TaxTMI 
TaxTMI 
1992 (4) TMI 243
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.... the said decision is correct. In Manku Narayana's case (supra) this Court took the view that: "The decree in execution is a composite decree, personally against the defendants including the respondent and also against the mortgaged property. We do not pause to consider whether the two portions of the decree are severable or not. We are of the view that since a portion of the decreed amount is covered by the mortgage, the decree- holder Bank has to proceed against the mortgaged property first and then proceed against the guarantor. Since the High court was not told that such steps were taken, we do not think we will be justified in holding that the High Court was in error in making the direction which is under challenge before us." Before we go into the question of the correctness or otherwise of the aforesaid decision a few facts of the present case may be noticed. The appellant, one of the Nationalised Banks, is a decree-holder. M/s. Indexport Registered, respondent no. 1, is a partner firm. Shri Janeshwar Kumar Jain, respondent No. 2, was a partner of respondent No. 1 along with one Shri Ajay Kishan Mehta (since deceased and now represented by his mother Smt. Sa....
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....guarantor till the mortgaged shop is sold and it is only if the realization from the sale of the shop is deficient that the balance could be recovered from the judgment debtors personally. The Additional District Judge, Delhi, following the decision of this Court in Manku Narayana's case (supra) took the view that it is a composite decree, personally against the principal debtor and the guarantor and also against the mortgaged property of defendent No. 2, and therefore, since it is a composite decree and the mortgaged property is also involved, the decree-holder should have proceeded first against the mortgaged shop and since it has not done so, the execution application against the objector (guarantor) does not lie. The decree-holder challenged this decision dated 5.5.1989 by way of a revision petition before the High Court and the High Court also, following the decision of this Court in Manku Narayana's case (supra), dismissed the revision petition and it is against this decision that the present appeal arises. It will be noticed that the loan was taken by the firm, namely, respondent No. 1, which consisted of Sh. Dhaneshwar Kumar Jain, respondent No. 2 (defendant No.2)....
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....9] 1 SCR 620 the facts were that the plaintiff Bank lent money to Damodar Prasad, defendant No. 1, on the guarantee of Paras Nath Sinha, defendant No. 2. On the date of the suit Damodar Prasad was indebted to the Bank for ₹ 11,723.56 on account of principal and ₹ 2,769.37 on account of interest. In spite of demands neither the principal debtor nor the guarantor paid the dues. The plaintiff Bank then filed a suit claiming a decree for the amount due. The trial court decreed the suit against both the defendants but while passing the decree the trial court directed that the plaintiff Bank shall be at liberty to enforce its dues against defendant No. 2 only after having exhausted its remedies against defendant No. 1. The plaintiff went in appeal challenging the legality and propriety of this direction. The High Court dismissed the appeal, whereupon on certificate, the matter came before this Court. Bachawat, J. speaking for the Court held that the direction must be set aside. It was observed that: "It is the duty of the surety to pay the decretal amount. On such payment he will be subrogated to the rights of the creditor under Section 140 of the Indian Contract Act, ....
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....or. Venkatachaliah, J. (as His Lordship then was) observed:- "The question as to the liability of the surety, its extent and the manner of its enforcement have to be decided on first principles as to the nature and incidents of suretyship. The liability of a principal debtor and the liability of a surety which is co-extensive with that of the former are really separate liabilities, although arising out of the same transaction. Notwithstanding the fact that they may stem from the same transaction, the two liabilities are distinct. The liability of the surety does not also, in all cases, arise simultaneously." It will be noticed that the guarantor alone could have been sued, without even suing the principal debtor, so long as the creditor satisfies the court that the principal debtor is in default. In Jagannath Ganeshram Agarwala v. Shivnarayan Bhagirath and others, AIR [1940] Bombay 247, a Division Bench of the Bombay High Court (Kania and Wassoodew JJ.) held that the liability of the surety is co-extensive, but is not in the alternative. Both the principal debtor and the surety are liable at the same time to the creditors. In Muthuvelappa Goundan and another v. Palan....
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....e noticed that in present case no appeal was filed by the gurantor against the passing of the decree and the decree has become final. The decree for money is a simple decree against the judgment debtors including the guarantor and in no way subject to the execution of the mortgage decree against the judgment debtor No. 2. If on principle a guarantor could be sued without even suing the principal debtor there is no reason, even if the decretal amount is covered by the mortgage decree, to force the decree-holder to proceed against the mortgaged property first and then to proceed against the guarantor. It appears the above quoted observations in Manku Narayana's case (supra) are not based on any established principle of law and/or reasons, and in fact, are contrary to law. It, of course depends on the facts of each case how the composite decree is drawn up. But if the composite decree is a decree which is both a personal decree as well as a mortgage decree, without any limitation on its execution, the decree-holder, in principle, cannot be forced to first exhaust the remedy by way of execution of the mortgage decree alone and told that only if the amount recovered is insufficient....