IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA CWP No. 821 of 2006 Date of decision : September 16, 2011 H.P. State Cooperative Bank Ltd. …Petitioner. Versus Ram Gopal Sharma and anr. …Respondents. Coram The Hon’ble Mr. Justice Surjit Singh, Judge. Whether approved for reporting?1 Yes For the Petitioner : Mr. Surinder Sharma, Advocate. For the Respondents : None. Surjit Singh, Judge(Oral) Nobody appears on behalf of the respondents. Hence, they are proceeded ex-parte. 2. Heard and gone through the record. 3. Respondent No.2, Ghasi Ram, had raised loan from petitioner, i.e. H.P. State Cooperative Bank Ltd., a registered Cooperative Society, in the year 1984. The amount of money, taken by the said respondent by way of loan, was `5000/-. Respondent No.1, Ram Gopal Sharma and Prahlad Puri, now dead, stood sureties for re-payment of loan by respondent No.2. It Whether reporters of the local papers may be allowed to see the judgment? …2… appears that loan was not returned, in accordance with agreement executed between the petitioner-Bank and principal debtor, as also the sureties. Agreement provided for adjudication of dispute(s), arising between the parties, by an Arbitrator. So, an Arbitrator was approached by the Bank for recovery of money due to it from the respondents, on account of balance principal amount, as also the interest accrued thereon. Arbitrator, who was approached in the year 1993, gave his award in the year 2001, holding that both the respondents were liable to pay an amount of Rs. 40,157/-. He also awarded future interest @ 17.5% per annum. 4. Award was challenged by respondent No.1, by filing an appeal, before the Appellate Authority, i.e. Joint Registrar, Cooperative Societies, who, vide order, dated 21st August, 2002, copy Annexure PC, held that respondent No.1, having approached the petitioner-Bank in the year 1985, at the time of his transfer from Chamba with the request that some other surety may be arranged and the Bank having failed to act on his request, the surety (respondent No.1) stood absolved of his liability to pay the outstanding loan amount and the interest. Appellate Authority also accepted plea of respondent No.1, the surety, that other surety or his legal representatives having not been made party to the arbitration proceedings, he was not liable to pay the amount due from the principal debtor. …3… 5. Petitioner-bank filed a revision petition before the Secretary to the Government, which came to be decided by the Additional Secretary to the Government, vide order, dated 7th March, 2006, copy Annexure PE. Revision petition was dismissed with the observation that respondent No.1 had applied to the Bank for discharging him as surety, but the Bank took no action on his application and also when the principal debtor had defaulted, the Bank had not taken any steps to confiscate the consumer goods of the principal debtor. Another reason for dismissing the revision petition, noticed by the Revisional Authority, was that the second surety had not been made party to the arbitration proceedings. 6. View taken by the Appellate Authority, as also the Revisional Authority, is illegal, being contrary to the provisions of law, i.e. Sections 128, 137 and 138 of the Indian Contract Act, 1872. According to Section 128 of the Contract Act, liability of the surety is co-extensive with that of the principal debtor, unless the contract, otherwise, provides. In the present case, respondent No.1 did not plead that the contract of guarantee, executed by him, provided that his liability would not be co-extensive with that of the principal debtor and, therefore, presumption should be that Section 128 is applicable. 7. By simply making a request to the petitioner-Bank, i.e. the creditor, for directing the principal debtor to arrange for some other surety in his place on account of his transfer, …4… respondent No.1 could not claim that the guarantee stood revoked. Inaction on the part of Bank is of little consequence. There is no provision in the Contract Act for unilateral revocation of agreement of guarantee nor is there any provision in the said Act or any other law to the effect that if guarantor approaches the creditor for revoking the guarantee and the creditor takes no action on that request, the guarantor shall stand absolved of his liability. 8. View taken by the Appellate Authority and the Revisional Authority, that on account of non-impleadment of the second guarantor, respondent No.1 was not liable to pay the amount due from the principal debtor, is also contrary to Section 138 of the Contract Act, which says that where there are co- sureties, release of one of them by the creditor does not discharge the other(s). 9. Another reason given by the Appellate Authority and the Revisional Authority for discharging respondent No.1 of his liability is that the Bank had not confiscated the goods of the principal debtor, when the latter made default in payment of instalments. This reason is also contrary to the law, pertaining to liability of guarantor/surety. Section 137 of the Contract Act says that mere forbearance on the part of the creditor to sue the principal debtor or to enforce any other remedy against him, does not, in the absence of agreement to the contrary, discharge the surety. …5… 10. In view of the above-stated position, present petition is allowed and order of the Appellate Authority, which is dated 21st August, 2002 (Annexure PC) and that of the Revisional Authority, which is dated 7th march, 2006 (Annexure PE) are quashed. 11. Petition stands disposed of accordingly. September 16, 2011 (Surjit Singh), J (pankaj)