Surety discharged when creditor grants time to principal debtor without consent, defeating enforcement of deposited security.

A letter accompanying deposit of title deeds was treated as evidence of an intended security arrangement over immoveable property, but the decisive issue was suretyship. Where the creditor, without the surety's consent, gave time to the principal debtor by consent decree, the surety was discharged under the general law of suretyship. That discharge extended to property deposited as security even though there was no personal covenant to pay. The creditor therefore could not enforce the security against the sureties, and the defendants obtained relief with costs.

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Issues: (i) whether the letter and deposit of title-deeds created an equitable mortgage or required registration; (ii) whether the surety was discharged when time was given to the principal debtor without the surety's consent.

Issue (i): whether the letter and deposit of title-deeds created an equitable mortgage or required registration

Analysis: The evidence showed negotiations for security over the defendants' property and the subsequent deposit of the lease/title-deed. One view was that the letter merely evidenced an obligation to create security in futuro and therefore did not itself create or declare an interest in immoveable property so as to attract registration. The contrary view was that the letter amounted to a declaration that an equitable mortgage by deposit of title-deeds had been effected and was therefore inadmissible if unregistered. Both judges treated the document as material only to the extent that it connected the deposit with the advance and the alleged security arrangement.

Conclusion: The issue was not the decisive ground of disposal, but the Court accepted that the transaction was intended to operate as security over the defendants' property.

Issue (ii): whether the surety was discharged when time was given to the principal debtor without the surety's consent

Analysis: The Court held that the defendants were sued as sureties and that the creditor, by entering into a consent decree granting time to the principal debtor, altered the creditor-debtor arrangement without the defendants' consent. The Indian Contract Act was treated as not exhaustive, and the general law governing suretyship was applied. On that principle, a surety is discharged when the creditor gives time to the principal debtor without the surety's assent, and the rule was held to apply even where the surety had only deposited property as security and had no personal covenant to pay.

Conclusion: The defendants were discharged from liability as sureties, and the creditor could not enforce the security against them after granting time to the principal debtor without their consent.

Final Conclusion: The appeal succeeded, the plaintiffs' action failed, and the defendants obtained relief in respect of the lease and costs.

Ratio Decidendi: A surety is discharged when the creditor, without the surety's consent, gives time to the principal debtor, and this discharge extends to security deposited by the surety even if there is no personal covenant to pay.

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