SOLAPUR NAGARI AUDYOGIK SAHAKARI BANK NIYAMIT Vs. RAJAGOPAL

JUDGEMENT

(1.) THIS petition has been filed by the petitioner Bank challenging the orders passed by the Court of District Co-operative Judge, Solapur in Co-operative Case No.481/78 79 dated 24th October,1980 and the order passed by the Maharashtra State Co-operative Appellate Court in Appeal No.156 of 1982 dated July 19, 1983.

(2.) THE petitioner bank had filed a case against the respondents No.1 to 11 for recovery of a sum of Rs. 27,678.90. The respondent No.1 is a partnership firm. The respondents No.2 to 4 are the partners of the said firm. The Respondent No.5 is also a partnership firm and the respondents No.6 and 7 are the partners thereof. The respondent No.8 is also a partnership firm and the respondents No. 9 to 11 are the partners thereof. The respondent No.1 to 4 were granted bill discounting facility by the petitioner bank. The respondents No. 5 to 11 stood sureties for the said facility. The respondents No.1 to 4 sent receipts and hundies to the concerned parties which were dishonoured, to the extent of Rs.18,890/-. Since the amounts were not paid, the petitioner had filed the recovery case before the Co-operative Court for recovery of a sum of Rs.27,678.90. The Co-operative Court after considering the evidence passed an award in favour of the petitioner in the sum claimed together with interest at the rate of Rs.16/- p.m. p.c. p.a. on principal amount. This award was, however, passed only against the respondents No.1 to 4. While considering the case, it was observed that the defendants No.1 to 4 have not led any evidence and in fact remained absent from the Court. The petitioner Bank produced documentary evidence to establish their claim. The defendants No.5 and 8 appeared through their partners being the defendants No.6, 7, 9, 10 and 11 and submitted the written statement. The defendants No.5 to 11, who are impleaded as respondents No.5 to 11 in the Writ Petition submitted that the Co-operative Court had no jurisdiction to try the case against them, as they were not the members of the petitioner bank. It was admitted that the respondents are sureties for the loan to the extent of Rs.10,000/-. It is further submitted that since the petitioner bank has made breach of contract of sanctioned limit, the respondents No.5 to 11 were not liable for the difference between the amount of loans and the actual limit which was sanctioned. A perusal of the order shows that the first loan of Rs.10,000/- was sanctioned on 11th January, 1975 for which the defendants No.5 to 11 had become sureties. An additional amount of Rs.15,000/- was also sanctioned on 26th April, 1975, for which the respondents No.5 to 11 again stood sureties. Although the defendants No.1 to 4 had not produced any oral or written evidence, the defendants No.1 and 2 were permitted to submit their arguments before the Court. The defendants No.1 and 2 submitted their argument in writing before the Court and stated that the petitioner Bank has not done rebooking of the hundies. The petitioner had also not produced any document before the Court. This argument was, however, rejected by the Court because the defendants No.1 and 2 had themselves not lead any evidence. Thus, the argument was not accepted. Thereafter it was held that the respondents No.1 to 4 are liable for the dispute claim. It was observed that the respondents No.5 to 11 are sureties for the loan for Rs.10,000/- and not the remaining loan taken by the respondents No.1 to 4. It was further stated by the representative of the petitioner that the defendants No.1 to 4 had been granted the loan facility in the sum of Rs.57,114/-. This was over the limit of Rs.25,000/-. It was further submitted that as on 28th November, 1975, the respondents No.1 to 4 owe an amount of Rs.38,137/-. On 30th December, 1975, the due amount was Rs.37,739/-. The Court also notices the admission made by the representative of the petitioner bank that the amount which has been disbursed to the respondents No.1 to 4 over and above the limit was not continued sureties being respondents No.5 to 11. In view of the above, the Court held that the liability of the respondents No.1 to 4 was limited to Rs.10,000/- on account of the first facility. The Court thereafter observes that by virtue of Section 143 of the Indian Contract Act, the liability of the surety ceases whenever the petitioner has made the transaction beyond the limit of the sanctioned amount. Since Rs.50,000/- have been granted above the sanctioned limit, the respondents were held not liable to pay the amount. The Court also observed that the sureties for the loan of respondents No.1 to 4 are not liable. This fact is said to be admitted by the representative of the petitioner in the cross-examination. Thereafter the Court proceeded to pass an order for recovery of a sum of Rs.27,678.90 against the defendants No.1 to 4 being the respondents No.1 to 4 in the Writ Petition.

(3.) THE counsel for the petitioner bank has submitted that the Co-operative Court fell in error in making an order for recovery only against the respondent No.1. Since the liability of the principal debtor and the surety is co-extensive, the surety ought not to have been discharged. So far as the Appellate Court is concerned, it is submitted by Mr.Agrawal that Section 133 of the Contract Act has been misconstrued by the Court. There is no variation in the contract in the present case. In any event, the bank is only claiming the amount for which the respondents No.5 to 11 are sureties. Therefore, it is submitted that the order of the trial Court was only to be corrected to the extent that the Order of recovery should be effective against all the respondents and could not have been limited only to respondent No.1. The Counsel for the respondents has vehemently argued that it has been admitted before the Co-operative Court by the representative of the petitioner bank that the amount outstanding against the respondents No.1 to 4 is far in excess of the amount sanctioned. The representative of the petitioner bank has also admitted that in such circumstances sureties being the respondents No.5 to 11 would not be liable for the amount. It is further submitted by Mr.Godbole that in view of Section 139 read with section 141 of the Indian Contract Act, it was obligatory on the petitioner bank to give credit for the amount which could have been realised by the bank by re-sale of the goods with respect to which hundies have been dishonoured. Admittedly, the bank had taken no steps whatsoever for selling the goods. The Counsel has submitted that some of the goods had been lost by the bank whilst they were in their custody. Therefore, it was encumbant upon the Co-operative Court to have taken this matter into consideration. There was no evidence on the record and the Co-operative Court failed to exercise its jurisdiction in not taking material evidence into account. In view of the above, it is submitted by Mr.Godbole that the matter deserves to be remanded back at least to the Appellate Court to consider as to whether or not the conditions provided for under Section 139 and 141 of the Indian Contract Act have been satisfied by the petitioner bank.