GuaranteeSuretySupreme Court of India

State Bank of India v Indexport Registered

(1992) 3 Supreme Court Cases 159; All India Reporter 1992 Supreme Court 174019922 min read
The case in brief30-second read
Facts
The bank advanced credit facilities to the principal debtor. The respondent stood as guarantor, and the principal debtor's property was mortgaged as further security.
Issue
Whether a decree-holder holding a composite decree must exhaust execution against the mortgaged property of the principal debtor before executing against the guarantor.
Held
The Supreme Court held that the bank was entitled to execute the decree against the guarantor without first proceeding against the mortgaged property. The liability of the guarantor being co-extensive with that of the principal debtor, the decree-holder has the option to choose the mode and the order of execution. There is nothing in law which obliges a decree-holder holding a composite decree to exhaust one remedy before resorting to another. The guarantor's remedy is to pay and then seek subrogation under S.140.
Principle
Where a composite decree is passed against the principal debtor and the guarantor, the decree-holder may execute it against the guarantor without first exhausting execution against the mortgaged property of the principal debtor.
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Facts

  • The bank advanced credit facilities to the principal debtor.
  • The respondent stood as guarantor, and the principal debtor's property was mortgaged as further security.
  • On default the bank obtained a composite decree against the principal debtor and the guarantor.
  • In execution the bank proceeded against the guarantor personally.
  • The guarantor objected, contending that the bank must first bring the mortgaged property to sale and proceed against him only for any shortfall.

Issue

  1. Whether a decree-holder holding a composite decree must exhaust execution against the mortgaged property of the principal debtor before executing against the guarantor.

Held

  • The Supreme Court held that the bank was entitled to execute the decree against the guarantor without first proceeding against the mortgaged property. The liability of the guarantor being co-extensive with that of the principal debtor, the decree-holder has the option to choose the mode and the order of execution. There is nothing in law which obliges a decree-holder holding a composite decree to exhaust one remedy before resorting to another. The guarantor's remedy is to pay and then seek subrogation under S.140.

Ratio decidendi

The principle in S.128 that a surety's liability is co-extensive and immediate operates at the execution stage as much as at the stage of suit. A decree-holder is not compelled to realise security before enforcing a personal decree against the guarantor, and the existence of a mortgage does not convert the guarantor's liability into a subsidiary one.

Exam use

How to use it in an answer

  • Cite alongside Bank of Bihar v Damodar Prasad (1969) to cover both the suit and the execution stages.
  • Useful where the problem involves both a guarantee and a mortgage, and the surety argues the security must be realised first.
  • Note the counterpoint: under S.141 the surety is entitled to the benefit of the creditor's securities, so a creditor who loses or releases the security discharges the surety to that extent. Choosing not to realise it is different from losing it.
  • Remember the surety's compensating rights under S.140 subrogation and S.145 indemnity.

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Citation

State Bank of India v Indexport Registered (1992) 3 Supreme Court Cases 159; All India Reporter 1992 Supreme Court 1740

Reported: AIR 1992 Supreme Court 1740; extends Damodar Prasad to the execution stage; 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.