Dena Bank v. Hari Prasad — 1991 DIGILAW 381 (PAT)

JUDGMENT : S.B. Sinha, J. This first appeal is directed against a judgment and decree dated 15.12.1986 passed by Sri Yogendra Prasad, 2nd Additional Subordinate Judge, Jamshedpur in Money Suit No. 76/56 of 1983-85, whereby and whereunder the said learned court decreed the suit as against the defendant nos. 1 and 3 but dismissed the same as against the defendant no. 2. 2. In view of the points involved in this appeal, it is not necessary to state the facts of the matter in great details. 3. Suffice it to say that admittedly the appellant granted a loan for a sum of Rs. 34,000/- to the defendant no. 1 who agreed to re-pay the same amount with interest @ 11 percent per annum on monthly rent on demand, repayable in 24th monthly instalment of Rs.1500/- 4. Admittedly, the defendant no. 1 was to purchase a trekker out of the aforementioned amount of loan and the defendant no.2 stood as guarantor of the defendant no. 1 in respect of the loan. The defendant no. 1 purchased a trekker and the said trekker was also hypothecated and the defendant nos. 1 and 2 executed a term loan agreement of hypothecation of the said vehicle bearing registration no. BHX 7431. The defendant no.2 also deposited his fixed. deposit receipt no. 115524 dated 17.3.1978 for a sum of Rs. 10,000/- by way of colateral security. He further executed a letter of guarantee in favour of the plaintiff, in respect of the aforementioned loan. 5. It appears that the maturity value of the aforementioned fixed deposit sum being Rs. 14600/-, was further deposited by way of colateral security. The defendant no.2 allegedly approached the plaintiff's Manager for grant of a receipt of the said fixed amount which was deposited by him. 6. Admittedly, the defendant no.1 had paid certain instalments. On 18.11.1981 the defendant nos,1 and 3 joint by gave a letter to the plaintiff's manager stating that the defendant no. 1 has handed over his vehicle in question to the defendant no.3 for plying the same and the instalment towards the liability would be paid by her. Allegedly the said arrangement was made by the defendant no.1 with defendant no.3 without the knowledge, consent and permission of the plaintiff. 7. 1 has handed over his vehicle in question to the defendant no.3 for plying the same and the instalment towards the liability would be paid by her. Allegedly the said arrangement was made by the defendant no.1 with defendant no.3 without the knowledge, consent and permission of the plaintiff. 7. The defendant no.3, by a letter dated 1.2.1983 informed the plaintiff that the vehicle in question bearing registration No. BHX 7431 has been taken back by the defendant no.1 on 31.1.1983 from her. 8. In paragraph 28 of the plaint the plaintiff stated as follows : "That, the present liability of the defendants is Rs. 24,878.49 (Rupees twenty four thousand eight hundred seventy-eight and paisa forty-nine) which the plaintiff is entitled to recover from the defendants jointly and severally together with interest @ 1950 % per annum from 1.4.1983 till realisation and hence the necessity of filing this suit against the defendants for recovery of the aforesaid amount as fully described in the schedule below of this plaint." 9. In the aforementioned suit, thus, the plaintiff prayed for a decree as against all the defendants jointly and severally. 10. The defendant-respondent no.2 filed a written statement asserting, inter alia, therein that the plaintiff-Bank was acting in collusion with the defendant no. 1. According to the defendant no. 2, in view of the fact that the plaintiff had wasted a lot of time, his liability as a guarantor has been discharged. It was further stated that in view of the fact that the defendant no. 3 was allowed to ply the said vehicle and further was allowed to deposit the monthly instalment, the same caused a substantial variation in the terms of the contract by and between the plaintiff and the defendant no. 2 as a guarantor and subsequently his liability under the guarantee bond has been discharged. It was further stated" that the arrangement between defendant nos.1 and 3 was made with the consent of the plaintiff-Bank. 11. In view of the pleadings of the parties, the learned court below framed the following issues : "1. Is the suit as framed maintainable? 2. Has the plaintiff-Bank got any cause of action to bring this suit? 3. Is the suit barred by law of limitation? 4. Had the defendant no. 1 borrowed loan of Rs. 34,000/- from the plaintiff-Bank? Had the defendant no.2 stood guarantor to the said loan? Is the suit as framed maintainable? 2. Has the plaintiff-Bank got any cause of action to bring this suit? 3. Is the suit barred by law of limitation? 4. Had the defendant no. 1 borrowed loan of Rs. 34,000/- from the plaintiff-Bank? Had the defendant no.2 stood guarantor to the said loan? Had the defendant nos.1 and 2 executed loan documents in favour of the Bank for the said loan? 5. Has the defendant no.2 been discharged from the liability of suretyship to the said loan? 6. Is the Bank entitled to get money decree as claimed against the defendants? 7. To what other relief or reliefs if any, the Bank is" entitled to?" 12. The learned trial court considered issue no.5 in great details and came to the conclusion that the liability of the defendant no. 2 stood discharged in view of the variation of contract made by it in terms of Section 133 of the Indian" Contract Act. 13. Mr. A. K. Sinha, the learned counsel appearing on behalf of the appellant raised a short question in support of this appeal. The learned counsel submitted that from a perusal of Ext. 13 as also the other documents admittedly executed by the defendant no.2, it would appear that the defendant no.2 made himself liable to pay the amount of loan as and when called upon to do so. According to the learned counsel, the letter of guarantee executed by the defendant no.2 was an instrument of continuing guarantee and in that view of the matter the defendant no.2 cannot absolve himself of his liability in terms of the aforementioned documents. The learned counsel, in this connection, has drawn my attention to Sections 133 and 139 of the Indian Contract Act. 14. Mr. P. K. Prasad, the learned counsel appearing on behalf of the defendant-respondent no.2, on the other hand, submitted that from the conduct of the plaintiff-Bank, it is evident that it allowed variation in the contract by and between itself and the defendant no. 1 without the defendant no. 2's consent. According to the learned counsel, therefore, in terms of the provisions of Section 133 of the Indian Contract Act, the surety stood discharged. 15. 1 without the defendant no. 2's consent. According to the learned counsel, therefore, in terms of the provisions of Section 133 of the Indian Contract Act, the surety stood discharged. 15. It was further submitted by the learned counsel that in view of the fact that the plaintiff-Bank had sued the defendant no.3 also for realisation of the amount in question and a decree having been passed as against her, it does not lie in the mouth of the plaintiff-bank that the respondent no. 2 shall continue to have his liability in terms of Ext. 13 or otherwise. The learned counsel, in this connection, has placed a strong reliance in Motilal Ramkumar vs. Akbarbhai Fakhruddin, reported in AIR 1939 Bombay 309, Mundla Venkkama vs. Rao Sahib Kotla Sanyasayya, reported in AIR 1938 Madras 422 and Seth Pratapsingh Maholalbhai vs. Kushulal Harilal Setalwad, reported in 1935 P.C. 21. 16. In this view of the matter, the only question which arises for consideration in this appeal is whether the learned court below has correctly decided issue no. 5. 17. There cannot be any doubt that in terms of Section 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. 18. The Supreme Court in Bank of Bihar vs. Damodar Prasad, reported in AIR 1969 SC 297 , held that in the absence of some special equity the surety has no right to restrain an action against him by the creditor on the ground that the principal is solvent or that the creditor may have relief against the principal in some other proceedings. 19. Section 139 of the Indian Contract Act also provides if the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged. 20. However, in this case, this Court is • concerned with the provisions of Section 133 of the Indian Contract Act. 21. As noticed hereinbefore, it has been admitted in the plaint itself that the defendant nos. 1 and 3 issued a joint letter on 18.11.1981 which was marked as Ext. 15 wherein it was categorically stated that the defendant no. However, in this case, this Court is • concerned with the provisions of Section 133 of the Indian Contract Act. 21. As noticed hereinbefore, it has been admitted in the plaint itself that the defendant nos. 1 and 3 issued a joint letter on 18.11.1981 which was marked as Ext. 15 wherein it was categorically stated that the defendant no. 1 has transferred the vehicle in question in favour of the defendant no. 3 and prayed• that the defendant no. 3 should be allowed to deposit the stipulated monthly instalments. 22. It is true that the plaintiff in the plaint has pleaded that the said letter was issued without its knowledge and consent. Such a plea, on the part of the plaintiff, however, cannot be believed in view of its own conduct. 23. It is admitted that, although, no written agreement was entered into by and between the plaintiff Bank and the defendant nos.1 and 3 whereby the defendant no.3 was permitted to take the vehicle from the defendant no. 1 and pay the monthly instalments to the Bank in terms of various documents executed by the defendant no. 1; but there cannot be any doubt whatsoever that the plaintiff-Bank allowed the defendant no. 3 to ply the vehicle in question and further accepted all the amounts deposited by her without any demur whatsoever. 24. Such variance in the contract was substantial in nature inasmuch as thereby the terms of contract were sought to be amended and it must be held to be a case which comes within the purview of Section 133 of the Indian Contract Act. Such a conduct, on the part of the plaintiff-Bank would amount to acceptance of the offer of the defendant nos.l and 3 in terms of their letter dated 18.11.1981 sub-silentio. Reference, in this connection, may be made to Ramji Dayawala & Sons (P) Ltd. vs. Invest Import, reported in 1981 (1) SCC 80 . 25. It further appears that the defendant no.3 had issued a letter dated 1.2.1983 (Ex1.15/A) wherein the defendant no.3 stated that the defendant no. 1 had taken back the aforementioned trekker from her and as such her name should be deleted from the plaintiff's records and the balance amount be realised from the defendant no. 26. Further from another letter issued by the husband of the defendant no.3 which has been marked as Ext. 1 had taken back the aforementioned trekker from her and as such her name should be deleted from the plaintiff's records and the balance amount be realised from the defendant no. 26. Further from another letter issued by the husband of the defendant no.3 which has been marked as Ext. 15/B, it appears that therein it was stated that as the vehicle had broken down it would not be possible for the defendant no.3 to pay the stipulated monthly instalment of that month. In that letter, however, it was father stated that monthly instalments would be regularly paid from the next month. 27. The plaintiff, is a banking institution. If its version to the effect that the arrangement between defendant nos. 1 and 3 did not have its consent was correct, there was absolutely no reason as to why' it did not issue any letter either to the defendant no. 1 or to the defendant no. 3 asserting that it would not agree to the arrangements entered into by and between the defendant no. 1 and the defendant no. 3 with regard to plying of the said vehicle. 28. From the records, it is, thus, evident that the plaintiff-Bank allowed the defendant no. 3 to ply the said vehicle for a period of more than one year and accepted the monthly instalments from her. It, therefore, in my opinion, is estopped and precluded from contending that the arrangement• 'made between the defendant nos. 1 and 3 with regard to plying of the vehicle in question was not done with its consent. In such a situation like this, in my opinion, the plaintiff must be held to have given its consent to the aforementioned arrangement by necessary implication. 29. This conduct, on the part of the plaintiff-Bank, is itself suggestive of t he fact that according to it the defendant no.3 became personally liable to pay the entire amount by entering into fresh contract. Even the plaintiff-Bank has not contended that the decree passed as against the defendant no.3 by the court below was erroneous or illegal. 30. It was not and could not he t he case of the plaintiff that the aforementioned arrangement arrived at by and between the plaintiff, on the one hand, and the defendant nos. 1 and 3 on the other, was done with the consent of the defendant no.2. 30. It was not and could not he t he case of the plaintiff that the aforementioned arrangement arrived at by and between the plaintiff, on the one hand, and the defendant nos. 1 and 3 on the other, was done with the consent of the defendant no.2. In this view of the matter, this case clearly comes within the purview of the section 113 of the Indian Contract Act. 31. In Gundla Venkamma vs. Rail Sahib Kotla Sanyasayya, reported in AI R 1038 Madras 422, a division bench of the Madras High Court held that an arrangement is entered into by and between the purchaser and the principal debtor to the disadvantage of the surety, the surety stands discharged. 32. In Motilal vs. Akbarbhai, reported in AIR 1939 Bombay 309, a learned single Judge of the Bombay High Court quoted with approval the law as stated in the Halsbury's Laws of England, 2nd Edn, Vol. XVI, Art. 52 at page 9 which is in the following terms : "The surety is regarded as a favoured debtor. He is entitled, as such, to insist upon a rigid adherence to the terms of his (the surety's) obligation by the creditor, and cannot be made liable for more than he has undertaken; for, though his contract is not, like that of an insurer, uberrima fidei, it is one strictissimi juris." 33. In Seth Pratapsingh Moholalbhai vs. Keshavlal Harilal Setalwad, reported in 1935 P.C.21, the law has been stated thus: "In the present case, as in many others, the contract between the creditor and the principal debtor was the basis of the surety bond. It was shown to the sureties before the bond was executed and is referred to in the body of the document. Having arrived, at this conclusion, it becomes necessary to consider the effect of S.133, Contract Act. Whether that much discussed section relates only 10 continuing guarantees or is intended to affect a guarantee of one obligation, and if so what it means, it is unnecessary to determine. In any view of the section it cannot, in their Lordships' opinion, operate to alter the primary law of the contract of guarantee that the promises must show performance before he can hold the promisor to his promise. In any view of the section it cannot, in their Lordships' opinion, operate to alter the primary law of the contract of guarantee that the promises must show performance before he can hold the promisor to his promise. It could hardly be contended that in India, if a surety guaranteed repayment of an advance to be made to the principal debtor on a specific contract that the advance was to be applied towards the purchase of real estate, the creditor could, whether he and the debtor rescinded the specific contract or not, recover from the surety on the advance of a sum made to finance. speculations in shares. And while by S.128 the liability of the surety is co-extensive with that of the principal debtor, it only extends to this liability on the contract guaranteed and not on something different." 34. In this case also a letter (Ext.13) and various other documents referred to in the plaint were executed by the guarantor with regard to the performance of contract with the defendant no.1 and the defendant no.2 never agreed to be a surety so far as the performance of the said contract by the defendant no.3 vis-a-vis the plaintiff-Bank is concerned. 35. In this view of the matter, there is no merit in this appeal which is accordingly dismissed. However, in the facts and circumstances of this case, the parties shall bear their own costs If this appeal.