Sections 144 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 144 covers a guarantee given on the condition that the creditor shall not act on it until another person joins as co-surety. Section 145 says that in every contract of guarantee the principal debtor impliedly promises to indemnify the surety for what the surety has rightfully paid. For help drafting a guarantee that handles both points clearly, see our agreement drafting service.
Section 144: where a guarantee is given on a contract that the creditor shall not act upon it until another person has joined as co-surety, the guarantee is not valid if that other person does not join. Section 145: in every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety, and the surety may recover whatever sum he has rightfully paid under the guarantee, but no sums which he has paid wrongfully.
Section 144: guarantee conditional on a co-surety joining
The text: "Where a person gives a guarantee upon a contract that the creditor shall not act upon it until another person has joined in it as co-surety, the guarantee is not valid if that other person does not join."
| Limb | Plain meaning |
|---|---|
| "upon a contract that the creditor shall not act upon it" | The condition is part of the contract: no action on the guarantee yet |
| "until another person has joined in it as co-surety" | The condition is that a particular other person signs as a co-surety |
| "the guarantee is not valid if that other person does not join" | If the co-surety does not join, the guarantee fails |
The Act prints no illustration under section 144. The parties and the nature of a surety are defined in section 126. The rules among co-sureties are in sections 146 and 147.
Section 145: implied promise to indemnify the surety
The text: "In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety, and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but, no sums which he has paid wrongfully."
Three limbs:
- "An implied promise by the principal debtor to indemnify the surety": it is in every guarantee, whether or not written. The wording is "in every contract of guarantee".
- "Whatever sum he has rightfully paid": the surety may recover what he rightfully paid.
- "But, no sums which he has paid wrongfully": payments made wrongly are outside the right.
The Act's own section on indemnity, section 124, defines a contract of indemnity separately. Section 145 is the specific rule that a guarantee carries an implied promise of this kind from the debtor to the surety.
The Act's illustrations to section 145
- Illustration (a). B is indebted to C, and A is surety for the debt. C demands payment from A and, on his refusal, sues him. A defends the suit, having reasonable grounds for doing so, but is compelled to pay the amount of the debt with costs. He can recover from B the amount paid for costs, as well as the principal debt.
- Illustration (b). C lends B a sum of money, and A, at the request of B, accepts a bill of exchange drawn by B upon A to secure the amount. C, the holder of the bill, demands payment from A and, on A's refusal, sues him upon the bill. A, not having reasonable grounds for defending, has to pay the amount of the bill and costs. He can recover from B the amount of the bill, but not the sum paid for costs, as there was no real ground for defending the action.
- Illustration (c). A guarantees to C, to the extent of 2,000 rupees, payment for rice to be supplied by C to B. C supplies B rice to a less amount than 2,000 rupees, but obtains from A payment of 2,000 rupees in respect of the rice supplied. A cannot recover from B more than the price of the rice actually supplied.
The line between (a) and (b) is whether the surety had reasonable grounds for defending. The line in (c) is that the surety cannot recover from the debtor more than the debtor actually owed.
Summary table
| Item | Section 144 | Section 145 |
|---|---|---|
| Subject | Guarantee conditional on another surety joining | Surety's recovery from the principal debtor |
| Rule | Not valid if the other person does not join | Implied promise to indemnify; recover sums rightfully paid |
| Illustrations | None printed | (a), (b), (c) |
A modern example of our own
Vishal Hardware agrees to supply cement on credit to a contractor on the footing that two sureties, Wasim and Yamini, will both sign. Wasim signs on the understanding that the supplier will not act on his guarantee until Yamini has joined. Yamini never signs. Under section 144, Wasim's guarantee is not valid.
Separately, Zoya is the surety for a borrower. The lender sues her, she has reasonable grounds to defend, and loses. She pays the debt and the costs. Following the Act's illustration (a), she may recover both from the borrower. Had she defended with no real ground, illustration (b) says she could recover the debt but not the costs.
What can the parties change?
Neither section carries the words "unless the contract provides otherwise". Section 144 is itself a condition the parties write into the contract. For section 145, the text speaks of an implied promise, so the Act supplies it by default; whether a written term can alter it is not addressed in the text.
What the sections do not say
- Section 144 does not say what form the condition must take.
- Section 145 does not define "rightfully" or "wrongfully", beyond the Act's illustrations.
- Section 145 does not say how the surety makes the demand or in what time.
Practical points
- Creditors: if a guarantee is conditional on a co-surety joining, complete the signatures before acting on it.
- Sureties: if you sign on that condition, record it in the document.
- A surety who is sued should keep the reasons for defending, and a record of what was paid in debt and costs.
- Do not pay more than the debtor actually owes; illustration (c) says you cannot recover the excess from the debtor.
Need help drafting a guarantee with conditions?
A guarantee that depends on another person signing, or that settles how the surety is repaid, should say so in plain words. Our agreement drafting team can draft or review a guarantee with these terms. Bring the loan or supply terms and the names of every proposed surety.
Key takeaways
- A guarantee given on condition that the creditor will not act until a co-surety joins is not valid if that person does not join (s.144).
- In every guarantee the principal debtor impliedly promises to indemnify the surety (s.145).
- The surety recovers sums rightfully paid, not those paid wrongfully.
- The Act's illustrations contrast defending with and without reasonable grounds, and paying more than the debtor owed.
Read next
- Sections 146 and 147: co-sureties' contribution
- Section 140: rights of surety on payment or performance
- Stamp duty on guarantee and indemnity deed
Disclaimer: Based on the text of the Indian Contract Act, 1872 as consulted on 1 October 2026. Many questions under this Act turn on case law and on the wording of the particular contract, which this article does not cover. It is general information, not legal advice; check the official text and take advice before acting.