2001 (9) TMI 1160 - HC - Indian Laws

Summary

Issues Involved:
1. Liability of the surety when the principal debtor's liability is discharged.
2. Executability of the decree against the surety when the suit against the principal debtor has abated.
3. Applicability of relevant provisions of the Indian Contract Act, 1872.

Detailed Analysis:

1. Liability of the Surety when the Principal Debtor's Liability is Discharged:
The primary issue to be considered was whether the plaintiff/Decree Holder can proceed against the surety when the principal debtor's liability stands discharged. The respondent, who was the judgment debtor and surety, argued that he was not liable to pay the debt as the principal debtor's liability had been discharged due to the abatement of the suit against the principal debtor. The executing court held that the debt against the surety also stands discharged when the debt had abated against the principal debtor.

2. Executability of the Decree Against the Surety when the Suit Against the Principal Debtor has Abated:
The executing court framed the point "whether the decree obtained against the respondent/second judgment debtor is executable or not?" and concluded that since the debt had abated against the principal debtor, the debt against the surety also stands discharged, thus dismissing the execution petition. The petitioner/Decree Holder contended that the executing court erred in dismissing the execution petition as not executable against the surety. The petitioner argued that the surety's liability is co-extensive with that of the principal debtor, and once a decree has been passed against the surety, it is binding and cannot be challenged by the executing court.

3. Applicability of Relevant Provisions of the Indian Contract Act, 1872:
The court examined several provisions of the Indian Contract Act, 1872, including Sections 126, 128, 134, 139, and 140. Section 126 defines the contract of guarantee, surety, principal debtor, and creditor. Section 128 states that the surety's liability is co-extensive with that of the principal debtor unless otherwise provided by the contract. Section 134 provides that the surety is discharged by any contract between the creditor and the principal debtor by which the principal debtor is released or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. Section 139 discusses the discharge of the surety by the creditor's act or omission impairing the surety's eventual remedy. Section 140 outlines the rights of the surety on payment or performance.

The court observed that the creditor's omission to bring the legal representatives of the deceased principal debtor on record resulted in the abatement of the suit against the principal debtor, thereby discharging the debt against the principal debtor. Consequently, the surety's liability also stands discharged under Section 134 of the Contract Act.

Relevant Case Laws:
The court considered several judgments to support the contentions of both parties. Notably, in the case of Bank of Bihar v. Damodar Prasad, the Supreme Court held that the creditor can proceed directly against the surety without exhausting remedies against the principal debtor. Similarly, in State Bank of India v. Indesport Registered, the Supreme Court held that the creditor is not bound to exhaust remedies against the principal debtor before suing the surety. However, these cases did not address the specific situation where the suit against the principal debtor had abated due to the creditor's omission.

Conclusion:
The court concluded that the liability of the surety is discharged when the principal debtor's liability is discharged due to the abatement of the suit. The creditor's omission to bring the legal representatives of the deceased principal debtor on record resulted in the discharge of the debt against the principal debtor, and consequently, the surety's liability also stands discharged. Therefore, the decree against the surety is not executable.

Final Order:
The revision petition was dismissed, and the court upheld the executing court's order that the decree against the surety is not executable. The petitioner/Decree Holder cannot proceed against the surety as the liability of the surety stands discharged along with the discharge of the principal debtor's liability due to the abatement of the suit.