In WRIT PETITION NO. 20590 OF 2021(GM-CPC)-KAR HC- Liability of surety is coextensive with that of principal debtor, clarifies Karnataka High Court Justice Sachin Shankar Magadum [14-07-2022]

Read Order: MR. ABBUBAKAR v. M/S SINCHANA CHITS PVT LTD 

Tulip Kanth

Bengaluru, July 19, 2022: While emphasizing that the decree holder has every right to proceed against the judgment debtor when the award attains finality, the Karnataka High Court has placed reliance on Section 128 of the Indian Contract Act, 1872,  and opined that the liability of surety is coextensive with that of the principal debtor.

The Bench of Justice Sachin Shankar Magadum referred to the judgment of the Top Court in Ram Kishun and others .vs. State of U.P. and others AIR 2021 SC 2288 , wherein it was held that it is the prerogative of the creditor alone, whether he could move against the principal debtor first or the surety to realise the loan amount. The Apex Court, in the referred case, was also of the view that the surety had no right to restrain the execution of the decree against him until the creditor had exhausted his remedy against the principal debtor.

The writ petition in question was filed by the judgment debtor questioning the order dated passed by the Executing Court in issuing salary attachment warrant of petitioner herein. It was the case of the petitioner that the second respondent who is the principal borrower owns property worth Rs10 crore and apart from that, the movables owned by the third respondent is worth Rs 10 lakh. Therefore, it was contended that the Garnishee warrant attaching the petitioner’s salary was liable to be set aside by this Court. 

It was also argued that the attachment of the salary of the petitioner was excessive and therefore, the executing Court had exceeded its jurisdiction. The grievance of the petitioner was that more than 1/3rd of the petitioner’s salary was sought to be attached and therefore, the attachment was in violation of Article 14 of the Constitution. 

The  writ petition was filed on the basis of an award passed by the Deputy Registrar and the said award was not at all questioned by the judgment debtors. A recovery certificate was also issued by the authority. Noting these aspects, the Bench asserted, “If the award has attained finality, the decree holder has every right to proceed against the judgment debtor. On a bare reading of the provisions of Contract Act, more particularly Section 128 of Indian Contract Act, 1872, it is quite clear that the liability of surety is coextensive with that of the principal debtor.” 

Referring to the Judgments of the Top Court in  Lalit Kumar Jain vs. Union of India and others  and Ram Kishun’s Case (Supra) and observing that Section 128 of the Indian Contract Act, 1872, would squarely apply to the case on hand, the Bench came to the conclusion that if the surety does not have the right to dictate terms to the creditor as to how he should make recovery, the present petitioner who is the guarantor cannot escape his liability for the debt taken by the principal debtor. 

Thus, considering the aforementioned aspects, the Bench dismissed the petition.