Kerala High Court
P.K.Uthup vs Sree Gokulam Chit And Finance Co. (P) ... on 19 February, 2025
2025:KER:13973
RFA (INDIGENT) NO.179 OF 2022
1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE A. BADHARUDEEN
WEDNESDAY, THE 19TH DAY OF FEBRUARY 2025/30TH MAGHA, 1946
RFA (INDIGENT) NO. 179 OF 2022
AGAINST THE JUDGMENT AND DECREE DATED 11.01.2013
IN OS NO.42 OF 2009 OF SUB COURT, MUVATTUPUZHA
APPELLANT/2ND DEFENDANT:
P.K.UTHUP
AGED 63 YEARS
S/O KURIAKOSE,
PAZHUKKALAYIL HOUSE, KADATHY,
MUVATTUPUZHA.
BY ADVS.
ALIAS M.CHERIAN
K.M.RAPHY
BRISTO S PARIYARAM
NEENU ANNA BABU
RESPONDENTS/PLAINTIFF/1ST DEFENDANT:
1 SREE GOKULAM CHIT AND FINANCE CO. (P) LTD. 356
ARCOT ROAD, KODAMBAKKOM, CHENNAI - 600 024
REPRESENTED BY POWER OF ATTORNEY HOLDER
MR. RAJEEV M.B.,
AGED 44 YEARS,
S/O. LATE PADHMANABHAN NAIR,
MANAGER (BUSINESS), MUVATTUPUZHA BRANCH,
YAS COMPLEX, VELLOORKUNNAM VILLAGE,
MUVATTUPUZHA TALUK.
2 JOBBY.K.MATHEW
AGED 37 YEARS,
S/O. K.M.MATHEW,
KALLEPARAMBIL HOUSE,
KIZHAKKUMBHAGAM, ETTUMANOOR VILLAGE,
KOTTAYAM.
2025:KER:13973
RFA (INDIGENT) NO.179 OF 2022
2
BY ADV MAHESH V RAMAKRISHNAN
THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD
ON 19.02.2025, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
2025:KER:13973
RFA (INDIGENT) NO.179 OF 2022
3
CR
JUDGMENT
Dated this the 19th day of February, 2025 This appeal is at the instance of the 2nd defendant in O.S.No.42/2009 on the files of the Sub Court, Muvattupuzha, challenging decree and judgment dated 11.01.2013 therein. The 1st respondent herein is the plaintiff and the 2 nd respondent is the 1st defendant before the trial court, whose suit was dismissed for default.
2. Heard the learned counsel for the appellant/ 2nd defendant and the learned counsel appearing for the 1 st respondent/plaintiff in detail. Perused the verdict under challenge.
3. The parties in this regular first appeal will be referred hereinafter with their status before the trial court.
4. The suit has been instituted by the plaintiff, alleging that the 1st defendant joined for three chitties with the plaintiff vide ticket Nos.J21/0134/JMM/12, J2J/0134/JMM/13 2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 4 and JSJ/0134/JMM/14, having sala of Rs.10,00,000/- each, commenced on 10.09.2005 and terminated on 10.04.2007 and the chitties were auctioned on 26.11.2005 for Rs.7,50,000/- each and the 1st defendant received the amount on 26.11.2005. The further case of the plaintiff is that the 2nd defendant stood as a guarantor for the above said transaction and executed necessary documents in favour of the plaintiff company, agreeing to repay the same. But the 1 st defendant repaid only Rs.11,70,750/- and he kept Rs.24,05,464/- as arrears. Thus the said amount sought to be realised.
5. Before the trial court, the plaintiff failed to take steps against the 1st defendant and the suit against him was dismissed for default on 16.12.2009.
6. The 2nd defendant filed written statement denying the allegations and raising specific contention in paragraph Nos.17 and 18 of the written statement as under:
2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 5 "17. The document produced by the plaintiff as per the list shown in the plaint are forged and falsely created by the defendant and the same are not admissible in evidence. The document shown in the list is alleged agreement produced by the plaintiff dated 31/05/06 is false and fabricated and forged one. It does not bear the signature of this defendant. The defendant denies the signature alleged to be put by the defendant in the alleged pro note alleged to be executed on 31/5/06.
18. It is submitted that this defendant joined a chit with the plaintiff in 2002. Though this defendant defaulted payment the chit was closed and there arose a dispute with regard to the interest payable by this defendant towards the chit amount.
Though the chit was closed, the plaintiff failed to return the documents obtained from this defendant which includes blank signed papers and blank cheque leaves. The plaintiff has already filed a complaint before the JFCM, Thodupuzha against the defendant as ST No.23/08 for an alleged offence u/s 138 of NI Act. The evidence has been over in the case and the case is posted for hearing. The present suit is an after thought and is filed experimentally towards 2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 6 this defendant to extract money from this defendant illegally by hook or crook."
7. The trial court on the basis of pleadings, raised necessary issues and tried the case. PW1 was examined and Exts.A1 to A5 were marked on the side of the plaintiff. DW1 was examined and Exts.B1 to B5 were marked on the side of the 2nd defendant. Finally, the trial court decreed the suit, holding that the evidence of PW1, supported by Exts.A1 and A2, are convincing to prove the case of the plaintiff.
8. The learned counsel for the 2nd defendant initially argued that the suit against the 2nd defendant/guarantor alone would not lie after dismissal of the suit against the 1st defendant/principal debtor. That apart, it is argued that in the instant case, the specific case against the 2nd defendant is that the 2nd defendant joined for a chitty with the plaintiff during the year 2002 and thereafter, the chitty transaction was closed. But there arose a dispute with regard 2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 7 to the interest payable by the 2 nd defendant and in consequence thereof, the plaintiff did not return the documents obtained from the 2nd defendant in connection with the chitty of the year 2002. The case of the 2 nd defendant further is that thereafter, the documents obtained from the 2nd defendant during the year 2002, viz., blank signed papers and blank cheque leaves were not returned. The plaintiff fled a complaint before the Judicial First Class Magistrate Court, as S.T.No.23/2008 by using one among the cheques and the same ended in acquittal, on finding that the transaction therein not proved. According to the learned counsel for the 2nd defendant, in this case, no documents produced to show the chitty transactions between the plaintiff and the 1st defendant and the suit documents are Exts.A1 and A2. The specific case of the 2nd defendant is that those are documents created by using the papers issued by him in connection with the chitty of the year 2002. Accordingly, it is submitted that the plaintiff miserably failed 2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 8 to prove the case.
9. Repelling this contention, the learned counsel for the plaintiff reiterated the case of the plaintiff and relied on Exts.A1 and A2, support by the evidence of PW1 to substantiate that the case of the plaintiff proved and therefore, the trial court granted decree in favour of the plaintiff rightly. In such view of the matter, no interference by the trial court is called for.
10. The questions which would require determination are;
1. Whether a suit against the guarantor alone would lie without the junction of the principal debtor or after dismissal of the suit against the principal debtor for default?
2. Whether the trial court is right in holding that the plaintiff's case as to the chitty transactions and entitlement of the suit amount is proved?
3. Whether the verdict of the trial court is liable to be interfered?
4. Reliefs and Cost.
2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 9
11. Point No.1:
In the instant case, the suit has been filed arraying the principal debtor/subscriber of the chitties as the 1 st defendant and the guarantor as the 2nd defendant. But the plaintiff did not take steps to issue notice against the 1 st defendant and accordingly, the suit against the 1 st defendant was dismissed on 16.12.2009. Thereafter, the suit against the 2nd defendant alone was proceeded and the trial court granted decree.
12. In this connection, reference to Section 126 of the Indian Contract Act, 1872, (hereinafter referred to as 'Contract Act' for short) is necessary. Section 126 of the Contract Act deals with "Contract of guarantee", "surety", "principal debtor" and "creditor". Section 126 of the Contract Act reads as under:
"126. "Contract of guarantee", "surety", "principal debtor" and "creditor": - A "contract of guarantee" is a contract to perform 2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 10 the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the "surety"; the person in respect of whose default the guarantee is given is called the "principal debtor", and the person to whom the guarantee is given is called the "creditor". A guarantee may be either oral or written.
13. As per Section 127 of the Contract Act, consideration for guarantee is anything done, or any promise made, for the benefit of the principal debtor, may be a sufficient consideration to the surety for giving the guarantee.
14. Section 128 of the Contract Act deals with the liability of the sureties. As per Section 128 of the Contract Act, surety's liability is co- extensive with that of the principal debtor, unless it is otherwise provided by the contract.
15. Section 133 of the Contract Act deals with discharge of surety by variance in terms of contract and the same provides as under:
2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 11 "133. Discharge of surety by variance in terms of contract.--Any variance, made without the surety's consent, in the terms of the contract between the principal debtor and the creditor, discharges the surety as to transactions subsequent to the variance."
16. Section 134 of the Contract Act provides as under:
"134. Discharge of surety by release or discharge of principal debtor.--The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor."
17. Section 135 of the Contract Act deals with discharge of surety when creditor compounds with, gives time to, or agrees not to sue, principal debtor, subject to Section 136 of the Contract Act.
2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 12
18. Section 137 of the Indian Contract Act provides as under:
"137. Creditor's forbearance to sue does not discharge surety.--Mere forbearance on the part of the creditor to sue the principal debtor or to enforce any other remedy against him does not, in the absence of any provision in the guarantee to the contrary, discharge the surety."
19. In the decision in Central Bank of Indian v. C.L.Vimala and Others, reported in AIR 2015 SC 2280, the Apex Considered the impact of Section 128 of the Contract Act and held in paragraph No.11 as under:
"11. We are of the opinion that the questions that need to be decided by us are regarding the liability of the guarantor under Section 128 of the Indian Contract Act, 1872.
The legislature has succinctly stated that the liability of the guarantor is co-extensive with that of the principal debtor unless it is otherwise provided 2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 13 by the contract. This Court has decided on this question, time and again, in line with the intent of the legislature. In Ram Kishun and Ors. v. State of U.P. and Ors. (2012) 11 SCC 511, this Court has held that "in view of the provisions of Section 128 of the Contract Act, the liability of the guarantor/surety is co-extensive with that of the debtor." The only exception to the nature of the liability of the guarantor is provided in the Section itself, which is only if it stated explicitly to be otherwise in the Contract."
20. Thus reading Section 128 of the Contract Act, surety's liability is co- extensive with that of the principal debtor, unless it is otherwise provided in the contract. Similarly, as per Section 137 of the Contract Act, mere forbearance on the part of the creditor to sue the principal debtor or to enforce any other remedy against him does not, in the absence of any provision in the guarantee to the contrary, discharge the surety. A conspectus analysis of Section 128 to Section 137 of the Contract Act, the legal provision is emphatically clear that the liability of the principal 2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 14 debtor as well as the guarantor is co-extensive unless it is otherwise provided by the contract. In a contract of guarantee which is co-extensive (due to absence of any provision in the guarantee to the contrary), mere forbearance on the part of the creditor to sue the principal debtor or to enforce any other remedy against him does not discharge the surety. Similarly, the liability which is co-extensive if not specifically excluded by the contract of guarantee, surety's liability will be discharged in accordance with Sections 133, 134 and 135 of the Contract Act and not otherwise. In all other cases where the surety's liability is co-extensive even without the principal debtor, the creditor is entitled to proceed against the guarantor alone. Therefore, the first question is answered in the negative, holding that a suit against the guarantor alone would lie without the junction of the principal debtor or after dismissal of the suit against the principal debtor for default when the liability is found as co-extensive. At the same time, when a suit against a principal debtor is dismissed finding that no such liability in between the creditor and the principal debtor, after adducing evidence, the liability of 2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 15 the surety does not arise. In such cases after dismissal of the suit against the principal debtor guarantor cannot be sued for the same liability which was found in the negative. 21. Point Nos.2 to 4
In the instant case, according to the plaintiff, the 1st defendant joined for three chitties, having sala of Rs.10,00,000/- each, on 10.09.2005 and the prize amount at the rate of Rs.7,50,000/- each was released to the 1st defendant on 26.11.2005. The further case of the plaintiff is that the 1st defendant repaid only Rs.11,70,750/- and defaulted Rs.24,05,464/-. Therefore, according to the plaintiff, the guarantor alone is liable to repay the same. The case of the 2 nd defendant is by denying his status as that of a guarantor. According to the 2nd defendant, Ext.A1 and Ext.A2 documents produced by the plaintiff to show the 2nd defendant as a guarantor are forged documents and in this connection, the 2 nd defendant placed reliance on Ext.B5 dated 31.01.2011 issued from the State Forensic Science Laboratory, Police 2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 16 Department, Government of Kerala, Thiruvananthapuram, whereby it was opined that "it has not been possible to arrive at any conclusion regarding the authorship of the questioned signatures, marked Q1 to Q10 in comparison with the standards marked A1 to A4 & S1 to S161". In fact, Ext.B5 report was obtained by sending the documents referred in ST.No.23/2008. Anyhow, as per Ext.B2 judgment, the case against the 2nd defendant as accused ended in acquittal and the said prosecution also in connection with dishonour of a cheque alleged to be issued by the 2nd defendant in favour of the plaintiff to discharge the liability pertaining to the same chitty transactions averred in the plaint. It is the fundamental and ever settled position of law is that when the plaintiff asserts a case to realise the suit amount, the plaintiff shall prove the transaction and the entitlement of the amount claimed in the suit. In the instant case, as already pointed out, no documents are produced to show that the 1st defendant joined in chitty Nos.J21/0134/JMM/12, J2J/0134/JMM/13 and 2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 17 JSJ/0134/JMM/14 by producing the applications filed by the 1 st defendant on 10.09.2005. Even though the allegation of the plaintiff is that the chitty prizes were released on 26.11.2005, no documents are produced to show receipt of chitty prizes, amounting to Rs.7,50,000/- each, by the 1st defendant. No receipt in this regard also produced. According to the plaintiff, the 1st defendant paid Rs.11,70,750/- and the arrears outstanding as on the date of the suit would come to Rs.24,05,464/-. But no documents or statements of accounts produced to establish the transaction showing remittance of Rs.11,70,750/- and to show that the balance outstanding would come to Rs.24,05,464/-. Thus instead of producing the basic documents showing chitty transactions in between the plaintiff and the 1st defendant and the other documents to show receipt of chitty prizes by the 1st defendant and also without producing any statement of accounts, showing the paid amount and the balance outstanding, the plaintiff produced Exts.A1 and A2 alone to substantiate the plaintiff's case.
2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 18
22. On perusal of Ext.A1, it seems to be an agreement executed on 31.05.2006 in a stamp paper, worth Rs.100/-, purchased in the name of the 1st defendant on 19.11.2005, wherein, in the operative portion, it has been stated that the agreement is executed in between the plaintiff and the 1st defendant alone. Coming to the second page of Ext.A1, that is a printed form, wherein also, the amount is shown after filling the gaps in the printed form and in the agreement, the 1st defendant signed as 'subscriber'. Thereafter, two witnesses signed on the bottom page and one P.K.Uthupp, the 2nd defendant, also signed thereafter. In fact, on reading the entire text, the same is not in the form of a guarantee agreement jointly executed by 1st and 2nd defendants, instead, the same is an agreement in between the plaintiff and the 1st defendant, though according to the plaintiff, on the last page the 2 nd defendant also put signature. Coming to Ext.A2, the same also is a promissory note, prepared by typewriting in a printed form by filling the blanks 2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 19 therein and the name of the 2nd defendant is shown as 'guarantor'. In fact, as I have already pointed out, Ext.A1 does not satisfy the ingredients of a guarantee agreement by saying that if the principal debtor would fail to pay the amount, the guarantor would pay the same. Coming to Ext.A2, the same appears to be one jointly executed promissory note by the 1st and the 2nd defendants, but the 2nd defendant is shown as a guarantor. According to the 2nd defendant, the signature in Ext.A2 is forged and he did not sign the same. In fact, the legal sanctity of Ext.A2 promissory note would be considered only when the plaintiff is able to prove that there were chitty transactions between the plaintiff and the 1st defendant and the chitty prizes were released on 26.11.2005, amounting to Rs.7,50,000/- each. Similarly on tallying, the balance outstanding to be paid.
23. In the instant case, even though the trial court found that PW1's evidence supported by Exts.A1 and A2 proved the transaction and the plaintiff would get the 2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 20 suit amount, the fact remains is that the plaintiff did not produce any material documents, as discussed hereinabove, to prove the case. Therefore, the chitty transactions in between the plaintiff and the 1st defendant, the payment of chitty prize, and also the amount due as alleged in the plaint, etc., not at all proved. If so, the trial court went wrong in holding that the plaintiff succeeded in proving the transaction and entitlement of the amount claimed in the suit.
24. To the contrary, the evidence available in no way established the case of the plaintiff supported by necessary documents. Therefore, the decree and judgment are found to be unsustainable and the same would require reversal.
25. In the result, the appeal stands allowed and the decree and judgment of the trial court are reversed and set aside.
26. Considering the nature of the contentions, both parties shall suffer their respective costs.
2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 21
27. Since the appeal has been filed as C.M.C.P.No.51/2022, and this Court allowed the appellant to proceed with the appeal without paying court fee, as an indigent person, he is bound to pay court fee. Therefore, Registry is directed to take necessary steps in this regard.
28. The appellant/2nd defendant is directed to pay court fee of Rs.2,55,760/- (Rupees two lakh fifty five thousand seven hundred and sixty only) within a period of one month from today and on failure, Registry is directed to forward a copy of the decree to the District Collector concerned to realise the same from the plaintiff, as per law, without fail, at any rate within a period of two weeks, on completion of one month period to pay the court fee with specific direction to the District Collector to realise the court fee, within three months from the date of receipt of a copy of the decree.
2025:KER:13973 RFA (INDIGENT) NO.179 OF 2022 22 Registry is directed to forward a copy of this judgment to the trial court forthwith.
Sd/-
A. BADHARUDEEN JUDGE nkr