Consideration for guarantee

Q: When did Section 127 of the Indian Contract Act come into force?

Section 127 of the Indian Contract Act, cited as Contract Act 127, 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 127 of the Indian Contract Act, 1872 deals with consideration for guarantee. Anything done, or any promise made, for the benefit of the principal debtor, may be a sufficient consideration to the surety for giving the guarantee. The Act came into force on 01 Sep 1872.

Anything done, or any promise made, for the benefit of the principal debtor, may be a sufficient consideration to the surety for giving the guarantee.
Illustrations
(a) B requests A to sell and deliver to him goods on credit. A agrees to do so, provided C will guarantee the payment of the price of the goods. C promises to guarantee the payment in consideration of A's promise to deliver the goods. This is a sufficient consideration for C's promise.
(b) A sells and delivers goods to B. C afterwards requests A to forbear to sue B for the debt for a year, and promises that, if he does so, C will pay for them in default of payment by B. A agrees to forbear as requested. This is a sufficient consideration for C's promise.
(c) A sells and delivers goods to B. C afterwards, without consideration, agrees to pay for them in default of B. The agreement is void.
Section 127, 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: Anything done or any promise made for benefit of principal debtor may be sufficient consideration to surety for giving guarantee

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Questions about Section 127

What have the courts held on Section 127 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: Anything done or any promise made for benefit of principal debtor may be sufficient consideration to surety for giving guarantee.

How do I find court cases under Section 127 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 127, section 127 Contract Act, section 127 of the Indian Contract Act. People searching for it also type 127 contract act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 1 reported judgment on this section is 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 127 of the Indian Contract Act come into force?

Section 127 of the Indian Contract Act, cited as Contract Act 127, 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.