporting to be a power of Attorney, and to have been executed before, and authenticated by, a Notary Public, or any Court, Judge, Magistrate, Indian consul or Vice-Consul or representatives of the Central Government, was so executed and authenticated. " ( 17 ) FOR raising a presumption under this section, twin requirements to be fulfilled are: (1) that the document in question must purport to be a power of Attorney, and (2) that it must purport to have been executed before and authenticated by a Notary Public, or any Court, Judge, Magistrate, Indian Consul, or Vice-Consul, or representative of the Central Government. Exhibit P-42/a is a document which purports to be a power of Attorney. It further purports to have been executed before and authenticated by a Notary Public. Thus, both these requirements stand fulfilled and there is no dispute to this extent. ( 18 ) WHAT presumption has to be raised under Section 85 of the Evidence Act? Section 85 says that the Court shall presume that such a document was so executed and authenticated. Executed by whom: Obviously by the person purporting to have executed the power of attorney before the Notary Public. Ex. P-42/a is purported to have been executed by Walter. R. Humphrey, Executing Officer, and Carl W. Desch, Cashier, for the First National City Bank. It bears the seal of the bank. The real executant or the donor of powers is, therefore, the First National City Bank Section 85 in terms makes no distinction between natural person and legal person. Thus, a presumption would have to be raised under S. 85 that this power of attorney had been executed by the said bank. In other words, it will also be presumed that the two officers had the authority to execute the power of attorney on behalf of the bank. ( 19 ) THE authentication is not merely attestation but something more. In other words, it will also be presumed that the two officers had the authority to execute the power of attorney on behalf of the bank. ( 19 ) THE authentication is not merely attestation but something more. According to Law Laxicon by T. P. Mukherjee and K. K. Singh, authentication connotes an attestation made by an authorised officer by which he certifies that a record is in due form of law. The words 'due form of Law' are very important and lend support to the contention of the learned counsel for the plaintiff, namely, that under Section 85 a presumption would arise that the two officers who executed the power of attorney on behalf of the bank were competent to do so. The nature and manner of the authentication by the Notary Public also support this contention. If it was not required of the Notary Public to satisfy himself about the competence of these two officers to execute the power of attorney, there was no necessity for him to satisfy himself about their power to execute the power of attorney. ( 20 ) IN the absence of the provisions contained in Section 85 of the Evidence Act, any party to a suit etc. relying on a power of attorney would have to prove it like any other document by producing in the witness- box the executant of the document, or the person in whose presence it was so executed, or the person acquainted with the signatures of the executant etc. , as the case may be. If that party is a company corporated in India or in any other country, it would be further required to prove that the person of persons executing the power of attorney on its behalf had been duly authorised by means of a reasolution duly passed in accordance with law and the articles of association. The purpose of Section 85, in my view, is to eliminate all this cumbersome evidence in case such a power of attorney is executed before and authenticated by a Notary Public, or other authorities mentioned therein. If evidence to prove these facts except the facts of execution by the executant, was insisted upon most of the purpose of Section 85 would be frustrated specially in these days of prevalent international trade. If evidence to prove these facts except the facts of execution by the executant, was insisted upon most of the purpose of Section 85 would be frustrated specially in these days of prevalent international trade. ( 21 ) THIS very question came up for consideration before this Court in National Grindlays Bank v. Radio Electronics Corporation P. Ltd. , (1978 Rajdhani LR 217 ). After detailed discussion. Gill, J. upon examining the various authorities and meaning of the word 'authentication' held as under: "in my view Section 85 (of the Evidence Act) does not draw any distinction between the kind of documents, viz: power of attorney executed by an individual and the one executed on behalf of a Company. Authentication of any of these instruments by a Notary Public raised a legal presumption that the same has been duly executed and the person or persons, who had executed, had the authority to do so. Undoubtedly such a presumption is not conclusive, being rebuttable. The other party is, therefore, legally entitled to disprove such a presumption. The reason to incorporate such a provision in quite obvious. Its inclusion is intended to obviate the production of evidence as is otherwise enjoined to prove the execution of the document. Embarking on an inquiry and demanding proof about the authority of the executant would frustrate the very purpose for which Section 85 has been engrafted. Moreover, asking for proof would have far reaching consequences. Apart from entailing delay and unnecessary expense, it would also hamper the entire trade, more particularly the international trade. Thus, the interpretation placed by the learned counsel for the defendants does not reflect or effectuate the real legislative intention. It, on the other hand, unwarrantedly restricts and whittles down the true meaning and legitimate scope of an unambiguous provision. "similar view was taken by Sultan Singh J. , in Suit No. 671/77, Bank of India v. Ajaib Singh Pritam Singh decided on April 20, 1979 : (reported in AIR 1979 NOC 199 ). It, on the other hand, unwarrantedly restricts and whittles down the true meaning and legitimate scope of an unambiguous provision. "similar view was taken by Sultan Singh J. , in Suit No. 671/77, Bank of India v. Ajaib Singh Pritam Singh decided on April 20, 1979 : (reported in AIR 1979 NOC 199 ). Repelling the contention of the defendants to the contrary, it was observed as under : 'the contention of the learned counsel for defendants 1 to 3 is that there is a presumption of the execution of power of attorney i. e. the signatures of the executant on the power of attorney, but there is no presumption that the persons executing the power of attorney on behalf of the plaintiff- bank were duly authorised to execute such power of attorney. I do not agree. If the contention of the learned counsel for the defendants is accepted. Section 85 of the Evidence Act would become redundant. The purpose of Section 85 of the Evidence Act is that the power of attornies are executed throughout the world and if such power of attorney is executed and authenticated by a Notary Public or other officer as mentioned in Section 85 of the Evidence Act, the Court is bound to presume that the power of attorney was duly executed and authenticated. This presumption, however is a rebuttal presumption and the person challenging the authority of the attorney under such power of attorney is to prove that such power of attorney is invalid or that the person acting on the basis of such power of attorney is not duly authorised. "the decision of Gill, J. referred to above, was followed. This presumption, however is a rebuttal presumption and the person challenging the authority of the attorney under such power of attorney is to prove that such power of attorney is invalid or that the person acting on the basis of such power of attorney is not duly authorised. "the decision of Gill, J. referred to above, was followed. ( 22 ) IN National and Grindlays Bank Ltd. v. World Science News, (AIR 1976 Delhi 263), the question whether the facts that the person who had executed the power of attorney on behalf of a body corporate had the authority to do so was to be the presumption or not, was not urged or decided as such, but on the production of a similar power of attorney duly authenticated by a Notary Public and relying on Section 85 of the Evidence Act the onus to prove whether the suit had been instituted by a duly authorised person, was placed on the defendant The relevant observations at page 264 read as under: "the document in the present case is a power of attorney and again on the face of it shows to have been executed before and authenticated by a notary public. In view of Section 85 of the Evidence Act, the Court has to presume that it was so executed and authenticated. Once the original document is produced purporting to be a power of attorney so executed and attested as stated in Section 85 of the Evidence Act, the Court has to presume that it was so executed and authenticated. The provision is mandatory and it is open to the Court to presume that all the necessary requirements for the proper execution of the power of attorney have been duly fulfilled. There is no doubt that the section is not exhaustive and there are different legal modes of executing a power of attorney, but once the power of attorney on its face shows to have been executed and authenticated by a notary public the Court has to so presume that it was so executed and authenticated. "this Court is thus constantly taking the view that under Section 85 of the Evidence Act, it would also be presumed that the person executing the power of attorney on behalf of a corporate body was competent to do so. I find no reason to take a difierent view. "this Court is thus constantly taking the view that under Section 85 of the Evidence Act, it would also be presumed that the person executing the power of attorney on behalf of a corporate body was competent to do so. I find no reason to take a difierent view. ( 23 ) ON behalf of the defendant reliance has been placed on various authorities. The first judgment is in Suit No. 316 of 1966 (Caltex (India) Limited v. Faridabad Glass Works Private Limited) decided by P. N. Khanna, J. , on November 8, 1969. The decision in this judgment is of no help to the defendant. The suit in that case had been filed by one Tej Pal Singh and to prove that he was duly authorised to do so, he produced power of attorney executed in his favour by one Vincent de paul Ryan, General Manager of Caltex (India) Limited in India. To prove that the said Ryan was competent to execute the power of attorney, on behalf of the company, the plaintiff earlier produced a copy of the resolution of the Board of Directors of the plaintiff company, but later on, on being permitted to lead additional evidence produced on affidavit of the plaintiff attested by a Notary Public and counter- signed by the Indian Consul in New York stating therein that the resolution, reproducted in the affidavit, had been passed by the Board of Directors of the plaintiff company. It was held that the said affidavit though dulyattested was not sufficient to prove the board resolution. The question of the extent of the presumption which is to be raised under Section 85 was not at all involved in that case. ( 24 ) IN Harihar Prasad Singh v. Deonarain Prasad, ( AIR 1956 SC 305 ), the question which came for determination was regarding the presumption to be raised under Section 90 of the Evidence Act. It was held that the presumption enacted in Section 90 could be raised with reference to original documents and not to copies thereof. It was further held that if the document happened to be signed by the agent of the person against whom the presumption is sought to be raised and there is no other proof that he was an agent. It was further held that if the document happened to be signed by the agent of the person against whom the presumption is sought to be raised and there is no other proof that he was an agent. Section 90 does not authorise the raising of the presumption as to the existence of the authority of the agent to represent that person. Much help cannot be obtained from this decision for the simple reason that the extent of presumption which has to be raised under Section 85 was not involved in that case. Section 90 empowers the Court to presume in case of thirty years old document. In certain circumstances, that signature and every other part of that document which purported to be in the handwriting of any particular person was in that person's handwriting and in case of a document executed or attested that it was duly executed and attested by the person by whom it purported to be executed. It does not speak about the presumption regarding the authentication. As observed above, authentication is something more than attestation. ( 25 ) IN Siva Pratap Bhattadu v. Commr. of I. T. , Madras (AIR 1924 Mad 880), it was held that a statement contained in a power of attorney that a particular firm was a joint family would not prove that fact itself. There is no quarrel so far as the principle is concerned, but this principle is not helpful in determining the scope of the presumption to be raised under Section 85. ( 26 ) IN Bhagwat Prashad v. Zafar Mohammad (AIR 1926 Oudh 241), to prove that one Ram Bahadur purported to act as agent of his father, reliance had been placed on the endorsement made by the Sub-Registrar at the time of registering a mortgage deed. It was held that that endorsement was prima facie evidence that the power of attorney under which it was presented was regular in all respects and nothing more. This decision is not applicable to the question involved in this case which is entirely different. ( 27 ) THE last authority relied is the decision of Allahabad High Court in Wall Mohammad Chaudhari v. Jamal Uddin Chaudhari ( AIR 1950 All 524 ). In this case, it was held that the authentication under S. 85 was not merely attestation. This decision is not applicable to the question involved in this case which is entirely different. ( 27 ) THE last authority relied is the decision of Allahabad High Court in Wall Mohammad Chaudhari v. Jamal Uddin Chaudhari ( AIR 1950 All 524 ). In this case, it was held that the authentication under S. 85 was not merely attestation. It means that the person authenticating has assured himself of the identity of the person who has signed the instrument as well as the fact of execution. I fail to understand as to how this authority helps the defendant. It was nowhere held that under Section 85 it could not be presumed that the person executing the power of attorney on behalf of a corporate authority had the requisite authority to execute it on behalf of that authority. It was then argued that the statement made by the Notary Public in the power of attorney regarding the articles Of plaintiff bank being contents of documents could be proved only by producing memorandum of articles. Reliance was placed on a decision of the Judicial Commissioner in Nar Bahadur v. Anil Krishna (AIR 1970 Manipur 57 ). In this case, it was held that the statements contained in the powers of attorney have to be proved like any other statement. There is no quarrel so far as the principle of law is concerned. But, I have referred to these statements nor for the purpose of using them as evidence to prove those facts but only to show the act of notarisation. Those statements do show that the Notary Public had satisfied himself about the authority of the executants of the power of attorney. ( 28 ) IT was also contended that the contention canvassed on behalf of the plaintiff, if accepted, may result into absurdities inasmuch as anybody may execute a power of attorney purported to be on behalf of a legal person and get it notarised and then the person in whose favour it has been executed may execute similar power of attorney and so on, which was likely to create chaos. There is no merit in this contention for the simple reason that the presumption raised is a rebuttable presumption. ( 29 ) I consequently, hold that Mr. M. M. Bahl was competent to sign and verify the plaint and file the suit. There is no merit in this contention for the simple reason that the presumption raised is a rebuttable presumption. ( 29 ) I consequently, hold that Mr. M. M. Bahl was competent to sign and verify the plaint and file the suit. Issue is decided in favour of the plaintiff. Issue No. 2: The plaintiff inter alia, has claimed a sum of Rs. 6,36,580. 00 towards costs incurred by it in the suit filed in the Court of IInd Civil Judge, Kanpur, for enforcement of the mortgage created by "manufacturers Ltd. " in its favour. For the purpose of recording a finding if the plaint discloses a cause of action regarding this claim, the Court has to see the allegation in the plaint only and has not to take into consideration the defence plea. The plaintiff's claim is that under the guarantee deed dated November 21, 1973, (Ex. P-14), it was entitled to the costs. Under para 1 of the guarantee deed the defendant 'jute Mills' had guaranteed due payment and to discharge all the principal liabilities under the loan agreement including the interest and in respect of costs etc. In presence of these averments, it cannot be said that the plaint does not disclose any cause of action regarding this claim. Whether on the examination of the entire document and other documents and circumstances of the case, the plaintiff is entitled to this amount or not is a different matter. But, it cannot be said that the plaint did not disclose any cause of action regarding this claim. The plaint does disclose a cause of action. This issue is decided against the defendant. Issue No. 5: In para 28 of the plaint, it was pleaded that the loan was advanced by the plaintiff at New Delhi and it was repayable in New Delhi, and, therefore, the Court had the jurisdiction to dispose of the case. These allegations were not denied by the defendant in its written statement. It was, however, pleaded that while seeking the relief, under O. 2, R. 2 of the Civil P. C. , in the Kanpur suit of enforcing the mortgage created in its favour the plaintiff has averred that the said suit on the basis of the mortgage would be instituted, if at all, against the present defendant, only at Kanpur. These allegations, even if correct, make no difference. These allegations, even if correct, make no difference. First of all, according to the defendant, it was not a party to thoseproceedings. That order, therefore, does not affect its rights and consequently would not create rights in its favour. Moreover, it is not a suit for enforcing the mortgage. It is a suit under Order 37 for recovery of the money as observed earlier. As a matter of fact this issue was not pressed. The issue is decided against the defendant. Issues Nos. 3, 4 and 7, 12 and 14: The claim in the present suit- is based on a deed of guarantee (Ex. P-14) admittedly executed by the defendant 'jute Mills' in favour of the plaintiff. The plaintiff's case in the plaint is that the request for loan was made to it by the 'manufacturers Ltd. ' and the defendant 'jute Mills' Loan was sanctioned in favour of both of them. The relationship created under the deed of guarantee between the plaintiff and the defendant was that of a creditor and principal debtor and liability of the defendant 'jute Mills' was that of a principal debtor. On the other hand, defendant's contention is that it had executed a deed of guarantee (Ex. P-14) whereby it guaranteed the due payment and discharge of the principal liabilities to the bank, under the loan agreement executed in favour of the plaintiff bank by the 'manufacturers Ltd. ' on November 21, 1973, subject to the conditions contained in the said deed of guarantee. Its liability was that of a surety and its liability stood discharged on account of various acts and omissions committed by the plaintiff, which will be noticed later on. ( 30 ) THE question whether the defendant's liability was that of a principal debtor would be decided under other issues, if need be. For purposes of deciding these issues, it would be presumed that liability of the defendant 'jute Mills' was that of surety. ( 31 ) ACCORDING to Section 126 of the Indian Contract Act, a 'contract of guarantee' is a contract to perform the promise, or discharge the liability, of a third person in case of his default. For purposes of deciding these issues, it would be presumed that liability of the defendant 'jute Mills' was that of surety. ( 31 ) ACCORDING to Section 126 of the Indian Contract Act, a 'contract of guarantee' is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the surety : the person in respect of whose default the guarantee is given is called the 'principal debtor' and the person to whom the guarantee is given is called the 'creditor' A guarantee may be either oral or written. ( 32 ) IN the present case, it is the defendant's own case that the defendant was the surety and the plaintiff bank was the creditor. Examination of Section 126 reveals that the liability of surety arises only on the default of the principal debtor. It is not disputed in the present case that the principal debtor, i. e. 'manufacturers Ltd. ' has failed to discharge its liability under the loan agreement dated November 21, 1973, which liability the defendant has agreed to discharge under the deed of guarantee (Exhibit P-14 ). It is admitted that the plaintiff bank filed a suit for the recovery of the amount due to them under the said agreement and obtained a decree for Rs. 55,27,570 with interest at the rate of 12. 5% from tha date of the suit till repayment. It is otherwise clear from the copy of the decree (Extribit D-8 ). It is not disputed that the plaintiff bank has not been paid a single penny in execution of the said decree against the 'manufacturers Ltd. ' passed by. the IInd Civil Judge, Kanpur. In para 23 of the plaint, it was pleaded by the plaintiff that it had not recovered any money under the said decree passed by the Kanpur Court. This allegation as such was not denied in the written statement. It was, however, pleaded that in pursuance of the decree passed by the said Court on October 15, 1977 the machinery and plant had been sold for Rs. 45,50,101. 00 and because of the said sale which had been confirmed by the Court, the defendant's liability, if any, stood discharged. It was, however, pleaded that in pursuance of the decree passed by the said Court on October 15, 1977 the machinery and plant had been sold for Rs. 45,50,101. 00 and because of the said sale which had been confirmed by the Court, the defendant's liability, if any, stood discharged. There is no specific plea in the written statement that any amount out of this sale amount or otherwise had been paid to the plaintiff in execution of the said decree. I have already observed that the payment had been stayed by the Allahabad High Court on a petition filed by Ram Achhyavar Singh against 'manufacturers Ltd. ' vide its order dated March 10, 1980, copy Ex. D-6. It has been proved that the plaintiff-bank has not been paid anything in execution of the decree against the 'manufacturers Ltd. ' Thus, in my view, there is a clear default on the part of the principal debtor giving rise to the liability of the surety. As a matter of fact, this fact was not much disputed. ( 33 ) THE plea of the defendant, however, is that this liability stood discharged on account of the acts and omissions on the part of the plaintiff namely (i) filing of Suit No. 315 of 1977 in the Court of the IInd Civil Judge, Kanpur, for the recovery of the loan amount against the Principal debtor, i. e. "manufacturers Ltd. ' without impleading the defendant 'jute Mills' as a party therein and further by entering into a compromise with 'manufacturers Ltd. ' without the concurrence of the present defendant and obtaining the consent decree dated October 15, 1977, and (2) by getting the receiver appointed by consent of the parties in that suit and agreeing to sale/disposal by the receiver of the security that had been offered by 'manufacturers Ltd. ' and getting a part of the security, i. e. the plant and machinery, put to sale and sold by the receiver in pursuance of the said Court decree and giving its consent to the sale which was later on confirmed by the Court. Section 135 of the Indian Contract Act reads : "a contract between the creditor and the principal debtor by which the creditor makes a composition with or promises to give time to or not to sue, the principal debtor discharges the surety unless the surety assents to such contract. Section 135 of the Indian Contract Act reads : "a contract between the creditor and the principal debtor by which the creditor makes a composition with or promises to give time to or not to sue, the principal debtor discharges the surety unless the surety assents to such contract. "whether the act of the plaintiff in obtaining a consent decree against the 'manufacturers Ltd. ', the principal debtor amounts to 'composition' within the meaning of Sec. 135, is the question which requires determination. To decide this question, it is necessary to examine the claim of the plaintiff in the suit filed in the Kanpur Court, the terms of the compromise and the decree passed on the basis of the compromise. ( 34 ) EX. D-l is the copy of the plaint in Suit No. 315 of 1977 filed by the plaintiff against the 'manufacturers Ltd. ' in the Courtof the Und Civil Judge, Kanpur. A perusal of this document shows that the suit was filed by the plaintiff only against the 'manufacturers Ltd. '. The suit was based on the basis of the equitable mortgage created by the 'manufacturers Ltd. ' in favour of the plaintiff as the security for the due repayment of the loan of Rs. 60 lacs advanced to 'manufacturers Ltd. ' The plaintiff sought a preliminary decree against the 'manufacturers Ltd. ' for a sum of Rs. 55,27,570. 01 (Rs. 55 lacs towards unpaid principal and Rs. 27,570. 01 towards unpaid interest up to the date of the filing of the said suit) with future interest from the date of the suit till the date of the decree and, thereafter, on the decretal amount till repayment, at 12. 5% per annum. The plaintiff also prayed for a final decree for the sale of mortgage property comprising the 'manufacturers Ltd. 's' factory, land, building, plant and machinery installed/affixed and/or lying therein together with affixations and fittings etc. at Kamlapat Road, Kanpur, U. P. , in the event of the said "manufacturers Ltd. ' failing to comply with the preliminary decree. ( 35 ) EX. D-8 is the copy of the application made under O. 23, R. 3, Civil Procedure Code by the parties in the said suit. at Kamlapat Road, Kanpur, U. P. , in the event of the said "manufacturers Ltd. ' failing to comply with the preliminary decree. ( 35 ) EX. D-8 is the copy of the application made under O. 23, R. 3, Civil Procedure Code by the parties in the said suit. According to the document the parties to the suit agreed to compromise the suit on the following terms: " (I) That the suit be decreed and final mortgage decree be passed in favour of the plaintiff for Rs. 55,27,5701- with interest from the date of the suit till final repayment @ 12. 5% per annum. Further, costs of the suit be awarded to the plaintiff as prayed for. (ii) That Shri S. K. Kapoor, Advocate, District, Government Council (Civil) Kanpur be appointed Receiver to take immediate possession of defendant Company's properties including land, buildings, plant and machinery at Kamlapat Road, Kanpur, mortgaged to the bank and to immediately prepare an inventory thereof. (iii) That the Receiver be directed and empowered to take appropriate steps at the earliest to dispose of the mortgaged properties in one or more lots. The sale proceeds of all assets so disposed be paid over directly to the plaintiff towards the decretal amount. (iv) That the Receiver be empowered to dispose of the assets by public auction and/or by private sale and the expenses if any of such sale shall be paid out of the sale proceeds and the net proceeds will be paid by Receiver to plaintiff. However, no sales shall be effected without the prior consent of the plaintiff. (v) That pending the sale of the godowns and the buildings at Kamlapat Road. Kanpur, the Receiver be empowered to license out the same with prior written consent of the plaintiff and on such terms as the plaintiff shall have previously approved. Compensation, licence fee etc. realised thereupon shall be paid over directly to the plaintiff towards the decretal amount. (vi) That the Receiver's remuneration be fixed by this Hon'ble Court at Rs. 500. 00 per month plus out of pocket expenses. The fees payable to the Receiver shall be costs in the suit but at the first instance shall be paid by plaintiff/decree holder. (vii) That on the decree being satisfied, the remaining assets and funds, if any, in the hands of the Receiver shall be handed/paid over to the defendant. 500. 00 per month plus out of pocket expenses. The fees payable to the Receiver shall be costs in the suit but at the first instance shall be paid by plaintiff/decree holder. (vii) That on the decree being satisfied, the remaining assets and funds, if any, in the hands of the Receiver shall be handed/paid over to the defendant. (viii) That the parties be empowered to move this Hon'ble Court for further directions as may be required from time to time. " ( 36 ) EX. D-4 is the copy of the judgment of the IInd Civil Judge dated October 15. 1977, deciding the suit in terms of the compromise which was to form part of the decree. The final decree was directed to be prepared accordingly. ( 37 ) AN examination of the claim in the plaint and the terms of the compromise reveal that the consent decree was for the full amount of Rs. 55,27,570. 00 with future interest from the date of the suit till final payment at 12. 5%. Instead of a preliminary mortgage decree, a final mortgage decree was passed. I fail to understand as to how such a decree can fall within the purview of the provisions contained in Section 135 of the Indian Contract Act. If the principal debtor, the defendant in a suit, concedes judgment by filing the written statement admitting the allegations in the plaint as correct and a decree follows, can it be said that the plaintiff in that case had made a 'composition' with the principal debtor within the meaning of Section 135. Obviously, no such conclusion can be drawn unless it is the result of the fraud or collusion. An honest defendant is not supposed to contest the suit when there is no defence open to him. In the present case, the terms contained in the application under Order 23, Rule 3, Civil Procedure Code amount to admitting the claim of the plaintiff in toto. Such a consent decree would not be covered by the provisions of S. 135. Filing a suit by the creditor against the principal debtor and obtaining a decree for the full amount would not by any stretch of imagination amount to 'composition' resulting in the discharge of liability of the surety. Such a consent decree would not be covered by the provisions of S. 135. Filing a suit by the creditor against the principal debtor and obtaining a decree for the full amount would not by any stretch of imagination amount to 'composition' resulting in the discharge of liability of the surety. It would not make the slightest difference if the decree is a consent decree, especially in this case when the creditor by way of the consent decree got 100% relief, Ordinarily, the plaintiff would have been entitled to a preliminary mortgage decree for the amount in suit but it obtained a final decree. Such a decree has not in any way impaired or prejudiced the right of the defendant surety and, in my considered opinion, there is no question of discharge of its liability. It may be added here that there is no suggestion even that the consent decree obtained from the Kanpur Court was a result of any fraud or collusion between the creditor and the principal debtor. My view finds support from a Division Bench decision of the Bombay High Court in the case Amin Abdul Kedar Murtasa v. Jivraj Otmal ( AIR 1972 Bom 88 ). ( 38 ) THE fact that Receiver was appointed with the consent of the parties by the Kanpur Court while passing a final decree, would also not make the slightest difference. Section 51 of the Code of Civil Procedure, provides various modes for the execution of the decree and one of the modes, contained in Cl. (d) of the said section, is by appointing a Receiver. Appointment of the Receiver was, therefore, a step in execution of the decree and it does not in any way affect the rights of the surety. I consequently, hold that by filing Suit No. 315 of 1977 in the Kanpur Court and obtaining a consent decree and by getting a Receiver appointed under the final decree, the liability of defendant surety does not stand discharged. I consequently, hold that by filing Suit No. 315 of 1977 in the Kanpur Court and obtaining a consent decree and by getting a Receiver appointed under the final decree, the liability of defendant surety does not stand discharged. ( 39 ) SECTION 141 of the Indian Contract Act reads: "a surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into whether the surety knows of the existence of such security or not; and if the creditor loses, or without the consent of the surety, parts with such security the surety is discharged to the extent of the value of the security. "this action confers a right on the surety to the benefit of every security which the creditor has against the principal debtor at the time when the contract of surety is entered into. The word 'security' has not been defined under the Indian Contract Act. What was meant by the expression 'security' came for consideration before the Supreme Court in State of Madhya Pradesh v. Kaluram ( AIR 1967 SC 1105 ). The relevant observations at pages 1108-09 read as under : "the expression "security" in S. 141 is not used in any technical sense, it includes all rights which the creditor had against the property at the date of the contract. The surety is entitled on payment of the debt or performance of all that he is liable for, to the benefits of the rights of the creditor against the principal debtor which arise out of the transaction which gives rise to the right or liability: he is therefore on payment of the amount due by the principal debtor entitled to be put in the same position in which the creditor stood in relation to the principal debtor. " ( 40 ) SIMILAR observations have been made in Amrit Lal v. State Bank of Travancore ( AIR 1968 SC 1432 ). ( 41 ) IT is admitted in para 16 of the plaint itself that on Nov. 22, 1973, the 'manufacturers Ltd. ' had deposited documents of title relating to their textile unit at Kalpi Road, Juhi Khurd, Kanpur, and thereby mortgaged in favour of the plaintiff all the said properties of the textile unit to secure the repayment of the loan of Rs. 60 lacs. 22, 1973, the 'manufacturers Ltd. ' had deposited documents of title relating to their textile unit at Kalpi Road, Juhi Khurd, Kanpur, and thereby mortgaged in favour of the plaintiff all the said properties of the textile unit to secure the repayment of the loan of Rs. 60 lacs. Thus, by virtue of the provisions contained in S. 141, the defendant 'jute Mills' the surety, was entitled to the benefit of this mortgage. ( 42 ) MORTGAGE, according to S. 58 of the Transfer of Property Act, is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. The plaintiff-creditor, therefore, had the right to realise the loan amount by enforcing its right under the mortgage. A mortgagee under Section 67 of the Transfer of Property Act has a right, after the mortgage 'money has become due to him, to obtain from the Court a decree for the property to be sold. In other words, the plaintiff-mortgagee had a right to realise the loan amount by getting a decree for the sale of the mortgaged property and getting it sold. The defendant- surety had the benefit of this very right by virtue of S. 141 of the Indian Contract Act. ( 43 ) BY getting the plant and a machinery, which were admittedty a part of the mortgaged property, sold in execution of the decree passed by the Kanpur Court, which sale has since been confirmed, can the plaintiff-creditor be said to have lost or parted with such security, resulting in the discharge of the surety under S. 141 ? In my view, the answer to this query must' be in the negative. Losing or parting with the security or a part of it, in my judgment, would mean depriving itself and consequently the surety of the right to enforce the security, i. e. the right to realise the loan amount by getting the mortgaged property sold. No such thing has been done by the mortgagor. On the other hand, the plaintiff-creditor had enforced the right by getting a part of the machinery and plant sold. No such thing has been done by the mortgagor. On the other hand, the plaintiff-creditor had enforced the right by getting a part of the machinery and plant sold. This was the only right which a mortgagee had under the equitable mortgage, and, therefore, it cannot be said that the plaintiff-creditor had lost or parted with its right in respect of this security. The plaintiff-creditor by this act has not impaired in any way the remedy of the defendant-surety against the principal debtor. If the defendant-surety pays the loan amount for which it is liable under the deed of guarantee, it will stand subrogated by operation of law in place of the plaintiff- decree-holder in that case. Section 140 of the Contract Act vests this right in the surety. It is entitled to the remedy which the creditor has against the principal debtor, i. e. the right to enforce the security and all means of payment. Under Section 145 of the Indian Contract Act, he has a right to be indemnified and to recover from the principal debtor whatever sum he has originally paid under the guarantee, and to stand in place of the creditor. The act of the plaintiff-creditor in obtaining a decree and in getting the part of the mortgaged property sold in execution thereof, is in no way inconsistent with these rights of the surety. The defendant-surety would be entitled to the benefit of sale, i. e. sale money of the plant and machinery. There is no suggestion that the sale was not bona fide or there was any negligence on the part of the Receiver or the plaintiff in conducting the sale of the plant and machinery of 'manufacturers Ltd. '. In such a situation, I am of the considered view that the creditor had neither lost nor parted with a part of the security which it had against the principal debtor, i. e. 'manufacturers Ltd. ' ( 44 ) THE contention of Mr. Anil Divan, learned counsel appearing for the defendant, is that the surety was entitled to the security in exactly the same condition in which it existed at the time when the contract of surety was entered into. The part of the security, i. e. machinery and plant, has been cold and, therefore, the part of the security was not intact or in the same position and consequently the defendant-surety would stand discharged. The part of the security, i. e. machinery and plant, has been cold and, therefore, the part of the security was not intact or in the same position and consequently the defendant-surety would stand discharged. Reliance was placed on Pledge v. Buss (1860-123 RR 281 ). The relevant observations at p. 283 read as under: "the law is now well established, that a person having a mortgage for a guaranteed debt is bound to hold it for the benefit of the surety, so as to enable him, on paying the debt which he has guaranteed, to take the security in its original condition unimpaired. "these observations, in my view, do not help the defendant-surety, if examined a bit carefully. It is not disputed that the surety on paying the amount which he has guaranteed is entitled to the benefit of the security in its original conditions unimpaired. This, however, does not mean that the creditor cannot enforce the security by filing a suit or obtain a decree and get the mortgaged property sold. In that case, the principal debtor having become bankrupt, the creditor, instead of going in under the bankruptcy, as he might have done, and applying to have the security realised and to be admitted as proof for the balance, in effect, purchased the equity of redemption, the price being the surrender of his right of proof. This affected the right of the surety inasmuch as all that the creditor could then give to the surety was a security taking priority from thepresent time. This is not the case here. Here the creditor has filed a suit for enforcement of the mortgage which, as a matter of fact, was his duty to do and was the only course open to enforce the payment of loan. It cannot be said that the security had been impaired in any way. ( 45 ) RELIANCE was then placed on Strange v. Fooks (1863-141 RR 254 ). The facts of that case were quite different and have no application to the facts of the present, case. ( 46 ) REFERENCE was also made to paragraph 12-A of the case State of M. P. v. Kaluram ( AIR 1967 SC 1105 ) (supra), appearing at p. 1109, where the law stated by Hannen, J. in Wulff and Billing v. Jay ( (1872) 7 QB 756), has been quoted with approval. ( 46 ) REFERENCE was also made to paragraph 12-A of the case State of M. P. v. Kaluram ( AIR 1967 SC 1105 ) (supra), appearing at p. 1109, where the law stated by Hannen, J. in Wulff and Billing v. Jay ( (1872) 7 QB 756), has been quoted with approval. These observations read : I take it to be established that the defendant became surety upon the faith of there being some real and substantial security pledged, as well as his own credit, to the plaintiff, and he was entitled, therefore, to the benefit of that real and substantial security in the event of his being called on to fulfil his duty as a surety, and to pay the debt for which he had not become surety. He will, however, be discharged from his liability as surety if the creditors have put it out of their power to hand over to the surety the means of recouping himself by the security given by the principal that doctrine is very clearly expressed in the notes in Rees v. Barrington, (1795) 2 White and Tudor's LC, 4th Edh. at p. 1002 As a surety on payment of the debt is entitled to all the securities of the creditor, whether he is aware of their existence or not, even though they were given after the contract of suretyship, if the creditor who has had, or ought to have had, them in his full possession or power, loses them or permits them to get into the possession of the debtor, or does not make them effectual by giving proper notice, the surety to the extent of such security will be discharged. A surety, moreover will be released if the creditor by reason of what he has done, cannot, on payment by the surety, give him the securities in exactly the same condition as they formerly stood in his hands. " ( 47 ) THIS rule of law does not help the defendant at all. By obtaining a decree and getting the part of the mortgaged property sold in execution thereof, it cannot be said that the creditor had put the security out of its power to hand over to the surety. On payment, the defendant-surety can stand in the shoes of the creditor and take the place of creditor-decree-holder in that case. By obtaining a decree and getting the part of the mortgaged property sold in execution thereof, it cannot be said that the creditor had put the security out of its power to hand over to the surety. On payment, the defendant-surety can stand in the shoes of the creditor and take the place of creditor-decree-holder in that case. ( 48 ) DECISIONS in Amrit Lal ( AIR 1968 SC 1432 ) (supra), and the State Bank of Saurashtra v. Chitranjan Rangnath Raja ( AIR 1980 SC 1528 ) do not apply to the facts of this case. ( 49 ) THE rule of law laid down in Forbes v. Jackson ( (1881-1885) All ER Re-print 863) does not help the defendant at all, because it cannot be said that the surety on account of the sale of the part of the mortgaged property in execution of the mortgage decree had ceased to be entitled to the benefits of the original security. Making of such sale cannot amount to any impairment of the rights of the surety. ( 50 ) IT was held in Polak v. Everett ( (1874-1880) All ER Re-print 991) that the question whether the surety is benefited when the principal creditor deprives him of any right is not to be looked into. But, in the present case, as stated earlier, the question of depriving the surety of its rights does not arise. The act of the creditor in filing the suit, obtaining the mortgage decree, getting the part of the property sold was all in good faith, bona fide act and by way of enforcement of its rights under the loan agreement and the mortgage. These acts do not impair the rights of the surety in any way. . ( 51 ) SECTION 91 of the Transfer of Property Act confers a right on the surety, on the payment of the mortgage debt or any part thereof, to redeem the mortgaged property or institute a suit for redemption of the mortgaged property. It was urged on behalf of the defendant that this right had been impaired by the act of the plaintiff- creditor in filing a suit in Kanpur Court without impleading the defendant-surety and obtaining a decree and getting the part of the mortgaged property sold. What is the right of redemption ? It was urged on behalf of the defendant that this right had been impaired by the act of the plaintiff- creditor in filing a suit in Kanpur Court without impleading the defendant-surety and obtaining a decree and getting the part of the mortgaged property sold. What is the right of redemption ? The right of redemption, as is clear from an examination of Sec. 60 of the Transfer of Property Act, is a right to require the mortgagee to deliver to the mortgagor anybody else who is entitled to redeem a mortgage deed all documents relating to the mortgagee property which are in the possession or power of the mortgagee on payment or tender at a proper time and place the mortgage money. How this right of the surety can be said to have been impaired by obtaining a final mortgage decree and getting the part of the property sold. The rights under the said decree, on payment of the amount agreed to be paid under the deed of guarantee, would vest in the defendant-surety by virtue of the provisions contained in Ss. 140 and 141 of the Indian Contract Act. The decision of the Privy Council in Mohammad Sher Khan v. Raja Seth Swami Dayal, (1922) ILR 44 All 185 : (AIR 1922 PC 17), has no application to the facts of the present case. The filing of the suit and obtaining the mortgage decree in getting the mortgage property sold does not amount to a clog on the equity of redemption or affects the statutory right of the surety to redeem the property for the reasons already recorded. ( 52 ) SIMILARLY, the decision in Mehrban Khan v. Makhna, (1930) ILR 11 Lah 251 : (AIR 1930 PC 142) has no application to the facts of the present case. ( 53 ) FOR all these reasons, I am of the considered opinion that the defendant-surety does not stand discharged on account of the said acts on the part of the plaintiff- creditor. ( 54 ) IT was then contended on behalf of the defendant that the defendant-surety was a necessary party in the Kanpur suit and by not adding it as a party to that suit, its right had been impaired. ( 54 ) IT was then contended on behalf of the defendant that the defendant-surety was a necessary party in the Kanpur suit and by not adding it as a party to that suit, its right had been impaired. Non-joinder of the necessary party in the Kanpur suit, in my opinion, would not affect the present case, so far as the rights of the plaintiff are concerned. It may be stated that under O. 1, R. 13, Civil Procedure Code all objections on account of non-joinder of the parties are required to be taken at the earliest possible opportunity and in all cases where issues are settled on or before such settlement, unless the ground of objection has subsequently arisen and any such objections not so taken, shall be deemed to have been waived. The objection of non-joinder of a necessary party was required to be taken by the 'manufacturers Ltd. ' who was the only defendant in that case. The fact that it did not take this objection would have the effect of waiver of this right. In any case, this does not affect the rights of the defendant in the present suit. It may be stated that the provisions contained in O. 2, R. 2, Civil P. C. are not at all attracted because the present suit is not in respect of the same cause of action. The earlier suit was based on the mortgage created in favour of the plaintiff by the principal debtor 'manufacturers Ltd. '. The claim in this suit is based on the deed of guarantee, which is entirely a different cause of action. The fact that the consideration was the same is of no consequence. An independent separate suit against the surety was competent. ( 55 ) THE surety would stand discharged under Sec. 135 if the creditor makes a 'composition' with or promises to give him to sue or not to sue the principal debtor unless the surety ascends to such a contract. Similarly, under S. 141, the surety stands discharged if the creditor loses or without the consent of the surety parts with such security. Under the terms of the deed of guarantee (Ext. P-14), the defendant-surety has given its consent for all these acts as is clear from a perusal of CIs. 4, and 10 of the said document, which read as under:"4. Under the terms of the deed of guarantee (Ext. P-14), the defendant-surety has given its consent for all these acts as is clear from a perusal of CIs. 4, and 10 of the said document, which read as under:"4. We hereby confirm and declare that notwithstanding anything herein contained, we have agreed with you, that although as between the Principal and ourselves we are to be considered as sureties only for the principals, yet as between your bank and ourselves, we are to be considered as principal debtors to your bank to the extent mentioned above, viz. Rs. Sixty lacs in respect of all advances made and to be made and of all facilities granted and to be granted by your bank to the principals, so that none of us nor our successors and assigns shall be discharged or exonerated (a) by any variance made without our consent in the terms of any contract or transaction between your Bank and the Principals, or (b) by any contract made between your Bank and the Principals by which the Principals be released, or (c) by any act or omission of your Bank the legal consequence of which may be the discharge of the Principals, or (d) by your Bank making a composition with, or promising to give time to or not to sue the Principals without our previous assent thereto, or with, or promising to give time to or not to sue the Principals without our previous assent thereto, or (e) by any other act, omission, dealings or arrangement between the Principals, their successors and assigns and the Bank, its successors and assigns, whereby we or any of us as sureties for the Principals would have been so discharged or exonerated. XX XX XX XX 10. The guarantee shall remain in full force and effect for the ultimate balance of your dues against the principals in terms of the loan agreement and this will not be vitiated by any indulgence or time granted by you to us and or to the Principals and/or your obtaining any promissory notes and/or other securities and/or guarantees from the Principals or securities and/or renewing the same from time to time. This guarantee shall also not be vitiated by any act of omission or commission on your part and/or on our part and/or on the part of the Principals under the loan agreement and this guarantee shall also remain in full force and effect notwithstanding any changes in the constitution of your Bank and/or the Principals and/or ourselves and notwithstanding the winding up of the Principals and/or ourselves. "these clauses contain the consent envisaged under Ss. 135 and 141. Such a consent, in my view, could be given at the time of original agreement of suretyship and it is not necessary that it should be given only at the time of making the composition etc. ( 56 ) THE following observations of Chitty on Contracts, 24th Edn. , Vol. II, p. 1014, para 4803, may be helpful:"contract of suretyship as against principal debtor alone It is by no means unusual for a party to a contract to be a principal debtor as against the creditor, but a surety as against another debtor. Such an arrangement is commonly entered into where the creditor wishes to avoid the technical rules relating to contracts of suretyship under which the surety may become discharged from liability in various circumstances. In this event the transaction takes effect according to its terms, that is to say, there will be a contract of suretyship between the principal debtor and the surety, but there will be no contract of suretyship between the surety and the creditor. The creditor is accordingly entitled to treat the surety as a principal debtor in every respect. "from these observations, it is clear that a surety can enter into an agreement with the creditor giving up his rights relating to tha contract of suretyship under which the surety may be discharged from its liability in various circumstances. ( 57 ) IN Hodges v. Delhi and London Bank Ltd. (1900-27 Ind-App 168) the appellants, in becoming sureties to the respondent covenanted that though as respect the principal debtor they should be considered as sureties only, yet as regards the bank they should be considered as principal debtors, so as not to be exonerated from liability by any dealing between the bank and principal debtor which would otherwise have that effect. It was held that the appellants became liable as principal debtor to the bank immediately on the default of the principal debtor and were not discharged by reason of time having been given to him. The effect of the deed being plain, neither appellant could escape liability except by proof of misrepresentation or undue influence. To the same effect is the decision of the Division Bench of the Madras High Court in A. R. Krishnaswami Ayyar v. Travancore National Bank Ltd. (AIR 1940 Mad 437 ). On behalf of the defendants, reliance was placed on a Division Bench decision of the Punjab High Court in Union of India v. Pearl Hosiery Mills (AIR 1961 Punj 281) where a contrary view has been taken. In this case, it was held in clear terms that provisions of Sec. 133 were not subject to the contract to the contrary between the parties to the contract. The said section was in unqualified terms. It was not necessary to put in the words 'notwithstanding any contract to the contrary' in this section. because wherever the legislature wanted that the terms of the contract between the parties should take precedence over the provisions of any section, the words 'in the absence of any contract to the contrary' or 'in the absence of any special contract' have been inserted in that particular section as has been done in Ss. 152 and 163 of the contract Act and therefore this right could not be waived. With utmost respect, I have not been able to persuade myself to accept this view. In my opinion, there was no necessity for the legislature to provide the words 'in the absence of any contract' in Sec. 133 or 135 or 141, because the sections themselves speak of consent of the surety, regarding variance in the terms of the contract between the principal debtor and the creditor, composition with the principal debtor etc. In the presence of the words 'without the surety's consent' the words 'in the absence of any contract to the contrary' would have been surplus. With utmost respect, therefore, I would follow the Privy Council and the Madras Judgments and hold that the rights conferred on the surety under Sections 133, 135 or 141 could be waived by specific agreement in the deed of guarantee. With utmost respect, therefore, I would follow the Privy Council and the Madras Judgments and hold that the rights conferred on the surety under Sections 133, 135 or 141 could be waived by specific agreement in the deed of guarantee. As a matter of fact, such an agreement would amount to consent within the meaning of those sections. ( 58 ) THE plaintiff has also raised the plea that the defendant had no right to the benefit of the securities held by the plaintiff and furnished to it by 'manufacturers Ltd. ' because of the agreement dated Sept. 25, 1971, as modified on Oct. 3, 1973. These documents are Annexures I and II to the plaint So far as the agreement dated Sept. 25, 1971, is concerned, it does not contain any terms from which it can be said that the defendant had given up its right to the benefit of the securities held by the plaintiff and furnished to it by 'manufacturers Ltd. ' Reliance was, however, placed on CIs. 5 (a) and 5 (b) of the supplementary agreement. These provide that the licensor, i. e. 'manufacturers Ltd. ' may, if so required by the licensee, i. e. the defendant 'jute Mills' and in order to meet the terms and conditions of the bank or financial institutions obtain for the licensee loan and/or advance of moneys for various purposes, the loan and/or advance so obtained shall be on the express condition that as between the licensor and the licensee, the licensee shall be liable for payment of the principal money, interest, costs, etc. The licensee was also authorised to give to the bank such securities/guarantees as may be required by the bank or financial institutions. These clauses do not help the plaintiff at all. From this clause, in my view, it cannot be said that the defendant had given up the right of the securities, which the licensor, i. e. 'manufacturers Ltd. ' were required to give to the ,bank for loans. ( 59 ) PLAINTIFF has also led evidence to prove that besides the consent contained in the deed of agreement (Ext. P-14) the acts of obtaining the consent decree from the Kanpur Court, appointment of Receiver and sale of plant and machinery of 'manufacturers Ltd. ' were done with the consent of the defendant's surety. Mr. ( 59 ) PLAINTIFF has also led evidence to prove that besides the consent contained in the deed of agreement (Ext. P-14) the acts of obtaining the consent decree from the Kanpur Court, appointment of Receiver and sale of plant and machinery of 'manufacturers Ltd. ' were done with the consent of the defendant's surety. Mr. N. M. Bahl, Public Witness 1, deposed that after the suit had been filed at Kanpur, a series of meetings took place between the bank, Dr. Gaur Hari Singhania, who represented 'jute Mills' as a Director thereof, and Mr. P. D. Singhania, who represented 'manufacturers Ltd. ', as well as the defendant-'jute Mills'. The suit at Kanpur was decreed on the basis of the compromise arrived at between the Bank. Dr. Gaur Hari Singhania and Mr. P. D. Singhania. He also stated that the name of the Receiver was suggested by Dr. Gaur Hari Singhania to which the bank agreed. After the Receiver had taken possession of the assets of the 'manufacturers Ltd. ' in pursuance of Kanpur Court decree, the bank with Dr. Gaur Hari Singhania pressed the Receiver to advertise for sale of the plant and machinery of 'manufacturers Ltd. ' and the Receiver accepted the offer regarding the sale of the plant and machinery for Rupees 45,50,101. 00 with the consent of all the parties, namely, the Bank, Mr. P. D. Singhania and Dr. Gaur Hari Singhania, who represented 'jute Miils'. ( 60 ) IN rebuttal. Dr. Gaur Hari Singhania, appearing as DW 1, deposed that there were never any discussion between the 'jute Mills' 'manufacturers Ltd. ' and the Bank, regarding the compromise of the Kanpur suit. The Receiver was not appointed at his suggestion. There was no discussion regarding the advertisement and sale of the property of 'manufacturers Ltd. '. In cross-examination, he admitted that he assured the bank that all steps would be taken for lifting of the attachment so that there was no delay in the sale of the assets of 'manufacturers Ltd. '. . ( 61 ) ON behalf of the plaintiff, reliance was also placed on Ext. P-31, a letter dated Feb. 5, 1979, written to Mr. Bahl of the plaintiff-Bank by Dr. Gaur Hari Singhania. It was stated in this letter that he was unable to appreciate that the progress in delivering the plant and machinery to the buyers M/s. C. Patel and Co. P-31, a letter dated Feb. 5, 1979, written to Mr. Bahl of the plaintiff-Bank by Dr. Gaur Hari Singhania. It was stated in this letter that he was unable to appreciate that the progress in delivering the plant and machinery to the buyers M/s. C. Patel and Co. was due to any default on their part. It was admitted that the plant and machinery was attached for realisation of the E. S. I. dues but it was stated that at no time, delivery had been held up on account of non-payment of E. S. I. dues. It was also stated that liability of the E. S. I. was met as soon as pointed out. ( 62 ) I have carefully examined the entire evidence. I am unable to accept oral evidence regarding the alleged consent. It is mainly for the reason that the bank admittedly maintained minutes of the important discussions but the said minutes have not seen the light of the day. So far as letter Ext. P-31 is concerned, it appears that the bank complained to Dr. Gaur Hari Singhania that there was delay of delivery of the plant and machinery to the auction-purchaser because of the default on their part which allegation was refuted. This, in my view. strictly speaking, would not amount to consent, as contemplated on S. 141 of the Indian Contract Act. ( 63 ) IN any case, there is nothing on the record to show that Dr. Gaur Hari Singhania or Mr. P. D. Singhania who were Directors of 'jute Mills' had any authority to give the requisite consent on behalf of the 'jute Mills'. Giving of the consent was not a ministerial or just an administrative act. It was a very important act which had the effect of creating liability which otherwise would have been discharged and, therefore, such a consent could be given by the Directors only on the authority of board resolutions and not otherwise. ( 64 ) THE learned counsel referred me to a copy of board resolution dated June 13, 1974 (Ext. P-5), passed by the Board of Directors of the 'jute Mills'. By this resolution, Mr. P. D. Singhania and Mr. Banshidhar Kasera, Directors of the Company, were authorised to execute a hypothecation deed and to affix common seal of the Company on the document in their presence. P-5), passed by the Board of Directors of the 'jute Mills'. By this resolution, Mr. P. D. Singhania and Mr. Banshidhar Kasera, Directors of the Company, were authorised to execute a hypothecation deed and to affix common seal of the Company on the document in their presence. The document was to be executed in favour of the U. P. Financial Corporation. I fail to understand as to how this resolution authorised Dr. Gaur Hari Singhania or Mr. P. D. Singhania to give the requisite consent on behalf of the 'jute Mills'. Similarly, the resolution dated July 20, 1973 (copy Exhibit P-45), authorised Dr. Gaur Hari Singhania as Director of the 'jute Mills' to deposit with the plaintiff-Bank title deeds of the properties to create an equitable mortgage. The power to give the requisite consent cannot be spelled out from this resolution. ( 65 ) I would also add here that the plaintiff has not raised any specific plea in the plaint regarding the alleged consent by the defendant to the sale of the plant and machinery etc. except the terms of the agreement contained in Ext. P-14. ( 66 ) IT has also been argued that the plaintiff has claimed the amount in the suit on the plea of the existence of the relationship of creditor and principal debtor between the plaintiff and the defendant and it cannot be allowed to claim the amount on the basis of the relationship of creditor and the surety. This contention is fallacious. The suit is based on the deed of guarantee (Ext. P-14 ). It is correct that according to the contention of the plaintiff raised in the plaint, the relationship created under the said deed of guarantee was that of a creditor and the principal debtor. That plea, however, does not make much difference for the simple reason that it was the plea of the defendant itself that its status was that of a surety. Moreover, parties have been put to issue and no prejudice whatsoever has been caused. ( 67 ) FOR all these reasons, I hold that the suit filed by the plaintiff against the defendant as a surety was competent and maintainable. The defendant-surety does not stand discharged from its liability as a surety on account of the various acts of omissions and commissions on the part of the plaintiff. ( 67 ) FOR all these reasons, I hold that the suit filed by the plaintiff against the defendant as a surety was competent and maintainable. The defendant-surety does not stand discharged from its liability as a surety on account of the various acts of omissions and commissions on the part of the plaintiff. The sale of the plant and machinery of 'manufacturers Ltd. ' in pursuance of the decree obtained from the Kanpur Court has no effect on the liability of the defendant. Issues Nos. 3, 4, 7, 12 and 14 are decided accordingly. Issues Nos. 6, 9 and 11 : In view of my findings on Issues Nos. 3. 4, 7, 12 and 14 that the suit against the defendant as a surety was maintainable and it does not stand discharged of its liability. I need not go into the question whether there existed the relationship of creditor and principal debtor between the parties to the suit. Issues Nos. 8, 10 and 13 : Under S. 128 of the Indian Contract Act, the liability of the surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract. ( 68 ) WHAT is the liability of the principal debtor in this case? An examination of the decree passed by the Kanpur Court by consent, shows that a final decree for Rupees 55,27,570. 01 with interest at 12. 5% per annum from the date of the suit till realisation and costs amounting to Rs. 4,15,030. 00 was passed in favour of the plaintiff-Bank, the creditor, against the principal debtor 'manufacturers Ltd. '. The liability of the principal debtor was, therefore, Rupees 55,27,570. 01 towards unpaid principal and interest up to the date of filing of the suit in the Kanpur Court; interest 12. 5% per annum on the said amount which from the date of that suit till the date of the filing of the present suit, came to Rs. 15,46,583. 67; and costs amounting to Rs. 4,15,030. 00. ( 69 ) THE plaintiff's case is that it had spent Rs. 6,36,580. 00 towards costs. In other words, according to its claim it had incurred Rs. 2,21,570. 00 towards costs after the passing of the decree. To prove this fact, the plaintiff examined Mr. H. K. Dhadhwal (Public Witness 3), Manager, Citibank, Parliament Street, New Delhi. 4,15,030. 00. ( 69 ) THE plaintiff's case is that it had spent Rs. 6,36,580. 00 towards costs. In other words, according to its claim it had incurred Rs. 2,21,570. 00 towards costs after the passing of the decree. To prove this fact, the plaintiff examined Mr. H. K. Dhadhwal (Public Witness 3), Manager, Citibank, Parliament Street, New Delhi. He deposed that he had brought the original ledger, photo-copy Ext. Public Witness 3/1, relating to the account of 'manufacturers Ltd. ' and that a sum of Rs. 2,21,570. 00 had been incurred in the suit after the decree which included the remuneration paid to the Receiver @ Rs. 1,500. 00 per month and the payments made to watch and ward staff. I see no reason to disbelieve his statement. It is correct that the requisite vouchers, though available, have not been proved but his statement finds corroboration from the entries in the ledger. It may be added that in the written statement the correctness of this fact was not disputed. All that was disputed was the right of the plaintiff to realise this amount from the defendant. Thus, the liability of the principal debtor on the date of the filing of the suit was Rs. 77,10,733. 67, the amount claimed in the plaint. ( 70 ) IT is an admitted fact that the Receiver appointed under the consent decree by the Kanpur Court has since sold the plant and machinery, part of the property mortgaged, of 'manufacturers Ltd. ' for a sum of Rs. 45,50,101. 00 which sale has since been confirmed. The auction-purchaser has admittedly deposited a sum of about Rupees 8 lacs with the Receiver. It has also not been disputed that the payment of the amount to the plaintiff-creditor (decree- holder in that case) has been stayed by the Allahabad High Court vide its order dated March 10, 1980 (Ext. D-6 ). This order admittedly is still in force. Can it be said, in these circumstances, that the claim of the plaintiff-creditor stands satisfied to the extent of Rs. 45,50,101. 00 or a part of it. The answer to this question must be in the negative. Unless the amount is paid to the creditor, it will not be discharge of the legal obligation. Can it be said, in these circumstances, that the claim of the plaintiff-creditor stands satisfied to the extent of Rs. 45,50,101. 00 or a part of it. The answer to this question must be in the negative. Unless the amount is paid to the creditor, it will not be discharge of the legal obligation. Similarly, the mere passing of the decree by the Kanpur Court in the absence of any realisation of the decretal amount would not discharge the liability or a part of it, of the principal debtor Or the surety. The amount for which decree has been passed by the Kanpur Court can be claimed in the suit by the plaintiff against the surety. It is, however, subject to the limit, if any, fixed in the deed of guarantee. By obtaining the decree alone, the claim would not stand satisfied. ( 71 ) THE last question which is quite important is whether the liability of the defendant-surety is limited under the deed of guarantee and, if so, to what extent. The relevant clauses of the deed of guarantee (Ext. P-14) for the purpose of deciding this question may be reproduced :"gentlemen: In consideration of your making advances at our request or otherwise giving credit or financial accommodation to J. K. Manufacturers Limited, an existing Company within the meaning of the Companies Act, 1913, having its regitered office at Kamla Tower, Kanpur, Uttar Pradesh, (hereinafter called "the principals") in terms of or in manner recorded in the Loan Agreement dated 21st Nov. , 1973 executed by them with you (hereinafter called "the said Loan Agreement"), we the undersigned (wherein I/we are referred to as "the guarantors") do hereby guarantee the due payment and discharge of all the principals' liabilities to you, whether incurred before or after the date hereof on the strength of or under the said Loan Agreement or in terms thereof and whether incurred by the principals alone or jointly with others, and in whatever capacity whether as principals or sureties or otherwise and whether such liabilities, if any, have matured or not, and whether they are absolute or contingent, including all liabilities if any in respect of advances, letters of credit, cheques, hundies, bills, notes, drafts and other negotiable or non-negotiable instruments drawn, accepted, endorsed, or guaranteed by the principals, and in respect of interest with monthly rests, commission and other usual or reasonable banking charges and in respect of all costs, charges and expenses which you may incur in paying any rent, rates, taxes, duties, call, instalments, legal or other professional charges, or other outgoings whether for the insurance immovable or any chattels or actionable claims of scrip securities or title deeds pledged or to be pledged or mortgaged, to be mortgaged or assigned or to be assigned to or deposited with you as security for the due payment and discharge of the principals' liability to you. And following are the general conditions 1 to 3. 4. We hereby confirm and declare that notwithstanding anything herein contained, we have agreed with you, that although as between the Principal and ourselves, we are to be considered as sureties only for the Principals, yet as between your Bank and ourselves, we are to be considered as principals debtors to your Bank to the extent mentioned above viz. Rs. 4. We hereby confirm and declare that notwithstanding anything herein contained, we have agreed with you, that although as between the Principal and ourselves, we are to be considered as sureties only for the Principals, yet as between your Bank and ourselves, we are to be considered as principals debtors to your Bank to the extent mentioned above viz. Rs. Sixty lacs in respect of all advances made and to be made and of all facilities granted and to be granted by your Bank to the Principals, so that none of us nor our successors and assigns shall be discharged or exonerated (a) by any variance made without our consent in the terms of any contract or transaction between your Bank and the Principals or (b) by any contract made between your Bank and the Principals by which the Principals be released, or (c) by any act or omission of your Bank the legal consequence of which may be the discharge of the Principals or (d) by your Bank making a composition with, or promising to give time to or not to sue the Principals without our previous assent thereto or (e) by any other act, omission, dealings or arrangement between the Principals, their successors and assigns and the Bank, its successors and assigns, whereby we or any of us as sureties for the Principals would have been so discharged or exonerated. 5. to 9. . . . . . . . . . . 10. The guarantee shall remain in full force and effect for the ultimate balance of your dues against the principals in terms of the Loan Agreement and this will not be vitiated by any indulgence or time granted by you to us and/or to the principals and/or your obtaining any promissory notes and/or other securities and/or guarantees from the principals or otherwise and/or renewing the same from time to time. This guarantee shall also not be vitiated by any act of omission or commission on your part and/or on our part and/or on the part of the principals under the Loan Agreement and this guarantee shall also remain in full force and effect notwithstanding any changes in the constitution of your Bank and/or the principals and/or ourselves and notwithstanding the winding up of the principals and/or ourselves. " ( 72 ) IT is settled law that the terms of the surety bond should be construed strictly in a manner most favourable to the surety or the guarantor. It is said that the surety is a favoured debtor: see Pannaji Devichand v. Basappa Virappa Bellary (AIR 1943 Bom 243) and Subhankhan Ramjankhari v. Lalkhan Haji Umarkhan (AIR 1948 Nag 123 ). ( 73 ) AN examination of the deed of guarantee reveals that the first part of the document is all inclusive. In this para the defendant-surety guaranteed the due payment and discharge of all the principals' liabilities in respect of the principal, interest, commission, costs, etc. This para thus covers the entire liability which the principal debtor has towards the creditor. However. Cl. 4 limits that liability. The relevant portion of this clause says:"4. We hereby confirm and declare that notwithstanding anything herein contained, we have agreed with you, that although as between the Principal and ourselves, we are to be considered as sureties only for the Principals, yet as between your Bank and ourselves, we are to be considered as principals debtors to your Bank to the extent mentioned above, viz. Rs Sixty lacs in respect of all advances made and to be made and of all facilities granted and to be granted by your Bank to the Principals,. . . . . . . . . . . ". (Emphasis supplied) The plain reading of the terms contained in this clause is first that it overrides the terms contained in another clause of the document. This is clear from the words 'notwithstanding anything herein contained'. Again, the words (to the extent mentioned above, viz. Rs. Sixty lacs) show that the liability was limited to Rs. 60 lacs. No doubt the words, 'mentioned above' after the words 'to the extent' may have reference to the terms contained in para 1 of the document, according to which, the liability was all inclusive but the next following words, 'viz. Rs. Sixty lacs' explain the extent to which the liability was undertaken. 'viz. ', according to Websters Dictionary means, 'namely'. The words 'mentioned above' have thus been explained by the next following words 'viz. Rs. Sixty lacs'. The words, 'viz. Rs. Sixty lacs' quantify and limit the extent of the liability of the defendant up to Rupees Sixty lacs only. Rs. Sixty lacs' explain the extent to which the liability was undertaken. 'viz. ', according to Websters Dictionary means, 'namely'. The words 'mentioned above' have thus been explained by the next following words 'viz. Rs. Sixty lacs'. The words, 'viz. Rs. Sixty lacs' quantify and limit the extent of the liability of the defendant up to Rupees Sixty lacs only. Thus, the liability under the redemption bond, in my view, was limited, to Rs. 60 lacs. ( 74 ) THE learned counsel appearing for the plaintiff contended that the words 'to the extent mentioned above viz. Rs. Sixty lacs' mean only principal and have been used only to identify the principal amount and not the liability. ( 75 ) THIS contention cannot be accepted. The word 'extent', according to Chambers 20th Century Dictionary, means the space or degree to which a thing is extended; bulk, compass, scope, degree or amount 'to some extent', a stretch or extended space, evaluation of property etc. The word 'extent', in my view, means the scope of liability which has been named as Rs. 60 lacs. If the purpose was only to refer to the loan agreement or the loan amount, then ordinarily after the words 'to the extent mentioned above', there was no necessity of adding the words 'viz. Rs. Sixty lacs'. The liability of the defendant was, therefore, to the extent of Rs. 60 lacs only. It may be added here that the liability would remain the same even in case the relationship of the plaintiff and the defendant was that of a creditor and the principal debtor. ( 76 ) MR. Rajiv Sauhney then contended that the plaintiff may be allowed interest in equity. Reliance was placed on the decision of the Supreme Court in Mahabir Prasad Rungta v. Durga Datta ( AIR 1961 SC 990 ). It was laid down in this case that interest for a period prior to the commencement of the suit is claimable either under an agreement or usage of trade or under a statutory provision or under the Interest Act for a sum where notice is given. Interest is also awarded in some cases by course of equity. In the present case, there is no specific agreement regarding interest in the deed of guarantee. There is no plea or proof of usage of trade. Interest is also awarded in some cases by course of equity. In the present case, there is no specific agreement regarding interest in the deed of guarantee. There is no plea or proof of usage of trade. It was conceded by the learned counsel for the plaintiff that the provisions of the Interest Act were not attracted. ( 77 ) NOW, it has to be seen whether the circumstances existed to invoke equitable jurisdiction to allow interest. The circumstances relied upon are: (1) that it was a commercial transaction; (2) the creditor was a bank and it was its business to advance loans on interest and on all its transactions the payment of interest was involved; and (3) that under the deed of guarantee the liability of the surety was to arise first when notice in writing was given to it by the bank requiring it to pay and that such a notice has been given as far back as Oct. 27, 1976, copy Annexure VII to the plaint. The defendant did not make the payment in spite of the notice. ( 78 ) THESE circumstances would not help the plaintiff, much in a claim against the surety. ( 79 ) IN any case, in Maine and New Brunswick Electrical Power Co. Ltd. v. Alice M. Hart (AIR 1929 PC 185), it was held that when once a contract has been executed, then apart from cases where rescission on the ground of fraud is sought, there remains nothing to attract the equitable jurisdiction and interest cannot be allowed on. , equitable principle. Consequently, interest on equitable principle cannot be allowed. Even otherwise, it is not a case of hardship inasmuch as the remedy of the plaintiff-creditor for the balance amount would still be available against the principal debtor under the decree passed by the Kanpur Court. ( 80 ) THE result is that the plaintiff is entitled to recover only Rs. 60 lacs from the defendant. Issues are decided accordingly. . ( 81 ) IN conclusion, a decree for Rs. 60 lacs (Rupees sixty lacs) with proportionate costs and future interest at 12. 5% per annum on Rs. 55 lacs (Rupees fifty-five lacs) from the date of the suit till realisation is passed in favour of the plaintiff against the defendant.