Statutory security bond with two sureties becomes unenforceable after withdrawal unless fresh security is furnished as prescribed.

A statutory security bond under the Kerala Value Added Tax Rules that required two sureties became unenforceable when one surety withdrew, because the rules required fresh security within sixty days and did not permit mere substitution while leaving the original bond otherwise unchanged. The Department could not rely on the earlier bond once it no longer satisfied the prescribed two-surety requirement. The analysis also noted that, under Section 133 of the Contract Act, a surety is discharged when the contractual terms are varied without consent. The demand founded on the original bond was therefore unsustainable, and liability could not be enforced under that bond.

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Issues: Whether a security bond executed under the Kerala Value Added Tax Rules, requiring two sureties, becomes unenforceable when one surety withdraws, and whether the Department can enforce the earlier bond in the absence of fresh security.

Analysis: Rule 19(2)(d) required the security bond to be executed in Form No. 6 with two sureties. Rule 19(4) provided that when a surety desired to withdraw, the dealer had to furnish fresh security within sixty days, and the withdrawal would operate only when such fresh security was furnished. The rule did not contemplate mere substitution of one surety while leaving the original bond otherwise intact. Once one surety withdrew, the bond ceased to satisfy the statutory requirement of two sureties and became unenforceable unless replaced by a fresh bond. The Court also noted that, independently, Section 133 of the Contract Act discharged a surety when the contractual terms were varied without the surety's consent.

Conclusion: The Department could not enforce the original bond against the petitioner, and the demand based on that bond was unsustainable.

Final Conclusion: The writ petition succeeded, and the petitioner was relieved from liability under the first bond, leaving the Department to proceed only in accordance with the second bond.

Ratio Decidendi: Where a statutory security bond requires two sureties, withdrawal of one surety renders the bond unenforceable unless fresh security is furnished in the manner prescribed by the rule.

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