Contentious Discharge Of Surety’s Liability In Light Of Variance In The Contracting Terms

Contentious Discharge Of Surety’s Liability In Light Of Variance In The Contracting Terms Causing Prejudice To The Parties: An Analysis Of Section 133 Of The Indian Contracts

Jasmeet Singh Kang, LL.B., Jindal Global Law School, O.P. Jindal Global University, Sonipat

ABSTRACT

Section 133 of the Indian Contract Act, 1872 caters to the variance in the terms of agreement in absence of the surety’s consent. The strict provision calls for extinguishing of any liability that a surety has, if any variance in the terms of agreement has been made, in surety’s absence. Plain reading of the section can, howsoever, be misleading as the corpus of law includes many pronouncements of the courts that have further qualified the section. This will be dealt with precision in the subsequent parts in this paper. The aim of this paper is to microscopically analyse the rights and interests of the parties to a contract of guarantee (specially the surety) particular to a situation of extending a loan. The situation being, where a loan is granted and a part of which is secured by a guarantor. It could very well happen when such loan amount was subsequently increased, without informing the surety. The question arises that whether the guarantee for that part of loan would still hold good or such variance would be deemed to absolve the surety of its liability. The case of Shantanakasimhaiah v Dena Bank Mysore1 is precedent on the issue. It however fails to consider some basic equitable values of surety’s interest in the jurisprudence of contracts of guarantee, and this paper contains a critique of the same. In an attempt to do so, the structure of the paper aims initially at establishing the significance of surety’s interest. It further looks at the arguments and the jurisprudence circling the issue and then finally concludes with the critique of Shantanakasimhaiah v Dena Bank Mysore.