Surety's liability
Section 128 of the Indian Contract Act, 1872 deals with surety's liability. The liability of the surety is co- extensive with that of the principal debtor, unless it is otherwise provided by the contract. The Act came into force on 01 Sep 1872.
The liability of the surety is co- extensive with that of the principal debtor, unless it is otherwise provided by the contract.
Illustration
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.
Section 128, 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.
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Insolvency and Bankruptcy Board of India vs Rajender Rao Juvvadi
Court's Decision & Legal Precedent
The Central Government acted within its powers under Section 1(3) of the Insolvency and Bankruptcy Code, 2016 in issuing the impugned notification dated 15.11.2019 bringing into force provisions of the Code selectively for personal guarantors to corporate debtors. The notification is a valid exercise of conditional legislation as: (1) the 2018 Amendment Act provided sufficient legislative guidance by creating a separate category of personal guarantors and amending Section 60 to provide unified adjudication; (2) personal guarantors form a distinct category warranting differential treatment due to their intrinsic connection with corporate debtors; (3) the notification operationalizes existing provisions in accordance with Parliamentary intent; and (4) approval of a resolution plan for a corporate debtor does not discharge the personal guarantor's liability which arises from an independent contract of guarantee and is not discharged by involuntary discharge of the principal debtor by operation of law.
On this section: The Court analyzed the co-extensive liability of sureties with principal debtors, the discharge of sureties by variance in contract terms, the discharge by release of principal debtor, and the rights of sureties upon payment or performance
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Mahendra Kumar Rajpal vs Ministry of Corporate Affairs
Court's Decision & Legal Precedent
The Central Government, acting under Section 1(3) of the Insolvency and Bankruptcy Code, 2016, has the power to bring into force different provisions of the Code at different times for different categories of persons. The 2018 Amendment Act, by creating personal guarantors as a distinct category in Section 2(e) and mandating the NCLT as the adjudicating authority in Section 60, provided sufficient legislative guidance for the Central Government to selectively apply the Code to personal guarantors to corporate debtors. The notification dated 15.11.2019 is a valid exercise of conditional legislation, not an instance of excessive delegation or impermissible legislative exercise. Personal guarantors, though individuals, are intrinsically connected to corporate debtors and warrant unified adjudication before the NCLT. The approval of a corporate resolution plan does not discharge the personal guarantor's liability, which remains enforceable as an independent contractual obligation under the Indian Contract Act, 1872.
On this section: Liability of surety co-extensive with principal debtor unless otherwise provided
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Sanjay Singal vs Union of India
Court's Decision & Legal Precedent
The impugned notification dated 15.11.2019 bringing into force provisions of the Insolvency and Bankruptcy Code, 2016 only in so far as they relate to personal guarantors to corporate debtors is a valid exercise of power conferred by Section 1(3) of the Code. The Central Government acted within its constitutional powers in selectively applying Code provisions to personal guarantors as a distinct category of individuals, as this classification was created by Parliament through the 2018 Amendment Act which amended Section 2(e) and Section 60 to provide unified adjudication of corporate debtors and personal guarantors before the NCLT. The notification does not constitute impermissible delegation of legislative power or excessive modification of statutory provisions, but rather operationalizes the Parliamentary intent to treat personal guarantors differently from other individuals due to their intrinsic connection with corporate debtors. Approval of a resolution plan relating to a corporate debtor does not operate to discharge the liabilities of personal guarantors to such corporate debtors, as the guarantor's liability is co-extensive with the principal debtor and continues notwithstanding involuntary discharge of the principal debtor by operation of law.
On this section: Liability of surety is co-extensive with that of principal debtor unless otherwise provided by contract
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Lalit Kumar Jain vs Union of India
Court's Decision & Legal Precedent
The Central Government, in exercise of powers conferred by Section 1(3) of the Insolvency and Bankruptcy Code, 2016, has authority to bring into force different provisions of the Code at different times for different categories of persons, including personal guarantors to corporate debtors. The 2018 Amendment Act, by creating distinct classification of personal guarantors under Section 2(e) and amending Section 60, provided sufficient parliamentary guidance for such selective application. The impugned notification, which brings into force provisions of Part III of the Code only in relation to personal guarantors to corporate debtors, is valid exercise of power conferred by Section 1(3) and does not amount to excessive delegation or modification of Code provisions. Furthermore, approval of a resolution plan for a corporate debtor does not discharge the personal guarantee liabilities of guarantors, as such liabilities arise from independent contracts of guarantee and are not discharged by involuntary discharge of principal debtor by operation of law.
On this section: Liability of surety is co-extensive with that of principal debtor unless otherwise provided by contract; guarantor remains liable even after principal debtor's discharge by operation of law
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Muthyala Prasanna Sree v. Shriram City Union Finance Ltd.
Court's Decision & Legal Precedent
HC Final Order order-1.pdf 2019-04-30 DATE VERIFIED. Telangana DB Chauhan ACJ / Rajasheker Reddy. CRP 1143/2019. Isolates Contract 128: surety's liability is coextensive with the principal debtor unless the contract otherwise provides; the creditor may proceed against the surety first and need not exhaust the principal. M.A. Raoof treated as per incuriam of C.L. Vimla. Map contract-act 128 only. Do not pad SARFAESI or chit-fund special law.
On this section: Contract 128 makes the surety's liability coextensive with the principal debtor; the creditor need not exhaust the principal first (Muthyala Prasanna Sree).
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.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… The liability is absolute and unconditional. The fact that the Company in liquidation i.e. the principal debtor has gone into liquidation also would not have any effect on the liability of the Bank i.e. the guarantor. Under Section 128 of the Indian Contract Act, the liability of the surety is coextensive with that of the principal debtor unless it is otherwise provided by the contract. A surety is no doubt discharged under Section 134 of the Indian Contract Act by any contract between the creditor and the principal debtor by which the principal …
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… The liability is absolute and unconditional. The fact that the Company in liquidation i.e. the principal debtor has gone into liquidation also would not have any effect on the liability of the Bank i.e. the guarantor. Under Section 128 of the Indian Contract Act, the liability of the surety is coextensive with that of the principal debtor unless it is otherwise provided by the contract. A surety is no doubt discharged under Section 134 of the Indian Contract Act by any contract between the creditor and the principal debtor by which the principal …
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… The liability is absolute and unconditional. The fact that the Company in liquidation i.e. the principal debtor has gone into liquidation also would not have any effect on the liability of the Bank i.e. the guarantor. Under Section 128 of the Indian Contract Act, the liability of the surety is coextensive with that of the principal debtor unless it is otherwise provided by the contract. A surety is no doubt discharged under Section 134 of the Indian Contract Act by any contract between the creditor and the principal debtor by which the principal …
Questions about Section 128
What have the courts held on Section 128 of the Indian Contract Act?
Insolvency and Bankruptcy Board of India vs Rajender Rao Juvvadi (21 May 2021) is the leading judgment on this section among those set out below: The Court analyzed the co-extensive liability of sureties with principal debtors, the discharge of sureties by variance in contract terms, the discharge by release of principal debtor, and the rights of sureties upon payment or performance. Another 4 judgments on this section are set out below, 4 of them from the Supreme Court. They run from 2019 to 2021.
How do I find court cases under Section 128 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 128, section 128 Contract Act, section 128 of the Indian Contract Act. People searching for it also type contracts act cap 128. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 5 reported judgments on this section are set out on this page, beginning with Insolvency and Bankruptcy Board of India vs Rajender Rao Juvvadi (21 May 2021).
When did Section 128 of the Indian Contract Act come into force?
Section 128 of the Indian Contract Act, cited as Contract Act 128, 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
- 73. Compensation for loss or damage caused by breach of contract1822 words
- 23. What considerations and objects are lawful, and what not596 words
- 74. Compensation for breach of contract where penalty stipulated for577 words
- 28. Agreements in restraint of legal proceeding void512 words
- 25. Agreement without consideration, void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law423 words
- 16. "Undue influence" defined397 words
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.