Surety withdrawal and civil court jurisdiction: valid notice ended later liability, and statutory bar did not apply

A surety who served notice in accordance with the bond terms and proved service through unrebutted evidence was held to have validly withdrawn after the notice period, so liability could not extend to sales tax dues arising later. The court also held that a civil suit was not barred by section 62 of the Haryana General Sales Tax Act, 1973 where the plaintiff was neither dealer nor assessee and the impugned action was beyond statutory authority. On that basis, civil court jurisdiction remained available and the decrees in favour of the plaintiff were sustained.

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Issues: (i) Whether the plaintiff had effectively withdrawn from the surety bond by serving notice and ceased to be liable for sales tax dues arising thereafter; (ii) Whether the civil suit was barred by section 62 of the Haryana General Sales Tax Act, 1973.

Issue (i): Whether the plaintiff had effectively withdrawn from the surety bond by serving notice and ceased to be liable for sales tax dues arising thereafter.

Analysis: The evidence of service of the withdrawal notice dated 26 December 1991 was found to be unrebutted. The officer who was the material witness on the defendants' side was not examined, the testimony of the witness examined by them had little probative value, and the relevant receipt register was withheld, warranting an adverse inference. The concurrent finding that the notice had been served was supported by the record. Under the terms of the surety bond, the plaintiff was entitled to withdraw on six months' notice, and after expiry of that period it no longer remained surety for liabilities arising later.

Conclusion: The plaintiff validly ceased to be surety after expiry of the notice period and was not liable for the disputed liability arising thereafter.

Issue (ii): Whether the civil suit was barred by section 62 of the Haryana General Sales Tax Act, 1973.

Analysis: The plaintiff was neither the dealer nor the assessee, nor did it fall within the category amenable to the departmental machinery under the Act. The challenge was to an action that was held to be illegal and beyond statutory authority. In that situation, the bar of civil court jurisdiction under section 62 did not apply.

Conclusion: The civil suit was not barred under section 62 of the Haryana General Sales Tax Act, 1973.

Final Conclusion: The second appeal failed because no substantial question of law arose, and the decrees in favour of the plaintiff were sustained.

Ratio Decidendi: Where a surety validly withdraws from a bond in accordance with its terms and the taxing authority acts beyond the statute against a person not amenable to the Act, civil court jurisdiction is not excluded and liability cannot be fastened for subsequent dues.

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