Section 135 of the Indian Contract Act, 1872: Discharge of Surety
Section 135 deals with the effect on a surety when the creditor enters into a binding arrangement with the principal debtor to accept a composition, give time for payment or performance, or not sue the principal debtor. Unless the surety assents to that arrangement, the surety is discharged.
Text of Section 135
A contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor, discharges the surety, unless the surety assents to such contract.
Meaning and scope of Section 135
A contract of guarantee involves three relevant persons: the creditor, the principal debtor and the surety. These expressions are defined in Section 126 of the Indian Contract Act, 1872.
Section 135 protects the surety where the creditor and principal debtor alter the practical enforcement of the principal obligation through a binding arrangement without the surety's assent. The section identifies three forms of arrangement: composition with the principal debtor, a promise to give the principal debtor time, and an agreement not to sue the principal debtor.
When is the surety discharged?
| Arrangement | Effect under Section 135 |
|---|---|
| Creditor makes a composition with the principal debtor | The surety is discharged unless the surety assents. |
| Creditor promises the principal debtor additional time | The surety is discharged unless the surety assents. |
| Creditor agrees not to sue the principal debtor | The surety is discharged unless the surety assents. |
| Surety assents to the arrangement | Section 135 itself does not discharge the surety on account of that arrangement. |
Composition with the principal debtor
A composition generally involves an agreed settlement or compromise between the creditor and the principal debtor concerning the debt or obligation. Where such a contract is made without the surety's assent, Section 135 provides for discharge of the surety.
Giving time to the principal debtor
The statutory rule concerns a contract by which the creditor promises to give time to the principal debtor. It should be distinguished from a mere delay or forbearance in taking legal action. Section 137 specifically provides that mere forbearance by the creditor to sue the principal debtor or enforce another remedy does not, by itself and subject to the terms of the guarantee, discharge the surety.
Agreement not to sue the principal debtor
If the creditor contracts with the principal debtor not to sue, the surety is discharged unless the surety assents. The focus is therefore on a contractual arrangement, rather than simple inaction by the creditor.
Important distinction under Sections 136 and 137
Section 136 states that where the creditor's contract to give time to the principal debtor is made with a third person, and not with the principal debtor, the surety is not discharged. Section 137 separately preserves the surety's liability where there is only the creditor's mere forbearance to sue.
Related provisions on guarantees
Section 135 forms part of Chapter VIII of the Indian Contract Act, 1872, dealing with indemnity and guarantee. Closely related provisions include Section 133 on variance in the terms of the contract, Section 134 on release or discharge of the principal debtor, and Section 139 on acts or omissions impairing the surety's eventual remedy.
Official legal source
For the authoritative text and current status of the Central Act, refer to the Indian Contract Act, 1872 on India Code.