Liability of surety is co-extensive with principal debtor; creditor may proceed against guarantor without exhausting remedies against borrower's estate.

The petitioner stood as a guarantor for a personal loan availed by one late Azahar Ali (the borrower) from the respondent-Bank

Following the borrower's death on 05.05.2023, the loan account became irregular and was eventually classified as a Non-Performing Asset (NPA)

Despite demand notices issued to the petitioner in 2025, the outstanding dues remained unpaid

Consequently, the Bank placed a "hold/freeze" on the petitioner’s salary account to secure recovery

The petitioner challenged this action under Article 226, arguing that the Bank must first proceed against the deceased borrower's estate or legal heirs before targeting the guarantor’s salary account

1. Whether the respondent-Bank was legally entitled to proceed against the petitioner in his capacity as guarantor upon default committed in the loan account?

2. Whether the respondent-Bank was under a legal obligation to first proceed against the legal heirs or estate of the deceased borrower before invoking remedies against the guarantor?

3. Whether the action of freezing/holding the petitioner’s salary account was arbitrary or illegal warranting interference under Article 226?

Sections 126 and 128 of the Indian Contract Act, 1872, which define the contract of guarantee and mandate that the surety’s liability is "co-extensive" with that of the principal debtor

Bank of Bihar Ltd. v. Damodar Prasad (AIR 1969 SC 297), which established that a creditor is not required to exhaust remedies against the borrower before proceeding against the surety

Punjab National Bank v. Surendra Prasad Sinha (1993) and Canara Bank Overseas Branch v. Archean Industries Pvt. Ltd. (2026 INSC 247) were cited to affirm the Bank's right to realize security/debt through lawful contractual means upon default

The Court reasoned that the term "co-extensive" under Section 128 means the guarantor is liable to the same extent as the principal debtor immediately upon default

The death of the borrower does not extinguish the debt or the guarantee; the liability remains subsisting and enforceable

The Court rejected the petitioner’s argument that the Bank must first sue the legal heirs, noting that a creditor has the discretion to proceed against the debtor, the surety, or both simultaneously

Regarding the freezing of the salary account, the Court found no procedural infirmity because the Bank had issued multiple demand notices (04.02.2025, 05.05.2025, and 04.08.2025) before taking action

Since the petitioner admitted to the guarantee and the default, the Bank’s exercise of its contractual right to "hold" the account was neither arbitrary nor mala fide

the Bank can proceed directly against a guarantor upon default

there is no legal requirement to first exhaust remedies against the borrower’s estate

the specific hold on the salary account was not illegal as the petitioner failed to show any statutory or regulatory immunity for salary accounts against contractual debt recovery

The Court permitted the petitioner to approach the Bank with a settlement proposal, which the Bank must consider as per guidelines