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Contradiction between sections 135 and 137 of Indian Contract Act, 1872

When we talk about the Indian Contract Act of 1872, it is the act that has many contradictory terms or definitions in it, but no amendment bill was passed in it, ever since it was made. It is made by Britishers in the era in which they ruled on Indians. As we talk about our constitution itself, more than a hundred amendments were made in it, but in contract, no chance see in future for any amendments.

When we deeply study the Indian contract act, we find a contradiction in it, in special contract i.e, in sections 135 and 137 which states that:

  • Section135:

    Discharge of surety when creditor compounds with, gives time to , or agrees not to sue, principal debtor:
    "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, unlesss the surety assents to such contract."
  • Section 137:

    Creditor's forbearance to sue does not discharge surety:
    Mere forbearance on the part of the creditor to sue the principal debtor, or to enforce any other remedy against him does not, in the absence of any provision in the guarantee to the contrary, discharge the surety.

As we see above in both sections, we mention the contradiction between two sections in red color words, when we only read the colored part of section 135, we clearly understand that it says that:
A contract which is signed between the creditor and principal debtor whereby the creditor promises to the principal debtor that the creditor does not sue on the principal debtor, then it also results that surety is also discharged automatically from the contract between the creditor and principal debtor.

That is if the principal debtor does not pay the due to the creditor, then the creditor has no right to sue against surety rather also not against the principal debtor. So, no chance there that creditor take any action against the surety. Let us take an example of this theory to deeply understand the concept in it.

For example: Mr. A takes a loan from Mr.B and Mr.C makes surety between there contract as a guarantee. Now, after some days Mr.B sees that Mr.A is an honest person and Mr.A also helps him in moving his business, so, they promise Mr.A that, they do not sue on Mr.A if they don't pay their loan. Now, in this case, after this promise, the surety(Mr.C) is automatically discharged from the contract as there is no role of surety in the contract now.

On the contrary, Section 137 defines that:

Mere forbearance of the creditor to sue or to enforce any remedy against the principal debtor for not payment of due, not discharge the surety even in the absence of the provision in the guarantee to the contrary. It means that the creditor firstly not wants to sue on the principal debtor as he gets any benefits from this but after sometimes the creditor wants to sue on him which is contrary to section 135. Let us take an example of this theory to deeply understand this concept.

For example:
If Mr.D owes Mr.C a debt guaranteed by Mr.W. The debt becomes payable. Mr.C does not sue Mr.B for a year after the debt has become payable. Then, Mr.W is not discharged from his surety ship.

There are some limitations in it also, that the action against the principal debtor becomes time-barred. In this case, a question arises is that whether the surety is discharged in such a situation?
The answer is yes, as its mention in contract law, by these reasons that, firstly, even though the action becomes time-barred, it does not result in the complete extinction of the debt. Secondly, even though the creditor's right of action against the principal debtor may not be possible, "the surety can himself set the law in operation against the debtor."

In Mahanth Singh v. U Ba Yi, the privy council also adopted the same position and held that until the principal debtor did not pay the due, since then the surety is not discharged.

In conclusion, we can say that section135 and 137 have contradiction as in the first section it mentions that surety is discharged from his liability if creditor promise to the principal debtor not to sue on him and On the other section, it mentions that the forbearance of creditor does not mean that surety is discharge as principal debtor not pay the due. In conclusion, we only give pressure on the point that in these sections there is a need for amendment on it. Written By: Kartik Sangal

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