2007 (9) TMI 698 - HC - Indian Laws

Summary

Issues Involved:
1. Liability of sureties in the absence of the principal borrower.
2. Non-joinder of legal representatives.
3. Dismissal of the suit against the principal borrower.
4. Recovery of costs.

Summary:

1. Liability of Sureties in the Absence of the Principal Borrower:
The court addressed whether sureties could be held liable in the absence of the principal borrower. It was contended that the sureties, having executed the promissory note along with the principal borrower, were not liable to discharge the suit amount jointly or severally if the principal borrower was not on record. The court cited precedents, including *State Bank of Hyderabad v. Nagabushanam* and *Chattanatha v. Central Bank of India*, which emphasized that the liability of sureties is contingent upon the default of the principal borrower. The court concluded that the sureties could not be made liable without the principal borrower being on record.

2. Non-joinder of Legal Representatives:
The appellate court observed that the suit was not bad for non-joinder of other legal representatives of the deceased surety, V. Lakshman Raju. It was noted that the estate of V. Lakshman Raju was sufficiently represented by D3 (one of his sons) and D4 (his wife). The court held that non-impleading of other legal representatives could not be a ground for dismissal of the suit.

3. Dismissal of the Suit Against the Principal Borrower:
The appellate court noted that the suit against the principal borrower was dismissed for non-payment of batta and non-service of summons. It was observed that u/s 137 of the Indian Contract Act, mere forbearance by the creditor to sue the principal debtor does not discharge the surety. The court emphasized that the liability of the surety is co-extensive with that of the principal debtor, and the dismissal of the suit against the principal debtor does not discharge the sureties' liability.

4. Recovery of Costs:
The plaintiff appealed against the denial of costs by the appellate court. The court held that the appellate court had exercised its discretion in passing the order without costs, and the plaintiff could not insist on the suit being decreed with costs. The cross objections by D3 were accepted, and it was held that D3 was not liable to pay any amount due to the dismissal of the suit against the principal borrower.

Conclusion:
The cross objections were allowed, setting aside the judgment of the appellate court and confirming the decree of the trial court. The second appeal for recovery of costs was dismissed, with each party bearing their own costs.