AMRIT LAL GOVERDHAN LALAN versus STATE BANK OF TRAVANCORE & ORS.

Citation: [1968] 3 S.C.R. 724 · Decided: 11-04-1968 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

724 
AMRIT LAL GOVERDHAN LALAN 
v. 
STATE BANK OF TRAVANCORE & ORS. 
April 11, 1968 
[J. C, SHAH AND V. RAMASWAM!, JJ.J 
Indian Contract Act (9 of 1872), ss. 133, 135 and 141-Variance in 
-tern"iS of contract-When to be infe"ed-'Promise to give time to prin• 
cipal debtor', in s. 135-What amounts t<>-Scope of s. 141. 
In February 1956, respondents 3 to 6, as partners of respondent 2 firm, 
.entered into an agreement with a Bank (Predecessor-in.tnterest of the first 
Mipondent-bank), undertaking to open in the Bank a cash credit account 
to the extent of Rs. I 00,000 to be secured by goods to be pledged with the 
llMlk. Clause 9 of the agreement provided that the borrowers shall be res-
ponsible for ~ 
quantity and quality of goods pledged. The appellant 
executed a letter of guarantee in favour of the Bank guaranteeing the liabi· 
lily of the borrowers in respect of the account upto a limit Rs. I 00,000. 
Under cl. 5 of the letter of guarantee, the appellant agreed that the Bank 
may enforce and recover upon the guarantee the full amount guaranteed 
notwithstanding any other security the Bank may hold. The weekly state-
ment dated 15th March 1957 showed that the stock pledged was valued 
at about Rs. 99,991 but when the quantity of the goods actually in stock 
was verified with the weekly statement dated 18th April 1957, shortage of 
goods to the value of Rs. 35,690 was found. It was admitted on behalf of 
the Bank that. it was not known how the shortage occurred arid that res· 
pondenll! 2 tu 6 must have taken away the goods. Respondents 2 to 6 
were granted one month's time to make up the deficit, and in spite of the 
time being extended, the deficit was neyer made up. In May 1958, after 
adjusting the money realised. on the sale of the goods pledged and other 
adjustments, a sum of Rs. 40,933.58 was found due to the Bank from 
respondents 2 to 6. The Bank filed a suit against them and the appellant, 
and the suit was decreed. The decree was confirmed by the High Court. 
In appeal to this Court, it was contended that : (I) Certain entries in 
the account books .of the ·Bank showed that the maximum limit of credit 
was reduced to Rs. 50,000 and again raised to Rs. 100,000 without con-
sulting the appellant, that therefore there was a variation in the terms of 
the contract without the surety's (appellant's) consent and, under s. 133 
of the Indian Con"ract Act the liability of the appellant was discharged; 
(2) Under s. 135 of the Act, the conduct of the Bank in giving time to 
respondents 2 to 6 to make up the deficit in the quantity of goods absolved 
the appellant of all liability; and (3) under s. 141 of the Act, sin<» a por-
tion of the security was parted with or l<><t by the creditor without surety's 
consent, the liab'lity of the appellant was discharged to the extent of the 
value of the security so lost. 
HELD : (I) The entries in the books of account were mere internal 
instructions not legally binding on the respondents, and in view of the 
formal record in the original agreement and letter of guarantee. there could 
not have been a varia•ion in the terms without a proper written agreement. 
Therefore. the're wac; no variance in the terms of the contract between the 
creditor and· the mincioal debtor and the provisions of s. 133 of the Act 
were not attracted. [729 B-C. El 
A 
B 
c 
D 
E 
F 
G 
H 
A 
B 
c 
D 
E 
F 
G 
H 
AMRIT LAL v. STATE BANK (Ramaswami, J.)" 
725 
(2) What really ronstitutes a promise to give time within the meaning 
of s. 135 of the Act is the extension of the period at which, the principal 
debtor was uy the original contract obliged to pay the creditor, by substi-
tuting a new and valid contract between them, or, whenewr the taldng of 
a new secunty from the principal debtor operates as giving time. There'fore, 
the act of the Bank in giving time to the principal deb!or to make up the 
quantity of goods pledged is not tantamount to giving of time to the princi-
pal debtor for making payment of the money, within the meaning of the 
section. [730 E-F] 
Rouse v. Broad/ord Banking Co. (1894] 2 Ch. 32, referred to. 
(3) Under s. 140 of the Contract Act the surety is, on payment of the 
amount due by the principal debtor, entitled to be put in the same position 
in which the creditor stood in relation to the principal debtor. 
Under s. 
141 of the Act the surety has a right to the securities held by the creditor 
at the date when he became surety. 
The word 'security' is not used in 
any

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