Municipal remission and surety discharge failed where statutory contract formalities were not complied with and no valid variation existed.

A municipal remission of contractual obligations was held ineffective because the special general meeting was not convened in the manner required by municipal law and the statutory formalities for a binding municipal agreement were not met. The Court treated remission under the Contract Act as dependent on a valid agreement and held that the absence of the prescribed municipal form defeated the claimed dispensation. On the surety issue, there was no valid variation of contract or binding fresh contract between creditor and principal debtor, so the surety was not discharged under sections 133 or 135. The decree in favour of the municipality was upheld.

---

---

Issues: (i) Whether the municipal resolution purportedly remitting part of the defendant's obligations was valid and effective in law; (ii) Whether a dispensation or remission under the Contract Act required compliance with the municipal formalities for contracts; (iii) Whether the surety was discharged on the ground of variation of contract or a fresh contract between creditor and principal debtor.

Issue (i): Whether the municipal resolution purportedly remitting part of the defendant's obligations was valid and effective in law.

Analysis: The meeting at which the resolution was passed was held not to have been called by the President within the meaning of the municipal law, and the statutory mode for convening a special general meeting was not duly complied with. Even on the assumption that the resolution was communicated, the Court treated the remission as ineffective because the municipal action did not satisfy the mandatory requirements governing binding municipal agreements.

Conclusion: The alleged remission had no legal effect.

Issue (ii): Whether a dispensation or remission under the Contract Act required compliance with the municipal formalities for contracts.

Analysis: A dispensation or remission under section 63 was treated as resting on an agreement or contract. The Court read the term "agreement" in the Contract Act broadly, but held that a municipal contract or agreement not within the statutory form prescribed by the municipal law could not validly support the claimed remission. At the same time, the Court held that where there was executed consideration, a suit could still lie notwithstanding the absence of a sealed contract, and section 23 of the Contract Act did not compel a different result on the facts.

Conclusion: Compliance with the municipal formalities was required for the remission, and the absence of such compliance rendered it ineffective.

Issue (iii): Whether the surety was discharged on the ground of variation of contract or a fresh contract between creditor and principal debtor.

Analysis: The Court found that there was neither a valid variation of contract nor any binding contract between the creditor and the principal debtor capable of discharging the surety. Since the purported municipal arrangement was ineffective, the surety could not rely on sections 133 or 135 of the Contract Act.

Conclusion: The surety was not discharged.

Final Conclusion: The decree in favour of the municipality was upheld, and the defendants' challenge failed in full.

Ratio Decidendi: A municipal remission of contractual obligations is ineffective unless made in accordance with the statutory formalities governing municipal contracts, and a surety is not discharged where the alleged variation or discharge rests on an invalid and non-binding municipal act.

---