Under section 128 of ICA, the liability of surety is co-extensive that of the
principal debtor that means the surety is liable to the same extent as the
principal debtor. For example if the principal debtor is not liable for debt for
some reason, then surety is also not liable for the same. Also, the principal
debtor is discharged from his debt by the creditor for some reason then
surety will be discharged too. This section depends on the contract as well.
Therefore, the surety’s liability depends on the terms of the contract and is
not liable to pay more than the principal debtor has taken.[3]
Example- “A guarantees to B the payment of a bill of exchange by C, the
acceptor. The bill is dishonoured by C. A is liable, not only for the amount of
the bill, but also for any interest and charges which may have become due on
it. A guarantees to B the payment of a bill of exchange by C, the acceptor.
The bill is dishonoured by C. A is liable, not only for the amount of the bill, but
also for any interest and charges which may have become due on it.”
The liability of the surety is joint and connected with the principal debtor. It is
the choice of the creditor to recover the amount either from the principal
debtor after his default or from surety. He may file a suit against both the
principal debtor and the surety or may file a suit against the surety only or
the principal debtor only.
In Bank of Bihar v Damodar Prasad[4] it was held that the creditor do not have
exhaust all the remedies against principal debtor before suing the surety. It is
the duty of the surety to pay the debt if principal debtor does not pay. The
purpose of contract of guarantee is defeated if the creditor is asked to
postpone his remedies against the surety. The liability of surety is immediate.
