S B I BATHRI Vs. BALAK RAJ

JUDGEMENT

(1.) Whether a decree-holder, in case of a money decree against the principal-debtor and the guarantors, whose liability is joint and several, must exhaust his remedies against the mortgaged/hypothecated property as well as the principal-debtor-Judgment-debtor before proceeding against the guarantors-judgment-debtors, is a common question of law, having considerable importance, which requires determination in these cases. This question assumes added significance in view of conflict of opinion expressed in two Supreme Court decisions.

(2.) At the very outset, it would be appropriate to examine the case law having direct bearing on the above point.

(3.) In Bank of Bihar Ltd. v. Dr. Damodar Prasad, AIR 1969 SC 297, it has been held that the liability of a surety is not deferred until remedies against principal-debtor are exhausted. Damodar Prasad, defendant No. 1, in that case, was found to owe the plaintiff-bank a sum of Rs. 11, 723.56 p. on account of Principal and Rs. 2,769.37 P on account of interest. The surety, defendant No. 2, had agreed to pay and satisfy the liabilities of the principal-debtor up to the extent of the amount found due. The trial Court, while decreeing the suit against both the defendants, directed that the "plaintiff-bank shall be at liberty to enforce its dues in question against defendant No. 2 only after having exhausted its remedies against defendant No. 1." The legality and propriety of this direction was unsuccessfully challenged before the High Court. The Supreme Court, however, allowed the appeal and the aforesaid direction was set aside.