First Appeal No. 30 of 1989,First Appeal No. 68 of 1989

3rd April, 1997

Petitioner Counsel: S. D. LOTLIKAR, A. R. KANTAK
Respondent Counsel: G. V. TAMBA

Cases Cited:
AIR 1980 SC 1528 [Para 4]

JUDGMENT

T. K. CHANDRASEKHARA DAS, J. :- These two appeals arise out of a judgment in Special Civil Suit No. 20/1983 on the file of the Civil Judge, Sr. Division, at Bicholim dated 30-11-88. The first respondent herein, Indian Overseas Bank has filed the suit against four defendants. The first defendant is the principal borrower, who had borrowed an amount of Rs. 96,000/- for the purchase of Mahindra Mini Bus on execution of hypothecation agreement on 2-5-1981. The said amount was to be repaid by 40 monthly instalments at the rate of Rs.2,000/- per month. The defendant Nos. 2, 3 and 4 stood guarantors for the repayment of the aforesaid loan. Defendant no. 4 has expired. Defendant No.1 defaulted the repayment. Presumably by virtue of the conditions of the hypothecation deed, the plaintiff Bank attached the vehicle and with the help of the police the said vehicle was detained from 26-2-1983 to 15-7-1983. Thereafter, the Branch Manager took the possession of the said vehicle from the police on 15-7-1983. Since the first defendant defaulted payment, the Mini Bus was put in auction pursuant to the order of the Court on 25-9-87 and in the auction, only Rs. 10,000/- was realised as value of the scrap. It is to be noted that from 15-7-1983 till it was auctioned, the mini bus was in the custody of the plaintiff. It has come out in evidence that during this period, it was exposed to rain and sun. It has also come out in the evidence that when the mini bus was attached by the police, at the instance of the plaintiff, it was road worthy. The plaintiff Bank has filed the suit against the defendant for the recovery of the balance amount due from the first defendant. The suit was decreed jointly and severally by the Court below.

2. Defendants No.2 and 3, namely the sureties took a plea before the Court below that they are entitled for a declaration that their liabilities stand discharged under sections 139 and 141 of the Indian Contract Act and in view of the said plea, the lower Court has framed the following issue :

"Issue No.2 :

Whether the defendants prove that they are entitled for depreciation of the mini bus to the tune of Rs. 1,10,000/- for the negligence or inaction of the plaintiffs?"

3. After the trial, the aforesaid issue was found against the appellants. Defendant No.2 filed First Appeal No. 30/89 and defendant No.3 filed First Appeal No. 68/89, challenging the decree of the Lower Court.

4. We have heard the Counsel for the appellants and the respondents. In the circumstances of the case, the findings of the Court below are to be held as erroneous. The Court below ought to have disposed of the aforesaid issue in favour of the defendants. Relying on the decision of the Supreme Court in A.I.R. 1980 S.C. 1528, which was brought to the notice of the lower Court, we find that an attempt was made by the Court below to distinguish the aforesaid decision relying upon the decision of the Orissa High Court and some other decisions of High Courts. It is relevant at this juncture to refer to sections 139 and 141 of the Indian Contract Act. It is proved in this case that the loan was advanced by the plaintiff to the first defendant for purchase of a mini bus and accordingly the defendants No.2, 3 and 4 had stood sureties knowing well the purpose for which the loan was advanced. But, without informing the sureties the plaintiff took the possession of the vehicle and allowed it to be deteriorated and ultimately, it had to be sold as scrap. The Supreme Court in A.I.R. 1980 S.C. 1528 (The State Bank of Saurashtra v. Chitranjan Rangnath Raja and another), has held that even if the surety of the personal guarantee is not aware of any other security offered by the principal debtor, yet once the right of the surety against the principal debtor is impaired by any action or inaction which implied negligence, appearing from lack of supervision undertaken in the contract, the surety would be discharged under the combined operation of section 139 and 141 of the Act. In any event, if the creditor loses or without the consent of the surety parts with the security, the surety is discharged to the extent of the security lost as provided by section 141. According to us, the present case is squarely covered by the observations made by the Supreme Court. There is absolutely no evidence to show that care and caution had been taken by the plaintiff when the mini bus was in the custody of the plaintiff for 4 ears. Admittedly, no action for maintaining the mini bus had been taken by the plaintiff for 4 years. No protection from sun and rain had been afforded to the mini bus against its retention. Therefore, we have no hesitation to hold that in maintaining the mini bus, the plaintiff was absolutely negligent and their negligence contributed to the deterioration of the mini bus. Therefore, any reduction in the value of the security is to be accounted for by he plaintiff and the defendants to that extent stand discharged.

5. In the result, the appeals are allowed. Judgment and the Decree of the Court below dated 30-11-1988 as against defendants No.2 and 3 is set aside. In the facts and circumstances of the case, we are of the considered opinion that this is a fit case for awarding costs and the appellants in both the appeals are entitled for the costs of Rs. 1,000/- from the respondents.

Appeals allowed.