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1970 (8) TMI 100 - HC - Indian Laws

Issues:
1. Whether the liability of a surety is co-extensive with that of the principal debtor in the execution of a decree.
2. Whether a creditor must exhaust remedies against the principal debtor before proceeding against the surety.

Analysis:

Issue 1: The main contention in this case was whether the liability of a surety is co-extensive with that of the principal debtor in the execution of a decree. The appellant argued that his liability was only as a surety and not as a principal debtor, and thus, the execution could only proceed against him after exhausting remedies against the principal debtor. The appellant relied on a decision in Srinivasa v. Subramaniam, which suggested that a decree against a principal debtor and a guarantor should be treated as two separate decrees. However, a recent judgment of the Supreme Court in Bank of Bihar v. Damodar Prasad clarified that the liability of the surety is coextensive with that of the principal debtor under Section 128 of the Contract Act. The Supreme Court held that the surety becomes liable to pay the entire amount immediately upon the passing of the decree, without the need for the creditor to exhaust remedies against the principal debtor first.

Issue 2: The second issue raised was whether a creditor must exhaust remedies against the principal debtor before proceeding against the surety. The appellant contended that the creditor should first proceed against the principal debtor, as per the decision in Srinivasa v. Subramaniam. However, the High Court, following the Supreme Court's judgment in Bank of Bihar v. Damodar Prasad, held that in the absence of any special equity, the surety has no right to restrain an action against him by the creditor on the grounds of the principal debtor's solvency or the creditor's other potential relief against the principal. The Court emphasized that the surety's business is to ensure the principal pays, not to dictate terms to the creditor. Therefore, the Court dismissed the appeal and upheld the views of the lower courts, ruling that the creditor could proceed directly against the surety without exhausting remedies against the principal debtor first.

 

 

 

 

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