Security bond liability can extend to prior defaults where the bond language is clear and unconditional.

A security bond executed in Form No. 6 under Rule 19 of the Kerala Value Added Tax Rules, 2005 was held to cover a dealer's liability that had already accrued before execution, because the bond language was clear and neither the Rule nor the form limited its reach to future defaults. Liability remained recoverable even though the default pre-dated the bond, and cancellation of registration did not change the bond's effect. The sureties could not resist recovery on the ground that the obligation arose earlier, and recovery from them was upheld.

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Issues: Whether a security bond executed in Form No. 6 under Rule 19 of the Kerala Value Added Tax Rules, 2005 covered liability arising from the dealer's defaults that had occurred before the date of execution of the bond.

Analysis: The bond was executed to secure the dealer's liability under the Kerala Value Added Tax Act, 2003 up to the stated amount, and its language was treated as clear and unambiguous. Rule 19 permits security or additional security to be furnished by way of a bond in Form No. 6, and neither the Rule nor the form limited the bond to defaults occurring only after its execution. The liability sought to be recovered had already accrued, but it remained due even after the bond was executed, so the sureties could not avoid recovery merely because the default pre-dated the bond. The cancellation of registration did not alter the effect of the bond.

Conclusion: The security bond covered the prior liability, and the recovery from the petitioners was upheld.

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