WP(MD)/22523/2026 of S.Anantharajan Vs The Bank of India on 13 October 2026

ORDER

(Order of the Court was made by G.R.Swaminathan J.) Heard both sides.

2. The writ petitioner is one of the guarantors of the petition- mentioned loan transaction. The principal borrower was sued under the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC). An Insolvency Resolution Professional was also appointed and he has taken charge. An order has also been passed by the National Company Law Tribunal (NCLT) under the IBC appointing a liquidator. The matter is still pending. At this stage, by invoking Section 134 of the Indian Contract Act, 1872, the petitioner seeks return of the documents

WP(MD) No. 22523 of 2026 submitted by him since according to him, his liability has been discharged.

3. It is not as if the guarantor has made an absurd request. There is some logic too. Section 134 of the Indian Contract Act, 1872 reads that the surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. Let us go by the first principles. The liability of the debtor and the guarantor are co-extensive. The creditor has a choice. He can sue both the debtor and the guarantor simultaneously. Of course, he cannot enforce his remedy against both. That would amount to unjust enrichment. The surety also can proceed against the principal debtor after satisfying the creditor’s claim. As pointed by the learned Standing Counsel for the Bank there is a direct ruling of the Hon’ble Supreme Court in Lalit Kumar Jain Vs Union of India & Others ((2021) 9 SCC 321) against the petitioner on this point. It was held therein that approval of a resolution plan does not ipso facto discharge a personal guarantor of a corporate debtor of her or his liabilities under the contract of guarantee; the release or discharge of a principal borrower from the debt owed by it to its creditor, by an

WP(MD) No. 22523 of 2026 involuntary process that is by operation of law, or due to liquidation or insolvency proceeding does not absolve the surety / guarantor of his or her liability, which arises out of an independent contract. In other words, approval of a resolution plan relating to a corporate debtor does not operate so as to discharge the liabilities of personal guarantors to corporate debtors. This ruling was followed in Maitreya Doshi v. Anand Rathi Global Finance Limited (2023) 17 SCC 606, Rakesh Bhanot Vs Gurdas Agro (P) Ltd (2025) 6 SCC 781, BRS Ventures Investments Ltd Vs SREI Infrastructure Finance Ltd (2025) 1 SCC 456, Dilip B.Jiwrajka Vs Union of India (2024) 5 SCC 435, Ajay Kumar Radheyshyam Goenka Vs Tourism Finance Corporation of India (2023) 10 SCC 545.

4. It is not as if Lalit Kumar Jain had struck a different note. It is in consonance with the precedents. The principle remains the same. The application alone is different. The truth of what we have now said would become evident from the following extracts found in Pollock and Mulla’s Commentary on the Indian Contract Act, 1872 : “Section 134 would not apply where the release or discharge is not caused at the instance of or by any act of the creditor. Where a decree was obtained against the principal-debtor and a surety, and thereafter the principal-debtor applied to a Debt Conciliation

WP(MD) No. 22523 of 2026 Board, which discharged him from the debt on failure of the decree-holder to prove his debt, the surety was not discharged, but became liable as a judgment-debtor. (Nellore Co-op Urban Bank Ltd v. Akili Mallikarjunayya AIR 1948 Mad 252). However, where no decree had been passed, or the surety had been provided after the decree, the surety was discharged under s. 134 if the principal-debtor applied to a Debt Conciliation Board, and the creditor failed to prove his debt, or declared that he would recover the debt from the surety, and not from the principal-debtor (Babu Rao Ramchandra Rao v. Babu Manaklal Nerhmal (1939) Nag 175). The fact, that the debtor is discharged under S.4(b) of the Tamil Nadu Relief Undertaking Act, would also not discharge the liability of the surety when it gives relief to the principal-debtor (Gopilal J Nichani v. Trac Inds and Components AIR 1978 Mad 134). Nor does a discharge, which the principal-debtor may secure by operation of law, in bankruptcy (or in liquidation proceedings in the case of a company), absolve the surety of his liability (Maharashtra State Electricity Board v. Official Liquidator AIR 1982 SC 1497)….”

5. In view of the settled position of law, we hold that the restructuring of the liability of the principal borrower on account of their coming under the IBC regime cannot be taken advantage of by the petitioner herein who is a guarantor. His liability remains unaltered by the outcome of the IBC proceedings. It is independent.

WP(MD) No. 22523 of 2026

6. The learned counsel for the petitioner states that the secured asset offered by him as guarantee is a piece of agricultural land and therefore, in view of Section 31 of the SARFAESI Act, it cannot be proceeded against. There is considerable force in this contention. But then, no action taken under SARFAESI Act is under question. On the other hand, what is demanded is the return of his documents. As and when any SARFAESI action is initiated against the petitioner, this point can be urged.

7. The learned counsel for the writ petitioner states that a sum of Rs.20,00,000/- (Rupees Twenty Lakhs only) was paid by him as a condition for grant of interim stay. Since the sale notice itself came to be subsequently withdrawn by the Bank, he wants the said amount to be refunded. We grant liberty to the petitioner to file a miscellaneous petition in the disposed of SARFAESI Application in this regard. The learned counsel for the petitioner states that since he enjoyed the benefit of interim stay, he will not claim any interest. We make it clear that the question as to whether the amount of Rs.20,00,000/- should be refunded or not is a matter to be considered and decided by the Tribunal after hearing the Bank.

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8. With the aforesaid liberty, the writ petition is dismissed. No costs. (G.R.S.,J.) (M.D.S.,J.) 13-10-2026 Index: Yes/No Speaking/Non-speaking order Neutral Citation: Yes/No MGA

WP(MD) No. 22523 of 2026 To

1. The Bank of India The Authorized Officer, Dhun Building, D.No.827, Anna Salai, Anna Salai (Mount Road) Branch, Chennai - 600002

2. The Recovery Officer, Bank of India, Zonal Office, Annasalai (Mount Road Branch), Star House 4th Floor, Old No.17, New No.30, Errabalu Street, Chennai - 600001

WP(MD) No. 22523 of 2026 G.R.SWAMINATHAN, J. AND M.D.SUMATHI, J. MGA WP(MD) No. 22523 of 2026 13-10-2026