Q: "M" is a farmer. He got a loan of Rs.20,000 from a Bank. "N" was the surety. By way of Debt Relief Act, the debt was reduced to Rs. 10,000. But "M" was not in a position to pay even the reduced amount. What is the liability of "N"?

Ans: As per Sec. 128 of the Indian Contract Act, 1872, the liability of the Surety is co-extensive with that of the Principal debtor unless otherwise provided for in the contract.

In this context, reference is made to the case law, Subramania Vs. Narayanaswami, AIR 1951 Mad.48 (FB) wherein the Court held that if the principal Debtor's liability is extinguished, then the Surety's liability also gets extinguished because the liability of the Surety is co-extensive with that of the Principal Debtor as stated u/s 128 mentioned above.

Therefore, in the above case, 'N', the Surety, is absolved of his liability to the extent of Rs. 10,000/- as 'A' who is a farmer and the Principal Debtor in this case gets a debt relief to that extent. However, as 'A' is not in a position to pay even the reduced amount the Surety has to answer the liability to the Bank The Bank may invoke recovery proceedings from N to the extent of Rs. 10,000/-.