CENTRAL BANK OF INDIA Vs. B K NAYAR

JUDGEMENT

(1.) The plaintiff, Central Bank of India, filed the suit for the recovery of Rs. 7,325.91, on the allegations that B. K. Nayar, defendant 1, was running the business of general merchandise under the name and style of Jawahar Stores at New Jawahar Nagar, Jullundur City. He was the proprietor thereof and requested the plaintiff for a loan of Rs. 25,000/-. The plaintiff sanctioned him a loan of Rs. 7,500/- on June 1, 1972, in the shape of a limit under the scheme, stock in trade. The said loan was re-payable on demand. The rate of interest chargeable thereon was 12 per cent, per annum with monthly rests. Dev Raj Malhotra, defendant 2, became the guarantor for the return of the said amount by defendant 1. It was required of defendant 1 to submit daily stock report and to deposit the dairy proceeds of the sale in the account of the said Jawahar Stores and to repay the loan in instalments. It was alleged that the defendant did not maintain the accounts properly nor submitted the required stock report. A sum of Rs. 7,325.91 was thus found due from the defendant for which the suit was filed claiming future interest at the rate of 14 per cent, per annum from the date of the institution of the suit till realisation. Defendant 1 admitted the contract and the conditions thereof. However, his case was that he had been maintaining the accounts property and submitting his returns of stock regularly. As he was running into losses, the Bank placed its charge on the hypothecated goods and took into possession property worth Rs. 8,000/-. The same was later disposed of by the Bank in open market and the money was realised as such. Thus, nothing was due from him. On behalf of defendant 2, the guarantor, it was pleaded that the loan and the security were admitted, but he was not liable to pay the amount as the plaintiff had allowed the security to be lost. Thus, the guarantor was discharged from his liability on account of the negligence of the plaintiff. The trial Court found that defendant 1 had failed to prove that the Bank took into possession the hypothecated goods worth Rs. 8,000/- and sold the same and, therefore, nothing was due from him. As regards the liability of the guarantor, defendant 2, it found that the Bank was negligent in not getting hold of the goods of the plaintiff and to apply the sale proceeds thereof towards the discharge of the loan of defendant 1. Therefore, the guarantor, defendant 2, stood discharged and was not liable to make payment to the plaintiff. With these findings, the plaintiffs suit for a sum of Rs. 7,325.91 was decreed against defendant 1 with future interest at the rate of six per cent, per annum till its realisation. No decree was passed against defendant 2. Aggrieved against the same, the plaintiff filed the appeal in order to claim the relief against the guarantor, Dev Raj Malhotra, defendant 2 also. The learned District Judge affirmed the finding of the trial Court and, thus, maintained the decree passed by the trial Court. It was observed by the learned District Judge "that it is only when the creditor is not guilty of any laches affecting rights of the surety that the liability of the surety would still stand. In this view of the matter, the conditions of S.139, Contract Act, (hereinafter called the Act), were fulfilled and the surety was rightly discharged." Dissatisfied with the same, the plaintiff has come up in second appeal to this Court.

(2.) The learned counsel for the appellant contended that vide, Exhibit P. 9, the guarantor, Dev Raj Malhotra, defendant No. 2, agreed, by Cl.9 thereof that he shall not be entitled to any of the rights conferred on sureties by Ss.133, 134, 135, 139 and 145 of the Act. Thus, argued the learned counsel, in view of the said clause of the agreement, Exhibit P. 9, it could not be held that in view of the provisions of S.139 of the Act, the guarantor was not liable for the guarantee. In support of the contention, the learned counsel relied upon Krishnaswami v. Travancore National Bank, AIR 1940 Mad 437; The State of Punjab v. Muni Lal, (1962) 64 Pun LR 416; Sonepat Co-operative Society Ltd. v. Kapuri Lal, AIR 1936 Lah 305 and Mahanth Singh v. U Ba Yi, AIR 1939 PC 110. It was also contended that apart from the legal proposition, there is no evidence on the record to show that the plaintiff was in any way guilty of any laches affecting the rights of the surety, as contemplated under S.139 of the Act. According to the learned counsel this finding of the Court below is without any evidence on the record.

(3.) After hearing the learned counsel for the parties, I find force in the contention raised on behalf of the appellant.