JUDGMENT R.S. Garg, J. 1. This judgment shall also dispose of first appeal no. 3/87. 2. The plaintiff/respondent Punjab National Bank filed the suit against Shaikh Umar, Shankar Lal, Saranjit Singh and Vishnupuri for recovery of Rs. 1,36,775.75/- inter alia pleading that Shaikh Umar and Shankar Lal had taken a term loan of Rs. 60,000/- and a cash credit loan of Rs. 25,000/-. According to the plaintiff Bank on 8.2.80 Shaikh Umar and Shankar Lal who were real brothers had started Umar Soda Water Factory for preparation of Soda Water, pea-cola, Tanza, Special soda, turu lemon. On 8.2.80, defendant no. 1 and 2 had taken term loan of Rs. 25,000/- and another loan of Rs. 25,000/- under cash credit hypothecation agreement. It was also submitted that the documents were executed on 8.2.80 and later on 28.3 80, the defendants no. 1 and 2 executed two agreements, one for Rs. 60,000/- and another for Rs. 25,000/-. The defendant no. 1 and 2 had admitted that they would pay the interest at the rate of 14% with quarterly rest it was further submitted that defendant no. 3 and 4 stood guarantors for the defendant no. 1 and 2 and executed the required documents. According to the plaintiff as the defendant no. 1 and 2 did not pay the amounts due, therefore, they were forced to file the suit for recovery of the amounts. According to them, under the term loan account, they were entitled to Rs. 1,01,167.65/-, under cash credit hypothecation account 35,568.10/- and Rs. 50/- towards advertisement charges. The plaintiff also submitted that various other documents were executed by the principal debtors i.e. defendant no. 1 and 2 and the guarantors i.e. defendant no. 3 and 4. 3. The defendant no. 1 and 2 remained ex-parte, but the defendant no. 3 and 4 filed their joint written statement, admitted the execution of the documents, but inter alia pleaded that the defendant no. 1 and 2, without any information to any body absconded and to this effect a report was lodged by the Bank Manager Omprakash Kapoor, on 6.6.83. According to the defendants on 6.6.83, said Omprakash Kapoor came to the factory and the defendants after receiving the information also reached the factory. The factory was in working condition, factory manager Kashiprasad and others were busy in the work. According to the defendants on 6.6.83, said Omprakash Kapoor came to the factory and the defendants after receiving the information also reached the factory. The factory was in working condition, factory manager Kashiprasad and others were busy in the work. The bank manager Omprakash Kapoor turned out the factory manager and the other workers and put his lock. According to defendant no. 3 and 4, this act of the bank manager was arbitrary and illegal on the part of the bank manager. The defendants further submit that while putting the lock, bank manager did not prepare the list of the articles nor had made the inventory of the goods and machineries. According to them, the bank manager did not make proper arrangement for proper safety of the factory. After the property was taken in possession by the bank, on 12.12.83, because of carelessness and as no proper arrangements were made for safety of the factory a theft was committed in the factory premises. The matter was reported by bank manager to police. The defendants further submit that they had made application to the plaintiff bank that they were ready and willing to discharge the loan amount and make payment of the said therefore, the factory premises be given to them. According to them as the factory premises were not given to them and the goods were stealthily removed or the same were stolen, they were not answerable to the claim of the bank. 4. On the pleadings of the parties, learned trial Court framed various issues. After recording the evidence and bearing the parties, the learned Court below held that Omprakash Kapoor was omitted to file the suit for and on behalf of the bank; the defendant no. 1 and 2 had taken the loan and had executed the documents. The Court also held that the defendant no. 1 and 2 left Chhatarpur without any information to anybody. The trial Court also held that on 6.6.83, the bank manager Omprakash Kapoor had put lock on the main gate of the factory. It also held that no manufacturing activities were going on when the lock was put, but at the same time the trial Court also held that the bank manager did not make proper arrangements for the safety of the goods and the factory. It also held that no manufacturing activities were going on when the lock was put, but at the same time the trial Court also held that the bank manager did not make proper arrangements for the safety of the goods and the factory. The trial Court, however, held that the theft was not committed as a result of carelessness of the bank manager, though it held that while putting the lock the list of the articles and inventories were not made. It, however, held that the bank manager did put the lock on the premises, but he did not take possession of the factory and the goods. The trial Court, in view of its findings, granted a decree for recovery of the suit amount against defendant no. 1 and 2, but, however, limited the liability to the extent of Rs. 90,000/- against the guarantors defendant no. 3 and 4. 5. Being aggrieved by the judgment and decree passed by the learned trial Court, the guarantors, defendant no. 3 and 4 have filed appeal no. 205/86 and bank being dis-satisfied with the partial decree against the defendant no. 3 and 4 has filed first appeal no. 3/87. 6. Shri Abhay Sapre and Shri Neeraj Vegad, learned counsel appeared for guarantors, defendant no. 3 and 4 and the bank was represented by Shri J.P. Sanghi Advocate. The parties have made their submissions in detail and have taken this Court through the oral and documentary evidence. 7. Contention of Shri J.P. Sanghi, learned counsel for the Bank was that in view of the findings recorded by the trial Court that the defendant no. 3 and 4 stood guarantors and their liability was co-extensive and co-terminus, the decree could not be confined to the tune of Rs. 90,000/- only. He submits that the bank was entitled to full decree as claimed in the suit. 8. Shri Sapre and Shri Vegad, learned counsel for defendant no. 3 and 4 submitted that in view of the findings of the learned trial Court that the lock was put by the bank manager on the main gate of the factory and no list of the goods or inventory of the articles were made and a theft was committed, the defendant no. 3 and 4 were at all not answerable to the claim and they would stand absolutely discharged. 9. 3 and 4 were at all not answerable to the claim and they would stand absolutely discharged. 9. The evidence of P.W. 1 Omprakash Kapoor clearly shows that after receiving the information from the defendant no. 3 and 4, he came to the factory premises and at that time he found that the factory was not in production. He made the inquiries but as no satisfactory reply was received by him, he had put the lock on the main gate. He denied the suggestion that the workers were engaged in production. He also denied the suggestion that he had put the locks on each and every room. He, however, admitted that he did not make any arragnement for safety of the factory or the goods lying inside, as according to him, factory was not surrendered and the factory was not in production. He admits that he did not make the list of the goods or inventory of the articles. According to him he did not seek permission either from the bank officers or from the Court for putting the lock on the factory premises. According to him, he had only sent information to his superiors. He further submits that the lock was put by him at the request of Saranjeet Singh, defendant no. 3. In para 17 of his statement, he admits that he did not send anybody to look after the factory from the date of putting the lock i.e. 6.6.83, though he himself had gone to see the factory premises. According to him, he could not remember the exact number of his visit to the factory, but he was sure that once in a month he had gone to inspect the factory premises. He admits that despite the lock on the factory premises, the gate could be opened and this fact was informed by him to the guarantors. However, no document regarding such information was filed by him. He admits that no written information was given by him either to the police or to the grantor. He was unable to say as to what ware the goods or articles inside the factory and what was the value of the same P.W. 1 admits that after abscontion of the principal debtors, the guarantors made various requests to him that they were ready and willing to discharge the loan amount provided the factory premises were given to them. He was unable to say as to what ware the goods or articles inside the factory and what was the value of the same P.W. 1 admits that after abscontion of the principal debtors, the guarantors made various requests to him that they were ready and willing to discharge the loan amount provided the factory premises were given to them. According to him he had conveyed the proposal to the higher authorities, but the higher authorities ware of the opinion that unless the guarantors deposit Rs. 50,000/-, the possession of the factory premises cannot be given to them. From this statement, it is clear that on 6.6.83, bank had taken the possession of the factory premises, the goods and the articles. On one side, the witness says that he had merely put the lock on the main gate and at the same time, he says that possession of the factory could not be given to the defendant no. 3 and 4 because they were unable to deposit Rs. 50,000/-. 10. P.W. 1 Omprakash Kapoor admits that a theft was committed in the factory premises and he had lodged the report on 12.12.83. It is clear from his statement that Saranjeet Singh had informed him about the theft and he had gone to the police station with Saranjeet Singh for lodging the report. From his statement, it is clear that no list or inventory of the stolen articles were made. Even the list of the remaining articles or goods was not made. He is unable to say that what was the value of the installed machinery. 11. From the statement of P.W. 1 the facts which emerge can thus be summarized as after receiving the information that defendant no. Even the list of the remaining articles or goods was not made. He is unable to say that what was the value of the installed machinery. 11. From the statement of P.W. 1 the facts which emerge can thus be summarized as after receiving the information that defendant no. 1 and 2, the principal debtors, had run away, Omprakash Kapoor the bank manager came to the factory premises put a lock on the main gate of the factory, did not make a list of the goods or inventories of the articles, did not make necessary arrangements for safety of the goods and articles, did not seek permission from his higher officials or from the Court for putting the lock on the factory premises, the guarantor made various requests to the bank for giving possession of the factory premises, the bank did not concede to the requests of the guarantor not did deliver the possession to the guarantor as they were unable to deposit Rs. 50,000/-, he knew that deposite the lock on the main gate the gate can be opened, on 12.12.83 he was informed by Saranjeet Singh that some theft has been committed in the factory premises, with Saranjeet Singh he went to lodge the report to police, even after learning about the theft he did not make an inventory or list of the remaining articles and machinery. 12. From the statement of P.W. 2 Rajendra Prasad Gupta, it appears that loan was taken by defendant no. 1 and 2, the defendant no. 3 and 4 stood guarantors and all the defendant had executed various documents in favour of the bank. It also appears that the list of hypothecated goods/articles is prepared in duplicate, one is given to the debtor and the other remains with the bank. It also appears that list of the articles was given to the bank. It also appears that the documents clearly show the price of the articles purchased by the debtor. 13. From the statement of DW - 1 Ambikaprasad, the defendants have proved the list of the articles which were purchased by the defendant no. 1 and 2 for installation of the Soda Water Factory. From the statement of DW - 2, Head Constable Hiralal Namdeo, the defendants could successfully prove that a report was lodged by Omprakash Kapoor on 12.12.83. From the statement of DW - 1 Ambikaprasad, the defendants have proved the list of the articles which were purchased by the defendant no. 1 and 2 for installation of the Soda Water Factory. From the statement of DW - 2, Head Constable Hiralal Namdeo, the defendants could successfully prove that a report was lodged by Omprakash Kapoor on 12.12.83. D.W. 4 Saranjeet Singh has stated that on 6.6.83 he was informed by the bank manager that he was going to put a lock in the factory premises, therefore, the witness must accompany him. When they reached the factory, they found 15-16 persons engaged in the production. The bank manager Omprakash Kapoor turned out every body and informed them that because of non-deposit of the loan amount, he was taking possession of the factory. Thereafter, the bank manager had put the lock everywhere and had also affixed his seal. Before putting the lock the list of the goods and inventory of the articles were not made and even after putting the lock no arrangements for proper safety of the factory premises and the articles lying inside were made. The witness had asked the bank manager that he was ready and willing to pay the loan amount provided the factory was given in their possession. On 12.12.83, he had made an application to the Regional Manager of the Bank and sent a copy of the same to the manager. He also made application to the Collector, General Manager (industries). According to the witness Panchnama D-7 was prepared and photographs of the lock were also taken. According to him about 80,000 bottles were purchased by the defendant no. 1 and 2 for Rs. 2.15 per bottle and machines and other articles worth about 2 lacs were also purchased by the defendant no. 1 and 2. He submits that he went to the factory premises, but found that barring the scrap of the machines, he could not find anything. He had denied the suggestion that on 6.6.83 only two/four employees were working in the factory. He has also denied the suggestion that rooms were not locked and the said workers were only cleaning the bottles. From this suggestion, it is clear that certain persons were employed for cleaning the bottles. He had denied the suggestion that on 6.6.83 only two/four employees were working in the factory. He has also denied the suggestion that rooms were not locked and the said workers were only cleaning the bottles. From this suggestion, it is clear that certain persons were employed for cleaning the bottles. From this suggestion, it is also clear that statement of P.W. 1 Omprakash Kapoor that the factory was not in production and he did not find even a single employee is absolutely incorrect. PW-4 Saranjeet Singh further states that he did not lodge the report to the police but had made certain representations to the Suptd. of the Police and Collector and had supplied the copies of the same to the bank and its regional manager. According to him Omprakash Kapoor had put 5 locks in the factory premises. He had denied the suggestion that they were giving baseless and false applications to the bank to avoid the loan liability. 14. From the statement of Saranjeet Singh, it is clear that on 6.6.83 locks were put on the factory premises two/four, at least, employees were cleaning the bottles no arrangements for proper safety of the factory promises were made, some theft was committed in the factory premises about which the report was lodged by the bank manager and the witness had also made representations to the Collector and Suptd. of Police. It is also clear from his statement that he had made various applications to the bank for giving the possession of the property, but the bank was not ready to give the possession. 15. The learned trial Court has also found it as a fact that the defendant no. 1 and 2 absconded from Chhatarpur and their whereabouts were not known to anybody. On 6.6.83 P.W. 1 Omprakash Kapoor had put a lock on the main gate of the factory, Omprakash did not make necessary arrangements for the proper safety of the factory, list of the goods and inventory of the articles were not made, after the lock was put by the Omprakash a theft was committed in the factory premises, certain persons were employed who on 6.6.83 were cleaning the bottles, and the defendant no 3 and 4 had moved applications for getting the possession of the factory premises. From Ex. D/5, letter dated 9.1.84, it appears that defendant no. From Ex. D/5, letter dated 9.1.84, it appears that defendant no. 3 and 4 were ready and willing to take the possession of the factory and were ready to make the payment of the loan. 16. The learned trial Court, after recording above findings suddenly held that though the lock was put by the bank, but possession was not taken by the bank. I am unable to understand this finding. When the lock was put by the bank and the bank was ready and willing to give the possession of the same to the guarantors, how could it be held that the bank had not taken the possession. Once the lock is put by the creditor, then it is clear that it had taken the possession of the property and the articles. The learned Court below, in my opinion, was patently wrong in holding that by putting a lock, it could not be held that the possession of the property in absence of any Panchnama, etc. would not amount to taking the possession by the bank. It para 13 of the judgment, the learned Court below has held that the bank had merely put the lock, therefore, in absence of the Panchnama etc., it cannot be held that the property was legally taken in possession by the bank. An illegal act of taking the possession would not help and assist the bank. The bank cannot take advantage of its own wrong. Being a creditor, under the agreement and even under the law, the bank was entitled to take possession of the property. If the defendant no. 1 and 2 had absconded, the bank was entitled to take possession and if it had taken the possession by putting a lock, restraining others from entering the premises, it has to be held that the bank had taken the possession of the property. If the defendant no. 1 and 2 had absconded, the bank was entitled to take possession and if it had taken the possession by putting a lock, restraining others from entering the premises, it has to be held that the bank had taken the possession of the property. If the bank had taken the possession of the property, then it was mandatory for the bank to prepare a list of the goods and inventory of the articles so that in the event of the decree the said articles could be produced before the Court for sale or in the event of payment by the guarantor the articles and the factory premises held as security by the bank could be returned to the guarantors because on payment of the loan amount, the guarantors were entitled to each and every security whether known or un-known held by the bank. The learned trial Court was justified in holding that defendant no. 1 and 2 had abandoned the possession of the factory premises and was also right in holding that putting of the lock by Omprakash Kapoor was not contrary to law. The findings recorded by the learned trial Court are self-contradictory. At one place it had justified the act of the Omprakash Kapoor and at the same time it has held that the possession was not legally taken. The question whether possession was legally taken or not would not be so material because the bank had taken the possession. The fact, therefore, remains that on 6.6.83 by putting a lock over the factory premises the bank had taken the possession of the property without making a list or inventory. The fact also remains that on or before 12.12.83 a theft was committed in the factory premises, when the factory premises were in possession of the bank. The fact also remains that immediately after taking the possession of the factory premises, the bank or its officers, especially, P.W. 1 Omprakash Kapoor did not make necessary arrangements for proper safety of the factory premises and the articles lying in it. Once the possession of the factory premises were taken by the bank, it was an absolute responsibility of the bank to take care of the premises and the articles lying inside. Once the possession of the factory premises were taken by the bank, it was an absolute responsibility of the bank to take care of the premises and the articles lying inside. The learned trial Court was wrong in holding that the bank could not be held liable for the damages or the loss caused because of the theft. The trial Court was also wrong in holding that as the defendant no. 3 and 4 have not made any counter claim, they would not be entitled to any damages. 17. It appears that the learned trial Court has not taken pains to appreciate the rights and liabilities of a creditor and the guarantor. According to Section 139 of Indian Contract Act, 1872 (for abort 'the Act'), 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. Section 139 requires the creditor not to do any act which is inconsistent with the rights of the surety and also obliges him to do all acts which his duty to the surety requires him to do. According to Section 140 of the Act where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor. According to Section 141 of the Act the surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of surety ship 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. According to Section 145 of the act in every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety; and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but no sums which he has paid wrongfully. According to Section 145 of the act in every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety; and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but no sums which he has paid wrongfully. A combined reading of the above referred sections would clearly show that on payment of the amount, the surety is entitled to the securities held by the creditor against the principal debtor and the surety is entitled to recover the amount from the debtor which he had rightfully paid to the creditor. The surety is also invested with all the rights which the creditor had against the principal debtor. If the creditor has omitted 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 would certainly stand discharged. 18. Shri Sanghi submits that principles which apply to the cases of pledge would not be applicable to the cases of hypothecation because in a case of hypothecation the property is not in actual physical possession of the creditor. He submits that the bailment of goods as security for payment of a debt or performance of a promise alone is called 'pledge'. For constituting pledge there must be bailment of goods and if there is no bailment, there is no pledge and if the bank had even put his locks over the hypothecated goods, the surety would not be discharged. 19. In my opinion, the argument is mis-conceived. Hypothecation is nothing, but is an extended form of pledge. When by deed of hypothecation, the property is pledged with the bank and the possession remains with the debtor, then in law the debtor is in possession only as a bailee and the pledgee creditor is the real owner, hence the creditor is in a position to treat the securities in its possession as properties of the trust it has authored. In a pledge the property remains under the actual physical possession or lock and key of the creditor and it has every right and control over it, but in case of hypothecation the property in the goods remains with the creditor, though it has no actual physical possession, but it is in constructive possession of the creditor and it has a right to take possession of the same. In the instant case, this question need not be considered further because hypothecated goods and articles were taken in possession by the bank. Once the possession was taken by the bank then it was the duty of the bank which required it under the law to take care of it, so that the eventual remedy of the surety against the principal debtor was not impaired. The bank and its officers were absolutely negligent. After putting their lock and taking possession of the property they did not make proper arrangement for proper safety of the property and even did not prepare the list of the articles or inventories of the same before taking the possession. It is not expected of the bank or its officers that on one hand they would take possession of the property and at the same time would not take care of the property. Successful reliance can be placed on the dictum of the Supreme Court, in the matter of State of M.P. v. Kaluram A.I.R. 1967 S.C. 1105. In the said case, there was an agreement of sale between the State Government and a contractor and it was specifically provided that after making the payment under the agreement, the contractor would be permitted to remove the goods. Though the payments were not made but the creditor i.e. the State permitted the contractor to remove the goods. The Supreme Court held that when the property was in possession of the State and by its act, it had permitted the debtor/contractor to remove the goods, the eventual remedy of the surety himself against the principal debtor was thereby impaired. Though the payments were not made but the creditor i.e. the State permitted the contractor to remove the goods. The Supreme Court held that when the property was in possession of the State and by its act, it had permitted the debtor/contractor to remove the goods, the eventual remedy of the surety himself against the principal debtor was thereby impaired. In the instant case, it is clear that the creditor has omitted to make proper arrangements for the safety of the property which his duty to the surety required him to do because the surety was entitled to all the securities held by the bank, on payment of the amount and was also to be invested with all the rights which the creditor had against the principal debtor. The facts as appear from the records clearly show that the bank was absolutely negligent. In the matter of State Govt. Saurashtra v. Chitranjan Rangnath Raja A.I.R. 1980 S.C. 1528 it is clear that if because of the negligence or omission or inaction or non-action of the bank the securities are damaged or lost, then to the extent of the value of the securities, the surety is discharged. 20. It was next contended that as the defendant no.3 and 4 have given up their rights available to them under Section 133, 134, 135, 139 and 141, they would not be entitled to raise all these defences. It would be against the public policy to hold that even on payment of the debt amount, the surety would not be entitled to the securities held by the bank. Section 140 regarding which no exception has been claimed by the bank is clear in its terms when it states that upon payment or performance of all that he is liable for the surity is invested with all the rights which the creditor had against the principal debtor. The creditor is certainly liable to return all the securities to the debtor and surity but in the instant case, even if the total amount is paid, the creditor is not in a position to return the securities held by him. According to section 141 if the creditor loses or parts with such security, the surety would be discharged to the extent of the value of the security. According to section 141 if the creditor loses or parts with such security, the surety would be discharged to the extent of the value of the security. In the instant case, unfortunately, there is no evidence on record from the side of the bank that what was the value of the security lost because of the inaction/non-action of the bank in not taking proper safety measures in relation to the property over which the lock was put by the bank. In absence of such evidence, it was to be held that the sureties are absolutely discharged. 21. I have no hesitation in holding that the bank had taken the possession of the goods lying in and the factory premises and because of their negligence and omission to take proper care, the goods were lost and as the value of goods/securities is not known on the date when possession was taken by the bank the surety will be absolutely discharged. It is unfortunate that because of inaction on the part of the bank, and its officers and because of the negligence of some officers of the bank, the suit of the bank has to fail against the guarantors. 22. The decree of the trial Court, so far as it relates to the defendant no. 1 and 2, the principal debtor, is maintained, but however, the decree granted against the appellants/defendants no. 3 and 4 deserves to and is accordingly set aside. First appeal 205/80 is accordingly allowed and First appeal no. 3/87 is dismissed. The appellants of first appeal no. 205/86 and the respondents no. 1 and 2 of first appeal no, 3/87 shall be entitled to their costs throughout. Counsel fee in such of the appeal as per schedule. Decree be framed in each of the appeal separately. Appeal allowed