JUDGMENT T. Sathiadev, J. 1. First defendant is the appellant. Plaintiff is the sole respondent, which filed O.S. No. 520 of 1977 on the file of the Sub Court, Madurai, for recovery of a sum of Rs. 50,491.26 due from first defendant and seven others. 2. Plaintiff stated as follows : Messrs. Vijayamohini Mills Ltd., Thirumala, Trivandrum-4, was one of the constituents of first defendant bank. One Sundaram Chettiar was one of the Directors, and the second defendant is his wife, and defendants 3 to 6 are his son and daughters. The Mill entered into a contract with a Japanese firm for the purchase of one Kemitsu Doubler Winder with spares and accessories of the total value of Rs. 43,50,000, Japanese yens on deferred payment basis, payable in 20 half yearly instalments. Plaintiff Bank at the instance of the first defendant and late Sundaram Chettiar executed a letter of credit- cum-guarantee on 15th October, 1966 (Ex. A2) in favour of the foreign sellers. In consideration of this guarantee being given first defendant and late Sundaram Chettiar executed a counter indemnity in favour of plaintiff Bank on 13th October, 1966 (Ex. A3). As per the contract, the instalment payment commenced on 21st April, 1958 and 13 instalments were paid by the Mill. The last instalment fell due on 21st October, 1977. The Mill failed to pay 14th to 19th instalments by due dates. The default thus occasioned, resulted in plaintiff Bank paying the foreign sellers, and in turn, it issued a notice on 15h June, 1977 calling upon defendants to pay the amount. First defendant alone sent a reply on 5th July, 1977 and others did not send any reply. Hence, the plaintiff had filed the suit for the reliefs claimed in the plaint. 3. The first defendant came forward with a claim that under Sick Textiles Undertaking Notification Act 57 of 1974, the Mill having been nationalised, and its right, title and interest and liabilities having stood transferred to Central Government on and from 1st April, 1974, the National Textile Corporation alone could be called upon to make the payment. At one stage, the General Manager of National Textile Corporation, by letter dated 17th June, 1975, called for particulars to be furnished, but later on, nothing further was done. At one stage, the General Manager of National Textile Corporation, by letter dated 17th June, 1975, called for particulars to be furnished, but later on, nothing further was done. The Compensation deposited having been vested with the Commissioner for discharging the liabilities of the Mill, and by operation of law the liability of the principal debtor having been discharged, and the conditions precedent for enforcing the liability being absent, the suit itself is not maintainable. National Textile Corporation is a necessary and proper party, and the suit is bad for non-joinder of necessary parties. 4. Second defendant did not file any written statement. Defendants 3 to 5 having opposed the suit claim, and as they are not parties to this appeal, their stand need not be referred to. 5. Trial Court dealt with the aspect as to how far the guarantee executed is enforceable or not, and held that the guarantee continues to be enforceable. Ultimately, the suit was decreed as prayed for with costs. 6. Aggrieved as against the suit being decreed, first defendant alone has preferred this appeal mainly confining its point about the effect of the application of Act 57 of 1974 on the counter indemnity granted by it in favour of the plaintiff. It is claimed that the right, title and interest of the principal debtor were transferred to the Central Government, and vested in the National Textile Corporation free from all liabilities and, therefore, the contract of guarantee became frustrated and unenforceable. Due to supervening and subsequent change in law, it is beyond the control of the parties to stand by the contract (Ex. A3) any longer, and that when the security is no longer available in the form in which it was contracted for,. Ex. A3 is no longer enforceable. 7. Mr. Dolia, Learned Counsel for the first defendant, would refer to Sections 56 and 132 to 136 of the Contract Act and plead that the performance under Ex. A3 has become impossible by reason of an event, which first defendant could not contravene because of the Sick Mills Undertaking Act having been enacted; and variance of the enforceability regarding the security having been brought into existence by operation of law, the surety got discharged. Out of the compensation amount, nothing could be realised by first defendant. A3 has become impossible by reason of an event, which first defendant could not contravene because of the Sick Mills Undertaking Act having been enacted; and variance of the enforceability regarding the security having been brought into existence by operation of law, the surety got discharged. Out of the compensation amount, nothing could be realised by first defendant. The machinery is not available for being proceeded against, which was the main item along with other assets of the Mill being taken into account, while executing Ex. A3. He therefore strenuously pleads that when a totally different situation had been brought into existence by operation of law, and the consequences being radical and far-reaching, and the circumstances which were taken into account originally having ceased to exist totally, it is obligatory on the part of the plaintiff to look to the Central Government and the National Textile Corporation for any balance of payment recoverable, and hence, the suit, as laid was not maintainable. 8. Mr. Subramaniam, Learned Counsel for the plaintiff, would refer to Section 5(1) of the Act, to show that the owner is liable for certain prior liabilities. The Mill is the owner as defined in Section 2(1)(b). Only the undertaking having been taken over, the Mill continues to be liable to discharge the obligations, and the first defendant bank having executed Ex. A3, it continues to be responsible for the consequences that flow out of the non-compliance with the terms and conditions under which the machinery was supplied by the foreign seller. Having committed default in 14th to 19th instalments, plaintiff was justified in relying upon Ex. A3. In this context, he relied upon the decision in State of Andhra Pradesh v. The Central Bank of India (1982) 1 An.W.R.(S.N.) 10, wherein in a similar situation it was held that every liability other than the liabilities specified in Section 5(2) in respect of any period prior to the appointed day, is the liability of the owner and enforceable as against him. When the liability could be discharged out of the compensation amount paid is possible under the Act, the liability of the owner having not been extinguished, it follows that the liability of the surety or guaran for is not equally extinguished, it being co-extensive with that of the principal debtor. When the liability could be discharged out of the compensation amount paid is possible under the Act, the liability of the owner having not been extinguished, it follows that the liability of the surety or guaran for is not equally extinguished, it being co-extensive with that of the principal debtor. The identity of the owner of the sick mill having been preserved under the Act, notwithstanding the undertaking having vested in the Central Government, the surety bond given to the State Government is not in any manner extinguished. This decision has found acceptance of this Court in C.S. No. 453 of 1977, judgment dated 13th February, 1984. It was held that nationalisation of the sick textile undertakings did not have the effect of wiping out the liability of the surety. 9. Even in a case where a company goes into liquidation, by reference to scope of Sections 4, 126, 128 and 134 of the Contract Act, in M.R.E.B., Bombay v. Official Liquidator , the Supreme Court held that by virtue of Section 120 of the Contract Act, the surety's i.e., the Bank's liability is co-extensive with that of the principal debtor, i.e., the company and though Section 134 refers to discharge or release of the surety under certain circumstances when bankruptcy or liquidation occasions by operation of law, it does not result in the surety being absolved from his liability. Hence, when by operation of law, the undertaking of the Mill had vested in the Central Government, in the light of these decisions, it quite evident that Ex. A3 executed by first defendant in favour of the plaintiff had not been discharged by passing of Act 57 of 1974. 10. Hence, the appeal having been preferred only based on the scope and extent to which Act 57 of 1974 could be applied to Ex. A3, and in the context of the decisions above referred to, it being held that the counter indemnity executed under Ex. A3 had not been in any manner discharged, this appeal is dismissed. No Costs.