Co-extensive surety liability permits direct action against guarantors' mortgaged property without first exhausting the principal debtor

A surety's liability under Section 128 of the Indian Contract Act is co-extensive with the principal debtor's liability unless the guarantee contract provides otherwise, so a creditor need not first exhaust remedies against the principal debtor. Where the guarantee deeds made the guarantors liable for the whole amount due on default, and did not exclude the ordinary operation of Section 128, the statutory power under Section 29 of the Orissa State Financial Corporation Act could be invoked directly against the guarantors' mortgaged properties. The Corporation was therefore entitled to proceed against the guarantors without first proceeding against the principal debtor, and the challenge failed.

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Issues: Whether the Corporation could proceed against the guarantors' mortgaged properties under Section 29 of the Orissa State Financial Corporation Act, 1951 without first exhausting remedies against the principal debtor.

Analysis: The liability of a surety under Section 128 of the Indian Contract Act, 1872 is co-extensive with that of the principal debtor unless the contract provides otherwise. On the authorities considered, a creditor is not bound to exhaust remedies against the principal debtor before proceeding against the surety. The guarantee deeds in question made the guarantors liable for the whole amount due on default and did not exclude the ordinary operation of Section 128. The statutory power under Section 29 of the Orissa State Financial Corporation Act, 1951 could therefore be invoked against the mortgaged properties of the guarantors.

Conclusion: The Corporation was entitled to proceed against the guarantors and their mortgaged properties without first proceeding against the principal debtor; the challenge failed.

Ratio Decidendi: In the absence of a contractual stipulation to the contrary, a surety's liability is immediate and co-extensive with that of the principal debtor, and the creditor may proceed directly against the surety without first exhausting remedies against the principal debtor.

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