Discharge of surety by release or discharge of principal debtor
Section 134 of the Indian Contract Act, 1872 deals with discharge of surety by release or discharge of principal debtor. The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. The Act came into force on 01 Sep 1872.
The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor.
Illustrations
(a) A gives a guarantee to C for goods to be supplied by C to B. C supplies goods to B, and afterwards B becomes embarrassed and contracts with his creditors (including C) to assign to them his property in consideration of their releasing him from their demands. Here B is released from his debt by the contract with C, and A is discharged from his suretyship.
(b) A contracts with B to grow a crop of indigo on A's land and to deliver it to B at a fixed rate, and C guarantees A's performance of this contract. B diverts a stream of water which is necessary for the irrigation of A's land and thereby prevents him from raising the indigo. C is no longer liable on his guarantee.
(c) A contracts with B for a fixed price to build a house for B within a stipulated time, B supplying the necessary timber. C guarantees A's performance of the contract. B omits to supply the timber. C is discharged from his suretyship.
Section 134, 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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State Bank of Patiala vs S. K. Mathur
Court's Decision & Legal Precedent
Section 134 contemplates only two situations in which the surety is discharged - a contract between creditor and principal debtor by which the debtor is released, or an act or omission of the creditor which in law operates as the discharge of the principal debtor. Read with Sections 128 and 137, the death of the principal debtor during the suit does not by itself discharge the surety, and the High Court was wrong to hold that the recovery suit abated as a whole; proceedings were directed to recommence against the guarantor.
On this section: Settles the outer limits of Section 134 by holding that abatement against a deceased principal debtor is neither a release by contract nor a creditor's act or omission, so the surety's liability survives.
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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: Surety discharged by contract between creditor and principal debtor by which principal debtor is released or by act or omission of creditor resulting in discharge of principal debtor
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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: Surety discharged by contract between creditor and principal debtor releasing principal debtor; does not apply to discharge by operation of law such as insolvency
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Shri Kundanmal Dabriwala vs Haryana Financial Corp., Anr.
Court's Decision & Legal Precedent
A scheme of arrangement sanctioned by the Company Court binds all creditors and extinguishes the balance of the creditor's claim against the principal debtor; on such extinction the surety stands discharged, because he can no longer step into the creditor's shoes and sue the debtor under Sections 139 and 140. The Court distinguished cases of winding up, abatement or dismissal, which only bar the remedy against the debtor without extinguishing the debt, in which the surety remains liable.
On this section: Holds that a court-sanctioned compromise extinguishing the principal debtor's liability falls squarely within Sections 134 and 135, and quashed the Corporation's notice seeking to fix the surety with the residual liability.
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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… 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 debtor is released or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. But a discharge which the principal debtor may secure by operation of …
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… 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 debtor is released or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. But a discharge which the principal debtor may secure by operation of …
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… 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 debtor is released or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. But a discharge which the principal debtor may secure by operation of …
Questions about Section 134
What have the courts held on Section 134 of the Indian Contract Act?
State Bank of Patiala vs S. K. Mathur is the leading judgment on this section among those set out below: Settles the outer limits of Section 134 by holding that abatement against a deceased principal debtor is neither a release by contract nor a creditor's act or omission, so the surety's liability survives. Another 3 judgments on this section are set out below, 3 of them from the Supreme Court. They run from 2011 to 2021.
How do I find court cases under Section 134 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 134, section 134 Contract Act, section 134 of the Indian Contract Act. People searching for it also type section 134 of indian contract act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 4 reported judgments on this section are set out on this page, beginning with State Bank of Patiala vs S. K. Mathur.
When did Section 134 of the Indian Contract Act come into force?
Section 134 of the Indian Contract Act, cited as Contract Act 134, 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 14 Oct 2026. This page is not a substitute for legal advice.