Guarantor Cannot Insist Creditor Exhaust Remedies Against Principal Borrower First, Allahabad HC Rules

The Allahabad High Court's Lucknow Bench dismissed writ petitions by two postal employees challenging monthly salary deductions made by a cooperative bank to recover loans they had guaranteed, holding that a guarantor's liability under Section 128 of the Indian Contract Act, 1872 is immediate, absolute, and co-extensive with that of the principal borrower.

A Division Bench of the Allahabad High Court at Lucknow, comprising Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary, on 6 August 2026 dismissed two writ petitions filed by Vineet Pandey and Anoop Kumar Mishra — both serving as Postal Assistants at Balrampur Post Office — who had challenged monthly deductions of Rs 10,000 from their salaries. The deductions were initiated by U.P. Postal Primary Cooperative Bank Limited to recover dues on loans taken by a colleague for whom the petitioners had stood as guarantors. The bench held that the bank was fully entitled to proceed directly against the guarantors without first exhausting its remedies against the principal borrower, and that simultaneous recovery from both is not only permissible but consistent with the nature of a contract of guarantee.

The Dispute Before the Lucknow Bench

Vineet Pandey (WRIT-C No. 6410 of 2026) and Anoop Kumar Mishra (WRIT-C No. 6423 of 2026) had stood as guarantors for loans availed by their colleague Vikrant Dubey, a Postal Assistant posted at Mankapur Post Office, District Gonda. Dubey had borrowed three separate amounts from U.P. Postal Primary Cooperative Bank Limited during 2022–23: a festival loan of Rs 50,000, a short-term loan of Rs 3,00,000, and a personal loan of Rs 18,00,000.

When Dubey defaulted, the bank initiated recovery proceedings against him and simultaneously sought to recover dues from the two petitioners in their capacity as guarantors. The bank wrote to the Postal Department requesting deduction of Rs 10,000 per month from each petitioner's salary. On 15 April 2026, it formally issued the recovery letter to this effect.

The petitioners approached the High Court under Article 226 of the Constitution of India, seeking a writ of certiorari to quash any recovery order passed against them, and a writ of mandamus directing the respondents not to make deductions from their salaries. Both petitions raised the same legal question and were decided by a common order.

The Petitioners' Case and the Respondent No. 4 Communication

Counsel for the petitioners, Shri Anand Dubey, argued that the recovery proceedings were illegal and arbitrary. He contended that settled law requires a creditor to first exhaust all remedies against the principal debtor and proceed against the guarantor only for any residual amount that remains unpaid thereafter. He submitted that simultaneous recovery from both the principal borrower and the guarantor is impermissible.

In support, counsel pointed to a communication dated 6 March 2026 from Respondent No. 4, which had specifically called upon the bank to explain why recovery was not being effected from the principal borrower Vikrant Dubey, and had cautioned that proceeding against the guarantors would not be proper until Dubey's status was clarified. The bank, however, furnished no satisfactory response and went ahead with the 15 April 2026 recovery letter.

Counsel also relied on paragraphs 10 and 11 of the Supreme Court's decision in Ram Kishun v. State of U.P., reported in (2012) 11 SCC 511, contending that these passages supported the proposition that creditors must first proceed against the principal debtor.

What Section 128 of the Indian Contract Act Actually Says

The bench identified the core legal question as “whether the creditor is obliged to exhaust remedies against the principal borrower before proceeding against the guarantor.” It answered that question directly from Section 128 of the Indian Contract Act, 1872, which provides that the liability of the surety is co-extensive with that of the principal debtor unless the contract provides otherwise.

The bench read the term “co-extensive” as making the guarantor liable for the whole of the amount for which the principal borrower is liable — neither more nor less. Crucially, it held that this liability is joint and several: the creditor is entitled to proceed against either or both simultaneously.

Three Supreme Court decisions were cited to establish that this position has been consistently maintained over decades. In Bank of Bihar Ltd. v. Dr. Damodar Prasad and Anr., AIR 1969 SC 297, the Supreme Court held that a creditor is not bound to exhaust remedies against the principal debtor before suing the surety, and that requiring the bank to proceed first against the principal borrower would defeat the very object of a guarantee. In State Bank of India v. M/s Indexport Registered & Ors., (1992) 3 SCC 159, the Supreme Court held that a decree-holder bank can execute a decree against the guarantor without proceeding against the principal borrower. In Industrial Investment Bank of India Ltd. v. Biswanath Jhunjhunwala, (2009) 9 SCC 478, the Supreme Court again affirmed that the liability of the guarantor and the principal borrower is co-extensive and not in the alternative.

How the Bench Dealt With the Ram Kishun Argument

The bench examined paragraphs 10 and 11 of Ram Kishun v. State of U.P., the very passages relied upon by the petitioners' counsel, and found they worked against the petitioners rather than for them. Those paragraphs, as quoted in the order, restate that the surety has no right to restrain execution of a decree against him until the creditor has exhausted remedies against the principal debtor, and that the liability of a guarantor is immediate and not deferred.

The bench described counsel's reliance on Ram Kishun as “a self-goal on the part of the learned Counsel for the petitioners” that did not advance the petitioners' case in any manner whatsoever.

The Natural Justice Argument Also Rejected

The petitioners had additionally argued that principles of natural justice were violated because they were not given an opportunity of personal hearing before the bank's recovery proposal dated 15 April 2026 was issued. The bench rejected this contention as equally untenable.

The bench reasoned that when liability flows directly from a contractual guarantee and is co-extensive under Section 128, the petitioners had ample opportunity to discharge their obligations or seek civil remedies. A writ petition under Article 226 cannot be used as a device to defeat contractual and statutory liability.

The bench added that the High Court in exercise of jurisdiction under Article 226 does not sit as a court of appeal over contractual obligations or interfere with recovery proceedings that are in accordance with law.

Effect of the Respondent No. 4 Communication

The bench addressed the 6 March 2026 communication from Respondent No. 4 — which had questioned why recovery was not being pursued from the principal borrower first and had cautioned the bank against proceeding against the guarantors — and held that this communication could not override the statutory liability under Section 128 or the settled judicial precedents of the Supreme Court.

No material had been placed on record to show that the contract of guarantee contained any stipulation postponing the guarantors' liability or requiring the bank to proceed first against the principal borrower. In the absence of any such contractual restriction, the statutory rule of co-extensive liability applied squarely.

Outcome

The bench held that the recovery proposed by the bank from the salaries of the petitioners at the rate of Rs 10,000 per month is legally sustainable. Both writ petitions were dismissed as devoid of merits. No order as to costs was made.

The bench also clarified that the petitioners remain free to pursue their rights of subrogation or contribution against the principal borrower Vikrant Dubey after discharging the liability, but they cannot restrain the bank from enforcing the guarantee.