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Indian Contract Act, 1872 · Chapter VI: Of the Consequences of Breach of Contract · Of indemnity and guarantee

Section 141: Surety's right to benefit of creditor's securities

In plain words

A surety gets the benefit of every security the creditor held against the principal debtor when the guarantee was given, whether or not the surety knew of it.

  • If the creditor loses that security, or gives it up without the surety's consent, the surety is discharged to the extent of its value.

Example: C lends 2,000 rupees to B on A's guarantee and also holds a mortgage of B's furniture, which C then cancels. A is discharged to the extent of the furniture's value.

A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.

Read the in-depth explanation, with key Supreme Court rulings ↓

Official text

A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and if the creditor loses, or, without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security.

Illustrations

(a) C, advances to B, his tenant, 2,000 rupees on the guarantee of A. C has also a further security for the 2,000 rupees by a mortgage of B's furniture. C cancels the mortgage. B becomes insolvent and C sues A on his guarantee. A is discharged from liability to the amount of the value of the furniture.

(b) C, a creditor, whose advance to B is secured by a decree, receives also a guarantee for that advance from A. C afterwards takes B's goods in execution under the decree, and then, without the knowledge of A, withdraws the execution. A is discharged.

(c) A, as surety for B, makes a bond jointly with B to C, to secure a loan from C to B. Afterwards, C obtains from B a further security for the same debt. Subsequently, C gives up the further security. A is not discharged.

Source: India Code (indiacode.gov.in), the consolidated text published by the Legislative Department, Government of India. Text as updated on India Code on 15 October 2026. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.

Understanding this section

Section 141 entitles the surety to the benefit of every security the creditor held against the principal debtor when the guarantee was given, whether or not the surety knew of it. If the creditor loses or parts with such security without the surety's consent, the surety is discharged to the extent of its value.

Securities held at the time of guarantee

The section covers securities existing when the suretyship was entered into. Securities taken later are covered by the general right of subrogation under section 140 once the surety pays.

Discharge to the extent of value

The surety is not discharged entirely, only to the extent of the value of the security lost or released.

Common mistakes

  • Treating loss of security as a complete discharge.

Read with: Section 140 Indian Contract Act, 1872, Section 139 Indian Contract Act, 1872

Prepared with AI assistance as a study aid. Every ruling listed was checked against the Supreme Court's own judgments on this site, and quoted words appear in those judgments; linked names open the full judgment. Read the judgments themselves before relying on them. Not legal advice.

Supreme Court judgments citing the section 141