THE NELLORE CO-OPERATIVE URBAN BANK LTD. BY ITS SECRETARY, MR. V. VENKATAPPAYYA Vs. AKILI MALLIKARJUNAYYA

JUDGEMENT

(1.) THIS second appeal was heard by Rajamannar, J., in the first instance but the learned Judge by his order dated, the 12th March, I947 referred the case to a Division Bench as it raised important points on which there is no direct authority.

(2.) THE facts are not in dispute and may be briefly stated. One Yarramreddi Balakrishna Reddi borrowed Rs. 500 on the 20th May, 1932, from the Nellore Cooperative Urban Bank, Ltd. (hereinafter called "the Bank"), and the respondent herein guaranteed the due repayment of the debt. As the debt was not, however, duly paid, the bank preferred a claim under Section 51 of the Madras Co -operative Societies Act (VI of 1932) and the claim having been referred to an arbitrator, an award was passed against both Balakrishna Reddi and the respondent on the 13th July, 1936.

(3.) THE bank attempted to recover the amount under the award from the respondent by filing an execution application on the 12th August, 1940, before the Deputy Registrar of Co -operative Societies, Nellore, for attachment and sale of certain, moveable properties of the respondent, and it was sent to the sale officer, North Nellore, for effecting the attachment and sale. Thereupon the respondent preferred a "claim petition" before that officer on the 9th June, 1942, objecting to the execution of the award against him on the ground that inasmuch as the liability of the principal debtor Balakrishna Reddi had been extinguished as a result of the proceedings before the Board and as he was only a surety, there was no subsisting award of which execution could be ordered against him. The sale officer by his order dated the 19th December, 1942, upheld the objection and allowed the " claim petition ". The bank thereupon instituted the suit in the District Munsiff's Court, Nellore, out of which this appeal arises for a declaration that it is entitled to proceed against the respondent for recovery of the amount due under the award dated the 13th July, 1936, and that the order of the sale officer dated the 19th December, 1942, is illegal. The District Munsiff decreed the suit holding that the proceedings before the Board did not affect the liability of the respondent under the award and that the order of the sale officer was therefore contrary to law. On appeal, however, the District Judge of Nellore held that the statutory discharge of the debt of the principal debtor Balakrishna Reddi operated as a discharge of the liability of the surety, the respondent, as well, and, accordingly,, he dismissed the suit. Hence this second appeal.