What are the liabilities of a Guarantor towards a creditor?

809 votes

The guarantor of a loan is liable to pay it if the debtor fails to clear it, the Supreme Court has ruled, while maintaining that financial institutions too cannot act like property dealers in recovering the debts.
A bench of justices BS Chauhan and Dipak Misra also said the guarantor cannot insist that the creditor must first exhaust all remedies against the principal debtor before recovering the debts from the surety holders.





There can be no dispute to the settled legal proposition that in view of the provisions of Section 128 of the Indian Contract Act, 1872, the liability of the guarantor / surety is co-extensive with that of the debtor.
"Therefore, the creditor has a right to obtain a decree against the surety and the principal debtor.
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"The surety has no right to restrain execution of the decree against him until the creditor has exhausted his remedy against the principal debtor for the reason that it is the business of the surety/ guarantor to see whether the principal debtor has paid or not," said Justice Chauhan, writing the judgement for the bench.
The apex court gave the ruling on an appeal by one Ganga Kishun, who had stood as a guarantor to a bank loan, raised by one Ganga Prasad, who had died without clearing it. Ganga Kishun had come to the apex court against the Uttar Pradesh government's decision to recover the loan arrears from him after the death of principal debtor Ganga Prasad.
While dismissing Ganga Kishun's appeal, the apex court, however, faulted the government's decision to auction Ganga Kishun's entire stretch of land for Rs 25,000 to recover an arrear worth Rs 8,500 only and not confining the auction to only 1/3rd of the land which could have fetched the arrears.

Advocate Siddhant Sharma LawRato

524 votes

Garnishee is a legal person holding a claim or something thats against a legal claim. The guarantor have all the liabilities of a borrower. But once the borrower defaults n guarantor clears it wholely or partly. The guarantor is at liberty to claim that from tje borrower butbonly after clearing the debt. Guarnishee can be directed to pay the debt at the final stage.
Qury lacks some details
Hope am up to ur query

Advocate Manoj George LawRato