Liability of surety is co extensive with the principal borrower - surety is bound to pay entire amount

AIR 1986 SUPREME COURT 868

SUPREME COURT

(From : Allahabad)

E. S. VENKATARAMIAH , J. and M. P. THAKKAR , J.

Civil Appeals Nos. 569-70 of 1986, D/- 14 - 2 - 1986

State Bank of India Appellant v. M/s. Saksaria Sugar Mills Ltd. and others Respondents.

Sugar Undertakings (Taking Over of Management) Act (49 of 1978), S.7 - Notification under

- Secured liabilities due to Bank excluded by notification while suspending all liabilities under

contract to which notified undertaking was party - Suit against notified sugar undertaking

and guarantors filed by bank for.recovery of amount due - Suit would remain unaffected by

notification.

Judgment of Allahabad High Reversed.

Contract Act (9 of 1872), S.128 -

Where the notification issued by Central Government under S. 7(1)(b) read with sub- s.(2) although

declared that the operation of all obligations and liabilities arising out of all contracts etc. to which

the notified sugar undertaking was party would remain suspended for certain period but it excluded

all secured liabilities due to a Bank or financial institution from its operation, a suit filed by a Bank

against a notified sugar mill and its guarantors for recovery of amount due from the mill would

remain unaffected by the notification. Moreover, even when a notification is issued under S. 7(1)

(b) suspending the operation of any agreement or assurances of property to which a notified sugar

undertaking or the person owning was a party, any proceeding against the guarantor would remain

unaffected by the issuance of such a notification. Judgment of allahabad High Court, Reversed.

AIR 1969 SC 297, Ref. to.

 (Paras 7 , 8) 

Cases Referred