Bank of Bihar Ltd v Damodar Prasad
Rule established
The liability of a surety under Section 128 is immediate and co-extensive with that of the principal debtor. A creditor is not bound to exhaust his remedies against the principal debtor, or to realise any security, before proceeding against the surety.
Facts
- The appellant bank advanced money to the principal debtor.
- The respondent guaranteed repayment as surety.
- The principal debtor defaulted.
- The bank sued both the principal debtor and the surety.
- The trial court passed a decree but directed that the bank should enforce the decree against the principal debtor first, and proceed against the surety only if that recovery failed.
- The High Court upheld that direction. The bank appealed.
Issue
- Whether a creditor must exhaust his remedies against the principal debtor before he can enforce the guarantee against the surety.
Held
- The Supreme Court allowed the appeal and set aside the direction. The liability of the surety is immediate and, under S.128, co-extensive with that of the principal debtor unless the contract otherwise provides. It is not deferred until the creditor has exhausted his remedies against the principal debtor. To impose such a condition would defeat the object of a guarantee, which is to give the creditor an additional and immediately enforceable remedy. A guarantee is a collateral security taken precisely so that the creditor may proceed against the surety without delay.
Ratio Decidendi
Section 128 makes the surety's liability co-extensive with the principal debtor's, and that liability arises immediately on default. The creditor has an unfettered choice of whom to proceed against. Any judicial direction compelling him to pursue the principal debtor first is contrary to S.128 and to the commercial purpose of suretyship.
How to use it in an exam
- The standard citation whenever a surety argues that the creditor must sue the principal debtor first, or must first realise the security.
- Explain the meaning of co-extensive: identical in quantum, but still secondary in character.
- Extended to the execution stage by State Bank of India v Indexport Registered (1992).
- Contrast with the surety's protective provisions in S.133 to S.141, which do limit the creditor's freedom of action.
Source
Source: AIR 1969 Supreme Court 297; leading Indian authority on the immediacy of a surety's liability; citation and bench checked against Indian Kanoon and reported sources, audit of 12 August 2026
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.