Chapter VIII - Of Indemnity and Guarantee
Section 140
Section 140: Surety rights after payment
A surety who pays or performs all that the surety is liable for obtains the creditor’s rights against the principal debtor.
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Need advice on Section 140?
This article is for general information. Refer to the Indian Contract Act, 1872 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.
Rule and business relevance
The debt must have become due, or the guaranteed duty must have been defaulted on. Following the required payment or performance, the surety is invested with the creditor’s rights against the debtor.
Limits and related provisions
Do not assume a small part payment alone satisfies the stated condition. Also distinguish these transferred rights from the separate indemnity right under section 145.
Hypothetical business example
Hypothetical example: After default, a surety pays the full amount for which the guarantee makes that surety liable. The surety then examines the creditor’s available rights and supporting documents against the debtor.
Practical decision flow
Confirm the due debt or defaulted guaranteed duty.
Document payment or performance of all the surety is liable for.
Identify and preserve the creditor’s rights and records against the debtor.
Check the applicable legal framework
This guide explains the central provision. Applicable State amendments, the agreement, transaction date and other governing laws can affect its application. Check the current legal framework before relying on it for a commercial decision.
Practical checklist
Do
- Confirm the due debt or defaulted guaranteed duty.
- Document payment or performance of all the surety is liable for.
- Identify and preserve the creditor’s rights and records against the debtor.
Avoid
- Do not assume a small part payment alone satisfies the stated condition. Also distinguish these transferred rights from the separate indemnity right under section 145.
Glossary
- Subrogation
- The surety’s being invested with the creditor’s rights after the statutory conditions are met.
- Guaranteed duty
- The principal debtor’s performance obligation covered by the guarantee.
Frequently asked questions
Does the section address payment before any debt is due or default?
Its stated conditions are a due debt or default of the guaranteed duty.
Is all required liability to be performed relevant?
Yes. The wording requires payment or performance of all that the surety is liable for.
Is indemnity the same statutory right?
Section 145 separately addresses the debtor’s implied promise to indemnify the surety.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026