57. Bowes to C a debt guaranteed by A. The debt becomes payable. C does not sue B for a year after the debt has become payable. Is A discharged from his suretryship.

1. Facts of the Case

• B, the principal debtor, owed a debt to C, the creditor.
• A stood as a surety for the debt, guaranteeing payment in case B failed to pay.
• The debt became due and payable, but C did not take any legal action against B for a period of one year after the debt became payable.
• A claims that he is discharged from his suretyship because C failed to sue B promptly.
• The issue is whether mere inaction or delay on the part of the creditor in suing the principal debtor discharges the surety from liability.

2. Issues in the Case

1. Does the creditor’s delay or inaction in suing the principal debtor discharge the surety from his obligation?
2. Is a surety discharged only when the creditor’s conduct results in loss or impairment of the surety’s remedies against the principal debtor?
3. Whether, under Indian Contract Act, 1872, the surety’s liability remains co-extensive with that of the principal debtor despite the creditor’s delay in enforcing payment?

3. Legal Principles Covered to Support Case Proceedings and Judgement

Relevant Provisions – Indian Contract Act, 1872

1. Section 128 – Surety’s liability is co-extensive with that of the principal debtor:
   • The surety’s liability is equal in extent and duration to that of the principal debtor unless otherwise provided by the contract.
   • This means that if the debtor does not pay when the debt becomes due, the creditor can proceed directly against the surety without first suing the debtor.
2. Section 134 – Discharge of surety by release or discharge of principal debtor:
   • A surety is discharged if the creditor releases the principal debtor or does any act which has the legal effect of discharging the principal debtor.
   • However, mere inaction or delay on the part of the creditor in suing the debtor does not amount to a release of the debtor.
3. Section 137 – Creditor’s forbearance to sue does not discharge surety:
   • The forbearance of the creditor to sue the principal debtor or to enforce any other remedy against him does not discharge the surety, unless there is an express agreement by which the creditor agrees to give time to the debtor.

Supporting Case Laws

1. Maharashtra State Electricity Board v. Official Liquidator, High Court, Ernakulam (1982) AIR 1497 (SC):
   • It was held that the surety’s liability is not affected by the creditor’s delay in taking legal action against the principal debtor.
2. Bharat Nidhi Ltd. v. Takhatmal (1969) AIR 313 (SC):
   • The Supreme Court observed that mere forbearance or omission to sue the principal debtor does not discharge the surety, unless it can be shown that such delay caused actual prejudice or was accompanied by a binding agreement to extend time.
3. Polak v. Everett (1876) 1 QBD 669:
   • The court held that the surety is not discharged by the creditor’s forbearance to sue unless there is an agreement supported by consideration to extend the time of payment.
4. SBI v. Indexport Registered (1992) 3 SCC 159:
   • The creditor is not bound to exhaust his remedy against the principal debtor before proceeding against the surety. The liability of the surety arises immediately on default by the principal debtor.

Legal Analysis

• The surety’s liability arises the moment the principal debtor defaults.
• The creditor’s failure to sue immediately or delay in legal proceedings does not discharge the surety, as long as there is no contract between the creditor and debtor extending the time of payment without the surety’s consent (Section 135).
• Under Section 137, mere forbearance to sue — that is, choosing not to sue immediately — is not a ground for discharge of the surety.
• Therefore, even though C did not sue B for one year, A’s liability remains intact, as C’s inaction did not extinguish or impair the surety’s rights.
• If C had entered into an agreement with B to extend time without A’s consent, then only A could have been discharged (as per Section 135).

4. Possible Judgement

• In this case, C’s failure to sue B for one year is a mere act of forbearance to sue, not an agreement to give time or release the debtor.
• According to Section 137 of the Indian Contract Act, 1872, forbearance to sue does not discharge the surety.
• Therefore, A is not discharged from his suretyship. His liability as surety continues and remains co-extensive with that of the principal debtor under Section 128.
• The creditor C is legally entitled to recover the debt either from B (principal debtor) or from A (surety).

Judgement:

• Held: A is not discharged from his suretyship.
• Reason: C’s inaction or delay in suing B for one year is only forbearance to sue, which does not discharge a surety under Section 137 of the Indian Contract Act, 1872.
• Legal Basis: Sections 128, 134, and 137 of the Indian Contract Act, 1872.
• Outcome: The creditor can recover the debt from either B or A.

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