Indian Contract Act, 1872  - Section 139 , The Code of Civil Procedure, 1908  - Order XXXVII Rule (3)

Respondent No. 1 (borrower) took house building loan from Finance Company (Plaintiff) - Respondents Nos. 2 and 3 stood guarantees for repayment - Borrower also executed Loan Agreement and also executed promissory note and created equitable mortgage in favour of Plaintiff - Execution of promissory note and mortgage will not absolve the guarantees of their liabilities - Non- payment of loan - Suit for recovery of money - Trial Court refused to grant leave to contest to guarantees and decree against guarantees rightly passed by trial court - Provisions of 39 of Contract Act will not apply - Further held - Liability of the guarantor is equal to and co-extensive with the borrower and it is highly doubtful that the guarantor can avoid his liability simply on the basis of the promissory note made out or an equitable mortgage created by the borrower in favour of the lender - However, in the facts of this case, this question does not even arise. 1976(4) SCC 687, relied.

Topic(s)-

Important Decision(s)- Liability of the guarantor is equal to and co-extensive with the borrower.