"Contract of guarantee", "surety", "principal debtor" and "creditor"

Q: When did Section 126 of the Indian Contract Act come into force?

Section 126 of the Indian Contract Act, commonly called guarantee, and cited as Contract Act 126, came into force on 01 Sep 1872, having been enacted on 25 Apr 1872. It is in force as at the date shown on this page.

In force From 01 Sep 1872 Act 9 of 1872 As on 15 Oct 2026

Act 9 of 1872 Ministry Law and Justice Enacted 25 Apr 1872 In force 01 Sep 1872

Section 126 of the Indian Contract Act, 1872 deals with "Contract of guarantee", "surety", "principal debtor" and "creditor". A "contract of guarantee" is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The Act came into force on 01 Sep 1872.

A "contract of guarantee" is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the "surety"; the person in respect of whose default the guarantee is given is called the "principal debtor", and the person to whom the guarantee is given is called the "creditor". A guarantee may be either oral or written.
Section 126, The Indian Contract Act, 1872 (Act 9 of 1872).

Related judgements & precedents

These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.

Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited vs Axis Bank Limited

Supreme Court of India 26 Feb 2020 Binding (Supreme Court) Reportable

Court's Decision & Legal Precedent

Mortgage transactions executed by a subsidiary to secure loans of its holding company constitute preferential transactions under Section 43 of the Insolvency and Bankruptcy Code 2016 when: (1) the transactions transfer the subsidiary's property for benefit of the holding company (a related party and creditor of the subsidiary) for antecedent debts owed by the subsidiary to the holding company; (2) the transactions put the holding company in a beneficial position compared to other creditors in liquidation distribution; (3) the transactions fall within the two-year look-back period for related party transactions; and (4) the transactions are not made in the ordinary course of business or financial affairs of the subsidiary, which requires reading the word 'or' in Section 43(3)(a) as 'and' to ensure both the subsidiary's and transferee's ordinary course of business are considered. Furthermore, lenders of a holding company cannot be categorized as financial creditors of a subsidiary merely by holding mortgages on the subsidiary's assets because financial debt requires disbursal against consideration for time value of money to the corporate debtor, and mortgage debt does not satisfy this essential requirement. The distinction between secured creditor and financial creditor must be maintained, with financial creditors being those with direct engagement in the corporate debtor's functioning from inception, involvement in assessing viability, and role in restructuring.

On this section: Contract to perform promise or discharge liability of third person in case of default; person giving guarantee is surety; person in respect of whose default guarantee given is principal debtor

Read the full order on eCourts India
A. Shakunthala v. A. Mangamma

High Court 01 Mar 2016 Binding (High Court) Reportable CRP No. 4299 of 2012

Court's Decision & Legal Precedent

Final Order order-1.pdf 2016-03-01. CRP 4299/2012. M. Seetharama Murti J. DATE-CHECK false positive (trial IA order 20.03.2012 / suo motu 31.12.2010 in the facts); body is signed 01st March 2016. Isolates Contract 126: a contract of guarantee has three parties (creditor, principal debtor, surety) and may be oral or written; indemnity has two parties; a surety’s ‘Jameenu’ on a promissory note is a s.126 guarantee (Stamp Art. 48), not a s.2(5) bond (Art. 13). Map contract-act 126 cited only. Do not pad contract 124/128 (128 already filled).

On this section: Contract 126 is a three-party contract (creditor, principal debtor, surety) and may be oral or written; a surety endorsement on a promissory note is a guarantee, not a two-party indemnity (A. Shakunthala).

Read the full order on eCourts India

The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.

Questions about Section 126

What have the courts held on Section 126 of the Indian Contract Act?

Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited vs Axis Bank Limited (26 Feb 2020) is the leading judgment on this section among those set out below: Contract to perform promise or discharge liability of third person in case of default; person giving guarantee is surety; person in respect of whose default guarantee given is principal debtor. Another 1 judgment on this section is set out below, 1 of them from the Supreme Court. They run from 2016 to 2020.

How do I find court cases under Section 126 of the Indian Contract Act?

In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Contract Act 126, section 126 Contract Act, section 126 of the Indian Contract Act. People searching for it also type indian contract act 126. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 2 reported judgments on this section are set out on this page, beginning with Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited vs Axis Bank Limited (26 Feb 2020).

When did Section 126 of the Indian Contract Act come into force?

Section 126 of the Indian Contract Act, commonly called guarantee, and cited as Contract Act 126, came into force on 01 Sep 1872, having been enacted on 25 Apr 1872. It is in force as at the date shown on this page.

Other sections of this Act

Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.