 more specifically when we talk of section 141 of the Indian Compact Act, 1872. And in the today's session, Mr. Moldy would be taking us to the entire facets of law and coupled with, he has taken different aspects and he has prepared a questionnaire form that we will be asking those questions which we have already shared in the groups, coupled with the answers, he will give it to it. And thereafter, we will also share those notes for your convenience so that you could also at leisure understand the facets which you will be making us understand on these aspects because these questions are which we normally come as a practitioner and otherwise. And since we have Adilakshmi ma'am who is our knowledge partners and she's quite tied up with various webinars which she's taking out, but be that as it may despite the fact that she's having a hectic schedule she has agreed to log in and be our knowledge partners also I will ask ma'am to take over and then we'll ask Mr. Shikhar Mooli sir to take things over. What do you? Thank you Rikas. It is a very excellent day today. We are going to have our most respected and beloved Shankar Mooli sir once again on the Beyond Law CLC platform along with the Legal Eagles Allied and it is indeed a privilege that we are getting connected again and again is knowledge on civil jurisprudence as to be seen and in fact during this vacation in spite of recovering from his COVID he has taken so many subjects at length and he had done for Legal Eagles Allied some two and a half hours, three hours program clearing all the doubts it is immense pleasure connecting you on behalf of both of us and all the participants have joined in. Let's welcome our most respected Shankar Mooli sir for today's session. Welcome sir. Good evening to all. It is my immense pleasure to see you again in the webinar Beyond Laws series. Today's topic, the discharge of surities liability. The moment the topic discharge of surities liability we are all aware the liability of the guarantor is co-extensive with that of the principal debtor at the section 128 of the Indian Congress Act. So the guarantor cannot escape his liability. Whether or not the principal debtor is repaying the amount or not it's a duty of the guarantor to pay the amount due to the creditor. So uniformly having thought that the liability of the guarantor is co-extensive with that of the principal borrower but it is not so always. To a certain extent, the liability of the surity will be discharged. Let us see one by one before going to the main topic discharge of surity, surity is liability. I would like to emphasize what is the contract of guarantee? Guarantee means assurance or promise. Contract of guarantee is also known as contract of surity ship, both are same. A contract of guarantee is a tri-parted agreement with the triangular relationship namely principal creditor, principal debtor and the guarantor or surity. The properties offered is known as securities. A very known author of law books in his law and practice of international finance, 1980 points out guarantees are usually taken to provide a second packet to pay if the first packet should be empty. So the guarantee of guarantee is consisting of 3% creditor, principal debtor under the guarantor. It is in the nature of tri-parted agreement. The essential ingredients of guarantee are there must be an existing recoverable principal debt. The recoverable principal debt must be ascertained and it must be specific. There must be a duty to perform an obligation. That must be a duty to perform an obligation. The primary liability is on the principal debtor. The primary liability is on the principal debtor. There must be a tri-party agreement. There must be concurrence of the creditor, principal debtor and surity. So essential or valid contract must be fulfilled. There must be consideration. Consideration here is principal borrower borrows at an amount from the creditor and for the due repayment of the loan availed by the principal debtor, the guarantor guarantees the due repayment in case of default on the part of the principal borrower. So the money lent by the creditor to the principal borrower is the consideration so far as the guarantor is concerned. So without any consideration, the guarantor debt is invalid. Now the guarantor may be oral or written. So oral guarantor is also maintainable but in England, it's only written agreement. As I already said, a guarantor without consideration is void. The contract of guarantee is not a contract regarding a primary transaction. It is an independent transaction consisting, containing independent reciprocal obligation. It is on principle to principal basis. Suppose the principal borrower fails to repay the amount due to the creditor. As the liability of the guarantor is quite extensive with that of the principal borrower. The bank, it is the option on the part of the creditor either to sue the principal borrower or to sue the principal borrower under the guarantor or straight away sue the guarantor even without harrying the principal borrower as a party. It is an option because liability is quite extensive. The moment guarantor paid the entire amount due and payable to the creditor, then all the securities held by the guarantor shall be transferred to the guarantor. This is known as doctrine of subrogation. Once all the securities held by the creditor originally after the payment of the guarantor, it shall be transferred in favor of the guarantor. Then the surity becomes the creditor and the principal borrower is able to make good last to the guarantor. This is an implied promise in the contract. And that guaranteed there is an implied promise on the part of the principal borrower to indemnify the guarantor. The moment the entire guarantor is satisfied by the guarantor then the principal borrower is liable to pay the amount to the guarantor who becomes the creditor on account of the doctrine of subrogation. So the guarantor can limit his liability under the document. He can limit to certain extent I am liable and not more than that. In future transaction, I may not be liable. He can state that I am a guarantor or continuing guarantor whether the guarantor is continuing guarantor or not. Guarantee obtained by misrepresentation is invalid and guarantee obtained by concealment is also invalid. Now let us see one by one. Suppose the principal borrower fulfills his liability then surity liability does not arise. The implied promise by the principal guarantor to indemnify the surity is based on the general rule of equity. This is based on general rule of equity. It was expounded by a reputed advocate, Sir Samuel Romilly and the same was accepted by the court of chancellery in Craig Throne v Swenban, 33 England reporter, page 482. The surity will be entitled to every remedy which the creditor has against the principal data including the enforcement of every security. Another case, state of Madhya Pradesh versus Kaluram here 1967 Supreme Court, page 105. The Supreme Court has held the expression security employed in section 141 of the Indian Contract Act is not used in any technical sense. It includes all rights which the creditor has against the property on the data of the contract. The surity on payment of the amount to do by the principal data entitled to put the same in the position in which the creditor stood in relation to the principal data. If the creditor has lost or parted with the security without the consent of the surity, the latter is by the express provision contained in section 141 discharged to the extent of the value of the security lost or parted with. Now I will give an illustration. Then you can easily understand the spirit of the language used in section 141 of the Indian Contract Act. Suppose back is the creditor. X is the principal borrower, principal borrower of a wild loan to the tune of 1 crore, loan to the tune of 1 crore. And Y is the guarantor of X. He guarantees the repayment of the loan amount of 1 crore lent by the creditor bank to the principal borrower. The principal borrower offered certain securities. Say for example, valuable machinery stocks and trades. And he has hypothecated the goods. Hypothecated the goods. Later the guarantor came to know that the principal borrower is taking steps to sell the hypothecated goods. And he has given a notice to the bank that he is taking steps to sell the hypothecated goods with an intention to deprive me to realize the amount. Then the bank has not taken any steps to seize the goods hypothecated. Because the bank has got every power to seize the goods hypothecated in its favor. So no action was taken to seize the hypothecated goods. No criminal complaint was lodged. Then in spite of the objection, notice given by the guarantor that the principal borrower is acting detrimental to the interest. It is a duty of the creditor to take action against the principal borrower to stop the sale of the goods hypothecated or to take coercive action against the principal borrower. So on account of the negligence, on the part of the principal borrower, if the security is lost, security is lost, and there is no security, then the principal borrower will be allowed to go scot-free. Even if any suit is filed against him, there won't be any property. Because the property, the security is already hopped by the principal borrower. He is already sold and utilized for his personal benefit. Then what is the remedy of the guarantor in this regard? The close and conjoined reading of section 139, 140, and 141 of the Indian contractor postulates two things. Section 140 says once a guaranteed debt is satisfied by the guarantor, then he will be, then all the securities held by the creditor shall stand transferred in favor of the guarantor. But section 141 is on different footing. On account of the negligence, negligent act or voluntary act on the part of the creditor in protecting the security if on account of the negligence and the inaction on the part of the guarantor, the security is lost, then to the value of the security lost to the extent the liability of the security is discharged. He cannot be saddled with any liability to make the loss to the creditor bank because it is the duty of the bank creditor to protect the securities because assuming for a moment, if the securities offered by the principal borrower is protected, later the guarantor paid the entire amount due and payable to the creditor, then the bank creditor has to transfer all the securities held by it to the guarantor. Then it is very easy for the guarantor to find a suit on the basis of the security because he is a security cutter. When the goods offered as security is lost, it's not in existence. The eventual remedy, the final remedy of the guarantor is impaired. The final remedy of the guarantor is impaired. So to certain extent, to the value of the security, the guarantor is not liable. This is section 141. But involuntary act on the part of the creditor has to be considered. Suppose principal borrower availed the loan of 1 crore 20 banks. Principal borrower is X. Y is his guarantor. The property offered by the principal borrower, assuming for a moment, is one acre of land, agricultural land adjoining to the river Sindhu. During the course of blood, the one acre of land offered by the principal borrower's security in favor of the bank is lost away. There is a delivery on. The land is lost away. Now, the bank is entitled to find a suit against the guarantor to attach the property of the guarantor, which was offered as security. Then the guarantor may rise. Suppose I paid the entire amount due to you. Then it is your duty bound to deliver the entire securities held by you, whereas the securities offered by the principal borrower is lost. So my eventual remedy is in fact, then how can I recover the amount from the principal borrower? So my labor is discharged. If such a kind of contention is raised, then the law says this is an act of mismatch, act of God. This is an involuntary act on the part of the principal borrower. So he cannot be held liable for the loss of the goods. So still the guarantor is liable, and his liability is not discharged. This is one aspect. Another one aspect. Suppose principal borrower borrowed amount one crore from the bank. Why is the guarantor? Subsequently, your Punjab government announced that the entire agricultural loan, agricultural loan availed by the farmer is filed. Agricultural loan availed by the farmer is filed. Now can the bank, creditor bank, institute a suit against the guarantor? Here, section 129, the liability of the guarantor is co-extensive with that of the principal borrower. When the principal borrower liability itself is extinguished by operation of law, there is a question of claiming amount from the guarantor because his liability is co-extensive. When the principal borrower himself is relieved from the payment of debt, automatically the liability of the surities is also discharged. He's also discharged. But say for another example, a company availed the loan from the bank, a spending mill, spending and weaving mill, availed loan from the bank, ex-company. Why is the guarantor? Some default occurred and due to the stiff business competition, the principal borrower is not in a position to pay the installment amount. So there is a willful default. Then the government passed an act, sick textile industries nationalization act and it took over the entire management of the ex-company. Under the act, after taking over, under the sick textile industries nationalization act 1974, the compensation will be given to the principal borrower, to the bank, to the bank. Now say for example, out of the loan amount of 1 crore, 50 lakhs was given as compensation by the government to the creditors back. There remained 50 lakhs. Now the bank filed a suit for the recovery of balance amount of 50 lakhs against the guarantor. Whether such a suit is maintainable. Whether such a suit is maintainable. This is the point for consideration. If any suit is filed, the guarantor surity may rise. My liability is co-extensive with that of the principal borrower. I am liable to pay the amount in the event of default committed by the principal borrower. The moment I paid the entire amount due to you, you have to deliver the surities. Where is the security? The security has already taken over by the government. The security is lost. So section one part even says, if the principal creditor losses the security, then the liability of these surities is discharged to the extent of the value of the security. So if any plea is raised, so my advantage of remedy to recover the amount against a principal borrower is impact. So my liability is discharged. Then the answer is, the liability of the principal borrower is not extinguished. The creditor right to recover the amount against the principal borrower alone is bought by Vichu of the Sikh textile Industries Nationalization Act. It doesn't mean that the liability of the surities is also discharged. So despite the loss of the security, here the surity is liable. His liability is not discharged. His liability is not discharged. So these are very, very important points so far as the liability of the surity is concerned. Then I would like to place my reliance on the Supreme Court Dejahan, reported in state of Madhya Pradesh versus Kaluram. Here you are 1967 Supreme Court, page 1105. The Supreme Court had an occasion to see what is the meaning of security. Security occurred employed in section 141 of the contract that includes all the rights which the creditor has against the property on the death of the contract. An act of commission or remission by the creditor which is inconsistent with the rights of the surity. And on account of the same, if the eventual remedy of the surity against the principal debtor is impact, the liability of the surity stands. On payment of the guaranteed debt due which was deported by the principal debtor, the surity is invested with all the rights which the creditor had against the principal debtor. This is known as sabraketapinap sabraketapinap sabraketapinap. Then full bench decision of Madras Night Court. In the case Subramanya Chettiar versus Mouni M.P. Narayanaswamy Koundar, A.I.R. 1951 Madras, page 48, full bench. It has been held that the liability of the surity is co-extensive with the debtor of the principal debtor. If the latter's liability is scaled down in an amended degree or otherwise extinguished in the court or in part by statute, the liability of the surity also pro-tanto reduced or extinguished. By operation of law, if the liability of the principal borrower is scaled down, he's minimized. Then the liability of the surity pro-tanto will also be reduced. Agar Asra, S.E.B. versus official liquidator, High Court, Tarnafalam, 1982, Volume 3, S.E.C., page 358. A discharge which the principal debtor may secure by operation of law, the same does not absurd the liability of the surity. The word creditor losses employed in section 141 of the Indian Contract Act is in relation to a deliberate action on the part of the creditor and not a mere virtuous situation beyond the control of the creditor. Example, fire, tempest, floods, violence of any army or mob or other irresistible force. Under those circumstances, the creditor cannot be held alive. In China and South Sea Bank Ltd. versus Tom, 1989, three all-England reporters, page 839. The creditors has three sources of repayment. The creditor would sue the debtor, sell the mortgage security, or sue the surity. All these remedies could be exercised at any time, simultaneously or contemporaneously or successively at any time or not at all. If the creditor chose to sue the surity and not pursue any other remedy, the creditor on being paid in full was bound to assign the mortgage security to the surity. In Carter versus Whites Justice Blackburn, 1881, 1885, all-England reporters, page 921. A transaction which causes no loss of securities or a loss not attributable to the fault of the creditor will not discharge the surity's liability. Then, Krishna Dalwar versus Hindustan Commercial Bank Ltd. Here, 1957, Punjab, page 310. If the creditor who has had or ought to have had securities in his full possession or power loses them or permits them to get into the possession of the debtor or does not make them effective by giving proper notice, the surity to the extent of such a security will be discharged. State Bank of Saurashtra versus Sitranjan Banganath Raja. 1984, ACC, page 516. By reason of the deliberate act of the principal debtor or the creditor and without knowledge, concern and approval of the surity, Krishna further liability would not arise and the surities discharged from these liabilities. Industrial Finance Corporation of India Ltd. versus Kananur Spinning and Veeringbills Ltd. and the others, 2002, 5ACC, page 500, page 54. This is the authority on the subject, liability of the surity, when the surity is discharged and when not. Here, the principal debtor, Mil, was taken over under the 6th textile undertaking Nationalization Act 1974 and the entire circuit is given by the principal debtor, in the set mill west of the government, pre-Pramal kind of encompasses by paying compensation under this act. The creditor, Industrial Finance Corporation, filed a suit for recovery of the balance amount. If he was raised by the guarantor, that in as much as the security is lost, the eventual remedy of the guarantor is impact and he is not liable and his liabilities discharged. But repelling the contents and our Honorable Fx Court has held, creditor losses, employee section 141, must be construed with reference to deliberate action on the part of the creditor. It cannot be structured to an involuntary act on the part of the creditor. Therefore, the liability of the security is not discharged and the suit filed by the creditor against the guarantor, surety is maintainable and the surety is make good loss to the creditor back. Karnataka Bank Limited versus Dhajanam Shankar Rao Pulkarni K.R. 1977 Karnataka, page 14. The security on payment of the debt is entitled to putting the same position in which the creditor stands in relation to the principal debtor. This doctrine of subrogation is on the premises of equity and the natural justice. SBA versus Quality Bread Factory Patala KIR 1983 Panchapan Hariyana page 244. Any negligence or inaction on the part of the creditor by which he losses his security, it absorbs the liability of the surety. It absorbs the liability of the surety. Then Union Bank of India versus Manpunarayana, 1987 to SCC 335. Here, a portion of the degree amount is covered by the mortgage. Then the degree holder creditor bank ought to proceed or to levy the degree in execution as against the mortgage property and then proceed against the guarantor. Union Bank of India Bombay versus Suresh Balilal Mehta KIR 1997 Pujarat page 48. Here, repeatedly the guarantor sending notices one after another to the bank that the hypothecated goods are misused and he is taking steps to sell the property, stop them, seize the hypothecated goods. No action was taken by the bank to stop the sale of the hypothecated goods. No criminal action was taken, no criminal complaint was lodged. Then the court said the surety is discharged. And last one, EMR Chakrabani Ayyanka versus Kanra Bank, KIR 1977 Karnataka page 216. Same, when you deliberate action on the path of the creditor, impasse the eventual remedy of the guarantor, then the liability of the surety is discharged. So normally the liability of the surety is co-extensive with that of the principal debtor. That is well-suited. But a deliberate action, willful action, negligence on the path of the guarantor, on the path of the creditor and on account of the same, if the security is lost, then the eventual remedy of the guarantor is impact. Then under those circumstances, the surety liability is discharged. So the liability of the surety is discharged. Two things have to be satisfied. Number one, security has been not in existence. And the eventual remedy of the guarantor, surety, has against the principal borrower is impact. Then the surety's liability is discharged. This is a very small topic and let me go to the question. My question has just been posted. Vikas ji. Yes, sir. Answer the first question. First I will tell the question and answer. I will read the question. Yes. Murgusen is Kartha of his joint village family consisting of himself and minor son, Kandan, aged about 10 years. Murgusen sold a portion of the joint Hindu family in favor of one Pazani for rupees 10 lakhs without obtaining the court permission to sell. Out of the sale consideration, rupees 10 lakhs, five lakhs was paid in cash to Murgusen and remaining five lakhs was deposited with SBI. In the name of minor children, Kandan and Mrs. Shanti, the mother of Kandan, representing her minor son, Kandan, as a natural guardian. And mother filed a suit to set aside the sale in favor of Pazani as Murgusen has not obtained court permission. And the said alienation is not for the welfare of the joint family, particularly not in the interest of minor Kandan against Murgusen and Pazani. Murgusen had remained ex-party. Pazani filed his written statement stating that no court permission is necessary to sell. Miners undivided interest in the joint Hindu family and the minor share amount was newly deposited with the nationalized bank. The issues were whether Mrs. Shanti is entitled to present Kandan, the minor, as natural guardian, whether the burden of proof is on it. Elini, Pazani to discharge his initial burden that the alienation is for the welfare of the Hindu joint family. Whether the court promotion is necessary to sell. Miners undivided interest in the joint Hindu family. This is very important question. Whether court permission is necessary to sell the minors property under section 8.2 of the Hindu minority and guardianship act 1956. The natural guardian shall not sell minors property without obtaining previous permission from the court. Please keep it in mind. Section 8 sub-class 2 is a bar to sell the minors property without court permission. In this instant case, court permission was not obtained before the sale of the minors property. Now, we have to see whether the property stands in the name of the minor or whether the property of the minor is in the joint family. Here, the Khattah sold the property, this is a joint family property. When the minor is having any share in the Hindu joint family property, then to sell the minor share, no court permission is required. This is section 6 of the Hindu minority and guardianship act 1956. Section 6 of the said act excludes the minor share in the Hindu joint family property from the purview of the Hindu minority and guardianship act. So, as and when the share of the minor is in the Hindu joint family property or co-personary property, no permission is required from the court, from the district court to sell the property. Whereas, any property is purchased in the name of minor. If any property is devolved upon the minor by operation of law as class 1 legal here, under those circumstances, by which of section 8, 2 of the Hindu minority and guardianship act 1956, court permission is necessary. Without court permission, if any sale is affected, the sale is invalid, the minor can repudiate the sale. Now, next point, whether the mother can be the natural guardian of the minor, section 12 of the Hindu minority and guardianship act says, father is the natural guardian. After father, mother will become the natural guardian. So long as the father is alive, the mother cannot take the role of the natural guardian and to file a suit as guardian of the minor, he has no rights. Only after the demise of father, mother will become the natural guardian. During the lifetime of the father, mother cannot institute any suit on behalf of the minor, representing the minor as his guardian. Third issue, whose burden of group it is?