Section 137 The Indian Contract Act, 1872
Section 137 – The Indian Contract Act, 1872
Title: Discharge of Surety by Creditor's Forbearance to Sue
📜 Bare Act Language:
"Mere forbearance on the part of the creditor to sue the principal debtor, or to enforce any other remedy against him, does not, in the absence of any provision in the guarantee to the contrary, discharge the surety."
🔍 Explanation:
This section deals with contracts of guarantee, specifically the liability of the surety.
If the creditor delays taking action against the principal debtor (for example, doesn't sue them or enforce the debt),
That does not release the surety from their obligation,
Unless the contract of guarantee explicitly states that such delay would discharge the surety.
🧠 Key Concepts:
Surety: Person who promises to repay if the principal debtor fails.
Creditor's inaction or delay does not equal discharge of surety.
The surety remains liable until the debt is satisfied or discharged legally or by contract.
⚖️ Example:
C lends money to B. A stands as surety.
C does not sue B for 2 years even after default.
→ A is still liable as surety unless the guarantee contract says otherwise.
📚 Important Case Law:
Bank of Bihar Ltd. v. Damodar Prasad (AIR 1969 SC 297):
Held that a surety’s liability is not affected by the creditor's failure or delay in suing the principal debtor.
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