State Bank Of India vs Indexport Registered And Ors - Liability of the Surety is Co-extensive with that of the Principal Debtor

 Supreme Court of India (30.04.1992) in State Bank Of India vs Indexport Registered And Ors, [Civil Appeal No. 1888 of 1992 (SLP (Civil) No. 7434 of 1980]  held as under;

1. the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract”

2. The creditor is not bound to exhaust his remedy against the principal before suing the surety

3. The liability of a principal debtor and the liability of a surety which is co-extensive with that of the former are really separate liabilities, although arising out of the same transaction

4. It will be noticed that the guarantor alone could have been sued, without even suing the principal debtor, so long as the creditor satisfies the court that the principal debtor is in default”.

Excerpts of the order;

“ In the present case before us the decree does not postpone the execution. The decree is simultaneous and it is jointly and severally against all the defendants including the guarantors. It is the right of the decree holder to proceed with it in a way he likes. Section 128 of the Indian Contract Act itself provides that "the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract”.

 

“A surety's liability to pay the debt is not removed by reason of the creditor's omission to sue the principal debtor. The creditor is not bound to exhaust his remedy against the principal before suing the surety, and a suit may be maintained against the surety though the principal has not been sued."

 

"The question as to the liability of the surety, its extent and the manner of its enforcement have to be decided on first principles as to the nature and incidents of suretyship. The liability of a principal debtor and the liability of a surety which is co-extensive with that of the former are really separate liabilities, although arising out of the same transaction. Notwithstanding the fact that they may stem from the same transaction, the two liabilities are distinct. The liability of the surety does not also, in all cases, arise simultaneously." 

 

“It will be noticed that the guarantor alone could have been sued, without even suing the principal debtor, so long as the creditor satisfies the court that the principal debtor is in default”.

 

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