Section 140 Indian Contract Act 1872 - Rights of Surety on Payment or Performance

Section 140 of the Indian Contract Act, 1872 deals with the rights acquired by a surety after the guaranteed debt has become due or the principal debtor has defaulted, and the surety has paid or performed everything for which the surety is liable.

Updated: 20 September 2026

Text of Section 140 - Rights of Surety on Payment or Performance

Section 140. Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.

Meaning of Section 140

Section 140 embodies the principle commonly described as subrogation. Once the conditions in the section are satisfied and the surety pays or performs the liability covered by the guarantee, the surety steps into the position of the creditor for the purpose of enforcing the creditor's rights against the principal debtor.

The section does not merely give the surety a general claim for reimbursement. Its wording provides that the surety is invested with the rights that the creditor had against the principal debtor, subject to the extent and legal incidents of the guaranteed obligation.

When Does the Right of the Surety Arise?

The guaranteed debt must have become due, or the principal debtor must have defaulted in performing the guaranteed duty.
The surety must pay or perform all that the surety is liable for under the guarantee.
After such payment or performance, the surety acquires the creditor's rights against the principal debtor.

Who Is a Surety?

Under Section 126 of the Indian Contract Act, 1872, a contract of guarantee is a contract to perform the promise, or discharge the liability, of a third person in case of default. The person giving the guarantee is called the surety, the person in respect of whose default the guarantee is given is called the principal debtor, and the person to whom the guarantee is given is called the creditor.

Effect of Payment or Performance by the Surety

After satisfying the liability contemplated by Section 140, the surety may rely on the rights that the creditor had against the principal debtor. This statutory transfer of rights protects the surety from ultimately bearing a liability that, as between the surety and principal debtor, should be borne by the principal debtor.

This right should also be read with Section 141, which deals with the surety's right to the benefit of the creditor's securities, and Section 145, which provides for an implied promise by the principal debtor to indemnify the surety.

Simple Example

A borrows money from C and B guarantees repayment. If A defaults after the debt becomes due and B, as surety, pays the amount for which B is liable under the guarantee, Section 140 gives B the rights that C had against A in relation to that liability. B may then proceed against A in accordance with law.

Important: Section 140 concerns the surety's rights after payment or performance. Questions about the extent of a surety's liability are principally addressed by Section 128, while discharge of a surety may arise under provisions including Sections 133 to 139.

Related Provisions on Guarantee

The statutory scheme concerning guarantees includes the definition of guarantee and the parties under Section 126, consideration under Section 127, the surety's liability under Section 128, discharge provisions under Sections 133 to 139, rights after payment or performance under Section 140, rights in securities under Section 141, and indemnification under Section 145.

Official Legal Source

The current central Act can be checked on the Government of India's India Code portal. For legal proceedings or professional advice, the latest statutory text, amendments and applicable judicial decisions should be verified for the facts of the particular matter.