Chapter VIII - Of Indemnity and Guarantee
Section 141
Section 141: Surety benefit of creditor securities
A surety benefits from the creditor’s security existing when the guarantee is entered, whether or not the surety knew about it.
On this page
Need advice on Section 141?
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
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.
Rule and business relevance
If the creditor loses that security, or parts with it without the surety’s consent, discharge is to the extent of the security’s value. Timing and value are therefore central to the analysis.
Limits and related provisions
Do not automatically treat later-acquired security as security existing at inception. The third illustration distinguishes a further security obtained afterwards.
Hypothetical business example
Hypothetical example: A lender holds a mortgage when the guarantee is signed and later releases it without the surety’s consent. The value of the released security is relevant to the extent of discharge.
Practical decision flow
Inventory securities held when the guarantee was entered.
Record any loss or release and the surety’s consent.
Assess the security’s value and the corresponding extent of discharge.
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
- Inventory securities held when the guarantee was entered.
- Record any loss or release and the surety’s consent.
- Assess the security’s value and the corresponding extent of discharge.
Avoid
- Do not automatically treat later-acquired security as security existing at inception. The third illustration distinguishes a further security obtained afterwards.
Glossary
- Security
- An asset or right held by the creditor against the principal debtor.
- Pro tanto discharge
- Discharge to the relevant extent, here the value of the security.
Frequently asked questions
Must the surety have known of the original security?
No. The section expressly protects the surety whether aware of it or not.
Does loss necessarily erase the entire guarantee?
The statutory measure is discharge to the extent of the security’s value.
Is subsequently acquired security treated identically?
The third illustration distinguishes that situation; identify when the security arose.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026