JUDGMENT
K.L. Manjunath J.
1. This appeal is by the fourth defendant. The plaintiff-bank instituted a suit for the recovery of Rs. 4,40,847.50 together with court costs and current interest at 12.5 per cent, per annum, from the date of suit till the date of realisation.
2. According to the plaint averments, the first defendant M/s. Karnataka Paper Converters is a partnership firm and that defendants Nos. 2 and 3 are its partners. Defendant No. 3 is the wife of the fourth defendant.
3. The first defendant represented by defendants Nos. 2 and 3 have applied for loan facilities under various categories with the plaintiff-bank. Accordingly, a sum of Rs. 60,000 was sanctioned by way of cash credit pledge loan on December 22, 1978, and the said loan was sanctioned in favour of defendant No. 1 and defendants Nos. 1 to 3 have agreed to repay the said amount together with interest at the rate of 3 1/2 per cent, over and above the RBI with a minimum of 12 1/2 per cent, with quarterly rest. On the same date, the plaintiff has also sanctioned the cash credit hypothecation goods loan of Rs. 50,000 and accordingly defendants Nos. 1 to 3 have signed on the demand promissory note and defendant No. 4 who is the husband of defendant No. 3 has stood as a guarantor for these two loans and that defendant No. 4 has also executed the agreement of guarantee.
4. Subsequently, the limit of Rs. 60,000 has been enhanced to Rs. 1,90,000 per month at the request of defendant No. 1 and the said loan was sanctioned on February 6, 1979. On the request of defendant No. 1, a term loan of Rs. 19,000 was also sanctioned on December 22, 1978. Since the defendant did not repay the amount, the plaintiff filed the suit for the recovery of the amount. Defendants Nos. 1 and 2 filed a common written statement. Defendants Nos. 1 and 2 have not disputed the loan availed of by them from time to time. Defendants Nos. 1 and 2 have requested the plaintiff to redraw the account and also adjust the amount that may be payable by the insurance company towards this loan amount. Defendant No. 3 filed a separate statement. Accordingly, she became the partner of the firm and she effected the entire transaction. However, it is admitted that her signature has been taken by the second defendant to various papers and therefore she has denied her responsibility to one of the claims made by the plaintiff-bank.
5. Defendant No. 4 filed a written statement separately. According to him, he has admitted the two transactions, namely, the loan sanctioned in favour of the first defendant for Rs. 50,000 and Rs. 60,000, respectively and he has also admitted that he stood as a guarantor. But what has been contended by defendant No. 4 is that he has never stood as a guarantor for the subsequent enhancement from Rs. 60,000 to 1,90,000 on February 6, 1979, and for a term loan of Rs. 19,000. He also contends that since there is a variation of contract between the plaintiff and defendants Nos. 1 and 2, his surety has been discharged. Therefore, he is not liable to pay any amount to the plaintiff-bank.
6. Based on the above-said pleadings, the following issues have been raised by the trial court.
1. Whether defendants Nos. 1 and 2 prove that they are not liable to pay the compound interest ?
2. Do they further prove that on account of electrical short circuit, fire accident took place in the godown causing loss to defendant No. 1 firm ?
3. Whether defendants Nos. 1 and 2 prove that the plaintiff is entitled to recover amount from defendant No. 5 and it should be adjusted towards suit loan ?
4. Whether defendant No. 3 proves that she is not liable for the amount borrowed prior to her becoming partner ?
5. Whether defendants Nos. 3 and 4 prove that their signature was obtained on blank forms by the plaintiff-bank ?
6. Whether defendant No. 4 is only a surety and that he has not taken loan ?
7. Whether defendant No. 4 proves that loan facility was increased without his knowledge and as such he is not liable to pay the suit loan ?
8. Whether the plaintiff proves that defendant No. 5 is liable to pay insurance amount to the plaintiff ?
9. Whether defendant No. 5 proves that defendants Nos. 1 to 4 are not entitled to claim any insurance amount as contended in para. 3 of the written statement ?
10. Whether defendant No. 5 is not a necessary party to the suit ?
11. To what relief is the plaintiff entitled and from which defendants ?
12. What order ? What decree ?
7. Additional issue runs as hereunder :
Whether the fourth defendant proves that his liability is discharged to the extent of the value of the security as contended at para. 9A of his written statement ?
8. Thereafter, the parties have let in evidence. On behalf of the plaintiff-bank three witnesses have been examined. Defendant No. 3 has been examined as DW1. The second defendant has been examined as DW2 and the fourth defendant has been examined as DW4. In addition to that four more witnesses have been examined on behalf of the defendants. After appreciating the oral and documentary evidence, the trial court has held that defendants Nos. 1 to 3 are liable to pay the suit claim. However, the liability of defendant No. 4 has been limited to Rs. 60,000 and Rs. 50,000 respectively with interest accrued thereon as per the terms and conditions of the agreement.
9. Being aggrieved by the said judgment and decree, the fourth defendant has filed this appeal.
10. Learned counsel for the appellant Sri G. S. Visveswara contends that in view of Sections 133 and 139 of the Indian Contract Act of 1872 and as the plaintiff-bank without his consent or knowledge has varied the terms in respect of cash credit pledge loan of Rs. 60,000 raising the limit from Rs. 60,000 to Rs. 1,90,000, the fourth defendant cannot be made liable to pay the said amount, as the surety has been discharged automatically. He also contends that the second defendant had deposited the title deeds in respect of his property situated in Kotwal Ramaiah Road, Mysore, and that the plaintiff-bank allowed the second defendant to sell the said property and out of the sale proceeds, the plaintiff-bank has adjusted towards the other account namely, the loan advanced by the plaintiff-bank in favour of Cauvery Mines. Applying the principles of Sections 139 and 141, learned counsel for the appellant contends that the appellant herein is not answerable to the claim made by the bank and that the surety has been discharged due to the act of the creditor. To support his arguments, he relied upon two judgments. Seth Pratapsingh Moholalbhai v. Keshavlal Harilal Setalwad, AIR 1935 PC 21 and State Bank of Saurashtra v. Chi-taranjan Rangnath Raja, .
11. Per contra, learned counsel for the bank Sri G. V. Thimmappa supporting the judgment of the trial court contends that these two decisions or the points urged by learned counsel for the appellant will not come to the aid of the appellant in view of exhibit P10, which is a deed of guarantee executed by the appellant–fourth defendant. According to him as per Clause (3) of exhibit P10, the fourth defendant–appellant herein has agreed to all the terms and conditions of the clause of the said deed of guarantee. Therefore, in view of the said document, either the provisions of Sections 133, 139 and 141 of the Indian Contract Act cannot be made applicable to the facts and circumstances of the case. To support this argument, he has relied upon two judgments. One is T. Raju Setty v. Bank of Baroda and R. Lilavati v. Bank ofBaroda [1987] ILR Karn 964; [1990] 68 Comp Cas 267.
12. Relying upon these two decisions, the learned advocate for the respondent-bank requested this court to dismiss this appeal.
13. After hearing the arguments of both the advocates, the point that arises for determination in this appeal is, in view of the variation of contract between defendants Nos. 1 and 2 with the plaintiff by enhancing cash credit limit from Rs. 60,000 to Rs. 1,90,000 whether defendant No. 4-appellant has been discharged from the suretyship and whether due to the act of the bank, the appellant is discharged from the suretyship of cash credit hypothecation loan of Rs. 50,000.
14. The appellant herein has admitted the execution of documents in favour of the plaintiff-bank in respect of two loans, namely, cash credit hypothecation loan of Rs. 50,000 and also cash credit pledge loan of Rs. 60,000 and these two loans have been sanctioned by the bank in favour of the first defendant on December 22, 1978. The fourth defendant has also admitted exhibit P10, which is styled as the deed of guarantee. It is also an admitted fact that on the request of defendant No. 1, the bank has subsequently enhanced the cash credit pledge loan from Rs. 60,000 to Rs. 1,90,000 on February 6, 1979. It is also not in dispute that while enhancing the limit from Rs. 60,000 to Rs. 1,90,000, the fourth defendant herein has not stood as a guarantor. The guarantee of the fourth defendant is limited only to the two loan amounts of Rs. 50,000 and Rs. 60,000, respectively. Learned counsel for the appellant has relied upon Section 141 of the Indian Contract Act contending that at the time of availing of the loan, defendant No. 2 had given the title deeds of his house property situated at K. R. Road as a security for these two loans. According to him the bank has permitted the second defendant to sell the same by way of private sale and therefore he contends that as per the provisions of Section 141 his client has been discharged from the liability.
15. By looking into the court records, namely as per the exhibit P31, the second defendant has given a letter subsequent to December 21, 1978. As per this letter he has requested the bank to treat it as a security in respect of the present transaction also and in the said letter it is clearly mentioned that the title deeds in respect of the property has been hypothecated in respect of the other loan, namely, the loan advanced in favour of Cauvery Mines. So it is clear that as on the date the fourth defendant stood as a surety for defendants Nos. 1 to 3, defendant No. 1 had not given its property as a security for the loan advanced in favour of defendant No. 1. In the circumstances, Section 141 cannot be made applicable to the facts and circumstances of this case. Therefore, the arguments of learned counsel for the appellants that defendant No. 4 has been discharged from the suretyship in view of the bank permitting defendant No. 2 to sell his house property cannot be accepted or considered.
16. Let me consider whether the appellant has been discharged from the suretyship in view of the variation of the contract by the plaintiff between the plaintiff and defendants Nos. 1 and 2 subsequent to December 22, 1978. The learned advocate for the appellant has relied upon Section 133 of the Indian Contract Act of 1872. Section 133 of the Contract Act reads as hereunder :
“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.”
17. From looking into the provisions of Section 133 even if the variation is made without the sureties concerned, the surety is discharged as to the transactions subsequent to the variance. In the instant case, the trial court has not decreed the suit against defendant No. 4 in respect of the entire suit claim. The trial court has restricted the decree against the fourth defendant in respect of the loan amount of Rs. 60,000 and Rs. 50,000 for which he was the guarantor. If the court had granted a decree in respect of the transactions pursuant to variance made between the creditor and the debtor without the consent of the surety, the arguments of the learned advocate for the appellant could have been considered by me. But in the instant case, the transaction subsequent to the variance has not been considered by the trial court and no liability has been fixed on the appellant based on the subsequent variance. Therefore, the said argument is also without any force. In this background, let me examine the decision cited by the learned advocates for both the parties. In the decision in State Bank of Saurashtra v. Chitaranjan Rangnath Raja, , the hon’ble Supreme Court has held as hereunder (headnote of AIR) :
“(A) Contract Act (1872), Sections 141, 139–Cash credit facility by bank on pledged goods and surety–Pledged goods lost due to bank’s negligence–Surety, held discharged to the extent of security lost.”
18. This decision cannot be made applicable to the facts and circumstances of this case, since there was no security offered by defendants Nos. 1 to 3 at the time of availing of the two loan facilities for Rs. 60,000 and Rs. 50,000, respectively. Therefore, Section 141 cannot be pressed into service. The other decision relied upon by the learned advocate is Seth Pratapsingh Moholalbhai v. Keshavlal Harilal Setalwad, AIR 1935 PC 21 (headnote of AIR) :
“(B) Contract Act (1872), Section 133 Promisee must show performance before he can hold promisor to his promise.”
19. Relying upon this decision, the learned advocate contends that since there is a variance between the deed of guarantee executed by him and subsequent transaction enhancing the limit from Rs. 60,000 to Rs. 1,90,000 he has been discharged from his liability. But the learned advocate for the appellant does not dispute the execution of exhibit P10 by his client. Clause 3 of the said agreement reads as hereunder :
“You shall have the fullest liberty without in any way affecting this guarantee and discharging me/us from my/our liability hereunder to postpone for any time or from time to time the exercise of any power or powers conferred on you by the said agreement executed in your favour as aforesaid and to exercise the same at any time and in any manner and either to enforce or forbear to enforce payment of principal or interest or other moneys due to you by the borrower or any of the remedies or securities available to you or to grant any indulgence or facility to the borrower and I/we shall not be released by any exercise by you of your said liberty with reference to the matters aforesaid or any of them or by reason of time being given to the borrower or of any other forbearance, act or omission on your part or any other indulgence by you to the borrower or by any other matter or thing whatsoever which under the law relating to sureties would but for this provision have the effect of releasing me/us and I/we hereby waive all suretyship and other rights which I/we might otherwise be entitled to enforce.”
20. In view of this clause, the appellant herein has given go by to Sections 133, 139 and 62 of the Indian Contract Act. Since, he has given his consent in favour of the bank to vary the terms and conditions of the agreement even in his absence between the bank and defendants Nos. 1 and 2, the above-said decision cannot be made applicable to the facts and circumstances of the case.
21. In this background, it is useful to mention the judgments referred to by the learned advocate for respondent No. 1. A decision of the Division Bench of this court reported in T. Raju Setty v. Bank of Baroda, , has held as herein (headnote of AIR) :
Contract Act (1872), Sections 23, 133, 134, 135, 139 and 141 –Surety bond–Validity–Recital in bond that surety will not be entitled to rights under Sections 133, 134, 135, 139 and 141–Contract of surety is not rendered void.”
22. From the above discussion, it is clear that the plaintiff-bank has not committed any error in enhancing the cash credit limit from. Rs. 60,000 to Rs. 1,90,000 without the consent of the appellant herein and by virtue of the same appellant who stood as surety cannot be discharged and the trial court has rightly held that the appellant herein has not suffered any loss due to enhancing the limit by the bank in favour of defendants Nos. 1 and 2 and in view of exhibit P10 the appellant herein cannot be discharged from his suretyship. The trial court after appreciating the evidence properly has fixed the liability of the appellant in terms of the deed of guarantee executed by him.
Accordingly, there are no merits in the appeal.
Appeal is dismissed.
The parties to bear their own costs.