BANK OF BIHAR LTD. versus DAMODAR PRASAD & ANR.

Citation: [1969] 1 S.C.R. 620 · Decided: 08-08-1968 · Supreme Court of India · Bench: S.M. SIKRI · Disposal: Appeal(s) allowed
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Judgment (excerpt)

6~0 
BANK OF BIHAR LTD. 
v. 
DAMODAR PRASAD & A'.'IR. 
A U/?llS/ 8, 1968 
[S, M. S!KRI, R. S. BACHAWAT AND K. S. HEGDE, JJ.J 
Code of Civil Procedure, (5 of 1908) 0. XX r. 11(1)-Dlrection to 
creditor to en/ore<' derre<· against surl•ry after exhausting rt'mcdies against 
principal-If ;11sri(i..?d. 
The appcllant-crcdito'.' lent moncv' In the fir-,1 
ri.:~rondcnt 
on 
the 
guarantee of the second respondent.· l'hc appellant filed a suit agaimt 
the respondents for recovery of the amount due. and the suit v.•as decreed. 
While passing the decree, the Trial Cou·rt directed that the appellant would 
not he at liberty to enforce the decree ar,;!inst the second respondent until 
he had cxh:1ustcd his remedies againc;1 the fir~t respondent. The appellant 
challcngr.;d this direction. "I'hc H!gh c·ourt ,fi~mi .. scd !he ;1ppeal. Jn appeal 
on certificate, this Court:-
HELD :-The direction must be set aside. 
ln the absence of some special equity the surety ha~ no right to fC,i;.-
train execution against him until the creditor has exhausted his remedies 
againsl the principal. 
f'or making an order under O.XX 
r. 
11 ( 1) 
of 
C.P.<~. the court must give specific reasons. 
The direction po5tponing 
payment of the arnount decreed n1llo;t be clear and -specific. 
The injunc-
tion upon the t."'rcdilor not to proceed against the surety until the creditor 
has c..'\hauslcd hi.-; remedies against the principal was 
of the 
vagut.8t 
char;1ctcr. 
lt ,,,.-as not stated how and when the creditor would exhaust 
his rcmcdie5 <1~ain'.'it the principal. [622 A, F-GJ 
It is the duty of the surety to pay the dccrctal amount. On such pay-
n1cn1 he will be suhrogatc<l to the rir:ht<> of the creditor under s. 140 of 
the Indi;in C.-0n1r;1ct Act. and he may then 'recover the amount from the 
principal. 
The very object of the guarantee is defeated if the creditor 
jc; askc<l to postpone his remedies against the su~ty. In the present ca~e 
the creditor is hanking cornp~1ny. A guarantee is 
a 
collateral 
security 
usually taken hy a hanker. 
The security \\'ill become useleit-; if his rig.ht" 
again<>t the surety can be so easily cut do"·n. 'rhe impugned direction 
cannot h:! justified under O.XX r. 
11 ( 1). Assum in~ that 
apart 
fron1 
O.XX r. 11 ( 1) the Court had the inherent p<l\\·er under "· 151 to direct 
postponement of the execution of the decree. the ends of justice did not 
require o;;uch po .. tponcment. (62~ A-CJ 
l.achhnMn .lnhr.rhnal v. Rapu Khnnrfrt and Surrty Tuknran1 Khandoii. 
(1869) 4 Bon1 Jligh Court Reportc;, ~41. 
CIVIL APPELLATE JURISDlCTIO!'< : Civil Appeal No. I 109 of 
1965. 
Appeal from the judgment and decree dated December 
'.l, 
1962 of the Patna Hi!!h Court in ApPCal from 
Original Decree 
No. 300 of 1959. 
-
S. Mitra and R. C. Prasad, for the appellant. 
" 
B 
c 
D 
E 
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A 
II 
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D 
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BANK OF BIHAR v. DAMODAR (Bachawat, J.) 
621 
K. K. Sinha, for respondent No. 2. 
The Judgment of the Court was delivered by 
Bachawat, J. 
The plaintiff Bank lent moneys to defendant 
No. 1 Damodar Prasad on the guarantee of defendant No. 2 Paras 
Nath Sinha. On the date of the suit Damodar Prasad was indebt-
ed to the plaintiff for Rs. 11,723.56 nP on account of principal. 
and Rs. 2, 7 69. 3 7 nP on account of interest. 
In spite of demands 
neither he nor the guarantor paid the dues. 
The plaintiff filed a 
suit against them in the Court of the Subordinate Judge, 1st Court, 
Patna claiming a decree for the amount clue. 
The Trial Court 
decr~d the suit against both the defendants. 
While passing the 
decree, the Trial Court directed that the "plaintiff bank shall be at 
liberty to enforce its dues in question against defendant No. 2 only 
after having exhausted its remedies against defendant No. 1". The 
plaintiff filed an appeal challenging the legality and propriety of 
this ctirection. The High Court dismissed the appeal. The plain-
tiff has filed the present appeal after obtaining a certificate. 
The guarantee bond in favour of the plaintiff bank is dated 
June 15, 1951. The surety agrood to pay and satisfy the liabili-
ties of the principal debtor upo Rs. 12,000/- and interest thereon 
two days af(er demand. 
The bond provided that the plaintiff 
would be at liberty to enforce and to recover upo,n the guarantee· 
notwitb:standing any other guarantee security or remedy which the 
Bank might hold or be entitled to in respect of the amount 
secured. 
The demand for payment of the liability of the principal
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