Co-extensive surety liability survives company liquidation, and a bank may proceed against guarantors despite claiming in liquidation.

A surety's liability remains co-extensive with that of the principal debtor unless the guarantee provides otherwise, and a creditor is not required to exhaust remedies against the principal debtor before proceeding against the guarantor. The bank's lodging of its claim with the Official Liquidator, and receipt of dividend in the company's liquidation, did not amount to waiver of rights against the guarantors or a variation of the guarantee without consent. The Calcutta HC therefore held that the guarantors were not discharged and the bank could proceed against them in the suit.

---

---

Issues: Whether the guarantors were discharged from liability because the principal debtor company was in liquidation and the bank had lodged and had its claim admitted by the Official Liquidator, and whether the bank could still proceed against the guarantors in the suit.

Analysis: The liability of a surety is co-extensive with that of the principal debtor unless the contract otherwise provides. Mere forbearance by the creditor to sue the principal debtor does not discharge the surety, and the creditor is not bound to exhaust remedies against the principal debtor before proceeding against the surety. The bank's lodging of its claim before the Official Liquidator and acceptance of dividend did not amount to a waiver of its rights against the guarantors, nor did it amount to a variation of the guarantee contract without consent.

Conclusion: The guarantors were not discharged, and the bank was entitled to proceed against them in the suit.

Final Conclusion: The objection raised by the guarantors failed, and their liability under the guarantee remained enforceable despite the company's liquidation proceedings.

Ratio Decidendi: Lodging a claim against the principal debtor in liquidation does not discharge the surety, because the surety's liability remains co-extensive and is not extinguished by the creditor's forbearance or by admission of the claim in liquidation.

---