Case Note & Summary
The Supreme Court allowed appeal by Appellant against High Court order that discharged sureties from all liability -- The Court held that under Section 133 of Indian Contract Act, 1872, sureties are liable for original sanctioned loan amount of Rs. 4,00,000/- but discharged for subsequent overdrawn amounts as variance occurred without their consent -- The Court restored Gujarat State Co-operative Tribunal order with modification, directing recovery of Rs. 4,00,000/- with interest from sureties -- The judgment clarified that surety liability can be bifurcated between original contract and subsequent variations
Headnote
The Supreme Court allowed civil appeal filed by Appellant against Respondents -- The Court held that sureties are liable under Section 133 of Indian Contract Act, 1872 for original loan amount of Rs.4,00,000/- but discharged for subsequent overdrawn amounts due to variance without consent -- The High Court order was set aside and Gujarat State Co-operative Tribunal order restored with modification -- The judgment interpreted Sections 133 and 139 of Indian Contract Act, 1872 in context of surety liability bifurcation
Issue of Consideration
Whether respondents are entitled to benefit under Section 139 of Indian Contract Act, 1872 or liable as sureties under Section 133 of Indian Contract Act, 1872
Final Decision
The Supreme Court allowed appeal, set aside High Court order, restored Gujarat State Co-operative Tribunal order with modification -- Held sureties liable for original loan amount of Rs. 4,00,000/- with interest under Section 133 of Indian Contract Act, 1872 but discharged for subsequent overdrawn amounts
Law Points
- Section 133 of Indian Contract Act
- 1872 discharges surety only for transactions subsequent to variance without consent
- Section 139 of Indian Contract Act
- 1872 discharges surety if creditor's act impairs surety's remedy
- Surety liability can be bifurcated between original loan and subsequent overdrawn amounts
- Contract of guarantee defined under Section 126 of Indian Contract Act
- 1872
Case Details
2026 LawText (SC) (02) 73
Civil Appeal No.3200 of 2016
B. V. NAGARATHNA J. , UJJAL BHUYAN J.
Bhagyalaxmi Co-operative Bank Ltd.
Babaldas Amtharam Patel (D) through Legal Representatives & Others
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Nature of Litigation
Civil appeal challenging High Court order that discharged sureties from liability in loan recovery case
Remedy Sought
Appellant Bank sought recovery of loan amount from sureties respondents Nos.1 and 2
Filing Reason
High Court allowed writ petition by sureties, discharging them from all liability under Section 139 of Indian Contract Act, 1872
Previous Decisions
Board of Nominees decreed suit against principal debtor but dismissed against sureties -- Gujarat State Co-operative Tribunal allowed appeal against sureties for Rs.4,00,000/- -- High Court set aside Tribunal order
Issues
Whether sureties are entitled to benefit under Section 139 of Indian Contract Act, 1872
Whether sureties are liable under Section 133 of Indian Contract Act, 1872
Submissions/Arguments
Appellant argued sureties liable under Section 133 of Indian Contract Act, 1872 for original loan amount only
Respondents argued sureties discharged under Section 139 of Indian Contract Act, 1872 due to creditor's act impairing remedy
Ratio Decidendi
Under Section 133 of Indian Contract Act, 1872, surety is discharged only for transactions subsequent to variance made without consent -- Surety liability can be bifurcated between original contract amount and subsequent varied amounts -- Section 139 of Indian Contract Act, 1872 applies when creditor's act impairs surety's remedy against principal debtor
Judgment Excerpts
In our view, respondents are liable in accordance with Section 133 of the Act
Section 126 of the Act defines a contract of guarantee, surety, principal-debtor and creditor
Procedural History
Lavad Suit No.181/1995 filed before Board of Nominees -- Judgment dated 09.07.2001 decreed suit against principal debtor only -- Appeal No.552/2001 before Gujarat State Co-operative Tribunal allowed on 31.01.2007 -- Special Civil Application No.17125/2007 before High Court allowed on 25.06.2008 -- Civil Appeal No.3200 of 2016 before Supreme Court
Acts & Sections
- Indian Contract Act, 1872: Section 126, Section 133, Section 139
