Guarantee liability survives temporary statutory suspension of the principal debtor's remedy; sureties remain independently liable.

A statutory suspension of a relief undertaking's liabilities under the Tamil Nadu Relief Undertaking (Special Provisions) Act, 1969 does not extend to guarantors or sureties. Section 4(b) operates only in relation to the undertaking and instruments to which it is a party, while a guarantee remains a separate and independent contract. Section 128 of the Indian Contract Act, 1872 makes the surety's liability co-extensive with the principal debtor's liability, but that does not discharge the surety where the principal debtor's remedy is only temporarily suspended and the underlying debt is not extinguished. Proceedings against the guarantors therefore could continue, and the surety remained liable unless discharged under recognised Contract Act grounds.

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Issues: (i) Whether Section 4(b) of the Tamil Nadu Relief Undertaking (Special Provisions) Act, 1969 suspends proceedings against guarantors or sureties of a relief undertaking. (ii) Whether Section 128 of the Indian Contract Act, 1872 saves the surety from liability when the principal debtor's remedy is temporarily suspended under the relief undertaking notification.

Issue (i): Whether Section 4(b) of the Tamil Nadu Relief Undertaking (Special Provisions) Act, 1969 suspends proceedings against guarantors or sureties of a relief undertaking.

Analysis: Section 4(b) suspends contracts, rights, privileges, obligations and liabilities only in relation to the relief undertaking and instruments to which it is a party or which are applicable to it. A contract of guarantee is treated as a separate and independent contract between the creditor and the guarantor. The suspension of the undertaking's own contractual liabilities does not, by necessary implication, extinguish or suspend the guarantor's independent obligation. Section 7 of the Act also indicates that the effect is only a suspension and not an extinguishment of the underlying liability.

Conclusion: Section 4(b) does not bar proceedings against guarantors, and the suit could proceed against them.

Issue (ii): Whether Section 128 of the Indian Contract Act, 1872 saves the surety from liability when the principal debtor's remedy is temporarily suspended under the relief undertaking notification.

Analysis: Section 128 makes the surety's liability co-extensive with that of the principal debtor, but that expression relates to the extent of liability and not to a temporary statutory suspension of the principal debtor's remedy. The principal debt is not extinguished by the notification, and the guarantor's obligation arises from an independent contract. The surety therefore remains liable unless discharged under the recognised provisions of the Contract Act concerning variation, discharge, or impairment of surety rights.

Conclusion: The surety remained liable despite the temporary suspension affecting the principal debtor.

Final Conclusion: Proceedings against the relief undertaking were not maintainable during the subsistence of the notification, but the claims against the guarantors survived and could continue. The appeal by the guarantor failed, while the connected appeal succeeded only to the extent of allowing the suit to proceed against the sureties.

Ratio Decidendi: A statutory suspension of the liabilities of a relief undertaking does not, by itself, suspend or extinguish the independent contractual liability of a guarantor, and co-extensive liability under the Contract Act does not mean that the surety is discharged by a temporary suspension of the principal debtor's remedy.

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