Corporation Bank vs Mohandas Baliga on 6 November, 1992

JUDGMENT

K.A. Swami, Ag. C.J.

1. This Appeal by the plaintiff is preferred against the judgment and decree dated 22nd March, 1990 passed by the learned XVIII Additional City Civil Judge, Bangalore City in O.S.No. 10914/85. The suit was for recovery of a sum of Rs. 1,42,639.05 along with future interest and costs from defendants 1 to 3. The trial Court has decreed the suit as against defendants 1 and 2 but it has dismissed it as against defendant No. 3.

2. The suit claim was divided into three parts. The first defendant is a proprietory concern. It raised three types of loans from the plaintiff-Bank; (i) A loan of Rs. 15,000/- was raised on 14-7-1981 on overdraft facility with interest at the rate of 17.5% per annum to be compounded on quarterly basis under the over-draft Account No. 4/81. The second defendant was the surety; (ii) The second type of loan was a demand loan of Rs. 22,000/-. For this also the second defendant was a surety. This was operated under demand loan secured Account No. 6/81; (iii) The third type of loan was raised by the first defendant on hypothecation by hypothecating machinery. It was for Rs. 44,000/- Hypothecated properties were as described in Schedule-B to the plaint. According to the case of the plaintiff, defendant No. 3 was the surety to this loan; that a demand promissory note was also executed by defendants 1 and 3 on 21-11-80 for a sum of Rs. 44,000/- agreeing to pay interest of 19.40% per annum compounded on quarterly basis; that defendants 1 and 3 executed continuing guarantee agreement; that in addition to this the first defendant executed an Agreement hypothecating machineries as described in Schedule-B to the plaint. This machinery loan was maintained under loan account No. 1/80.

2.1. Defendants 1 and 2 though appeared through their Counsel, but they did not file the written statement, and they also did not contest the suit.

2.2. However, it was only the third defendant a surety to the sum advanced under machinery loan account No. 1/80 for a sum of Rs. 44,000/- under which account the total claim was worked out to the tune of Rs. 81,240.15 with interest at 19.5% per annum as on 10.10.1985 contested the suit. He appeared through a Counsel and filed the written statement, and inter-alia, contended that Sri M.P. Shenoy had no authority to institute the suit on behalf of the plaintiff-Bank; that M/s Jyothi B. Patil was not the proprietrix of the first defendant concern; that the second defendant was the proprietor of the first defendant; that the second defendant and Smt. Jyothi B. Patil are the husband and wife; that the second defendant started the business of hiring out cine equipment in 1980 and for that purpose, he approached the plaintiff-Bank for financial accommodation by offering all the cine equipments purchased and to be purchased, to be stored in the business premises as a floating security by way of hypothecation; that the defendant was not aware of the subsequent two transactions; that the machineries and accessories referred to in Schedule-B to the plaint, were also cine equipments which were liable to be held as security for the liability under the earlier transactions; that the first defendant approached the plaintiff-Bank for the machinery loan of Rs. 44,000/- but the second defendant was the proprietor and not Smt. Jyothi B. Patil; that the third defendant did not execute the guarantee bond and the pronote; that he had not executed any acknowledgment; that he was not liable for the suit claim under M.L.Account No. 1/80; that the alleged acknowledgment was taken long after the suit claim had become barred by time and that the plaintiff had no cause of action against the third defendant. Thus, the third defendant contested the suit on ail counts and denied his liability to the suit claim and also denied the execution of the documents relied upon by the plaintiff.

3. On the basis of the pleadings of the parties, the trial Court framed the following issues for consideration:

(1) Whether Sri. M.P. Shenoy was duly authorised to file the suit on behalf of the plaintiff-Bank?

(2) Whether the suit documents dated 14-7-81 relating to O.D.No. 4/81 are true and supported by consideration?

(3) Whether the acknowledgment of debt dated 25-5-84 is true?

(4) Whether the suit documents dated 14-7-81 relating to DIS A/c,No. 6/81 are true and supported By consideration?

(5) Whether the acknowledgment of debt dated 25-5-84 is true?

(6) Whether the suit documents dated 21-11-80 relating to M.L.A/c No. 1/80 are true and supported by consideration?

(7) Whether the acknowledgment of debt dated 20-11-83 is true?

(8) Whether the suit against the 3rd defendant is barred by limitation?

(9) Whether the plaintiff is entitled for decree as prayed for?

(10) To what reliefs are the parties entitled?

ADDITIONAL ISSUE NO. 1

Whether defendant No. 3’s liability is discharged for the reasons mentioned by defendant No. 3 in his written statement from paras 9 to 16?

4. In support of the case of the plaintiff, the Bank examined its Manager and Power of Attorney Holder as P.W.1 and also produced 22 documents which were marked as Exs.P.1 to P.22. The third defendant examined himself as D.W.1 but he did not produce any document.

5. The trial Court in the light of the arguments advanced by the parties, appreciated the evidence on record and considered the contentions urged and recorded its findings on issue Nos. 1 to 7 and additional issue No. 1 in the affirmative and on issue No. 8 in the negative. Accordingly, it passed a decree in favour of the plaintiff and against defendants 1 and 2 but dismissed the suit as against defendant No. 3. The suit against defendant No. 3 came to be dismissed in the light of the finding recorded on additional issue No. 1. Hence, the plaintiff has come up in appeal against the decree of the trial Court in so far as it has dismissed the suit of the plaintiff as against defendant No. 3.

6. In the light of the contentions urged on both sides, the following Points arise for consideration:

(1) Whether it is proved that M.P. Shenoy was authorised to institute the suit on behalf of the plaintiff-Bank?

(2) Whether it is proved that the plaintiff-Bank has advanced a loan of Rs. 44,000 under M.L. A/c No. 1/80 on 21-11-80 to the first defendant?

(3) Whether the plaintiff has proved that defendants 1 and 3 executed the pronote dated 21-11-80 marked as Ex.P.8, the guarantee bond dated 21-11-80 marked as Ex.P.11 and the acknowledgement dated 20-11 -83 marked as Ex.P.17?

(4) Whether the suit was barred by time?

(5) Whether the plaintiff is entitled to a decree against defendant No. 3 in respect of the amount due under M.LA/c.No. 1/80?

(6) Whether the decree passed by the trial Court dismissing the suit of the plaintiff as against defendant No. 3 is justified in law?

(7) What order or decree? .

7. POINT NO.(1): The trial Court has held that the plaintiff has proved that M.P. Shenoy, Manager of the plaintiff-Bank was authorised to institute the suit as there was Power of Attorney executed in favour of M.P. Shenoy. It is contended on behalf of the third defendant by Sri Ullal, learned Counsel that the execution of Ex.P.22 is not proved by the plaintiff- Bank. It is to be noticed that the Power of Attorney has been produced and it is marked as Ex.P.22. It is dated 8th November, 1973. It is executed by Sri N. Narayana Pai and B. Narayana Nayak as Directors of the Bank and Sri. J.B. Kamath as General Manager of the plaintiff-Bank. The Power of Attorney is executed in favour of Sri M. Prabhakar Shenoy s/o M. Venkataraya Shenoy who was working at that time as the Officer of the Bank at Doddaballapur Branch. M. Prabhakar Shenoy mentioned in the Power of Attorney is no other that the person who has instituted the suit on behalf of the plaintiff. In his evidence he has stated thus:

“I am the Power of Attorney holder of the plaintiff-Bank. Ex.P.22 is the original Power of Attorney executed by the Bank in my favour”.

P.W.1 has not been cross-examined on this point. The contention of Sri Ullal, learned Counsel for the third defendant, is that as the Power of Attorney (Ex.P.22) has not been Notorised, unless there is a specific evidence produced by the plaintiff to prove that Sri N. Narayana Pai and Sri. B. Narayana Nayak and Sri. J.B. Kamath executed the document in the presence of the persons giving evidence, there will not be a proof of the document as required by law and that mere production of the document does not amount to proof of the document. We have already pointed out that P.W.1 has specifically stated that Power of Attorney has been executed in his favour by the Bank and he himself has produced it. There is no cross-examination on the point. We do not see any justification as to why the evidence of P.W.1 should not be accepted regarding the proof of Ex.P.22. If only the third defendant had disputed the fact that the Power of Attorney was executed in favour of M.P. Shenoy by N. Narayana Pai and N. Narayana Nayak and J.B. Kamath on behalf of the plaintiff-Bank, then in the absence of further evidence it ought to have been possible to hold that the execution of the Power of Attorney was not proved. But, in the instant case, when P.W.1 was in the witness box and he produced the Power of Attorney, the third defendant did not choose to cross-examine him on that point. It can only be inferred that though the third defendant in his written statement denied that M.P. Shenoy was constituted the Power of Attorney to file the suit, however when M.P. Shenoy entered witness box and gave evidence as P.W.1 and produced the Power of Attorney, the third defendant did not pursue his case further and did not consider it just and necessary to cross-examine P.W.1 on the point. Therefore, it was P.W.I who was constituted the Power of Attorney and it was he who produced the document and spoke to it in addition to this, in his evidence the third defendant did not state anything about the Power of Attorney. Under these circumstances, we are of the view that the trial Court is justified in accepting the case of the plaintiff and holding that the plaintiff has proved that it has constituted M.P. Shenoy as the Power of Attorney of the Bank for the purpose of instituting the suit. We accordingly confirm the finding of the trial Court on this point and answer Point No.(1) in the affirmative.

8. POINT NOs. (2) and (3): To prove that the plaintiff has advanced the loan under M.L. loan Account No. 1/80, the plaintiff has produced the account extract of Ml. Account No. 1/80 which is marked as Ex.P.14 and has also produced the pronote Ex.P.8. These two Points are to be determined together because the proof of the documents produced as Ex.P.8, P.9, P.11 and P.17 and also p.10 will also go to prove the advancing of the loan under M.L. Account No. 1/80 to the first defendant to which, according to the plaintiff, the third defendant was a surety. Therefore, we consider Point Nos. (2) and (3) together. According to the case of the plaintiff, it advanced a sum of Rs. 44,000/- on 21-1-1980 to the “first defendant under machinery loan account No. 1/80 on the guarantee of the third defendant. In addition to producing Exs.P.8, P.9, P.10, P.11 and P.17, the plaintiff also produced the certified account extract of M.L.Account No. 1/80 – Ex.P.14. The trial Court has held that the execution of all these accounts has been proved by the plaintiff. It has held that the plaintiff has proved the execution of Exs.P.8, P.9 and P.17 by defendants 1 and 3 and Ex.P.10 by defendant No. 1. It has also held that Ex.P.14 – certified extract has also been proved. However, it has held that the plaintiff has failed to take appropriate action to recover the amount by selling the hypothecated articles and has also altered the conditions of guarantee, therefore, the liability of the third defendant is discharged on this ground. The trial Court has thus dismissed the suit as against defendant No. 3.

9. Before us, Sri Ullal, learned Counsel appearing for the 3rd defendant, has urged all the contentions which were advanced before the trial Court. Therefore, we take up for consideration as to whether the plaintiff has proved the documents referred to in the Points (2) and (3) raised by us for determination. P.W.1 has spoken to the certified extracts of the accounts produced as Ex.P-14, which relates to M.L. Account No. 1/80. The contention of Sri Ullal is that P.W.1 is not competent to speak to it because, at the time when the loan was advanced, he was not working in the Branch in question. Therefore, he had no knowledge of the advancing of the amount nor he is the person who maintained the accounts. The 3rd defendant has disputed the correctness of the accounts. Therefore, it is contended that in the absence of the evidence other than the accounts extracts, the amount mentioned in the account extract cannot be said to have been proved as advanced. It is relevant to notice that the expression “certified copy” has been defined under the Bankers’ Books Evidence Act, 1891. According to the said definition, “certified copy” means, a copy of any entry in the books of a bank together with a certificate written at the foot of such copy that it is a true copy of such entry, that such entry is” contained in one of the ordinary books of the bank and was made in the usual and ordinary course of business, and that such book is still in the custody of the bank, such certificate being dated and subscribed by the principal accountant or Manager of the Bank with his name and official title. Section 4 of the very same Act provides mode of proof of entries in Bankers’ Books. It provides that subject to the provisions in the Act, a certified copy of any entry in a Bankers’ Book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every case where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise. Therefore, it is clear from the provisions contained in Section 4 of the Bankers’ Books Evidence Act, 1891 that the certified extract of the accounts shall have to be received as prima facie evidence of the existence of the original entries in the accounts and the same are to be admitted as evidence of the transactions as entered, in the accounts. The Supreme Court, in CHANDRADHAR GOSWAMI AND ORS. v. GAUHATI BANK LTD. has, while considering Section 34 of the Evidence Act, and Section 4 of the Bankers’ Book Evidence Act, held as follows:

“6. The main question urged before us is that there is no evidence besides the certified copy of the amount to prove that a sum of Rs. 10,000/- was advanced to the appellants and, therefore, in view of Section 34 of the Evidence Act the appellants cannot be saddled with liability for that amount. Section 34 is in these terms:

“Entries in books of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the Court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability.”

It is clear from a bare perusal of the section that no person can be charged with liability, merely on the basis of entries in books of account, even where such books of account are kept in the regular course of business. There has to be further evidence to prove payment of the money which may appear in the books of account in order that a person may be charged with liability thereunder, except where the person to be charged accepts the correctness of the books of account and does not challenge them. In the present case, however, the appellants did not accept the correctness of the books of account. We have already indicated that they went to the length of saying that, the accounts were not correctly kept, and were fraudulent. They also said that no money had been taken by them after March 1, 1947. This 1. being their pleading, the trial Court rightly framed the third issue relating to the total amount due from the appellants to the bank. But unfortunately it overlooked to go into that issue specifically and we have already indicated how it made a mistake in arriving at the amount due when considering the issue relating to relief. In any case as the appellants had not admitted the correctness of the accounts filed by the Bank, particularly after March 1, 1947 the Bank had to prove payment of Rs. 10,000/- on March 19, 1947 if it wanted to charge the appellants with liability for that amount. But all that the Bank did was to produce a certified copy of account under Section 4 of the Bankers’ Books Evidence Act No. XVIII of 1891. Section 4 of that Act reads thus:

“Subject to the provisions of this Act, a certified copy of any entry in a bankers book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every case where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise”.

It will be clear that Section 4 gives a special privilege to banks and allows certified copies of their accounts to be produced by them and those certified copies become prima facie evidence of the existence of the original entries in the accounts and are admitted as evidence of matter, transactions and accounts therein, but such admission is only where, and to the same extent as, the original entry itself would be admissible by law and not further or otherwise. Original entries alone under Section 34 of the Evidence Act would not be sufficient to charge any person with liability and as such copies produced under Section 4 of the Bankers’ Books Evidence Act obviously cannot charge any person with liability. Therefore, where the entries are not admitted it is the duty of the bank if it relies on such entries to charge any person with liability to produce evidence in support of the entries to show that the money was advanced as indicated therein and thereafter the entries would be of use as corroborative evidence. But no person can be charged with liability on the basis of mere entries whether the entries produced are the original entries or copies under Section 4 of the Bankers’ Books Evidence Act. We cannot agree with the High Court that the mere fact that the appellants did not specifically mention the sum of Rupees 10,000/- as not having been advanced to them in their written statement would make any difference on the facts of the present case. We have already pointed out that the appellants did not admit the correctness of the accounts produced specially after March 1, 1947. We have also pointed out that it was stated on their behalf that nothing was borrowed after March 1, 1947. The main appellant in whose name the account was appeared as a witness and stated that so far as he remembered he only borrowed Rs. 8,000/- from the Bank and nothing thereafter. He also stated that he did not remember to have borrowed any sum from the bank after the execution of the mortgage-deed. In the face of this pleading of the appellants and the statement of one of them, the bank had to prove that the sum of Rs. 10,000/- was in fact advanced on March 19, 1947 and could not rely on mere entries in the books of account for that purpose. This is clear from the provision in Section 34 of the Evidence Act. No attempt was made on behalf of the bank to prove by any evidence whatsoever that a sum of Rs. 10,000/- was advanced on March 19, 1947. The entry in the account books in that connection is to the effect : “To amount paid to Gauhati branch as per D/advice, dated 6th March, 1947″. If this amount of Rs. 10,000 was paid by the bank on the order of the appellants or any one of them that order should have been produced in support of the entry, and then the entry would have been helpful to the bank as a corroborative piece of evidence. But the bank did nothing of the kind. The only witness produced on behalf of the bank was an officer who had nothing to do with the Tezpur branch where the transactions were entered into. We are, therefore, of opinion that in view of Section 34 of the Evidence Act the appellants cannot be saddled with liability for the sum of Rs. 10,000/- said to have been advanced on March 19, 1947 on the basis of a mere entry in the account. Section 34 says that such entry alone shall not be sufficient evidence, and so some independent evidence had to be given by the bank to show that this sum was advanced. What would be the nature of such independent evidence would certainly depend upon the facts of each case, but there can be no doubt that some independent evidence to show that advance had been made has to be given. Further, as in this case the dispute was with respect to one entry of Rs. 10,000/- it should not have been difficult for
the bank to produce evidence with respect thereto. We cannot, therefore, agree with the High Court that the advance of Rs. 10,000/- on March 19,1947 has been proved in this case.”

From what has been stated by the Supreme Court, it is clear that in that case, an entry relating to a sum of Rs. 10,000/- in the account extract was specifically challenged and it was held that Bank was required to prove that sum of Rs. 10,000/- was in fact advanced on March 19, 1947 and it could not rely on mere entries in the books of account for that purpose. It was further held that in view of Section 34 of the Evidence Act, such entry alone was not sufficient evidence and as such, some independent evidence was required to be given by the Bank and that as no attempt was made on behalf of the Bank to prove by independent evidence that the sum of Rs. 10,000/- was advanced on March 19, 1947, the entry in the account books in that connection could not have been taken as proof for advancing of the amount. Therefore, it was further held that the appellant therein could not be saddled with the liability of Rs. 10,000/- said to have been advanced on March 19,1947.

In the instant case, the plaintiff has not stopped at mere producing the account extract. In addition to producing the account extract, the plaintiff has also produced the pronote dated 21-11-80 relating to advancing of sum of Rs. 44,000/- as machinery loan, Ex.P.9 take delivery letter, Ex.P.10 hypothecation deed, Ex.P.11 guarantee bond and Ex.P.17 the acknowledgement. These documents also go to prove that a sum of Rs. 44,000/- was advanced as a loan to the first defendant by the plaintiff. Of course, if the plaintiff Bank fails to prove these documents, it cannot hope to obtain a decree against defendants 1 and 3 merely on the account extract produced by it. Therefore, now, we take up for consideration whether the plaintiff has proved the execution of the aforesaid documents by defendants 1 and 3. Ex.P.8 is a pronote dated 21-11-1980. It is produced along with the plaint. No doubt, defendant-1 has not denied the execution of it. Defendant-1 is a borrower. It is only the third defendant who has denied the execution of the pronote in his written statement. The execution of it has not been denied by the defendants 1 & 3. However, it is the case of the third defendant that when he executed, the pronote it did not contain any typed or written matter nor did it contain the signature of the proprietrix Smt. Jyothi B. Patil. Therefore, it did not amount to execution of the pronote and that the amount was also not advanced on that day. In addition to this, it is contended that in fact no amount was intended to be advanced. It was only for purchasing the machinery. Hence, the contention of the third defendant is also to the effect that even if it is held that the execution of the pronote is proved, it is not supported by consideration. In his evidence, the third defendant with reference to the pronote has not stated anything. He has not even denied the execution of the document Ex.P.S. He has stated in his examination-in-chief thus:

“…..I agreed to be the guarantor for the transaction by the 1st defendant in 1980. I mean 1st defendant means the Bhasanth Kumar Patil, the borrower. There were two guarantors, one is Jyothi Patil and another is myself. Mr. Basanth Kumar Patil took me to the bank. I have signed papers in the Bank. At the time of my signature nobody else’s signature was present. I was not present when the signature was made by anybody else. There was no ink or any typed matter when I put my signature. The loan amount was Rs. 40,000-00. It was secured loan. All out Door unit was security and hypothecated to the Bank. The second defendant had equipments at that time. The purpose of the loan is to acquire some more outdoor equipments. The acquired equipments were also be security to the loan. The 2nd defendant had worth Rs. 40,000-00 before availing loan. The security to be maintained in twice the value of loan amount.”

Thus, he has admitted his signature on the document. He has admitted that he stood surety for the loan advanced to Basanth Kumar Patil and not to Smt. Jyothi B. Patil. This contention of the 3rd defendant has not been accepted by the trial Court. We also find, it difficult to accept his contention when the signatures of Smt. Jyothi B. Patil and the 3rd Defendant found on Exhibit P-8 are not specifically denied by them. Ex.P-9 is a take delivery letter which is also signed by the 3rd defendant Smt Jyothi B. Patil as proprietrix of the 1st defendant and also the 3rd defendant. This take delivery letter specifically mentions the demand pronote dated 21-11-1980 for a sum of Rs. 44,000/-. It also further states the loan is to be repaid within 22 months in monthly instalments at Rs. 2,000/- each and first instalment commencing from 21.12.1980. The defence of the 3rd defendant in this regard is also similar to the one raised in respect of the pronote. The reasons given by us rejecting the case of the 3rd defendant in respect of the pronote will also equally apply to the contention raised in respect of Ex.P-9. Ex.P-10 is the deed of hypothecation, it is executed by Smt. Jyothi B. Patil as the proprietrix of the 1st defendant and also by the Manager of the Corporation Bank, Bangalore Cantonment. The execution of this document is not denied by the 1st defendant, who though put in appearance through a Counsel, but failed to file any written statement. Thus she had chosen not to contest the suit. In this hypothecation deed, specific loan amount is stated as Rs. 44,000/-. Further, it has been stated in Ex.P-19 that the 1st defendant has borrowed this amount and the first defendant is associated with the film industry dealing in or hiring out cine equipments proposed to be purchased or already purchased. The description of the hypothecated cine equipments and their value are mentioned in Schedule-A to the document. In Schedule-B it is stated that the goods mentioned in Schedule-A are kept in the premises bearing Nos. 32-33, 1 Main Road, Gavipuram Extension, Bangalore-19 or any other places specified from time to time when the equipments are given on hire basis. When the execution of Ex.P.10 is not disputed and Ex.P.10 specifically mentions the amount of loan advanced and also mentions the goods hypothecated, it is not possible to appreciate the defence of the third defendant that the plaintiff has not proved the fact of advancing of loan of Rs. 44,000/- as machinery loan to the first defendant.

10. Ex.P.11 is the guarantee bond. According to the plaintiff, it is executed by Smt. Jyothi B. Patil, proprietrix of the first defendant who borrowed the sum of Rs. 44,000/- and its M.L. account No. is 1/80. It is executed on the stamp paper and the printed document guarantee bond is also annexed to it. In the agreement, the matter is typed on the stamp paper which is also signed by the third defendant and Smt. Jyothi B. Patil. It is specifically stated thus:

“This agreement made this the 21st day of November 1980 between 1 M/s. B.P. Films, out Door Unit, Gavipuram Extension, Bangalore, hereinafter termed the Borrower, 2. B. Mohandas Baliga, Partner Mayura Movies, No. 4, Upstairs, Gandhinagar, Bangalore-9 hereinafter termed the “Guarantor” and Corporation Bank, a Banking Company wholly owned by the Government of India and constituted under the Banking Companies (Acquisition and Transfer of undertakings) Act, 1980, Act No. 40 of 1980 having their Head Office at Mangalore and branch office inter alia one at Cantonment Bangalore represented by their Manager and duly constituted Attorney P. Karunakara Alva hereinafter termed the ‘Bank’ which expression shall be deemed to include their assigns, successors and attorneys witnesseth”.

It is also signed by the third defendant as a guarantor and Smt. Jyothi B. Patil as the proprietrix of the first defendant. As far as the first defendant Smt. Jyothi B. Patil is concerned, she has not disputed the execution of this document. However, it is contended by the third defendant that when he signed this document there was no matter either typed or hand written. There was only a printed matter. The stamp paper also did not contain any typed matter. Hence, the contention is that there was no due execution of the document. According to the learned Counsel, due execution means the execution of the document knowing the contents of the document; that when the document did not contain the typed or written matter, it was only a blank printed document, that it only contained the printed material, therefore it cannot be held that there is due execution of the document. It is not possible to accept the contention of the third defendant. We have already pointed out that in his evidence he has not disputed his signature found on this document. Further, the first defendant has not disputed the execution of this document. This document is in relation to the loan advanced in respect of which the hypothecation deed has been executed by Smt. Jyothi B. Patil, proprietrix of the first defendant. Over and above, the third defendant himself has admitted in his evidence that he has stood as surety but he has tried to contend that he has stood as surety to the amount advanced to the husband of Smt. Jyothi B. Patil and not to Smt. Jyothi B. Patil and it is the husband of Smt. Jyothi B. Patil who was the proprietor of the first defendant and not Smt. Jyothi B. Patil. This defence, on the face of it, is untenable. The Bank has advanced the loan to the first defendant of which Smt. Jyothi B. Patil was the proprietrix. She has executed the document as the proprietrix of the first defendant. Apart from the contention urged in the aforesaid manner, no other evidence has been produced by the third defendant to prove that the proprietor of the first defendant was Basanth Kumar Patil and not Smt. Jyothi B. Patil. It only shows that the defence was raised only for the sake of defence and there was no truth whatsoever in it. In the normal course, the Bank is expected to verify before it advances the loan. Therefore, even if Basanth Kumar Patil was the proprietor of the first defendant and not Smt. Jyothi B. Patil, the Bank would not have advanced loan to the first defendant on obtaining the document from Smt. Jyothi B. Patil as the proprietrix. The defence appears to be far fetched one.

11. Ex.P.17 is the acknowledgement dated 21-11-1983. According to the case of the plaintiff, it is executed by Smt. Jyothi B. Patil, proprietrix of the first defendant and the third defendant. The defence of the third defendant in respect of this document is that he has executed it after the expiry of period of limitation. Therefore, it has no validity and it has no effect of extending the limitation. Thus, he does not dispute the execution of Ex.P.17. His case is that it is executed beyond the period of three years from the date of advancement of the loan in question. P.W.1 has specifically stated in his evidence that defendants 1 and 3 have signed Ex.P.17. In his evidence, the third defendant has admitted that he is educated; that he did not go through the document before signing; that he first put his signature before others had put their signatures on the document; that the renewal papers were brought by Basanth Kumar Patil and he signed them. He has further denied the suggestion that it is not true to say that Mrs. Jyothi B. Patil put her signature and then he put the signature; that he was aware of the entire transaction. Therefore, the only point to be seen whether the defence of the third defendant that he executed Ex.P.17 beyond the period of limitation is acceptable. Except asserting that it was executed beyond the period of limitation there is no other evidence. The third defendant has even put the date below his signature as 20-11-83. Therefore, it is clear that acknowledgement-Ex.P.17 was executed on 20-11-1983. The trial Court has also held that Ex.P. 17 was proved that it was executed on 20.11.1983. Hence, we are of the view that the plaintiff has proved that defendants 1 and 3 executed Ex.P.17 acknowledging the amount due as on that date under M.L Account No. 1/80. According to the contents of the acknowledgement, the outstanding balance as on 30-9-83 was Rs. 53,729/- inclusive of interest and incidental charges debited till 30-9-83. There was legal notice issued by the plaintiff to the third defendant as well as to Smt. Jyothi B. Patil. In the legal notice dated 30-5-84 it was specifically stated that both of them agreed to repay the loan amount within one year from the date of borrowing. The third defendant received the legal notice on 2-6-84 as per the Postal acknowledgement marked as Ex.P.21. Even then, he did not care to reply. The silence on the part of the third defendant in not replying to the legal notice would also go to show that there was a loan advance under M.L. account No. 1/80 to the tune of Rs. 44,000/- to Smt. Jyothi B. Patil by the plaintiff to which the third defendant was a surety and that he agreed to re-pay the loan amount. He nevertheless failed to repay it. Thus, taking into consideration the totality of ‘the evidence on record we are of the view that the plaintiff has proved the execution of the documents marked as Exs.P.8, P.9, P.11 and P.17 by defendants 1 and 3 and also Ex.P.10 by defendant No. 1. Consequently, it is to be held that the plaintiff has proved that it advanced loan amount of Rs. 44,000/- to the first defendant under M.L.Account No. 1/80 to which the third defendant stood as a surety. Accordingly, Point Nos.(2) and (3) are answered in the affirmative.

12. POINT NO. (4): This Point need not detain us any longer as we have already held that the plaintiff has proved that defendants 1 and 3 executed the acknowledgement dated 20-11-83 acknowledging the debt. The suit is filed on 11-10-85 within three years from 20-11 -83. Therefore, the suit has been filed well in time.

13. POINT NO. (5): Under this Point, Sri. Ullal, learned Counsel for the third defendant, very seriously contended that the plaintiff is not entitled to a decree against the third defendant because it failed to exercise its right to recover the amount from the first defendant by sale of the hypothecated goods and also showed leniency to the first defendant.

It is also contended that the plaintiff-Bank did not at all put forth a case that it was not at all open to the third defendant to rely upon his rights as a surety on the basis of the provisions contained in Sections 133, 134, 135, 139 and 141 of the Contract Act, having regard to the terms contained in the guarantee bond, as such it is not at all open to the appellant-Bank to put forth that case in the Appeal.

14. The learned trial Judge in para 8 of his judgment has held that the 3rd defendant has argued on the basis of the provisions contained in Sections 133, 135 and 141 of the Contract Act and as a result of these provisions and in the light of the conduct of the appellant-Bank towards defendant No. 1, because the plaintiff-Bank did not make efforts to recover the amount from the first defendant by sale of the hypothecated goods and thereby it acted in contravention of the provisions of the surety bond that consequently, the surety was very much affected. Hence he should be released from the surety.

15. The learned trial-Judge has accepted this contention without realising that the rights accruing to defendant No. 3 as surety under Sections 133, 135 and 141 of the Contract Act had been given up under the very contract of guarantee.

16. We first dispose of the contention of the learned Counsel Sri Ullal that the plaintiff Bank did not raise the contention that it was not at all open to the third defendant to raise a plea arising out of Sections 133, 135 and 141 of the Contract Act and therefore, it is not open to it to urge in the Appeal.

17. This contention, in our view, overlooks the very contents of surety bond and the case pleaded by the plaintiff that the third defendant is liable for the amount due under M.L.Account No. 1/80. When the surety bond specifically states that between the Borrower and the Guarantor, the guarantor is the surety only, the Guarantor agrees that between the Bank and the Guarantor, the Guarantor is the principal debtor jointly with the Borrower and accordingly the Guarantor shall not be entitled to any of the rights conferred as surety by Sections 133, 134, 135, 139 and 141 or any other relevant provisions of the Contract Act. This contention must be held to have been taken by the plaintiff when the plaintiff has based his claim against the third defendant on the basis of the surety bond itself. Therefore, the several Decisions relied upon by Sri Ullal, learned Counsel for the 3rd defendant, in support of this contention, need not be considered in detail. However, we make reference to them: (1) THE PRAKASH ROAD LINES PVT LTD v. THE ORIENTAL FIRE & GENERAL INSURANCE CO. AND ANR., 1988(1) KLJ 118 ; WAMAN SHRINIVAS

KINI v. RATILAL BHAGAVANDAS & CO, ; MURLIDHAR AGARWAL AND ANR. v. STATE OF UTTAR PRADESH, ; MANNALAL KHETAN ETC. ETC. v. KEDAR NATH KHETAN AND ORS., ; and M.G. BROTHERS LORRY SERVICE v. PRASAD TEXTILES, .

18. It is next contended that the very Clause contained in the surety bond under which the surety has given up the right conferred upon him as surety by Sections 133, 134, 135, 139 and 141 of the Contract Act, is unenforceable as it is opposed to public policy and also the provisions contained in the Contract Act and this aspect of the matter has not been taken into consideration by a Division Bench of this Court reported in RAJU SETTY v. BANK OF BARODA, . As a corollary of this contention, it is contended that the said Decision requires to be reconsidered, as it has not taken into consideration the other conditions and also the relevant provisions in the Contract Act.

19. Before considering these contentions, we may refer to Raju Setty’s case .

In Raju Setty’s Case, the following Questions were considered:

1) Whether, in law, it is permissible to enter into a contract giving up the rights available to a surety under Chapter VIII of the Indian Contract Act? In otherwords, whether it is open to contract outside the provisions of Chapter VIII of the Indian Contract Act? If so, whether such a contract is not hit by Section 23 of the Indian Contract Act?

These questions under Point No. 1 were considered in paras 9, 10, 10.1, 11 and 11.1 of the Judgment, therefore, it is necessary to reproduce the same:

“9. Chapter VIII of the Indian Contract Act, 1872, (hereinafter referred to as the ‘Act’) deals with indemnity and guarantee. Section 124 defines the expression “Contract of indemnity”; Section 125 defines “right of indemnity holder when sued”; Section 126 defines the expressions “Contract of Guarantee”,

“Principal Debtor” and “Debtor”; Section 127 provides regarding the consideration for guarantee; Section 128 deals with “Surety’s liability’; Section 129 states to as the “Continuing Guarantee”; Sections 130 and 131 deal with revocation of continuing guarantee by surety’s death respectively; Sections 132, 133, 134, 135 and 136 deal with liability of the sureties and discharge of their liabilities; Section 137 provides that the creditor’s forbearance 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; Section 138 provides that where there are co-sureties, a release by the creditor of one of them does not discharge the others; neither does it free surety so released from his responsibility to the other sureties; Section 139 deals with the discharge of surety by creditor’s act or omission impairing surety’s eventual remedy; Section 140 and 141 deal with the rights of surety on payment of performance and surety’s right to benefit of creditor’s securities respectively; Section 142 to 144 deal with the guarantee; Section 145 deals with the implied promise to indemnify surety; Section 146 deals with co-sureties liable to contribute equally and lastly Section 147 deals with liability of co-sureties bound in different sums. Thus, it is relevant to notice that all these provisions pertaining to surety and guarantee and the principal debtor have to be read together and not in isolation. Section 128 of the Act specifically 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 the other provisions contained in Chapter VIll relating to the rights of the sureties, we do not find the words ‘unless it is otherwise provided by the contract’ or ‘subject to the contract as may be arrived at by the parties’. Therefore, different views are expressed by the High Courts as to whether it is open to contract outside the provisions of Chapter Vlll of the Act pertaining to rights of the sureties.

10. High Court of Punjab in Union of India, Ministry of Food and Agriculture (Department of Food) New Delhi v. Pearl Hosiery Mills and Ors. has held that:

“Moreover, I am of the opinion that the provisions of Section 133 of the Indian Contract are not subject to a contract to the contrary between the parties to the contract. This Section is in unqualified terms. It was not necessary to put in the words ‘notwithstanding any contract to the contrary’ in this Section, because, wherever the legislature wanted that the terms of the contract between the parties should take precedence over the provisions of any Section, the words ‘in the absence of any contract to the contrary’ or ‘in the absence of any special contract’ have been inserted in that particular Section as has been done in Sections 152 and 163 of the Act.”

It appears that the word ‘not’ found in the second line in the above extracted portion is a clerical or a printing mistake as the word ‘not’ does not fit in with the view expressed therein. Pearl Hosiery Mills case was a case in which without the consent of the surety variations were made in the terms of the original contract. Therefore, in view of Section 133 of the Act it was held that surety stood discharged (See Para 34 of the Judgment). Therefore, it was not a case in which the point in question was considered.

10.1 In Citibank N.A. New Delhi v. Juggilal Kamalapat Jute Mills co. Ltd., Kanpur differing from the view expressed in the aforesaid Pearl Hosiery Mills’ case, it has been held that it was not necessary for the Legislature to provide the words ‘in the absence of any contract’ in Section 133 or 135 or 141, because the Sections themselves speak of consent of the surety regarding variance in the terms of the contract between the principal debtor and the creditor composition with the principal debtor etc. It has also been further held that in the presence of the words ‘without the surety’s consent’, the words ‘in the absence of any contract to the contrary’ would have been surplus. Therefore, following a Decision of the Privy Council in Hodges And Anr. v. Delhi & London Bank Ltd. (Law Reports 27 Indian Appeals 168) and A.R. Krishnaswami Ayyer and Anr. v. Travancore National Bank Ltd. (AIR 1940 Madras 437), it has been held that the rights conferred on the surety under Section 133, 135 or 141 of the Act could be waived lay specific agreement in the deed of guarantee; that as a matter of fact, such an agreement would amount to consent within the meaning of the aforesaid Sections of the Act. A learned Single Judge of this Court in Smt. R. Lilavati v. Bank of Barada and Ors. has in categorical terms held thus:

The Contract Act has created rights and liabilities. But the parties have got a right to contract out of the rights and liabilities mentioned in the Contract, That is envisaged by Section 128 of the Contract Act. Therefore, merely because we do not find words ‘notwithstanding anything contained in the contrary etc. in Section 141, it does not follow that the parties cannot contract out of the rights and liabilities laid down in Section 141 of the Contract Act. In this case defendant-4 has agreed that she will not claim the benefit given to her under Section 141 of the Contract Act. She herself is a party to that surety bond. Therefore, it is not open to her now to contend that the said Clause is neither bad in law or is not enforceable.”

11. We are of the view that as the provisions contained in Chapter VIII of the Act relate to Indemnity and Guarantee, they deal with one subject and they are to be read together. The liability of the surety as stated in general terms in Section 128 of the Act is no doubt co-extensive with that of the principal debtor, but this liability is also subject to the terms of the contract; because Section 128 of the Act itself specifically provides that the liability of a surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract. Thus the liability of the surety is subject to the terms of the contract as may be arrived at between the parties. The words “unless it is otherwise provided in the contract” occurring in Section 128 of the Act will also govern the other provisions contained in Chapter VIII of the Act and enable the surety to give up the rights available to him under Sections 133, 134, 135, 139 and 141 of the Act. It is a settled legal position of law that a legal right can be given up provided such giving up of legal right under any contract is not hit by Section 23 of the Act. Section 133 of the Act makes it clear that any variance made in the contract between the principal debtor and the creditor without the consent of the surety, discharges the surety as to transactions subsequent to variance. This consent of the surety can be obtained either at the time of contract is made between the principal debtor and the creditor to which the surety gives the guarantee for making any change or alteration in the contract to be made or not to claim any right or benefit under Chapter VIII of the Act. In other words, in the surety bond/guarantee-bond itself the surety can agree to waive his rights available to him under the various provisions contained in Chapter VIII of the Act. Such waiving of his right by the surety is permissible under Section 133 read with Section 128 of the Act.

11.1 The contention of the learned Counsel for the appellant is that the provisions contained in Chapter VIII of the Act defining the rights and liabilities of the sureties and the principal debtor are in-the nature of public policy because it is the policy of law that the persons who enter into a contract of indemnity and guarantee should have certain rights and liabilities. As otherwise it is likely that the creditor being in a dominating position may exploit the hopeless position of a person seeking credit and may compel the persons seeking credit and the persons furnishing guarantee and indemnity to agree to the terms which in the very nature of things will be iniquitous, unjust and unconscionable. It is submitted that it is this danger which is intended to be prevented or eliminated by Section 23 of the Contract Act. Section 23 of the Act specifically provides that the consideration or object of an agreement is lawful unless it is forbidden by law, or is of such a nature that if permitted, it would defeat the provisions of any law; or is fraudulent or involves or implies injury to the person or property of another; or the Court regards it as immoral or opposed to public policy. It also further provides that in each of the cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful, is void. In the case of a contract of guarantee, the consideration is advancing of loan to a principal debtor. The object of the agreement is to secure the debt of the creditor. Therefore, neither the consideration is unlawful nor the object of the agreement is unlawful. Both are also not forbidden by law. However, the contention is that the surety bond which provides that the surety will not be entitled to any of the rights conferred on him by Sections 133, 134, 135, 139 and 141 of the Act has the effect of defeating the provisions contained in Chapter VIII of the Act, therefore, it is hit by Section 23 of the Act. Section 23 is mainly concerned with the consideration or object of an agreement. In the instant case, as already pointed out, the consideration and object of the agreement of guarantee or contract of surety are not unlawful. The rights available to the surety under Chapter VIII of the Act, as already pointed out, can be waived by the surety. Therefore, such waiving of right by the surety is neither intended to defeat nor does it defeat any provisions of law. Therefore, it is also not possible to hold that the consideration and the object of the agreement of guarantee have the effect of defeating any provisions of law, A recital in the surety-bond in question that surety will not be entitled to any of the rights conferred by Sections 133, 134, 135, 139 and 141 of the Act cannot be held to defeat the provisions of Chapter VIII of the Act. The rights conferred on the surety under Chapter VIII are not inalienable rights nor those rights have anything to do with the public policy as such. Those rights relate to the contracts entered into by individuals. It is not the case of defendant-3 that the aforesaid recital in the surety bond has been obtained either fradulently or it involves or implies injury to the person or property of another. It is also not possible to view such a recital as immoral or opposed to public policy. Public policy is not to defeat the debt of the creditor, it is to ensure that the money of the creditor is secured and is recoverable in accordance with law; and the debtor or the surety is not absolved from his liability to discharge the debt except in accordance with law, Therefore, we are of the view that it is not possible to agree with the view as extracted above, expressed in Pearl Hosiery Mills’ case by the High Court of Punjab. We agree with the aforesaid view expressed in Citibank’s case by the High Court of Delhi and also approve the view expressed by Kulkami, J., in R. Lilavati’s case.”

20. Thus from the aforesaid Decision it is clear that the provisions contained in Sections 23, 128, 133, 134, 135, 139 and 141 of the Contract Act have been considered and it has been held that the agreement of surety is also like any other agreement, it is open to the person to give up his right under a contract or under any law. Similarly, the surety also can give up his right and the act of giving up of the right arising under the provisions of the Contract Act by a surety, does not amount to an act contrary to Section 23 of the Contract Act and as such it would not be opposed to public policy. While deciding the aforesaid question in Raju Setty’s case, reliance has also been placed on the Decisions in (1) Union of India, Ministry of Food and Agriculture (Department of Food) New Delhi v. Pearl Hosiery Mills and Ors., (2) Citibank N.A. New Delhi v. Juggilal Kamalapat Jute Mills Co. Ltd., Kanpur; (3) Hodges and Anr. v. Delhi & London Bank Ltd. Law Reports 27 Indian Appeals 168; (4) A.R. Krishnaswami Ayyer and Anr. v. Travancore National Bank Ltd AIR 1940 Madras 437; and (5) Smt. R. Lilavati v. Bank of Baroda and Ors. .

21. However the contention of Sri Ullal, learned Counsel appearing for the third defendant is that the Decisions in K.R. CHITGUPPl & CO. v. VINAYAK KASHINATH KHADILKAR ILR 1921 (45) Bombay 157 and STATE BANK OF INDIA v. MACHINE WELL INDUSTRIES AND ORS., 1983 (53) Company Cases 830 have not been considered, therefore the Decision requires to be considered.

22. It may be pointed out that K.R. Chitaguppi & Company’s case is a Decision of a Division Bench of Bombay High Court consisting of Justice Shah and Justice Hayward, Shah, J., in his Judgment, as a matter of fact, found thus:

“…..But it seems to me that in present case there is neither a general nor a specific consent to the variation in the terms of the sub-agency. I am therefore of opinion that the lower appellate Court was right in holding that in virtue of the provisions of Section 133 the defendant No.2 was absolved from liability.

Whereas, Hayward, J., while concurring with the conclusion of Shah, J., held thus:

“A contract of continuing guarantee was in my opinion clearly constituted by the letter between the parties. A commission of 7 1/2 per cent and a payment of office expenses was one of the conditions of the contract with the principal and a commission of 22 per cent. Without payment of office expenses was the condition subsequently introduced. The Courts do not consider how far modification is material, but leave it for the surety to judge the importance of any variation. If his consent is not obtained to such modification as this, which is obviously a variation, he is discharged from his surety-ship by Section 133 of the Indian Contract Act. But it has been argued that there is a saving provision to the effect that nothing herein contained shall affect any incident of any contract not inconsistent with the provisions of this Act in Section 1 of the Indian Contract Act and that it has been provided in the letter that any rights of a surety inconsistent therewith should be waived and that full liberty has been given by the letter to introduce variations notwithstanding Section 133 of the Indian Contract Act. It seems to me impossible to hold that these provisions of the letter were not in express terms inconsistent with the provisions of the Contract Act. Wherever it has been intended that independent provisions should be permitted, it has always been expressly provided for such provisions by the introduction of the phrase “in the absence of any contract to the contrary” which occur in Section 146 and a number of other Sections of the Indian Contract Act.

I concur, therefore, that this appeal ought to be dismissed with costs.”

Therefore, it is not possible to hold that Hayward, J., was of the view that it was not at all permissible to contract giving up the rights accruing under provisions contained in the Contract Act Further, the finding recorded by Shah, J. was to the effect that neither a general clause of specific consent to the variation in the terms of the sub-agency was obtained nor the letter could be considered as a consent to the variation. Thus, we are of the view that the said Decision turned upon the finding of fact recorded by Shah, J as such, it cannot be read as laying down the law that it is not at all open to the surety to give up his right arising out of Sections 133, 142, 143 and 144 of the Contract Act, by providing such a clause in the surety bond itself. Even if it is construed that Hayward, J., has held that it is not permissible to give up the rights of surety, as conferred by Sections 133, 135, 142, 143 and 144, we find it difficult to agree with the same because it is open to a party to give up his right as long as such agreement is not opposed to public policy and is not contrary to Section 23 of the Contract Act, and that such giving up of the right by a surety is not opposed to public policy and not opposed to Section 23 of the Contract Act, as held in Raju Setty’s case.

23. No doubt, the Decision in State Bank of India v. Machine Well Industries and Ors. was rendered earlier to the Decision in Citibank N.A. New Delhi v. Juggilal Kamalapat Jute Mills Co. LTd.’s case. But, that would not in any way make us to hold that the Decision in Citi Bank N.A. New Delhi’s case is not acceptable.

24. In State Bank of India v. Machine Well Industries’s case it was held that the rights conferred under Sections 133 or 135 of the Indian Contract Act, on a surety could be given up. However, it was further held that those rights cannot be given up in advance to vary the terms of contract between the creditor and the principal debtor. It was also further held that the surety’s consent occurring in Section 133 clearly indicated that the consent should be given along with or at the time of variance and similarly the words “unless surety assents to such contracts” occurring in Section 135 also indicated that the consent should exist at the time of the acts mentioned in the said provision. The word ‘assent’ suggested present tense which was indicative of the fact that the assent should be simultaneous with the composition etc.

25. Thus, the Decision in State Bank of India v. Machine Well Industries’ case, does not lay down that a surety cannot give up his right conferred by Sections 133, 135 and Sections 131 and 134, but what it says is that whenever variance has been made in the contract entered into between the principal debtor and the creditor to which a surety is party, the surety’s consent at the time of variance must be obtained and not earlier. In other words, the Decision amounts to laying down that at the time of entering into a contract, as surety, he cannot give up his right under Sections 133, 134, 139 and 149 of the Contract Act, and we find it very difficult to agree with this Decision. When it is open to the surety to give up his right, it is not possible to appreciate as to why it is not permissible for him to give up his rights under Sections 133, 134, 135, 139 and 141 while entering into an agreement of surety. There is no such obstacle or prohibition whatsoever in the Contract Act, or under any other, law or any principles having the force of law. Therefore, we are of the view that the Decision in Raju Setty’s case does not require to be re-considered.

26. In view of the fact that under Ext. P.-11, the 3rd defendant has given up his rights under Sections 133, 134, 135, 139 and 141 of the Contract Act, it is not possible to agree with the contention of the 3rd defendant that the plaintiff-Bank had not chosen to bring the hypothecated goods for sale and had given concession to the Principal debtor, therefore, the surety has stood discharged.

27. It is contended by Sri Ullal, learned Counsel appearing for the 3rd defendant, that Section 133 refers to the terms of the contract between the principal debtor and the creditor and similarly, Section 135 refers to contract between the creditor and the principal debtor, therefore, the provisions contained in Section 128 which deal with the liability of the surety cannot be read into them and as such, without the consent of the surety at the time of variance of the contract between the creditor and the principal debtor, the right of the surety cannot be said to have been given up merely by reason of the fact that in the surety bond it has been stated that the surety gives up those rights because such giving up of the right will not be at the time when the variance in the contract between the creditor and the principal debtor takes place. It is not possible to accept this contention. In Raju Setty’s case, it has been held that Section 128 of the Contract Act, should be read as a key to the interpretation to the other provisions contained in Chapter VIII of the Contract Act, relating to the liability of the surety. In addition to this, it may also be relevant to notice that the surety bond is executed by not only the surety but also the principal debtor in favour of the creditor. In the surety bond, the surety has specifically stated that the guarantor agrees that between the borrower and the guarantor the guarantor is the surety only. It is also further agreed to by the guarantor that as between the Bank and the guarantor, the guarantor is the principal debtor jointly with the borrower. Therefore, there is no scope whatsoever for accepting the contention advanced by Sri Ullal, learned Counsel appearing for the 3rd defendant that the surety agreement should be treated or construed as independent of the terms of the contract between the principal debtor and the creditor.

28. For the reasons stated above, Point No. 5 is answered in the affirmative.

29. POINT NO. (6) : In the light of the findings recorded on Point Nos. (1) to (5), the trial Court is not justified in law and on facts, in dismissing the suit as against Defendant No. 3. Point No. (6) is answered accordingly.

30. For the reasons stated above, this Appeal is entitled to succeed. It is accordingly allowed. The Judgment and decree passed by the trial Court are modified and there shall now be a decree for the claim arising under ML A./c No. 1/80 and as decreed by the trial Court as against defendant No. 3 also. Thus, the plaintiff-Bank shall have a decree in respect of the suit claim relating to ML A/c No. 1 of 1980 against defendant Nos. 1 and 3 jointly and severally with costs throughout.