The Allahabad High Court has held that a bank can recover loan dues from a guarantor without first exhausting its remedies against the principal borrower. The court said the guarantor’s liability is immediate, co-extensive and joint and several with that of the borrower, unless the guarantee contract provides otherwise.
A bank does not have to wait until it has recovered money from the principal borrower before proceeding against a guarantor, the Allahabad High Court has ruled.
The judgment came in two connected petitions filed by Vineet Pandey and Anoop Kumar Mishra, who had stood as guarantors for loans taken by their colleague, Vikrant Dubey.
The petitioners had challenged the bank’s proposal to deduct ₹10,000 every month from their salaries towards the outstanding loan dues.
The judgment was delivered by a bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary on August 6, 2026.
Why did the guarantors approach the court?
Pandey and Mishra were working as Postal Assistants. They had guaranteed three loans taken by Dubey from the U.P. Postal Primary Cooperative Bank Limited during 2022-23.
The loans comprised a festival loan of ₹50,000, a short-term loan of ₹3 lakh, and a personal loan of ₹18 lakh.
After Dubey defaulted on repayment, the bank started recovery proceedings against him. At the same time, it sought to recover the outstanding amount from the two guarantors.
The bank asked the Postal Department to deduct ₹10,000 a month from the salary of each guarantor.
The petitioners argued that the bank should first exhaust its remedies against the principal borrower. They also contended that simultaneous recovery from the borrower and guarantors was not permissible.
What did the Allahabad High Court say?
The court rejected this argument.
It relied on Section 128 of the Indian Contract Act, 1872, which states that the liability of a surety is co-extensive with that of the principal debtor unless the contract provides otherwise.
The court explained that “co-extensive” means that the guarantor can be liable for the entire amount for which the principal borrower is liable. The liability is joint and several, meaning the creditor can proceed against either the borrower, the guarantor, or both.
The court said there is no legal requirement for a creditor to follow a particular sequence of recovery.
It referred to several Supreme Court judgments, including Bank of Bihar Ltd. v. Damodar Prasad, State Bank of India v. M/s Indexport Registered and Industrial Investment Bank of India Ltd. v. Biswanath Jhunjhunwala.
These judgments establish that a creditor does not have to exhaust remedies against the principal borrower before proceeding against the guarantor.
Guarantor cannot dictate the recovery process
The High Court also rejected the petitioners’ reliance on Ram Kishun v. State of U.P.
The court said the Supreme Court’s judgment in fact supported the bank’s position. A guarantor cannot insist that the creditor first recover the money from the principal borrower.
The court observed that it is the guarantor’s responsibility to ensure that the principal borrower fulfils the repayment obligation. The guarantor cannot dictate to the creditor how or in what order it should pursue recovery.
Salary deductions can continue
The court also considered whether the bank could recover the dues through monthly salary deductions.
It found that there was nothing in the guarantee contract that postponed the guarantors’ liability or required the bank to proceed against the principal borrower first.
As a result, the court held that the bank was entitled to seek recovery from the petitioners’ salaries through monthly deductions.
The court also rejected the argument that the petitioners should have received a personal hearing before the recovery proposal. It said their liability arose from the contractual guarantee and Section 128 of the Contract Act.
Guarantor can seek recovery from borrower later
The judgment does not leave the guarantor without a remedy.
The court noted that after discharging the liability, the guarantors remain free to pursue their rights of subrogation or contribution against the principal borrower.
However, they cannot use those rights to stop the creditor from enforcing the guarantee.
Court dismisses petitions
The High Court concluded that the proposed recovery of ₹10,000 per month from the salary of each petitioner was legally sustainable.
It dismissed both writ petitions and made no order as to costs.
What does this mean for you as a guarantor?
If you agree to be a guarantor for someone’s loan, you could be asked to repay the dues if the borrower defaults. The bank does not necessarily have to first recover the money from the borrower.
The Allahabad High Court said that under Section 128 of the Indian Contract Act, a guarantor’s liability is generally co-extensive with that of the borrower. This means the bank can proceed against the borrower, the guarantor, or both simultaneously, unless the guarantee agreement provides otherwise.
In the case before the court, the bank sought to deduct ₹10,000 a month from each guarantor’s salary after the borrower defaulted. The court upheld the proposed recovery.
For you, the important point is that being a guarantor carries a direct financial obligation. You cannot generally insist that the bank first exhaust its recovery options against the borrower.
If you end up paying the borrower’s dues, you may have a right to seek recovery from the borrower, but that does not stop the bank from enforcing the guarantee.
