Bombay High Court
Jose Inacio Lourence vs Syndicate Bank And Another on 26 August, 1987
Equivalent citations: [1989]65COMPCAS698(BOM)
JUDGMENT Vaze, J.
1. The Syndicate Bank granted a loan of Rs. 13,000 on July 9, 1975, to Krishna Chandu Naik for which Jose Inacio Lourence stood as a guarantor. Krishna Naik purchased a chassis of Ashok Leyland make bearing Chassis No. AL-7569520 at Panaji and he as well as Jose Lourence executed an agreement on July 9, 1975, in favour of the bank.
2. The loanee made some payments but as further payments were not forthcoming, the Syndicate Bank filed Special Civil Suit No. 43 of 1984 in the Court of the Civil Judge, Senior Division at Margao, against the principal loanee, Krishna Naik, as well as the surety, Jose Lourence. The lower court decreed the suit with a joint and several liability for the principal loanee and the surety against which the surety, Jose Lourence, appeals.
3. Mr. Alvares, learned counsel for the appellant, relies on sections 139 and 141 of the Contract Act, 1872, for the proposition, firstly, that the surety is entitled to the benefit of every security which the creditor has against the principal debtor and that if the creditor omits to do any act which his duty to the surety requires him to do, the surety is discharged. According to counsel, even though the bank cannot be expected to depute one of its servants to accompany the truck wherever if moves throughout India, the least that the bank could have done in its normal business practice was to register a charge with the Regional Transport Officer, so that any further transfer of the vehicle could have been prevented or, at any rate, the purchaser of that vehicle would have known about the charge. Even on the admission of the witness for the bank, the vehicle has now left Goa and has been registered in Andhra Pradesh with a new number. Counsel argues that the surety was not expected to follow the vehicle in the hands of the new purchaser in Andhra Pradesh and be faced with the defence that he is a bona fide purchaser without notice of any charge of the bank or the surety on the vehicle.
4. At this stage, it is not known whether the ownership of the vehicle has changed but from the letters of the Assistant Director of Transport, one thing is certain that the vehicle has been re-registered under a new number APM-2883. Whether any no-objection certificate was obtained by the Regional Transport Officer, Andhra Pradesh, from the Regional Transport Officer, Goa, at the time of re-registration (as is their usual practice) is also not known. The bank cannot produce the vehicle for the benefit of the surety, an obligation imposed on them by section 141 and hence the surety would be discharged.
5. Mr. Mulgaoncar, for the bank, cannot assure the surety that the vehicle would be produced for the benefit of the surety nor can he say that a charge has been registered with the Regional Transport Officer.
6. There are two letters dated August 5, 1985, and January 17, i1986, from the Assistant Director of Transport, Goa, which are on record and neither of them speak of any charge of the loan being registered in their office. Such being the case, the creditor, viz., the bank, has parted with the security within the meaning of section 141 of the Contract Act and consequently the surety is discharged to the extent of the value of the security. The failure in not registering the charge is also an act which is inconsistent with the rights of the surety within the meaning of section 139 of the Contract Act and it is obvious that the eventual remedy which the surety may have against Krishna Naik or the purchaser in Andhra Pradesh is impaired resulting in the discharge of the surety.
7. In the facts of the present case, as some amounts have been paid and as the decretal amount is less than the amount of the surety, the surety is discharged in respect of the entire amount claimed in the suit.
8. Support for the above view can be obtained form State Bank of Saurashtra v. Chitranjan Rangnath Raja, 1980 SC 1528, as well as State Bank of India v. Quality Bread Factory, .
9. We do not regret having come to this decision about discharge of this surety because even if a decree were to be passed against the surety, the bank would have been driven to proceed against the mortgage property first and then proceed against the guarantor. See Union Bank of India v. Manku Narayana [1987] 62 Comp Cas 1 (SC). Here, we are absolving the surety in the suit itself because of the negligence of the bank in the registering the charge with the Regional Transport Officer.
10. The appeal succeeds and setting aside the judgment and decree of the Civil Judge, Senior Division, Margao, it is ordered that the decree shall read us under :-
11. Defendant No. 1, K. C. Naik, is directed to pay to the plaintiff the amount of Rs. 89,775.30 with interest at the rate of 17(1/2)% per annum from the date of the suit till final payment and the costs of the suit. Respondent-bank shall bear its own costs and also pay those of the appellant. Decreed accordingly.