Company dissolution in liquidation does not discharge sureties; pending suit against guarantors can continue.

A company in liquidation may be dissolved where its assets have been sold, the records are unavailable, and continuation of liquidation serves no useful purpose. The Court also clarified that dissolution of the principal debtor company does not extinguish the liability of guarantors or sureties. Applying the principle that a surety's liability is co-extensive with that of the principal debtor, and that discharge of the principal debtor by operation of law does not discharge the surety, the pending suit against the guarantors could continue in accordance with law, while the company was dissolved under section 481 of the Companies Act, 1956.

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Issues: Whether the company in liquidation should be dissolved under section 481 of the Companies Act, 1956, and whether the pending suit against the guarantors would remain unaffected by such dissolution.

Analysis: The company's assets had already been sold, the records were unavailable, and no useful purpose would be served by continuing the liquidation proceedings. The Court also considered the bank's objection that dissolution might affect its pending suit and held that the liability of the sureties was not extinguished by the company's dissolution. Relying on the settled principle that the surety's liability is co-extensive with that of the principal debtor, and that discharge of the principal debtor by operation of law does not discharge the surety, the Court held that the suit could continue against the guarantors.

Conclusion: The company was ordered to be dissolved under section 481 of the Companies Act, 1956, and the pending suit against the guarantors was held to continue in accordance with law.

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