Surety liability under a tax recovery bond remains capped by the agreed limit despite a change in partnership constitution.

A surety under a tax recovery bond was liable only up to the express contractual ceiling of Rs. 5,000. Continuation of the business under the same name and registration certificate after a change in partnership constitution did not enlarge the surety's undertaking or alter the registered dealer's identity for recovery purposes. Liability could continue for the period covered by the original partnership, but only within the bond limit, and recovery beyond that amount was invalid to that extent.

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Issues: Whether the petitioner, as surety under the bond executed for the dealer, could be made liable beyond the agreed ceiling of Rs. 5,000 for sales tax dues, including dues claimed after the original partnership was dissolved and a new partnership continued the business under the same registration certificate.

Analysis: The surety bond was treated as an independent undertaking limiting the petitioner's liability to Rs. 5,000. The business continued in the same name and under the same registration, and the mere change in partnership constitution did not alter the registered dealer's identity for the purposes of the recovery notice. The Court accepted that the surety's liability ceased for transactions arising after the formation of the new partnership, but held that this did not discharge liability for the earlier assessment year. For the period when the original partnership existed, the petitioner's liability as surety remained co-extensive with that of the principal debtor, but only up to the contractual limit.

Conclusion: The recovery could be enforced against the petitioner only up to Rs. 5,000 for the period covered by the original partnership, and the notice seeking recovery beyond that amount was invalid to that extent.

Ratio Decidendi: A surety's liability under a tax recovery bond cannot exceed the express contractual limit, and a change in the constitution of the dealer does not enlarge that liability beyond the period and amount undertaken in the bond.

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