Civil Appeal No 1058 of 1970
From the Judgment and Decree dated 25 4 1969 of the Gujarat High Court in Appeal No 2261
section N Kackar K J John and Sri Narain for the Appellant
section T Desai H section Parihar and I N Shroff for the Respondents
The Judgment of the Court was delivered by DESAI J
This appeal by certificate under Article 1331 a of the Constitution is by the original plaintiff State Bank of Saurashtra  the Bank  for short whose suit for recovery of Rs 76368 04 P from the legal representative of the deceased principal debtor Harilal Parmanaddas Adatia and his surety original defendant 2 Chitranjan Rangnath Raja
 Surety  for short was decreed by the trial court both against the legal representative of the principal debtor and the surety but on appeal by the surety was dismissed by the High Court only against the surety
Harilal Parmananddas Adatia hereinafter referred to as principal debtor  approached the Manager of the Bagasra Branch of State Bank of Saurashtra seeking facility for cash credit upto Rs 75000 
He submitted proposal form Ext
66 on September 101957 offering to give security for the cash credit by pledge of groundnut oil tins as also a personal guarantee of defendant 2 Chitranjan Rangnath Raja
919 After obtaining the approval of the General Manager of the Bank cash credit facility to the extent of Rs 75000 was sanctioned against the pledge of approved goods under the lock and key of the Bank and on personal guarantee of the surety
The principal debtor executed a demand promissory note Ext
81 in favour of the Bank on September 16 1957 and on the same day the principal debtor also executed a demand promissory note Ext 30 in favour of the surety which the surety endorsed in favour of the Bank Along with the two demand promissory notes simultaneously the surety executed a letter of guarantee Ext
31 in favour of the Bankand  the principal debtor executed a bond Ext
83 in favour of the Bank
The principal debtor also passed letter of continuity of the bond and the promissory note Ext
Thereafter the principal debtor enjoyed the cash credit facility by borrowing various amounts
By the end of February 1959 the principal debtor owed Rs 7636804 P in this account to the Bank
Principal debtor died in November 1957
The Bank wrote to the surety letter Ext32 dated December 241957 calling upon him to pay the outstanding balance of Rs 70879 in cash credit account of principal debtor as in the circumstances mentioned in the letter the balance was required to be recovered from the surety
Some correspondence ensued thereafter between the Bank and the surety and ultimately the Bank filed the suit for recovery of Rs 7636804 P against defendant 1 the legal representative of principal debtor and defendant 2 the surety
Defendant 1 contested the suit inter alia contending that the court had no jurisdiction to hear the suit and he had no knowledge about the suit transaction
The allegation of fraud made against him in the plaint was denied
He also denied his liability for the claim of the Bank as heir and legal representative of deceased principal debtor
Defendant 2 the surety contested the suit as per written statement Ext
7 inter alia contending that the Bank had agreed to grant cash credit facility to deceased principal debtor on the security of goods by way of pledge and that though the goods were to be kept in the godown in the compound of Vijay Oil Mills Pvt Ltd but the godown was to be kept under the lock and key of the Bank
It was also contended that the principal debtor would provide such quantity of goods as would provide full cover to the outstanding balance in the cash credit account and the Bank was to be responsible for the safe custody and keeping of the pledged goods
It was also contended that the principal debtor had all throughout pledged sufficient quantity of goods to provide full cover for the Bank s claim but the Bank either wrongfully lost the goods or was negligent in retaining the goods within 920 its custody or the Bank wrongfully parted with the goods without the consent of the surety and therefore the surety was discharged
The trial Court found that there was negligence on the part of the Bank with regard to the safe custody of the pledged oil tins but as the contract of guarantee entered into by the surety with the Bank was independent of the pledge of goods given by the principal debtor the surety is not discharged from his liability under the guarantee
So observing the trial court decreed the suit
On appeal by the surety the High Court held that the two promissory notes one executed by the principal debtor in favour of the Bank Ext 81 and another by the principal debtor in favour of the surety and endorsed by the surety to the Bank Ext30 and the letter of guarantee Ext 31 executed by surety in favour of the Bank as also the bond executed by the principal debtor in favour of the Bank Ext
83 and the letter of continuity Ext
82 executed by the principal debtor in favour of the Bank all on September 16 1957 constituted one composite transaction and they evidence that the principal debtor had offered two securities one the pledge of oil tins and another personal guarantee of the surety
The High Court further held that the Bank was utterly negligent and had not exercised such care as a prudent man would in the circumstances of the case which resulted in the loss of security namely pledged oil tins and therefore in view of combined operation of sections 139 and 141 of the Indian Contract Act  Act  for short the surety is discharged
Accordingly the appeal of the surety was allowed and the suit against him was dismissed
Hence this appeal by the plaintiff Bank
Uncontroverted facts concurrently found and not sought to be reviewed in this appeal are that the principal debtor as per his application Ext
65 sought cash credit facility to the extent of Rs 75000 pursuant to which the Bagasra Branch of the Bank submitted a proposal Ext
66 seeking permission of the General manager of the Bank to extend the facility
The General Manager of the Bank sanctioned advance inter alia on the following terms A cash credit limit of Rs75000 Rupees Seventy five thousand only is hereby sanctioned against pledge of approved goods under Bank s lock and key and on the personal guarantee of Shri C R Raja Junagadh
Noted that the Bank s godown keeper already posted at Amrali would look after the goods pledged by the above party also
921 All other terms as proposed underlining ours
Accordingly on the strength of two pronotes Exts 30 and 81 and on the strength of letter of guarantee Ext31 and the bond Ext83 cash credit facility was extended to the principal debtor
The pledged goods were kept in the godown in the compound of Vijay oil Mills under the lock and key of the Bank and the Bank had appointed a Godown keeper to look after the goods pledged by the principal debtor
Two promissory notes Exts
30 and 81 and letter of guarantee Ext
31 and the bond executed by the principal debtor Ext
83 all of September 16 1957 constituted one transaction
The High Court held that the surety had agreed to become surety on the principal debtor pledging oil tins as and by way of security for the advance and therefore two securities were offered namely pledge of goods and the personal guarantee of the surety
The High Court also found that 5000 tins of oil had come to be transferred by Vijay oil Mills in the name of the deceased principal debtor and they were treated as pledged with the Bank as security for cash credit facility
It is concurrently found that the Bank was utterly negligent with regard to the safe keeping and handling of pledged oil tins and the security of pledged oil tins was lost on account of the negligence of the Bank
Disagreeing with the trial court the High Court held that the pledge and the personal guarantee were not two independent transactions but they formed part and parcel of one composite transaction
The High Court therefore held that the creditor having lost one security namely the pledged goods the surety was discharged to the extent of the value of security and that as in this case the entire security was lost the surety was wholly discharged
Only contention canvassed in this appeal is that in view of clauses 57 and 13 of letter of guarantee Ext31 even if it is found as a fact that negligence of the creditor Bank was responsible for the loss of security of pledged oil tins yet the surety would not be discharged
Before we refer to clauses 5 7 and 13 it is necessary to notice section 141 of the Indian Contract Act under which the surety claims the relief of discharge
Section 141 reads as under 141A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into whether the surety knows of the existence of such security or not and if the creditor loses or without the consent of the surety parts with such security the surety is discharged to the extent of the value of the security
 922 In order to attract section 141 it must be shown that the creditor had taken more than one security from the principal debtor at the time when the contract of guarantee was entered into and irrespective of the fact whether the surety knew of such other security offered by the principal debtor if the creditor loses or without the consent of the surety parts with the other security the surety would be discharged to the extent of the value of the security
In the instant case as found by the High Court and not controverted the principal debtor had offered two securities i the pledge of goods ii personal guarantee of the surety
Verily the General Manager of the Bank accepted the proposal for cash credit facility on the specific condition that the principal debtor shall offer two securities one the pledge of goods to be kept under the lock and key of the Bank to be supervised by the Bank s employee and secondly the personal guarantee of the surety
The surety himself agreed to give personal guarantee on the specific understanding and with the full knowledge of the Bank that the principal debtor was offering another security namely pledge of goods
The surety contracted on the good faith of the principal contract when entering into contract of guarantee in which case he is deemed so to contract that both the securities would be available to the creditor see Sanderson vs Aston If the two promissory notes Exts
81 and 30 coupled with the letter of guarantee Ext
31 executed by the surety and the bond Ext
83 executed by the principal debtor at one sitting on September 16 1957 evidence one composite transaction it is an inescapable conclusion that the principal debtor offered two securities one the pledge of goods and the other the personal guarantee of the surety
The surety in good faith contracted to offer personal guarantee on the clear understanding that the principal debtor has offered security by way of pledge of goods and the goods were to be in the custody of the creditor Bank
On this conclusion section 141 of the Act will be indubitably attracted
Section 141 comprehends a situation where the debtor has offered more than one security one of which is the personal guarantee of the surety
Even if the surety of personal guarantee is not aware of any other security offered by the principal debtor yet once the right of the surety against the principal debtor is impaired by any action or inaction which implies negligence appearing from lack of supervision undertaken in the contract the surety would be discharged under the combined operation of sections 139 and 141 of the Act
In any event if the creditor loses or without the consent of the surety parts with the security the surety is discharged to the extent of the security lost as provided by section 141
923 In Halsbury s Laws of England 4th Edn Vol 20 para 280 p 52 the statement of law bearing on this point reads as under 280Effect of loss of securities
On paying the guaranteed debt the surety is entitled to have all securities held by the creditor for the debt handed over to him by the creditor in exactly the same state and condition in which they were originally provided whether they were in existence at the date of the contract of suretyship or came into existence subsequently
Consequently any act of the creditor interfering with or impairing that right will to the extent at all events of any loss inflicted relieve the surety from liability and if it has the effect of altering or purporting to alter the contract of suretyship discharge him altogether
Thus where there is a mortgage security given in respect of a debt which is subsequently guaranteed the creditor must hold the security for the benefit of surety so that on paying the debt the surety may obtain a transfer of mortgage in its original unimpaired condition
If the creditor does not fulfil his duty in this respect the surety is discharged
 This statement of law is reflected in ss140 and 141 of the Act
In State of Madhya Pradesh vs Kaluram the facts were that one Kaluram had executed a surety bond undertaking to discharge the liability arising out of any act or omission or negligence or default of a forest contractor whose bid was accepted at an auction held for sale of felled trees and who was required to pay the bid amount in four instalments
The forest contract rules provided for preventing the contractor from removing the forest goods in case he made default in payment of the instalments due
The authorities responsible for supervising the contract allowed the contractor to remove the felled trees without making the subsequent payments
Subsequently the State of Madhya Pradesh initiated proceedings to recover the balance of the amount through surety Kaluram
The surety Kaluram contended before this Court that because the State had lost or parted with the security namely forest produce he stood discharged
Upholding this contention this Court quoted Wulff and Billing vs Jay wherein Hannen J stated the law as under 
I take it to be established that the defendant became surety upon the faith of there being some real and substantial 924 security pledged as well as his own credit to the plaintiff and he was entitled therefore to the benefit of that real and substantial security in the event of his being called on to fulfil his duty as a surety and to pay the debt for which he had so become surety
He will however be discharged from his liability as surety if the creditors have put it out of their power to hand over to the surety the means of recouping himself by the security given by the principal
That doctrine is very clearly expressed in the note in kees vs Barrington 2 White  Tudor s LC 4th Edn
at p 1002 As a surety on payment of the debt is entitled to all the securities of the creditor whether he is aware of their existence or not even though they were given after the contract of suretyship if the creditor who has had or ought to have had them in his full possession or power loses them or permits them to get into the possession of the debtor or does not make them effectual by giving proper notice the surety to the extent of such security will be discharged
A surety moreover will be released if the creditor by reason of what he has done cannot on payment by the surety give him the securities in exactly the same condition as they formerly stood in his hands
 This Court concluded that subject to certain variations section 141 of the Indian Contract Act incorporates the English law relating to discharge from liability of a surety where the creditor parts with or losses to security held by it
Mr Kackar however contended that in view of clauses 5 7 and 13 of the letter of guarantee Ext 31 even if it is held proved that security of pledged goods was lost on account of the negligence of the creditor Bank yet the surety would not be discharged from the obligation undertaken under the letter of guarantee
Clauses 5 7 and 13 may be extracted 5
You shall in any case be at liberty and without myour further assent or knowledge at any time to grant to the customer or any person liable with or for his whether as guarantor or otherwise any time or indulgence and to determine enlarge or vary its credit and to vary exchange or take other securities or release any other securities held or to be held by you for or on account of the moneys intended to be hereby secured or any part thereof or to renew any bills notes or other negotiable security and to compound or make any other arrangements with the customer or any 925 person so liable with or for the customer as you may think fit without discharging or in any manner affecting myour liability under this guarantee 7
To the extent that you may obtain satisfaction of the whole of your claim against the customer Iwe agree that you may enforce and recover upon this guarantee the full amount hereby guaranteed and interest thereon notwithstanding any such proof or composition as aforesaid and notwithstanding any other guarantee security or remedy guarantees securities or remedies which you may hold or be entitled to in respect of the sum intended to be hereby secured or any part thereof and notwithstanding any charges or interest which may be debited in your account current with the customer or in any other account upon which the customer may be liable 13
Should the customer be a limited company corporate or an incorporate body committee firm partnership trustees or debtors on a joint account the provisions hereinbefore contained shall be construed and take effect where necessary as if the words importing the singular number included also the plural number
This myour guarantee shall then remain effective notwithstanding any death retirement change accession or addition as fully as if the person or persons constituting or trading or acting as such body committee firm partnership trustees or debtors on joint account at the date of the customer s default or at and time previously was or were the same as the date hereof
And further you may recover against meus to the extent here in before mentioned notwithstanding that any security given or to be given to you may be void defective or informal or notwithstanding that the customer being a limited company corporate or unincorporated body or committee may exceed its borrowing powers or that the borrowing from you may have been ultra vires
 Clause 5 confers right upon the creditor Bank to grant any time or indulgence in payment of the debt or to determine enlarge or vary its credit and to vary exchange or take other securities or release any other securities held by the Bank but such an act on the part of the Bank would not have the effect of discharging the surety or in any manner affecting his liability under the letter of guarantee
We fail to see how 926 clause 5 can help the creditor Bank in any manner
It is not a case of granting time or indulgence to the principal debtor or variation of the credit or taking one set of security in substitution of some other security or release of any security
Release of security implies a volitional act on the part of the Bank
Loss on account of negligence cannot be equated with release
Therefore clause 5 would not assist the Bank in this case
Clause 7 provides for non discharge of surety even if the creditor Bank enters into a composition with the principal debtor and that the surety would nonetheless be liable even if the Bank has guarantee security or remedy guarantees securities or remedies from the principal debtor
Upon a true construction of clause 7 the expression any other guarantee security or remedy  therein mentioned must be security other than the pledged goods
In an almost identical situation with regard to an identical clauses in Amrit Lal Goverdhan Lalan vs State Bank of Travancore and Ors this Court after referring to clause 5 in the letter of guarantee which is in pari materia with clause 7 of the letter of guarantee under discussion held as under On behalf of the respondent Bank reference was made to cl 5 of exhibit P 4 which has already been quoted
It was contended that on account of this clause in exhibit P 4 the appellant has opted out of the benefit of section 141 of the Indian Contract Act
We are unable to accept the argument put forward by the Attorney General on behalf of the respondent Bank
In our opinion the expression any security in cl 5 of exhibit P 4 should be properly construed as any security other than the pledge of goods mentioned in the primary agreement exhibit P 1 between the Bank and the firm
 We consider that there is nothing in cl 5 of Ex
P 4 to indicate that the appellant is not entitled to invoke the provisions of section 141 of the Indian Contract Act
 Therefore cl 7 is of no assistance to the Bank
A bare perusal of clause 13 would show that it provides for continuing the guarantee where the principal debtor is an association of persons and for continuance of the guarantee in the event of death retirement etc
of one of such association of persons or the guarantee remaining intact and effective and legally enforceable irrespective of some defect arising from the internal management of such association of person
We fail to see how it can render any assistance to the Bank
927 First security namely the pledged goods are lost to the Bank and the concurrent finding again incontrovertible is that the pledged goods were lost on account of the negligence of the creditor Bank
Whole of the security was lost and therefore the surety would be discharged in entirety because it is crystal clear that the principal debtor had agreed and had in fact pledged 5000 tins of oil which even if sold at the then current market price would have satisfied the Bank s entire claim
Accordingly the surety would be discharged in entirety
It is difficult to entertain a contention that section 141 would not be attracted and the surety would not be discharged even if it is found that a creditor has taken more than one security on the basis of which advance was made and the surety gave personal guarantee on the good faith of other security being offered by the principal debtor which itself may be a consideration for the surety offering his personal guarantee and the creditor by its own negligence lost one of the securities
Acceptance of such a contention would tantamount to putting a premium on the negligence of the creditor to the detriment of the surety who is usually described as a preferred debtor
Should a Court by its construction of such letter of guarantee enable the creditor to act negligently and yet be not in any manner accountable  Was the guarantee a guarantee against proper performance of the contract evidencing advance of loan and methods of its repayment or a guarantee covering Bank s utter disregard of its responsibility or to use the words of the High Court the Bank s utter negligence in failing to exercise the care of a prudent man which one would expect in management of one s own affairs  The appeal accordingly fails and is dismissed with costs
The respondent surety has made an application that in compliance with the decree made by the trial court he had paid the entire amount and he should not be exposed to second round of litigation for restitution of the amount and that this Court should give a direction to the Bank as part of this judgment that the amount be returned with interest at current rate to the respondent surety
By section 144 of the Code of Civil Procedure 1908 as it stood prior to amendment by the Code of Civil Procedure Amendment Act 1976 the jurisdiction to grant restitution was conferred upon the Court of first instance 
Since the amendment the expression the Court of first instance  has been substituted by the Court which passed the decree or order 
An explanation has been added to section 144 by the 928 Amendment Act of 1976 the relevant portion of which reads as under Explanation For the purposes of sub section 1 the expression Court which passed the decree or order shall be deemed to include a where the decree or order has been varied or reversed in exercise of appellate or revisional jurisdiction the Court of first instance
 In the instant case the appellant was the plaintiff and its suit was decreed by the trial court ie the Court of Civil Judge Senior Division Gondal on November 18 1960
The present appellant by its letter dated February 14 1961 demanded from the surety a sum of Rs 8482807P inclusive of costs and interest on the principal amount decreed
The surety respondent I in this Court paid the appellant Rs 8482807P on April 3 1961
In the appeal by the surety the High Court reversed the decree and dismissed the suit against the surety
Accordingly the surety is entitled to restitution
The limited question is whether this Court can grant restitution
Prior to Amendment Act 1976 an application for restitution under section 144 in all cases had to be made to the Court of first instance
Ever since the amendment the substituted expression the Court which passed the decree or order  would as per clausea of the explanation mean the Court of first instance because the expression the Court which passed the decree or order  has been deemed to include where the decree or order has been varied or reversed in exercise of appellate or revisional jurisdiction the Court of first instance
The present one is the simplest case where the suit in favour of the appellant and against the surety was decreed by the trial court ie the Court of first instance and this decree has been reversed by the High Court in exercise of its appellate jurisdiction
In such a situation clause a of the explanation would be attracted and an application for restitution will have to be made to the Court of first instance ie the Court of Civil Judge Senior Division Gondal
It is nowhere suggested that such a Court does not exist
Therefore it would not be proper for this Court to direct restitution
However there will be no justification for the appellant Bank to withhold the amount which was collected from the surety on a mere demand
Therefore an application for restitution made by the surety would not lie to this Court and it would stand disposed of accordingly
SR Appeal dismissed


Summary:
The appellant bank allowed a cash credit facility limited to Rs 75000 to the principal debtor Harilal Parmananddas Adatia on his pledging 5000 tins of groundnut oil under the lock and key of the Bank and on personal guarantee of the surety respondent No 2
The principal debtor executed a demand promissory note Ext
81 in favour of the Bank on September 16 1957 and on the same day the principal debtor also executed a demand promissory note Ext 30 in favour of the surety which the surety endorsed in favour of the Bank
Along with the two demand promissory notes simultaneously the surety executed a letter of guarantee Ext
31 in favour of the Bank and the principal debtor executed a bond Ext
83 in favour of the Bank
The principal debtor also passed letter of continuity of the bond and the promissory note Ext
Thereafter the principal debtor enjoyed the cash credit facility by borrowing various amounts
By the end of February 1959 the principal debtor owed Rs 7636804 P in this account to the Bank
Principal debtor died in November 1959
The Bank wrote to the surety letter Ext
32 dated December 24 1959 calling upon him to pay the outstanding balance of Rs 70879 in cash credit account of principal debtor as in the circumstances mentioned in the letter the balance was required to be recovered from the surety
Some correspondence ensued thereafter between the Bank and the surety and ultimately the Bank filed the suit for recovery of Rs 7636804 P against defendant 1 the legal representative of principal debtor and defendant 2 the surety
The trial court round that there was negligence on the part of the Bank with regard to the safe custody of the pledged oil tins but as the contract of guarantee entered into by the surety with the Bank was independent of the pledge of goods given by the principal debtor the surety is not discharged from his liability under the guarantee
So observing the trial court decreed the suit
The surety paid the entire amount demanded and appealed to the High Court
The High Court held that the two promissory notes one executed by the principal debtor in favour of the Bank Ext
81 and another by the principal debtor in favour of the surety and endorsed by the surety to the Bank Ext 30 and the letter of guarantee Ext
31 executed by the surety in favour of the Bank as also the bond executed by the principal debtor in favour of the Bank Ext
83 916 and the letter of continuity Ext
82 executed by the principal debtor in favour of the Bank all on September 16 1957 constituted one composite transaction and they evidenced that the principal debtor had offered two securities one the pledge of oil tins and another personal guarantee of the surety
The High Court further held that the Bank was utterly negligent and had not exercised such care as a prudent man would in the circumstances of the case which resulted in the loss of security namely pledged oil tins and therefore in view of combined operation of sections 139 and 141 of the Indian Contract Act the surety is discharged
Accordingly the appeal of the surety was allowed and the suit against him was dismissed
Hence this appeal by plaintiff Bank
Dismissing the appeal by certificate the Court  HELD 1
In order to attract section 141 of the Contract Act it must be shown that the creditor had taken more than one security from the principal debtor at the time when the contract of guarantee was entered into and irrespective of the fact whether the surety knew of such other security offered by the principal debtor if the creditor loses or without the consent of the surety parts with the other security the surety would be discharged to the extent of the value of the security
In the instant case as found by the High Court and not controverted the principal debtor had offered two securities i the pledge of goods ii personal guarantee of the surety
Verily the General Manager of the Bank accepted the proposal for cash credit facility on the specific condition that the principal debtor shall offer two securities one the pledge of goods to be kept under the lock and key of the Bank to be supervised by the Bank s employee and secondly the personal guarantee of the surety
The surety himself agreed to give personal guarantee of the specific understanding and with the full knowledge of the Bank that the principal debtor was offering another security namely pledge of goods
The surety contracted on the good faith of the principal contract when entering into contract of guarantee in which case he is deemed so to contract that both the securities would be available to the creditor
If the two promissory notes Exts
81 and 30 coupled with the letter of guarantee Ext
31 executed by the surety and the bond Ext
83 executed by the principal debtor at one sitting on September 16 1957 evidence one composite transaction it is an inescapable conclusion that the principal debtor offered two securities one the pledge of goods and the other the personal guarantee of the surety
The surety in good faith contracted to offer personal guarantee on the clear understanding that the principal debtor has offered security by way of pledge of goods and the goods were to be in the custody of the creditor Bank
On this conclusion section 141 of the Act will be indubitably attracted
922 A F Sanderson vs Aston 1873 L R at 76 quoted with approval
Section 141 comprehends a situation where the debtor has offered more than one security one of which is the personal guarantee of the surety
Even if the surety of personal guarantee is not aware of any other security offered by the principal debtor yet once the right of the surety against the principal debtor is impaired by any action or inaction which implies negligence appearing from lack of supervision undertaken in the contract the surety would be discharged under the combined operation of sections 139 and 141 of the Act
In any event if the creditor loses or without the consent of the surety parts with the security the surety is discharged to the extent of the security lost as provided by section 141
922 F H State of Madhya Pradesh vs Kaluram   followed
917 Wulff and Billing vs Jay  quoted with approval
In the instant case clauses 5 7 and 13 of the letter of guarantee Ext
31 would be of no assistance to the Bank
926 B G H a Clause 5 confers right upon the creditor Bank to grant any time or indulgence in payment of the debt or to determine enlarge or vary its credit and to vary exchange or take other securities or release any other securities held by the Bank but such an act on the part of the Bank would not have the effect of discharging the surety or in any manner affecting his liability under the letter of guarantee
It is not a case of granting time or indulgence to the principal debtor or variation of the credit or taking one set of security in substitution of some other security or release of any security
Release of security implies a volitional act on the part of the Bank
Loss on account of negligence cannot be equated with release
925 G H 926 A B b Clause 7 provides for non discharge of surety even if the creditor Bank enters into a composition with the principal debtor and that the surety would nonetheless be liable even if the Bank has other guarantee security or remedy guarantees securities or remedies from the principal debtor
Upon a true construction of clause 7 the expression any other guarantee security or remedy  therein mentioned must be security other than the pledged goods
926 B C Amrit Lal Goverdhan Lal and ors
vs State Bank of Travancore and ors
   731 followed
c Clause 13 provides for continuing the guarantee where the principal debtor is an association of persons and for continuance of the guarantee in the event of death retirement etc
of one of such association of persons or the guarantee remaining intact and effective and legally enforceable irrespective of some defect arising from the internal management of such association of persons
First Security namely the pledged goods are lost to the Bank and the concurrent finding again incontrovertible is that the pledged goods were lost on account of the negligence of the creditor Bank
Whole of the security was lost and therefore the surety would be discharge in entirety because it is crystal clear that the principal debtor had agreed and had in fact pledged 5000 tins of oil which even if sold at the then current market price would have satisfied the Bank s entire claim
Accordingly the surety would be discharged in entirety
926 G H 927 A B 4
Accepting a contention that section 141 would not be attracted and the surety would not be discharged even if it is found that a creditor has taken more than one security on the basis of which advance was made and the surety gave personal guarantee on the good faith of other security being offered by the principal debtor which itself may be a consideration for the surety offering his personal guarantee and the creditor by its own negligence lost one of the securities would tantamount to putting a premium on the negligence of the creditor to the detriment of the surety who is usually described as a preferred debtor 
A Court should not by its construction of such letter of guarantee enable the creditor to act negligently and yet be not in any manner accountable
927 B E 5
By section 144 of Civil Procedure Code 1908 as amended by the Amendment Act 1976 the jurisdiction to grant restitution is conferred upon the Court which passed the decree or order
By an explanation added to section 144 by the Amendment Act of 1976 the expression Court which passed the decree or 918 order shall be deemed to include where the decree or order has been varied or reversed in exercise of appellate or revisional jurisdiction the Court of first instance
927 G H 928 A In the instant case i the appellant was the plaintiff and its suit was decreed by the trial Court ie the Court of Civil Judge Senior Division Gondal on November 18 1960
The present appellant by its letter dated February 14 1961 demanded from the surety a sum of Rs 8482807 P inclusive of costs and interests on the principal amount decreed
The surety respondent 1 in this Court paid the appellant Rs 8482807 P
On April 3 1961
In the appeal by the surety the High Court reversed the decree and dismissed the suit against the surety
Accordingly the surety is entitled to restitution and ii the present one is the simplest case where the suit in favour of the appellant and against the surety was decreed by the trial court ie the Court of first instance and this decree has been reversed by the trial Court in exercise of its appellate jurisdiction
In such a situation clause a of the explanation would be attracted and an application for restitution will have to be made to the Court of first instance ie the Court of Civil Judge Senior Division Gondal
It is nowhere suggested that such a Court does not exist
Therefore it would not be proper for this Court to direct restitution
However there will be no justification for the appellant Bank to withhold the amount which was collected from the surety on a mere demand
Therefore an application for restitution made by the surety would not lie to this Court 928 B D F H