Surety discharge and limitation rules prevent creditor reliance on later debtor dealings to bind non-consenting guarantors.

A surety is discharged where the creditor and principal debtor, without the surety's assent, materially vary or substitute the original loan arrangement, because statutory protections under suretyship cannot be overridden by the guarantee bond. An acknowledgment or renewed promissory note executed only by the principal debtor does not extend limitation against the sureties, since limitation must be saved by the party against whom liability is asserted. A mere demand clause also does not defer the statutory start of limitation where the loan documents themselves fix the relevant starting point. The suit was therefore time-barred on proper computation of limitation.

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Issues: (i) Whether the guarantee bond could override the statutory protections of sureties under the Contract Act and whether the sureties were discharged by subsequent dealings between the creditor and the principal debtor. (ii) Whether an acknowledgment or renewed promissory note executed only by the principal debtor extended limitation against the sureties. (iii) Whether limitation in the suit for recovery of the loan began only on demand or from the date of the loan documents.

Issue (i): Whether the guarantee bond could override the statutory protections of sureties under the Contract Act and whether the sureties were discharged by subsequent dealings between the creditor and the principal debtor.

Analysis: The guarantee deed was read against the statutory scheme governing suretyship. A variance in the contractual terms between the creditor and the principal debtor, or a composition or extension of time granted without the sureties' assent, attracts the protective provisions relating to discharge of surety. The later loan advance and the renewed promissory note were transactions to which the sureties were not parties. The subsequent arrangement was treated as a substitution of contract, and the sureties could not be deprived of the statutory protection by terms in the guarantee bond.

Conclusion: The sureties were discharged and the guarantee terms could not defeat the statutory rights available to them.

Issue (ii): Whether an acknowledgment or renewed promissory note executed only by the principal debtor extended limitation against the sureties.

Analysis: An acknowledgment for the purpose of extending limitation must be by the party against whom the right is claimed. Since the sureties did not sign or assent to the later acknowledgment or the renewed promissory note, the extension of limitation operated only against the principal debtor. The principle that an acknowledgment by the debtor does not, by itself, save limitation against the surety was applied.

Conclusion: Limitation was not extended against the sureties by the principal debtor's acknowledgment or renewed note.

Issue (iii): Whether limitation in the suit for recovery of the loan began only on demand or from the date of the loan documents.

Analysis: The applicable limitation provisions prescribed a three-year period and linked the start of time to the date of the loan or promissory note in the circumstances of the case. A mere clause that payment would be made on demand did not postpone the commencement of limitation beyond the statutory scheme. The court rejected the contention that the creditor could postpone the starting point indefinitely by delaying demand.

Conclusion: Limitation began from the date of the relevant loan documents, not from a later demand.

Final Conclusion: The appeal failed because the sureties were not bound by the later transactions between the creditor and the principal debtor, the principal debtor's acknowledgment did not save limitation against them, and the suit was time-barred on the proper computation of limitation.

Ratio Decidendi: A surety is discharged where the creditor and principal debtor, without the surety's assent, materially vary or substitute the original contract, and an acknowledgment by the principal debtor alone does not extend limitation against the surety; limitation cannot be postponed beyond the statutory starting point by a mere demand clause.

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