Syndicate Bank H O Manipal vs Shri Gajanan S/O Janna Mestha
2024 Latest Caselaw 11636 Kant

Karnataka High Court

Syndicate Bank H O Manipal vs Shri Gajanan S/O Janna Mestha on 28 May, 2024

                            1


        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.
                              3


     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.

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

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

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

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

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

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

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.

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?

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

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

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

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

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

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

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.

¨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

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."

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."

"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

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

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.

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