Appeal No 1109 of 1965
Appeal from the judgment and decree dated December 3 1962 of the Patna High Court in Appeal from Original Decree No 300 of 1959
section Mitra and RC Prasad for the appellant
621 KK Sinha for respondent No 2
The Judgment of the Court was delivered by Bachawat J
The plaintiff Bank lent moneys to defendant No 1 Damodar Prasad on the guarantee of defendant No 2 Paras Nath Sinha
On the date of the suit Damodar Prasad was indebted to the plaintiff for Rs 1172356 nP on account of principal and Rs 276937 nP on account of interest
In spite of demands neither he nor the guarantor paid the dues
The plaintiff filed a suit against them in the Court of the Subordinate Judge 1st Court Patna claiming a decree for the amount due
The Trial Court decreed the suit against both the defendants
While passing the decree the Trial Court directed that the plaintiff bank shall be at liberty to enforce its dues in question against defendant No 2 only after having exhausted its remedies against defendant No 1
The plaintiff filed an appeal challenging the legality and propriety of this direction
The High Court dismissed the appeal
The plaintiff has filed the present appeal after obtaining a certificate
The guarantee bond in favour of the plaintiff bank is dated June 15 1951
The surety agreed to pay and satisfy the liabilities of the principal debtor upo Rs 12000 and interest thereon two days after demand
The bond provided that the plaintiff would be at liberty to enforce and to recover upon the guarantee notwithstanding any other guarantee security or remedy which the Bank might hold or be entitled to in respect of the amount secured
The demand for payment of the liability of the principal debtor was the only condition for the enforcement of the bond
That condition was fulfilled
Neither the principal debtor nor the surety discharged the admitted liability of the principal debtor in spite of demands
Under sec
128 of the Indian Contract Act save as provided in the contract the liability of the surety is coextensive with that of the principal debtor
The surety became thus liable to pay the entire amount
His liability was immediate
It was not deferred until the creditor exhausted his remedies against the principal debtor
Before payment the surety has no right to dictate terms to the creditor and ask him to pursue his remedies against the principal in the first instance
As Lord Eldon observed in Wright V Simpson1 But the surety is a guarantee and it is his business to see whether the principal pays and not that of the creditor
 In the absence of some special equity the surety has no fight to restrain an action against him by the creditor on the ground that the principal is solvent or that the creditor may have relief against the principal in some other proceedings
1  734   1282
622 Likewise where the creditor has obtained a decree against the surety and the principal the surety has no right to restrain execution against him until the creditor has exhausted his remedies against the principal
In Lachhman Joharirmal V Bapu Khandu and Surety Tukaram Khandoji1 the judge of the Court of Small Causes Ahmedabad solicited the opinion of the 13Bombay High Court on the subject of the liability of sureties
The creditors having obtained decrees in two suits in the Court of Small Causes against the principals and sureties presented applications for the imprisonment of the sureties before levying execution against the principals
The judge stated that the practice of his court had been to restrain a judgment creditor from recovering from a surety until he had exhausted his remedy against the principal but in his view the surety should be liable to imprisonment while the principal was at large
Couch CJ and Melvell J agreed with this opinion and observed  The court is of opinion that a creditor is not bound to exhaust his remedy against the principal debtor before suing the surety and that when a decree is obtained against a surety it may be enforced in the same manner as a decree for any other debt
 It is now suggested that under Order XX r 11 1  and sec
151 of the Code of Civil Procedure the Court passing the decree had the power to impose the condition that the judgment creditor would not be at liberty to enforce the decree against the surety
until the creditor has exhausted his remedies against the principal
Order XX r 11  1  provides that where and in so far as a decree is for the payment of money the Court may for any sufficient reason at the time of passing the decree order that payment of the amount decreed shall be postponed or shall be made by instalments with or without interest notwithstanding anything contained in the contract under which the money is payable
 For making an order under O XX r 11 1  the Court must give sufficient reasons
The direction postponing payment of the amount decreed must be clear and specific
The injunction upon the creditor not to proceed against the surety until the creditor has exhausted his remedies against the principal is of the vaguest character
It is not stated how and when the creditor would exhaust his remedies against the principal
Is the creditor to ask for imprisonment of the principal  Is he bound to discover at his peril all the properties of the principal and sell them and if he cannot does he lose his remedy against the surety  Has he to file an insolvency petition against the principal  The Trial Court gave no reasons for this extraordinary direction
The Court rejected the prayer of the principal debtor for payment of the decretal amount in instalments as there was no evidence to show 1 1869 4 Bom
High Court Reports
623 that he could not pay the decretal amount in one lump sum
It is therefore said that the principal was solvent
But the solvency of the principal is not a sufficient ground for restraining execution of the decree against the surety
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 sec
140 of the Indian Contract Act
and he may then recover the amount from the principal
The very object of the guarantee is defeated if the creditor is asked to postpone his remedies against the surety
In the present case the creditor is a banking company
A guarantee is a collateral security usually taken by a banker
The security will become useless if his rights against the surety can be so easily cut down
The impugned direction cannot be justified under O XX r 11 1
Assuming that apart from O XX r 11  1  the Court had the inherent power under section 151 to direct postponement of execution of the decree the ends of justice did not require such postponement
In the result the appeal is allowed the direction of the court below that the plaintiff bank shall be at liberty to enforce its dues in question against defendant No 2 only after having exhausted its remedies against defendant No 1 is set aside
The respondent Dr Paras Nath Sinha shall pay to the appellant costs in this Court and in the High Court
YP Appeal allowed


Summary:
The appellant creditor lent moneys to the first respondent on the guarantee of the second respondent
 The appellant filed a suit against the respondents for recovery of the amount due
and the suit was decreed
While passing the decree the Trial Court directed that the appellant would not be at liberty to enforce the decree against the second respondent  until he had exhausted his remedies against the first respondent
The appellant challenged this direction
The High Court dismissed the appeal
In appeal on certificate this Court  HELD The direction must be set aside
In the absence of some special equity the surety has no right to restrain execution against him until the creditor has exhausted his remedies against the principal
For making an order under OXX r 11 1  of CPC the court must give specific reasons
The direction postponing payment of the amount decreed must be clear and specific
The injunction upon the creditor not to proceed against the surety until the creditor has exhausted his remedies against the principal was of the vaguest character
It was not stated how and when the creditor would exhaust his remedies against the principal
622 A F G 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
and he may then recover the amount from the principal
The very object of the guarantee is defeated if the creditor is asked to postpone his remedies against the surety
In the present case the creditor is banking company
A guarantee is a collateral security usually taken by a banker
The security will become useless if his rights against the surety can be so easily cut down
The impugned direction cannot be justified under OXX r 11 1
Assuming that apart from OXX r 111 the Court had the inherent power under section 151 to direct postponement of the execution of the decree the ends of justice did not require such postponement
623 A C Lachhman Joharimal V Bapu Khandu and Surety Tukaram Khandoji 1869 4 Bom
High Court Reports 241