“It is not necessary for the creditor, before proceeding against the surety, to request the principal debtor to pay, or to sue him, although solvent, unless this is expressly stipulated for.”
In Bank of Bihar Ltd. v. Damodar Prasad & Anr., the Apex Court referred to a judgment in the case of Lachhman Joharimal v. Bapu Khandu and Tukaram Khandoji, in which the Division Bench of the Bombay High Court held-
“The court is of opinion that a creditor is not bound to exhaust his remedy against the principal debtor before suing the surety and that when a decree is obtained against a surety, it may be enforced in the same manner as a decree for any other debt.”
The Hon’ble Supreme Court of India has taken a similar view, in the case of Industrial Investment Bank of India Ltd. v. Biswanath Jhunjhunwala had observed-
“The very object of the guarantee is defeated if the creditor is asked to postpone his remedies against the surety. In the present case the creditor is a banking company. A guarantee is a collateral security usually taken by a banker. The security will become useless if his rights against the surety can be so easily cut down.”
In State Bank of India v. M/s. Indexport Registered, the Apex Court held that the decree holder bank can execute the decree against the guarantor without proceeding against the principal borrower. Guarantor’s liability is co- extensive with that of the principal debtor.
However a guarantor to a loan can sue the principal debtor if he defaults and the guarantor had to pay on his behalf. In fact, as per section 145 of the Contract Act, there is an implied promise to indemnify the surety.