Sivakumar and Senthilkumar vs Shriram Chits T. Nadu (P) Ltd.

S. Manikumar, J.—This revision petition is directed against the order of attachment dated 11.12.2012, in the above E.P. No. 2630 of 2012

in ARC. No. 1248 of 2010, on the file of X Assistant City Civil Court, Chennai. Material on record discloses that one Mr. Ramesh, was a

member of a Chit, run by Shriram Chits T. Nadu (P) Ltd. He has joined a credit chit No. 58302, and in an auction, he has borrowed a sum of Rs.

1,20,000/-. Alongwith the abovesaid member, four other guarantors have undertook to repay the said amount, with interest and that a promissory

note, dated 12.01.2009, has been executed. Subsequently, when all of them defaulted to repay the amount with interest, Arbitration Proceedings

No. 1248 of 2010 has been instituted, under the provisions of the Tamil Nadu Chits Act. Material on record further, discloses that notices have

been sent to the member/borrower, as well as to the guarantors. Despite the receipt of notice, the third respondent, in ARC. No. 1248 of 2010

remained absent. The notices sent to others have been returned. Inasmuch as notices sent to the respondents 1, 2 and 4 are concerned, paper

publication has been made on 24.02.2011 and after considering the substituted service, they were also set ex-parte. A witness on behalf of

Shriram Chits T. Nadu (P) Ltd., has been examined and he has marked five documents, viz., Ex. P1, Receipt, dated 12.01.2009, Ex. P2,

Pronote, dated 12.01.2009, Ex. P3, Legal notice, dated 18.10.2010, Ex. P4, Statement of Accounts, Ex. P5, Acknowledgement for sending the

legal notice. Taking note of the oral and documentary evidence and also the fact that after the institution of ARC, a sum of Rs. 25,000/- alone has

been paid, the Arbitrator, by order dated 30.03.2011, directed that all the respondents to be jointly and severally liable, to pay a sum of Rs.

1,79,354/- with subsequent interest, and a sum of Rs. 3,960/- has also been directed to be paid towards costs. A sum of Rs. 25,000/- paid, has

been directed to be taken credit for the outstanding dues.

Material on record further shows that the none of the guarantors have challenged the order made in ARC. No. 1248 of 2010, dated

30.03.2011. Subsequently, Shriram Chits T. Nadu (P) Ltd., has filed E.P. No. 2630 of 2012 seeking for a pro-order, to attach the salary of JD2,

JD3 and JD4, with the garnishees, namely, the employers of the judgment debtors/guarantors.

A counter affidavit has been filed on behalf of the judgment debtors stating that they were only guarantors and that they have not received any

amount from the chit company. Therefore, they have submitted that they are not liable to pay any amount. Material on record shows that after

considering their objections, the learned X Assistant Judge, City Civil Court, Chennai, by observing that the award passed earlier has not been

stayed and stating that the execution court cannot go beyond the decree, by order dated 22.01.2013 directed attachment of their salaries.

Though M/s. B. Karpagam, learned counsel for the revision petitioner assailed the correctness of the impugned order, inter alia contending that

the interest claimed is excessive and that the amount sought for recovery is more the chit amount of Rs. 2,00,000/-, this court is not inclined to

accept the said contention for the reason, as rightly observed, the court cannot go beyond the decree passed on the terms and conditions of the

chit. None of the guarantors have challenged the decree.

The question raised by the Judgment Debtors/Guarantors, in the present revision petitions that the Decree Holder, ought to have first proceeded

against the principal borrower and only thereafter, the decree could be enforced against the guarantors, is no more res integra, in view of the

settled legal position in State Bank of India Vs. Messrs. Indexport Registered and others, , wherein, the Supreme Court has considered the

question, as to whether the guarantor can be sued without suing the principal debtor. The Apex Court has considered the issue, as to whether the

guarantor''s liability is co-extensive with that of the principal debtor or not. Paragraphs 11 to 19, are relevant and that would answer the challenge

made by the present revision petitioners, the said paragraphs are extracted hereunder:

In Bank of Bihar Ltd. Vs. Dr. Damodar Prasad and Another, , the facts were that the plaintiff Bank lent money to Damodar Prasad, defendant

No. 1, on the guarantee of Paras Nath Sinha, defendant No. 2. On the date of the suit Damodar Prasad was indebted to the Bank for Rs.

11,723.56 on account of principal and Rs. 2,769.37 on account of interest. In spite of demands neither the principal debtor nor the guarantor paid

the dues. The plaintiff Bank then filed a suit claiming a decree for the amount due. The trial court decreed the suit against both the defendants but

while passing the decree the trial court directed that the plaintiff Bank shall be at liberty to enforce its dues against defendant No. 2 only after

having exhausted its remedies against defendant No. 1. The plaintiff went in appeal challenging the legality and propriety of this direction. The High

1038 Court dismissed the appeal, whereupon on certificate, the matter came before this Court. Bachawat, J. speaking for the Court held that the

direction must be set aside. It was observed that:

It is the duty of the surety to pay the decreetal amount. On such payment he will be subrogated to the rights of the creditor u/s 140 of the Indian

Contract Act, and he may then recover the amount from the principal. The very object of the guarantee is defeated if the creditor is asked to

postpone his remedies against the surety. In the present case the creditor is banking company. A guarantee is a collateral security usually taken by

a banker. The security will become useless if his rights against the surety can be so easily cut down.

The Court further held that such directions are neither justified under Order XX rule 11(1) or under the inherent powers of the Court u/s 151

of the CPC to direct postponement of the execution of the decree.

In the present case before us the decree does not postpone the execution. The decree is simultaneous and it is jointly and severally against all

the defendants including the guarantor. It is the right of the decree-holder to proceed with it in a way he likes. Section 128 of the Indian Contract

Act itself provides that ""the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.

In Pollock & Mulla on Indian Contract and Specific Relief Act, Tenth Edition, at page 728 it is observed thus:

Co-extensive-Surety''s liability is co-extensive with that of the principal debtor.

A surety''s liability to pay the debt is not removed by reason of the creditor''s omission to sue the principal debtor. The creditor is not bound to

exhaust his remedy against the principal before suing the surety, and a suit may be maintained against the surety though the principal has not been

sued.

In Chitty, on Contracts 24th Edition Volume 2 at page 1031 paragraph 4831 it is stated as under:-

Conditions precedent to surety:- Prima facie the surety may be proceeded against without demand against him, and without first proceeding against

the principal debtor.

In Halsbury''s Laws of England Forth Edition paragraph 159 at page 87 it has been observed that ""it is not necessary for the creditor, before

proceeding against the surety, to request the principal debtor to pay, or to sue him, although solvent, unless this is expressly stipulated for.

In The The Hukumchand Insurance Co. Ltd. Vs. The Bank of Baroda and Others, a Division Bench of the High Court of Karnataka had an

occasion to consider the question of liability of the surety vis-�-vis the principal debtor. Venkatachaliah, J. (as His Lordship then was)

observed:-

The question as to the liability of the surety, its extent and the manner of its enforcement have to be decided on first principles as to the nature and

incidents of suretyship. The liability of a principal debtor and the liability of a surety which is co-extensive with that of the former are really separate

liabilities, although arising out of the same transaction. Notwithstanding the fact that they may stem from the same transaction, the two liabilities are

distinct. The liability of the surety does not also, in all cases, arise simultaneously.

It will be noticed that the guarantor alone could have been sued, without even suing the principal debtor, so long as the creditor satisfies the

court that the principal debtor is in default.

In Jagannath Ganeshram Agarwala Vs. Shivnarayan Bhagirath, , a Division Bench of the Bombay High Court (Kania and Wassoodew JJ.)

held that the liability of the surety is co-extensive, but is not in the alternative. Both the principal debtor and the surety are liable at the same time to

the creditors.

The above decision has been followed by this Court, in Balakrishnan Vs. H. Chunnilal Bagmar, , wherein, at Paragraph 10, it has been held as

follows:

From the paragraph extracted above, it is clear that the liability of the principal debtor and the liability of a surety which is co-extensive with

that of the former are really separate liabilities although arising out of the same transaction. In the aforesaid Judgment, rejecting a similar contention

the decree-holder was allowed to proceed against the guarantor for execution of the decree. Since the Judgment of the apex Court is directly on

the point, it is not possible for me to make a different view interpreting Section 128 of the Indian Contract Act, as is sought to be done by the

learned Counsel for the petitioner. On this ground alone, this Civil Revision Petition is liable to be dismissed.

Following the decision in Gopilal J. Nichani Vs. Trac Industries and Components Ltd., Madras and Others, a Division Bench of this Court, held

that a suit against guarantor''s alone in the absence of Principal Debtor could be maintained. At this juncture, it is worthwhile to extract the

judgment rendered by this Court in Gopilal J. Nichani''s case, ""Section 128 of the Indian Contract Act talks of only one thing and that is about the

liability of the guarantor as being co-extensive with that of the principal debtor. The word ''co-extensive'' is an objective for the work ''extent'' and

it can relate to the quantum of the principal debt"".

In Dr. Vimala Vs. M/s. Shriman Chits and Investments Pvt. Ltd., the very same contentions raised in the present revision petition has been

answered at paragraph 12 of the above said judgment. It is to be noted that like in the present case, Shri Ram Chits Investments (P) Ltd., is the

respondent therein. Paragraph 12 reads thus:

The first and foremost question raised by the revision petitioner who is the second respondent before the Arbitrator is that she was a surety only

and not the principal debtor and that she should not have been proceeded against when the principal debtor is available. For this question, on the

part of the respondent, it would be answered that u/s 128 of the Indian Contract Act, the liability of the surety is co-extensive with that of the

principal debtor, unless it is otherwise provided by the contract''. So far as Section 128 of the Indian Contract Act is concerned, the said liability

which is co-extensive with the principal debtor must be proved against the surety in the same way as against the principal debtor. A judgment or

award against the principal is not admissible as against the surety without a special agreement to that effect. The petitioner, in so far as he has not

come forward to either plead or prove that his liability as a surety is not co-extensive, but otherwise provided by the contract, he cannot escape,

the co-extensive liability with that of the principal debtor. Therefore, this question is answered against the revision petitioner.

In A. Ramadas Rao Vs. J.P. Builders, a Division Bench of this Court held that the liability of a surety is co-extensive with that of the Principal

debtor, unless the contrary is provided in the contract. Perusal of the decree in ARC. No. 1248 of 2010, dated 30.03.2011, clearly shows that in

the decree passed, all the respondents to the proceedings, have been jointly and severally held liable to pay the amount and that therefore, even

taking it for granted that the revision petitioners have not received any money from Shriram Chits T. Nadu (P) Ltd., as guarantors, they are liable to

pay the amount, particularly, when they have also agreed to repay the amount with interest and executed a promissory note, dated 12.09.2009.

There is absolutely no manifest illegality in the order, warranting interference from this court. Hence, this Civil Revision Petition is dismissed.