Rights of surety on payment or performance
Section 140 of the Indian Contract Act, 1872 deals with rights of surety on payment or performance. Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor. The Act came into force on 01 Sep 1872.
Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.
Section 140, 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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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: Rights of surety on payment or performance; subrogation rights
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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: Rights of surety on payment or performance, surety invested with all rights creditor had against 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: Rights of surety on payment or performance; surety invested with all rights creditor had against principal debtor
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Mr G A Mansoor Alam Khan vs State Bank of Mysore
Court's Decision & Legal Precedent
A surety cannot seek deferment of recovery against him until the bank exhausts its remedies against the principal debtor; following Bank of Bihar Ltd. v. Dr. Damodar Prasad, it is the duty of the surety to pay the decretal amount, upon which he is subrogated to the rights of the creditor under Section 140 and may then recover from the principal debtor.
On this section: Treats the Section 140 right of subrogation on payment as the reason why the creditor need not be made to postpone recovery from the surety.
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Praveen Raj vs Margadarsi Chit Fund Pvt., Ltd. and 4 OTHERS
Court's Decision & Legal Precedent
A decree-holder may execute against the guarantor without first exhausting his remedies against the principal debtor, and the guarantor cannot resist execution on the ground that the principal debtor has died and his legal representatives have not been brought on record: on paying the decretal debt the surety has a right under Section 140 to recover it from the legal heirs of the principal debtor.
On this section: Uses Section 140 as the answer to the surety's objection - the surety's protection lies in his statutory subrogation after payment, not in compelling the creditor to proceed against the debtor first.
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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: Makes the loss of the surety's Section 140 right to step into the creditor's shoes the operative reason for holding him discharged.
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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… As per the resolution plan, a sum of Rs.38.87 crores was paid to the 1st respondent-financial creditor, which was in full and final settlement of the dues of the 1st respondent-financial creditor. He submitted that upon such payment being made by the appellant, Section 140 of the Indian Contract Act, 1872 (for short, 'the Contract Act') would squarely apply as the rights of the 1st respondent-financial creditor shall stand subrogated in favour of the appellant. Therefore, through ACIL, the appellant would step into the shoes of the 1st respondentfinancial creditor. He would, thus, …
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… In other words, argued counsel, the moratorium which would operate in respect of pending resolution plans of corporate debtors, upon the initiation of an application against personal guarantors puts them on the same level, which the statute itself does not permit. 28. It is submitted that by virtue of Section 140 of the Indian Contract Act, a guarantor upon payment or performance of all that he is liable for, is invested with all rights which the creditor had enjoyed against the principal debtor. This provision enables the guarantor to exercise all rights, which the creditor had against the principal debtor, which would …
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… In other words, argued counsel, the moratorium which would operate in respect of pending resolution plans of corporate debtors, upon the initiation of an application against personal guarantors puts them on the same level, which the statute itself does not permit. 28. It is submitted that by virtue of Section 140 of the Indian Contract Act, a guarantor upon payment or performance of all that he is liable for, is invested with all rights which the creditor had enjoyed against the principal debtor. This provision enables the guarantor to exercise all rights, which the creditor had against the principal debtor, which would …
Questions about Section 140
What have the courts held on Section 140 of the Indian Contract Act?
Mahendra Kumar Rajpal vs Ministry of Corporate Affairs (21 May 2021) is the leading judgment on this section among those set out below: Rights of surety on payment or performance; subrogation rights. Another 5 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 140 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 140, section 140 Contract Act, section 140 of the Indian Contract Act. People searching for it also type indian contract act section 140. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 6 reported judgments on this section are set out on this page, beginning with Mahendra Kumar Rajpal vs Ministry of Corporate Affairs (21 May 2021).
When did Section 140 of the Indian Contract Act come into force?
Section 140 of the Indian Contract Act, cited as Contract Act 140, 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.