THANKAPPAN NAIR Vs. SOUTH INDIAN BANK LTD

JUDGEMENT

(1.) Third defendant is the appellant. He was a surety to the principal debtor, the first defendant. Appellant's contention is that as admittedly the security of the goods hypothecated was lost thereby impairing the eventual remedy of the surety against the principal debtor his liability as surety is discharged and therefore Ext.A6 acknowledgement does not create any liability so far as he is concerned.

(2.) The Court below held that after 12-10-1977 the first defendant (principal debtor) disposed of the entire stock and closed down his shop and hence the security of the hypothecated goods was lost. It is in evidence that the first defendant's business premises was very near the local branch office of the plaintiff-bank. If there was effective supervision of the hypothecated goods by the plaintiff, the first defendant could not have sold the entire stock which formed the security for the amount due under cash credit loan. The Court below held that there was negligence on the part of the employees of the plaintiff-bank and it enabled the first defendant to remove the hypothecated goods from the godown. It is admitted by the plaintiff that the hypothecated goods were under its surveillance and provision was made for furnishing quarterly stock statement by the first defendant to the bank. As admittedly the security of the goods hypothecated was lost thereby impairing the eventual remedy of the surety against the principal debtor, appellant's liability as surety stood discharged.

(3.) S.139 of the Contract Act provides that the surety is discharged--