INDUSTRIAL FINANCE CORPORATION OF INDIA LIMITED Vs. CONNANORE SPINNING AND WEAVING MILLS LIMITED
LAWS(SC)-2002-4-33
SUPREME COURT OF INDIA (FROM: MADRAS)
Decided on
April 12,2002
INDUSTRIAL FINANCE CORPORATION OF INDIA LTD.
Appellant
VERSUS
CANNANORE SPINNING AND WEAVING MILLS LTD
Respondents
Referred Judgements :-
F.A. TAMPLIN STEAMSHIP CO. LTD. V. ANGLO-MAXICAN PETROLEUM PRODUCTS CO. LTD. [REFERRED]STATE OF MADHYA PRADESH VS. KALURAM [REFERRED]
NAIHATI JUTE MILLS LIMITED VS. KHYALIRAM JAGANNATH [REFERRED]
STATE BANK OF SAURASHTRA VS. GHITRANJAN RANGNATH RAJA [REFERRED]
MAHARASHTRA STATE ELECTRICITY BOARD BOMBAY VS. OFFICIAL LIQUIDATOR HIGH COURT ERNAKULAM [REFERRED]
PATHEJA BROS FORGINGS AND STAMPING VS. I C I C I LIMITED [REFERRED]
PRADIP CHANDRA PATNAIK VS. PRAMOD CHANDRA PATNAIK [REFERRED]
A L S P PL SUBRAMANIA CHETTIAR DECD VS. MONIAM P NARAYANASWAMI GOUNDER [REFERRED]
ORIENTAL COAL CO LTD VS. MOHANLAL KISNLAL [REFERRED]
KRISHAN TALWAR VS. HINDUSTAN COMMERCIAL BANK LTD [REFERRED]
Cited Judgements :-
SYNDICATE BANK VS. NARAYANA IYER [LAWS(KER)-2003-11-151] [REFERRED TO]UFLEX LIMITED VS. STATE OF U P AND OTHERS [LAWS(ALL)-2016-8-152] [REFERRED]
MAHENDRABHAI KANTILAL DAVE VS. MANEKCHOWK CO OP BANK LTD [LAWS(GJH)-2007-7-37] [REFERED TO]
ALEKHA SAHOO VS. PURI URBAN CO OPERATIVE BANK LIMITED [LAWS(ORI)-2004-4-4] [REFERRED TO]
RAGHU RAMA KRISHNAM RAJU VS. STATE OF TELANGANA [LAWS(TLNG)-2021-12-148] [REFERRED TO]
SKS ISPAT & POWER LIMITED; HIRA ENERGY LTD VS. SOUTH EASTERN COALFIELDS LIMITED; COAL INDIA LTD [LAWS(CHH)-2015-1-19] [REFERRED TO]
ORIENTAL INSURANCE CO. LTD VS. K.C. SUBRAMANYAM [LAWS(KAR)-2012-7-422] [REFERRED TO]
UNION OF INDIA VS. SATYANARAYANA CONSTRUCTION CO [LAWS(APH)-2007-12-1] [REFERRED TO]
EXPORT IMPORT BANK OF INDIA VS. CHL LIMITED [LAWS(NCLT)-2018-1-1] [REFERRED TO]
CANBANK FINANCIAL SERVICES LTD. VS. SFL INDUSTRIES LTD. & ANR. [LAWS(DLH)-2016-11-140] [REFERRED TO]
M I ITTY VS. KERALA FINANCIAL CORPORATION [LAWS(KER)-2010-4-9] [FOLLOWED]
SYNDICATE BANK VS. NARAYANA IYER [LAWS(KER)-2002-11-75] [REFERRED TO]
INDORE DEVELOPMENT AUTHORITY VS. MANOHARLAL ETC. [LAWS(SC)-2020-3-83] [REFERRED TO]
SANDEEP KAUR VS. STATE OF H.P. [LAWS(HPH)-2023-7-63] [REFERRED TO]
SVPCL LTD. VS. BOMBAY STOCK EXCHANGE LTD. [LAWS(SB)-2008-5-5] [REFERRED TO]
GEA EGI CONTRACTING/ENGINEERING CO. LTD. VS. BHARAT HEAVY ELECTRICALS LIMITED [LAWS(DLH)-2016-9-104] [REFERRED TO]
JAFER AHMAD KHAN VS. STATE OF U P AND 5 OTHERS [LAWS(ALL)-2017-5-565] [REFERRED TO]
MURALI D KANURI VS. DEBT RECOVERY APPELLATE TRIBUNAL CHENNAI [LAWS(APH)-2010-1-12] [REFERRED TO]
NATIONAL TEXTILES CORPORATION GUJARAT VS. STAT BANK OF INDIA [LAWS(SC)-2006-8-90] [REFERRED TO]
BINOY BHATTACHARJEE, SEPAHIJALA VS. STATE OF TRIPURA [LAWS(TRIP)-2014-4-16] [REFERRED TO]
MAHARANA PARTAP CHARITABLE TRUST VS. STATE OF HARYANA [LAWS(P&H)-2014-12-48] [REFERRED TO]
KUNDANMAL DABRIWALA VS. HARYANA FINANCIAL CORPORATION [LAWS(P&H)-2011-12-48] [REFERRED TO]
LEKH RAJ NARINDER KUMAR VS. UNION BANK OF INDIA [LAWS(P&H)-2022-7-255] [REFERRED TO]
FAIZABAD AYODHYA DEVELOPMENT AUTHORITY VS. DR. RAJESH KUMAR PANDEY [LAWS(SC)-2022-5-99] [REFERRED TO]
BANK OF INDIA VS. MARTIN TOPPO [LAWS(JHAR)-2022-11-93] [REFERRED TO]
B K MODI VS. MORGAN SECURITIES & CREDITS PVT LTD [LAWS(DLH)-2012-5-508] [REFERRED TO]
INTER COLLEGE KUSMAUL GORAKHPUR VS. STATE OF U P [LAWS(ALL)-2006-1-150] [REFERRED TO]
M/S D.C.M. LTD. AND OTHERS VS. STATE OF U.P. AND OTHERS [LAWS(ALL)-2016-7-118] [REFERRED]
BRS VENTURES INVESTMENTS LTD VS. SREI INFRASTRUCTURE FINANCE LIMITED [LAWS(SC)-2024-7-85] [REFERRED TO]
STATE BANK OF INDORE VS. COMMISSIONER OF PAYMENTS [LAWS(SC)-2004-1-71] [REFERRED TO]
ARCH DIOCESE OF MADRAS-MYLAPORE SOCIETY VS. JAYAROSE AMMAL [LAWS(MAD)-2008-12-161] [REFERRED TO]
FOOD CORPORATION OF INDIA VS. VELJI P AND SONS (AGENCIES) [LAWS(GJH)-2020-8-543] [REFERRED TO]
GAGAN DEAL TRADE PRIVATE LIMITED REP BY NISHANT AGARWAL VS. UNION OF INDIA AND 5 ORS REP BY ITS CHAIRMAN AND MANAGING DIRECTOR [LAWS(GAU)-2019-5-12] [REFERRED TO]
PROF P R RAMANUJAM VS. VICE CHANCELLOR (IGNOU) [LAWS(DLH)-2020-8-115] [REFERRED TO]
KUNSTOFFEN INDUSTRIE VOLENDAM KIVO VS. ASHOK K CHAUHAN [LAWS(DLH)-2009-5-24] [REFERRED TO]
STATE OF GUJARAT VS. S A HIMNANI DISTRIBUTORS PVT LTD [LAWS(GJH)-2013-12-451] [REFERRED TO]
MULTIPLEX ASSOCIATION OF GUJARAT VS. STATE OF GUJARAT [LAWS(GJH)-2009-6-62] [REFERRED]
ANIL KAUR VS. HARYANA FINANCIAL CORPORATION [LAWS(P&H)-2011-4-3] [REFERRED TO]
LALIT KUMAR JAIN VS. UNION OF INDIA [LAWS(SC)-2021-5-25] [REFERRED TO]
H B BASAVARAJ VS. CANARA BANK [LAWS(SC)-2009-10-71] [DISTINGUISHED]
Oriental Insurance Co., Ltd., Through its Regional Office, Leo Shopping Complex, No. 44/45 Residency Road, Bangalore - 560 025, Rep. By its Manager Sri K. Varadarajan VS. Sri K.C. Subramanyam, S/o Lt. Chakrapathi [LAWS(KAR)-2012-7-456] [REFERRED TO]
GAS AUTHORITY OF INDIA LIMITED NEW DELHI VS. OFFICIAL LIQUIDATOR MUMBAI [LAWS(BOM)-2004-1-38] [REFERRED TO]
STATE BANK OF PATIALA VS. GANESH TRADING CO [LAWS(P&H)-2014-2-350] [REFERRED TO]
RAHUL KUMAR VS. EAST DELHI MUNICIPAL CORPORATION [LAWS(DLH)-2021-7-59] [REFERRED TO]
JUDGEMENT
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(1.)The general rule of equity expounded by Sir Samuel Romilly as counsel and accepted by the Court of Chancery in Craythorne v. Swinburne (1807) 14 Ves 160, that the surety will be entitled to every remedy which the creditor has against the principal debtor, including the enforcement of every security stands statutorily recognised and incorporated in Section 141 of the Indian Contract Act as regards the discharge of a surety from liability, when the creditor parts with or loses the security held by him with, however, an insignificant variation to the effect that the surety is entitled to the securities given to the creditor, both before and after the contract of surety.
(2.)It is on this score thus Section 141 of the Act ought to be noticed at some length more so by reason of the same being the sheet-anchor in support of Respondents' presentation before this Court in the instant appeal to the effect that the surety is entitled to the securities given to the creditor, both before and after the contract of surety and in the event the same stands dissipated then and in that event there is cessation of liability to the extent of such dissipation or extinction. An indeed bold proposition but the same stands accepted by the High Court and hence the appeal before this Court. Before, however, adverting to the issue as above, it would be rather convenient to note certain decisions of this Court as well as of the English Court for further appreciation of the matter.
(3.)In State of Madhya Pradesh v. Kaluram [1967(1) SCR 266 : AIR 1967 SC 1105] this Court pointedly stated that the expression "security" in the Section is not used in any technical sense; it includes all rights which the creditor has against the property on the date of contract. In Kaluram (supra) this Court also lent its approval of Hannen, J., Wulff and Billing v. Jay, (1872 (7) QB 756), wherein the learned Judge stated the law as follows:-
".... I take it to be established that the defendant became surety upon the faith of there being some real and substantial security pledged, as well as his own credit, to the plaintiff; and he was entitled, therefore, to the benefit of that real and substantial security in the event of his being called on to fulfil his duty as a surety, and to pay the debt for which he had so become surety. He will, however, be discharged from his liability as surety if the creditors have put it out of their power to hand over to the surety the means of recouping himself by the security given by the principal. That doctrine is very clearly expressed in the notes in Rees vs. Barrington, 2 White and T.L.C., (4th Ed). at p. 1002 - 'As a surety, on payment of the debt, is entitled to all the securities of the creditor, whether he is aware of their existence or not, even though they were given after the contract of suretyship, if the creditor, who has had, or ought to have had, them in all full possession or power, loses them or permits them to get into the possession of the debtor, or does not make them effectual by giving proper notice, the surety to the extent of such security will be discharged. A surety, moreover, will be released if the creditor, by reason of what he has done, cannot, on payment by the surety, give him the securities in exactly the same condition as they formerly stood in his hands" - and it is on this score this Court, relying on the aforesaid, in Kaluram (supra) observed that "The surety is entitled on payment of the debt or performance of all that he is liable for to the benefit of the rights of the creditor against the principal debtor which arise out of the transaction which gives rise to the right or liability. The surety is therefore 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. If the creditor has lost or parted with the security without the consent of the surety, the latter is by the express provision contained in S. 141, discharged to the extent of the value of the security lost or parted with".
(Emphasis Supplied)
(2.)It is on this score thus Section 141 of the Act ought to be noticed at some length more so by reason of the same being the sheet-anchor in support of Respondents' presentation before this Court in the instant appeal to the effect that the surety is entitled to the securities given to the creditor, both before and after the contract of surety and in the event the same stands dissipated then and in that event there is cessation of liability to the extent of such dissipation or extinction. An indeed bold proposition but the same stands accepted by the High Court and hence the appeal before this Court. Before, however, adverting to the issue as above, it would be rather convenient to note certain decisions of this Court as well as of the English Court for further appreciation of the matter.
(3.)In State of Madhya Pradesh v. Kaluram [1967(1) SCR 266 : AIR 1967 SC 1105] this Court pointedly stated that the expression "security" in the Section is not used in any technical sense; it includes all rights which the creditor has against the property on the date of contract. In Kaluram (supra) this Court also lent its approval of Hannen, J., Wulff and Billing v. Jay, (1872 (7) QB 756), wherein the learned Judge stated the law as follows:-
".... I take it to be established that the defendant became surety upon the faith of there being some real and substantial security pledged, as well as his own credit, to the plaintiff; and he was entitled, therefore, to the benefit of that real and substantial security in the event of his being called on to fulfil his duty as a surety, and to pay the debt for which he had so become surety. He will, however, be discharged from his liability as surety if the creditors have put it out of their power to hand over to the surety the means of recouping himself by the security given by the principal. That doctrine is very clearly expressed in the notes in Rees vs. Barrington, 2 White and T.L.C., (4th Ed). at p. 1002 - 'As a surety, on payment of the debt, is entitled to all the securities of the creditor, whether he is aware of their existence or not, even though they were given after the contract of suretyship, if the creditor, who has had, or ought to have had, them in all full possession or power, loses them or permits them to get into the possession of the debtor, or does not make them effectual by giving proper notice, the surety to the extent of such security will be discharged. A surety, moreover, will be released if the creditor, by reason of what he has done, cannot, on payment by the surety, give him the securities in exactly the same condition as they formerly stood in his hands" - and it is on this score this Court, relying on the aforesaid, in Kaluram (supra) observed that "The surety is entitled on payment of the debt or performance of all that he is liable for to the benefit of the rights of the creditor against the principal debtor which arise out of the transaction which gives rise to the right or liability. The surety is therefore 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. If the creditor has lost or parted with the security without the consent of the surety, the latter is by the express provision contained in S. 141, discharged to the extent of the value of the security lost or parted with".
(Emphasis Supplied)
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