TaxTMI 
TaxTMI 
1992 (4) TMI 260
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.... to continue to remain as guarantors for Sankarsan also. Sankarsan ran into default, and the outstanding as on 15-7-1989 was to the extent of Rs. 2,06,631/-. When Sankarsan did not repay the loan despite notice, the Corporation tried to seize the bus in question when it was found that the Regional Transport Officer, Sambalpur had seized the said bus for non-payment of taxes, which along with penalty came to Rs. 4,26,876/-. A negotiation was made with the Regional Transport Officer, Sambalpur by the officials of the Corporation to take the bus into their custody, but having failed to do so, a notice under Section 29 of the Orissa State Financial Corporation Act, 1951 was issued against the petitioners asking them to clear up the outstanding,....
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....der, who placed reliance on the decision in Bank of Bihar v. Damodar Prasad, AIR 1969 SC 297 : (1969 All LJ 475) the ratio of which we shall note later. The Court did not apply the ratio of Damodar Prasad's case to the one at hand and observed in paragraph 4 that the decree being a composite one personally against the defendant including the respondent and also against the mortgaged property, the decree-holder has to proceed against the mortgaged property first and then proceed against the guarantor. Having found that the Bank had proceeded against the mortgaged property and also against the principal debtor, it was held that the execution against the guarantor was maintainable. 4. The aforesaid decision cannot be taken to have laid ....
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....ot, however, detain us because that Code perhaps had no provision parallel to that in Section 128 of the Indian Contract Act, which has provided that :-- "The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract". It is because of this section that in Damodar Prasad case it was held that the liability of a surety is not deferred until remedies against the principal debtor are exhausted. So, the Goa case cannot assist the petitioners. 5. Now let us come to Damodar Prasad's case. Therein, the Court was specifically concerned with the scope and ambit of Section 128 of the Contract Act, and after analysing its provisions and after noting the decisions in Wr....
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.... run from the date of execution of the guarantee notwithstanding a stipulation in the guarantee to the effect that the creditor may look for repayment to the surety if the principal debtor makes default in payment. The ratio of this decision is that the obligation upon a guarantee arises uno flatu with the execution of the document and does not depend upon any contingency. 7. A learned single Judge of the Madras High Court in Swaminath v. S.L. Lakshmana, AIR 1935 Mad 748, took the view after referring to Section 128 of the Contract Act that a suit against the surety without first exhausting the remedies against a principal debtor could be maintained. A Division Bench of the Lahore High Court in Kuckreja Ltd. v. Said Alam, AIR 1941 Lah 36....
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....ay stem from the same transaction, the two liabilities are distinct. In this connection, the following passage from Halsbury's Laws of England (3rd Edition) Vol. 22, paragraph 819, was quoted :-- "819. Proceedings by assured against debtor; except where the policy so provides, the creditor is not bound to sue the debtor or to enforce his security first; he is entitled, as soon as there is a default within the meaning of the policy, to claim payment from the insurers. The policy may, however, be limited to cover only the deficiency which remains after the creditor has exhausted his remedies against the debtor or his sureties". 10. We may finally refer to a Bench decision of the Andhra Pradesh High Court also in Nagpur Nagarik....