Karnataka High Court
Syndicate Bank H O Manipal vs Shri Gajanan S/O Janna Mestha on 28 May, 2024
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IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 28TH DAY OF MAY, 2024
BEFORE
THE HON'BLE MR. JUSTICE R.NATARAJ
REGULAR SECOND APPEAL NO.5063 OF 2009 (DEC)
BETWEEN:
SYNDICATE BANK,
H.O. MANIPAL,
DISTRICT SOUTH KANARA,
BRANCH OFFICE,
DANDELI
REPRESENTED BY ITS MANAGER
J.N. ROAD, DANDELI,
TALUK:HALIYAL, DISTRICT: UTTAR KANNAD.
...APPELLANT
(BY SRI. SURESH S. GUNDI, ADVOCATE)
AND:
1 . SHRI. GAJANAN
S/O. JANNA MESTHA
AGE: MAJOR
OCC: SERVICE IN HEALTH DEPARTMENT
STD CLINIC, ANKOLA,
TALUK: ANKOLA
DISTRICT:UTTAR KANNADA
2 . SHRI. MANJUNATH KRISHNA VAIDYA
SINCE DECEASED
REPRESENTED BY HIS LRS
(a) SMT. VANDANA
W/O. MANJUNATH VAIDYA
AGE: MAJOR
2
OCC: HOUSEHOLD
(b) SHRI. VINOD
S/O. MANJUNATH VAIDYA
AGE: MINOR
OCC: STUDENT
(c) SHRI. PRAMOD
S/O. MANJUNATH VAIDYA
AGE: MINOR
OCC: STUDENT
(d) KUMARI. NAGASHREE
D/O. MANJUNATH VAIDYA
AGE: MINOR
OCC: STUDENT
RESPONDENTS (b) to (d) REPRESENTED BY THEIR
NATURAL GUARDIAN MOTHER RESPONDENT
NO.2(a)
ALL ARE R/O. BEHIND MAHABALESHWAR CO-OP.
BANK, MADANAGERI, GOKARNA,
TALUK:KUMTA, DISTRICT: UTTAR KANNADA.
...RESPONDENTS
(BY MS. BHUTE MARA BASAVA, ADVOCATE FOR
SRI. G.K.HIREGOUDAR, ADVOCATE FOR
RESPONDENT NO.1;
SRI NARAYANA V. YAJI, ADVOCATE FOR RESPONDENT NO.2(a);
RESPONDENT NOS.2(b) TO 2(d) ARE MINOR REPRESENTED BY
RESPONDENT NO.2(a))
THIS RSA IS FILED UNDER SECTION 100 OF CPC
AGAINST THE JUDGMENT AND DECREE DATED 21.08.2008
PASSED IN R.A.NO.88/2007 ON THE FILE OF THE CIVIL JUDGE
(SR.DN), YALLAPUR DISMISSING THE APPEAL AND
CONFIRMING THE JUDGMENT AND DECREE DATED 09.08.2001
PASSED IN O.S.NO.12/1998 ON THE FILE OF THE CIVIL JUDGE
(JR.DN), DANDELI, DECREEING THE SUIT FILED FOR
DECLARATION AND RECOVERY OF MONEY.
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THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 12.03.2024 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THROUGH VIDEO
CONFERENCE THIS DAY, THE COURT DELIVERED THE
FOLLOWING:-
JUDGMENT
The defendant No.1 in O.S.No.12/1998 on the file of the Civil Judge Jr.Dn. Dandeli (henceforth referred to as 'Trial Court' for short) has filed this regular second appeal challenging the judgment and decree dated 09.08.2001 passed therein as well as the confirming judgment and decree dated 21.08.2008 passed by the Civil Judge, Sr.Dn. Yellapur (henceforth referred to as 'First Appellate Court' for short) in R.A.No.88/2007. Both the Courts held that the defendant No.1 is not entitled to exercise its lien over the account of the plaintiff and directed the defendant No.1 to release a sum of Rs.11,132/- with interest @ 15% per annum.
2. The parties shall henceforth be referred to as they were arrayed before the Trial Court.
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3. The suit in O.S.No.12/98 was filed for a declaration that the exercise of bankers lien on the Amar deposit No.35 which matured on 23.08.1995 and placing it in M.D. Account No.397/95 for Rs.43,542/- by the defendant No.1 was illegal, improper unjust and against the provision of the banker's lien and deducting Rs.6,820/- from the above deposit towards the due of the defendant No.2. The plaintiff also sought for a judgment to recover a sum Rs.6,820/- from defendant No.1 along with interest at 15% p.a. from 24.08.1995 till the date of suit and a sum of Rs.36,722/- from 24.08.1995 to 24.10.1995.
4. The plaintiff claimed that he was employed at the City Municipal Council, Dandeli. The defendant No.2 was employed as a watch man at the inspection bungalow, Madangeri, Kumta Taluk. He contended that the defendant No.1 had two branches, one at Dandeli and another at Kumbarakoppa. He claimed that he had an Amar account deposit at the branch of defendant No.1 at Dandeli. The Branch Manager of Dandeli branch, had informed the 5 plaintiff by a letter dated 16.08.1995 that the amount deposited in Amar deposit No.35 would mature on 23.08.1995. The Manager requested the plaintiff to renew the deposit and informed him the various rates of interest on deposits. On 22.08.1995, the plaintiff received a copy of a letter dated 12.08.1995 addressed to the Branch Manager, Kumbarakoppa informing the dues of the defendant No.2 at his branch. The plaintiff visited the branch at Dandeli on 24.08.1995 and opened a Savings Bank account at the branch, in view of the promise that the amount in Amar deposit would be credited into the Savings Bank account. The plaintiff was then informed that he had guaranteed the repayment of the loan raised by defendant No.2 and that a sum of Rs.6,458/- was due by defendant No.2 as on 01.07.1995. The plaintiff was therefore called upon to settle the due, failing which, it would invoke the lien over the Amar deposit account of the plaintiff at Dandeli branch. Later, on 28.08.1995, the plaintiff received another letter dated 24.08.1995 from the Branch Manager, Dandeli about the maturity of the Amar 6 deposit on 23.08.1995 and also that the amount was deposited in M.D. Account No.397/1995 for Rs.43,542/- and the plaintiff was informed that the bank had exercised its lien over the deposit to recover the dues of defendant No.2 at Kumbarakoppa branch. The plaintiff contended that the defendant No.2 while in service at T.M.C, Dandeli had applied for a loan with Kumabarakoppa branch of defendant No.1. The T.M.C, Dandeli had also sent a certificate to defendant No.1 dated 31.01.1981 furnishing the details of the salary and recommended sanction of the loan and informed that suitable intimation be given for effecting recovery. The loan applied by the defendant No.2 was sanctioned and the plaintiff stood surety. The loan amount was to be repaid by defendant No.2 by 1981. However, for the first time, the Branch Manager, Kumbarakoppa, vide its letter dated 12.08.1995 had intimated that the said loan amount of Rs.6,458/- plus interest at 18.75% was due by defendant No.2 as on 01.07.1995. The plaintiff claimed that the said letter came as a bolt from the blue, as the bank had slept over the 7 issue for over 14 years and did not take any steps to recover it within 03 years from the date when the loan fell due. He contended that he had never admitted his liability within a period of 03 years from the date of the loan becoming payable. He claimed that even if the defendant No.2 had acknowledged the dues, the plaintiff is not liable to pay the dues and therefore, the branch at Kumbarakoppa is barred from recovering the loan from the plaintiff. He contended that the plaintiff stood surety in view of the condition that the outstanding would be recovered from defendant No.2 from his salary from time to time, but the Branch Manager of Kumbarakoppa did not take any steps to inform T.M.C., Dandeli to recover the loan dues from the salary of defendant No.2, therefore, he contends that the plaintiff was not liable to pay any amount and the defendant No.1 could not exercise any lien over the amount payable to him. He contended that the Branch Manager, Dandeli in his letter dated 24.04.1995 had stated that the plaintiff was informed through a staff on 23.07.1995 and by Kumbarakoppa branch vide letter 8 dated 12.08.1995, which the plaintiff denied but contended that the letter dated 12.08.1995 was received by him on 28.08.1995. Therefore, he claimed that the alleged exercise of banker's lien by the Branch Manager, Dandeli on the plaintiff's Amar deposit No.35 which matured on 23.08.1995 is highly illegal, improper and unjust. He claimed that the loan due by the defendant No.2 was irrecoverable and barred by the law of limitation. He therefore, prayed that the defendants be directed to repay Rs.6,820/- deducted out of the Amar deposit of the plaintiff towards the dues of the defendant No.2 along with interest at 15% p.a. and Rs.36,722/- from 24.08.1995 to 24.10.1995 along with cost of the suit.
5. The defendant No.1 contested the suit by filing its written statement wherein it claimed that the plaintiff had opened an Amar deposit at its branch at Dandeli which was to mature on 23.08.1995. It also admitted that a letter dated 16.08.1995 was addressed to the plaintiff informing him about the maturity of the deposit made by 9 him. It also admitted that the plaintiff had opened Savings Bank account in the bank but it denied that the account was opened on the instructions of the Branch Manager, Dandeli. It admitted that it had addressed a letter 12.08.1995 requesting the plaintiff to settle the dues of defendant No.2 failing which, it would be constrained to exercise its lien over the Amar deposit of plaintiff and consequent thereto it exercised the lien and adjusted the due of defendant No.2 from out of the amount payable to the plaintiff. It also admitted that the plaintiff got issued a notice on 03.09.1995 which was replied on 10.10.1995, whereby the plaintiff was informed that defendant No.1 had exercised its lien as provided in law and the defendant No.1 claimed that it had statutory lien over the deposit which was in its hand to set off the liability due to the bank. It contended that right of lien is a defence in law and not a right to initiate action and as such, even if the claim is barred by law of limitation that did not prevent the defendant No.1 to exercise its lien. Therefore, it claimed that the suit of the plaintiff is misconceived and the 10 plaintiff is not entitled to any of reliefs from the defendant No.1. It alleged that the plaintiff and defendant No.2 had colluded with each other.
6. Based on these contentions, the Trial Court frame the following issues:
"1. Whether the plaintiff is entitled to recover the suit scheme with interest from the defendant No.1 as claimed in the suit?
2. Whether the plaintiff proves that exercise of bankers lien on amar deposit of plaintiff is illegal and improper?
3. Whether the defendant No.1 proves that bar of limitation does not apply to exercise bankers lien as claimed in para 5 of W.S.?
4. Whether the plaintiff is entitled for the relief claimed in the suit?
5. What decree or order?"
7. The plaintiff was examined as PW.1 and he marked Exs.P1 to P10. The manager of the defendant No.1 was examined as DW.1 and he marked Exs.D1 to D5. 11
8. Based on the oral and documentary evidence, the Trial Court decreed the suit of the plaintiff and held that the plaintiff was entitled to recover the suit claim of Rs.11,132/- along with interest at 15% from the date of suit till realisation.
9. Feeling aggrieved by the said judgment and decree, the defendant No.1 filed R.A.No.88/2007 before the First Appellate Court. The First Appellate Court secured the records of the Trial Court, heard the counsel for the parties and framed the following points for consideration:
"1. Whether the appellant proves that the provisions of Indian Contract Act and Limitation Act bearing on the point were not properly considered by the lower Court?
2. Whether the appellant further proves that under what provisions of law in regard to general lien of banking are override effect on the provisions of Limitation Act, 1963?12
3. Whether the judgment and decree of the lower court calls for interference with by this court?
4. What order?"
10. The First Appellate Court dismissed the appeal and confirmed the judgment and decree of the Trial Court. Being aggrieved by the concurrent judgment and decree of the Trial Court and the First Appellate Court, the defendant No.1 has filed this regular second appeal.
11. This appeal was admitted to consider the following substantial questions of law:
"Whether the Trial Court and the First Appellate Court have committed a serious error in coming to the conclusion that the Banker's General Lien cannot be made applicable in respect of a time barred debt?"
12. The learned counsel for the defendant No.1 contended that the general lien of a banker to retain the goods bailed by a customer or any person on his behalf is statutorily recognized in Section 171 of the Indian Contract 13 Act, 1872. He contends that the law relating to limitation prescribes that a person approaching the Court belatedly may loose the remedy but not the right. He contends that so long as a banker is in possession of funds of a customer or any funds deposited on behalf of the customer, it is entitled to exercise its lien and adjust it against the outstanding. In this regard, he relied upon the following judgments:
(i) Punjab National Bank and others Vs. Surendra Prasad Sinha - 1993 SUPP (1) SCC 499;
(ii) Vasupalaiah Vs. Vysya Bank - ILR 2001 Karnataka 5015;
13. Per contra, the learned counsel for the plaintiff contends that the surety offered by the plaintiff for the repayment of the loan raised by the defendant No.2 was subject to conditions set out in the loan agreement and the surety document. He submits that the defendant No.1 has not furnished any documents relating to the loan sanctioned and the terms of surety etc., He contended 14 that the defendant No.2 was employed and therefore the defendant No.1 must have recovered the loan by addressing appropriate communication to the employer of the defendant No.2. He submits that the defendant No.1 cannot be allowed to take advantage of its lien without establishing its right to recover the loan from the Amar deposit of plaintiff.
14. I have considered the contentions of the learned counsel for the plaintiff and the learned counsel for the defendant No.1. I have also perused the records of the Trial Court as well as its judgment and the judgment of the First Appellate Court.
15. The facts that are not in dispute are that the defendant No.2 had raised a loan from the defendant No.1 and that the plaintiff stood surety for the repayment of the loan. That the plaintiff had subscribed to a deposit scheme floated by the defendant No.1 which had matured for payment and that the plaintiff had opened a Savings Bank 15 Account at the defendant No.1 so as to enable it to credit into it the maturity value of the deposit.
16. The question in controversy is whether the defendant No.1 could have denied the payment of the maturity value of the deposit, on the ground that the defendant No.2 had failed to repay the loan and that it had a general lien over the amount bailed to it, either by defendant No.2 or on his behalf.
17. In order to answer this question, it is appropriate to first see whether the defendant No.1 had placed on record the documents to establish: (i) the terms of loan sanctioned to defendant No.2; (ii) the terms of surety offered by the plaintiff; (iii) the steps taken by the defendant No.1 to recover the installments from out of the salary payable to defendant No.2 and or from the retirement benefits etc.,
18. A perusal of the documentary evidence produced by the defendant No.1 shows that what were 16 produced were the reply dated 10.10.1995 addressed to the notice dated 03.09.1995 caused by the plaintiff (Ex.D1), a letter dated 16.10.1995 addressed to the plaintiff intimating him the adjustment of a sum of Rs.6,820/- against the loan outstanding of the defendant No.2 (Ex.D2), a postal acknowledgment (Ex.D3), receipt dated 24.10.1995 executed by the plaintiff (Ex.D4), a challan showing that a sum of Rs.36,722/- was credited into the Savings Bank account of the plaintiff (Ex.D5). Therefore, there was not even a shred of documentary evidence to demonstrate the terms and conditions of sanction of the loan, the terms and conditions of the surety offered by plaintiff. This assumes significance due to the usage of the words "unless otherwise provided by the contract" found in Section 128 and "in the absence of any provision in the guarantee to the contrary" found in Section 137 of the Indian Contract Act, 1872. Thus, it was incumbent upon the defendant No.1 to produce documents to show that there was nothing contrary mentioned in the loan documents pertaining to the liability of the plaintiff so 17 as to create an exception within the meaning of Section 128 of the Indian Contract Act, 1872.
19. In so far as the oral evidence of the defendant No.1 is concerned, the manager of the defendant No.1 was examined as DW.1, who deposed as follows:
2£Éà ¥Àwæ ªÁ¢UÉ ¸ÀªÀÄäA¢¹zÀAvÉ ¸Á®zÀ ¥ÀvÀæ £Á£ÀÄ £ÉÆÃr¯Áè CAzÀgÉ ¤eÁ. 2 £Éà ¥Àwæ ªÁ¢ CªÀ¢Aü iÀÄ°è ¸Á®zÀ ºÀtªÀ£ÀÄß CªÀ¢Aü iÀÄ°è vÀÄA§zÉ EzÀÝ°è ¨ÁåAQ£Àªg À ÄÀ PÀª æ ÀÄ vÉUÉzÀÄPÉƼÀî¨PÉ ÁUÀÄvÀz Û É CAzÀgÉ ¤eÁ.
¸Á® ¥Àqz É À 3 ªÀµð À zÀ CªÀ¢Aü iÀÄ°è CzÀ£ÀÄß ªÀ¸ÀÆ®Ä ªÀiÁqÀĪÀ PÀª æ ÀÄ vÉUz É ÀÄPÉƼÀî¨PÉ ÁUÀÄvÀz Û É CAzÀgÉ ¤eÁ. 2£Éà ¥Àwæ ªÁ¢¬ÄAzÁ ¸Á®zÀ ¨Á§ÄÛªÀÄgÀÄ¥ÁªÀw M¦àUÉ ¥ÀvÀæ vÉUz É ÀÄPÉÆAr¯Áè CAzÀgÉ £À£U À É UÉÆw¯Áè. ªÁ¢AiÀÄÄ ¨ÁåAQUÉ PÀ¼ÄÀ »¹zÀ £ÉÆÃnù£À°è ¸Á®zÀ ¨Á§ÄÛ «ªÀgª À ÁV §gÉ¢zÁÝgÉ ¤eÁ. ªÁ¢AiÀÄ PÀq¢ É AzÁ £ÉÆÃn¸À §AzÀ £ÀAvÀgÀ ¤±Á£É r 4 ªÀÄvÀÄÛ 5 §gÉ¢zÀÄÝ EzÉ CAzÀgÉ ¤eÁ. CªÀÄgÀ r¥ÉÆfl ºÀt ªÉÄZÀåªÉgÀ DzÀ £ÀAvÀgÀ ªÁ¢UÉ PÉÆqÀĪÀ ªÀgU É É CªÀgÀÄ gÀ²Ã¢ PÉÆqÀzÃÉ EzÀÝ PÁgÀt vÀqÉ »rAiÀįÁVvÀÄÛ. CªÀÄgÀ r¥ÉÆfmï ºÀuÁ ªÉÄZÀƪÉgÀ DVzÀÄÝ £À£Àß »A¢£À ªÀiÁå£d É gÀ EzÁÝUÀ CAzÀgÉ ¤d. CªÀgÀÄ AiÀiÁPÉ vÀqÉ »r¢zÀÝgÀÄ JAzÀÄ £À£U À É 18 ºÉüÀ®Ä §gÀĪÀÅ¢¯Áè. ªÁ¢AiÀÄÄ vÀ£Àß CªÀÄgÀ r¥ÉÆfl ºÀuÁ EzÀ£ÀÄß ¸Á®zÀ ¨Á§ÄÛ ºÉÆAzÁtÂPÉ ªÀiÁqÀ®Ä M¦àUÉ PÉÆnÖzÁÝ£É JAzÀÄ £Á£ÀÄ GzÁºÀgu À AÉ iÀÄ°è PÁt¹®è CAzÀgÉ ¤dªÀ¯Áè. ªÁ¢AiÀÄÄ PÀ°vÀª£ À ÀÄ EzÁÝ£É CAzÀgÉ ¤eÁ. ¤r 4 gÀAvÉ SÁ° ¹èÃ¥À £À ªÉÄÃ¯É ªÁ¢AiÀÄ ¸À» ¥Àqz É ÀÄ £ÀAvÀgÀ CzÀ£ÀÄß «ªÀgª À ÁV ¨ÁåAQ£Àªg À ÀÄ vÀÄA©zÁÝgÉ CAzÀgÉ ¤dªÀ¯Áè. ¤r 4 gÀ°è §gÉzz À ÀÄÝ £ÀªÄÀ ä »A¢£À ªÀiÁå£d É gÀ EzÁÝg.É ¤r 5 £ÀÄß £ÀªÀÄä ¹§âA¢ ªÀĺÁ¯É §gÉ¢zÁÝg.É "
On the other hand, the plaintiff was examined as PW.1 in his cross-examination he deposed as follows:
"2£Éà ¥Àw æ ªÁ¢AiÀÄÄ 12-8-95 gÀAzÀÄ ¸ÀºÁ CªÀ£ÀÄ ¨ÁåAQ¤AzÀ ¥Àqz É ÀÄPÉÆAqÀ ¸Á® vÀÄA©¯Áè J£ÀÄߪÀ «µÀAiÀÄ £À£U À É UÉÆwÛg° À ¯Áè ¸ÁQë ºÉüÀÄvÁÛg.É £À£U À É ¨ÁåAQ¤AzÀ £ÉÆÃnøÀ §AzÀ £ÀAvÀgÀ UÉÆvÁÛ¬ÄvÀÄ. 2£Éà ¥Àwæ ªÁ¢ £À£Àß UɼAÉ iÀÄ CAzÀgÉ ¸Àj C¯Áè. £Á£ÀÄ ªÀÄvÀÄÛ 2£Éà ¥Àwæ ªÁ¢ MAzÉà PÀZÉÃjAiÀÄ°è PÉ®¸À ªÀiÁqÀÄwÛzÀÝjAzÀ CªÀgÀ ¥ÀjZÀAiÀÄ EzÉ.
2£Éà ¥Àwæ ªÁ¢ ¥Àqz É ÀÄPÉÆAqÀ ¸Á®zÀ §UÉÎ £À£U À É ªÀiÁ»w EzÉ.
CzÀPÉÌ £Á£ÀÄ eÁ«ÄãÀzÁgÀgÀ JAzÀÄ ¸À» ªÀiÁrzÉÝãÉ. ¸Á® ¥Àqz É ª À £ À ÃÉ dªÁ¨ÁÝj eÁ«ÄãÀzÁgÀ£ÁzÀª¤ À UÀÆ ¸ÀºÁ ¸Á® ªÀÄgÀÄ¥ÁªÀw ªÀiÁqÀĪÀ dªÁ¨ÁÝj EgÀÄvÀÛzÉ CAzÀgÉ ¤eÁ.19
¨ÁåAQ£Àªg À ÄÀ 12-8-95gÀAzÀÄ £À£Àß CªÀÄgÀ r¥ÉÆÃfl ºÀt J¸ï © SÁvÉUÉ dªÀiÁ DVzÀÄÝ MAzÀÄ ªÉÃ¼É ¸Á® ªÀÄgÀÄ¥ÁªÀw ªÀiÁqÀzÃÉ ºÉÆÃzÀgÉ ¨ÁåAQ£Àªg À ÀÄ vÀªÀÄVgÀĪÀ ºÀPÀÄÌ ZÀ¯Á¬Ä¹ £À£Àß ºÀt¢AzÀ ªÀ¸ÀÆ®Ä ªÀiÁrPÉƼÀÄîªÀÅzÁV w½¹zÀÝgÀÄ CAzÀgÉ ¤eÁ. £ÀAvÀgÀ £Á£ÀÄ 2£Éà ¥ÀæwªÁ¢UÉ ¥ÀvÀæ §gÉzÀÄ ºÀt vÀÄA§®Ä ºÉý¯Áè. ¸ÁQë ºÉüÀÄvÁÛgÉ ªÉÊAiÀÄQÛPª À ÁV ºÉÆÃV ºÉý §A¢zÉÝÃ£É JAzÀÄ."
20. This evidence therefore, established the fact that the defendant No.2 had raised a loan from defendant No.1 and that the plaintiff stood surety for the loan. It also established that the plaintiff was aware of the outstanding payable by the defendant No.2 to defendant No.1. To this extent, the defendant No.1 is able to establish its case. However, what needs to be noted is that a surety would be liable to repay the loan payable by the borrower, if the principal creditor has complied with the terms of sanction of the loan. In this regard, it is relevant to consider the assertions made by the plaintiff in paragraph No.E of the plaint which is extracted below:
"(E) If the officials of the Kumbarakoppa branch of defendant No.1 were diligent in the discharge 20 of their duties, to recover the said dues of the loan amount, they would have certainly taken the necessary legal steps to recover the said dues of the loan amount from the defendant No.2 in time. Further the T.M.C. Dandeli, had also intimated the said Kumbarakoppa Branch Manager, that the loan may please be sanctioned and intimated to the said office, for effecting recovery by the letter dated
21.01.1981. The branch manager of the Kumbarakoppa branch had not taken any steps to intimate the T.M.C. Dandeli, for effecting the recovery of the loan dues of the defendant No.2 from his salary. It is further submitted that as the claim for the dues of loan amount in question is barred by the law of limitation, the defendant No.1, has no legal rights of recovery of the same by any more."
21. In response to this, the defendant No.1 contended as follows:
"4. Therefore rest of the contentions made by the plaintiff in para No.2(D), (E), (F), (G), etc are all rudiment."21
22. The defendant No.1 did not even deny the assertion made by the plaintiff and hence the fact asserted by the plaintiff has to be construed as admitted as provided in Order VIII Rule 5 of CPC.
23. Therefore, if the plaintiff stood surety for repayment of the loan by the defendant No.2, in view of the condition that the defendant No.1 shall recover it from the salary of defendant No.2, the non-taking of steps to intimate the Town Muncipal Council, Dandeli, resulted in discharge of the liability of the surety. In this regard, it is profitable to refer to Section 139 of the Indian Contract Act, 1872 which reads as follows:
"139. Discharge of surety by creditor's act or omission impairing surety's eventual remedy.- If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged."22
"Illustrations (c) to Section 139 of the Indian Contract Act is relevant and the same is extracted below:
(c) A puts M as apprentice to B, and gives a guarantee to B for M's fidelity. B promises on his part that he will at least once a month, see M make up on the cash. B omits to see this done as promised, and M embezzles. A is not liable to B on his gurantee."
24. When the plaintiff had asserted a fact in the plaint that the defendant No.1 was required to intimate the Town Municipal Council, Dandeli, (employer of defendant No.2) to effect recovery from out of the salary of the defendant No.2, and when the plaintiff specifically asserted that the defendant No.1 failed to do so, it was incumbent upon the defendant No.1 to establish before the Court that such an intimation was indeed given to the Town Municipal Council, Dandeli and that the outstanding amount payable by the defendant No.2 was the amount that could not be recovered despite exercising the aforesaid option. It is indisputable that the liability of a surety is coextensive 23 with that of a principal debtor, as provided under Section 128 of the Indian Contract Act and as observed by the Hon'ble Apex Court in the case of Ram Kishun and others Vs. State of Uttar Pradesh and others - AIR 2012 SC 2288 as well as the judgment of the Apex Court in the case of Punjab National Bank Vs. Surendra Prasad Sinha - 1993 SUPP (1) SCC 499 where it was held "it is settled law that the creditor would be entitled to adjust, from the payment of a sum by a debtor towards the time barred debt from the guarantor's account. The appellant did not act in violation of any law when he cut the amount from the fixed deposit of the respondent, that is the surety when the principal debtor failed to pay. It is also well settled that 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. However, the surety could be discharged in certain circumstances enumerated under Sections 133, 134, 135, 138 and 139 of the Indian Contract Act. In view of 24 illustration (c) to Section 139 of the Indian Contract Act, the failure on the part of the defendant No.1 to intimate the Town Municipal Council, Dandeli, to effect recovery from out of the salary of the defendant No.2, did discharge the plaintiff from his obligation to pay the loan outstanding payable by the defendant No.2 to defendant No.1.
25. Consequently, though ordinarily, the defendant No.1 had a general lien over all amounts lying with it, yet the defendant No.1 was bound to establish before the Court that it had taken due care and caution as provided under the loan agreement as well as surety document. Since the defendant No.1 has failed to produce the documents before the Court to establish that the defendant No.1 had done all that it could do to comply with the terms and conditions of the loan agreement and the surety document, the defendant No.1 was not entitled to any remedy. Consequently, the appeal filed by the defendant No.1 is liable to be dismissed.
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26. In so far as substantial question of law framed by this Court is concerned, it is held that the defendant No.1 has a general lien over the amounts lying with it, belonging either to the principal debtor or to the surety. However, in view of the default on the part of defendant No.1 to establish that it had taken all due care and caution as provided under the loan agreement to recover the amounts from the salary of the defendant No.2, the liability on the surety stood discharged.
27. In that view of the matter, this appeal lacks merit and is dismissed.
Sd/-
JUDGE HJ