THE HON’BLE SRI JUSTICE N.V. RAMANA W.P. No. 24483 of 2000 O r d e r: The petitioners, two in number, are working as Assistant Depot Clerks with the respondents-A.P.S.R.T.C. They stood as sureties to one late Sri. D.S. Narayana, Depot Clerk, who availed House Building Loan of Rs.49,500/- from the respondents- A.P.S.R.T.C. on 27.03.1995, agreeing to repay the same in 10 years. During the currency of the loan period, the loanee died on 20.08.1999. As on the date of death of the loanee, the petitioners state that the loanee had already repaid an amount of Rs. 18,819/-, and for recovery of the balance loan amount, respondent No.2 issued the impugned order to the petitioners, who stood as sureties to the loan amount. The petitioners state that upon the death of the loanee, their liability as surety to the loan amount ceased. The petitioners state that the respondents-A.P.S.R.T.C. without issuing any notice whatsoever, issued the impugned order for recovery of the balance loan amount. They state that the action of the respondents-A.P.S.R.T.C. in proceeding to deduct the balance loan amount from the petitioners without deducting the same out of the monetary benefits payable to the family members of the loanee (deceased), which they have already paid to his legal heirs, is illegal and arbitrary. At any rate, they state that the son of the loanee (deceased) is working as Conductor with the respondents-A.P.S.R.T.C., and they can well proceed against him, who being the legal heir of the loanee has succeeded to his estate. Thus the petitioners filed the writ petition praying to quash impugned order and pass appropriate directions to the respondents-A.P.S.R.T.C. not to recovery the balance loan amount from them. Heard the learned counsel for the petitioners and the learned Standing Counsel for the respondents-A.P.S.R.T.C. The learned counsel for the petitioners submitted that upon the death of the laonee, the liability of the petitioners, who stood as surety to the loan amount, ceased, and therefore, the respondents-A.P.S.R.T.C. could not have issued the impugned order for recovery of the loan amount, and more so without issuing any notice. At any rate, he submitted that the son of the loanee (deceased) is working as Conductor, and he having succeeded to the estate of loanee (deceased), the respondents-A.P.S.R.T.C. ought to have proceeded him for recovery of the balance loan amount instead of directing the recovery of the same from the petitioners. He thus submitted that the impugned order be quashed and the writ petition be allowed. On behalf of the respondents-A.P.S.R.T.C., their Law Officer has filed counter. The learned Standing Counsel appearing on their behalf, while reiterating the averments made in the counter submitted that the loanee at the time of availing the loan gave a declaration that the loan amount along with interest thereon can be recovered from his settlement dues, and the petitioners who stood as sureties to the loan amount agreed that in the even the loan amount is not recoverable from the loanee, the same can be recovered from the sureties. He submitted that as on 31.05.2000, an amount of Rs.30,681/- was outstanding towards the loan account, which as on 31.12.2002, stood at Rs.43,700/-. An amount of Rs.36,146/- was settled to the family of the loanee vide letter dated 01.03.2001. The petitioners having stood as sureties cannot contend that they their liability as surety ceased upon the death of the loanee. He thus prayed that the writ petition be dismissed. The petitioners admittedly are sureties to the loan, availed by one Sri. D. Narayana, who died during the currency of the agreement. According to the own admission of the respondents-A.P.S.R.T.C. in the counter, the loanee, as per the terms and conditions of the loan agreement, the loanee had given a declaration for recovery of the balance loan amount and interest thereon from his settlement dues. This loanee obviously has given this declaration so that the liability of the unpaid loan amount does not fall on the sureties. No doubt, under the agreement, the petitioners agreed that in the event the loan amount is not recoverable from the loanee, the same can be recovered from the petitioners, who stood as sureties, but in view of the declaration given by the loanee that the balance amount be recovered from his settlement dues, the respondents-A.P.S.R.T.C. ought to have deducted the balance loan amount from out of the settlement dues payable to the legal heirs of the loanee, which they did not do, and instead paid the settlement dues to the legal heirs of the loanee, which is very contrary to the declaration given by the loanee. No doubt under the agreement and under the provisions of the Contract Act, 1872 the liability of the surety exists until the entire loan amount under the agreement is repaid or until the principal discharges him from the liability, but the respondents-A.P.S.R.T.C. before proceeding to recover the balance loan amount, ought to have proceeded against the legal heir of the loanee, who is said to have succeeded to the estate of the loanee, and who is said to be working with the respondents-A.P.S.R.T.C. as Conductor, and in the event, the loan amount is not recoverable from the son of the loanee, who is said to have succeeded to his estate, then the respondents- A.P.S.R.T.C. would be at liberty to proceed against the petitioners. For the foregoing reasons, the impugned order cannot be sustained, and the same is accordingly quashed. The writ petition is allowed. The respondents-A.P.S.R.T.C. are at liberty to first proceed against the legal heir of the loanee (deceased), who is said to have succeeded to his estate, for recovery of the balance loan amount, and in the event of their failure to recover the amount from the legal heir of the loanee, they are at liberty to proceed against the petitioners. No costs. _________________ N.V. RAMANA, J. Date: 3rd January 2006. KSR