Guarantor

Indian Contract Act, 1872 — Sections 126–147; SARFAESI Act, 2002 — Section 2(f)

A person who gives a guarantee to repay a debt if the principal borrower defaults. In banking, personal guarantees of directors and promoters are typically required for corporate loans. Under SARFAESI, guarantors can be proceeded against — their properties can also be attached under the SARFAESI Act if they are mortgaged or charged as security.

In practice, a guarantor is the lender's second line of recovery, and counsel treat the guarantee as a parallel cause of action rather than an afterthought. Because a guarantor's liability under Sections 126-147 of the Indian Contract Act, 1872 is co-extensive with the principal borrower's, a bank can proceed against the guarantor without first exhausting remedies against the borrower, and a creditor will often file against borrower and guarantor together so a single Recovery Certificate runs against both. Where the guarantor has mortgaged or charged personal property, that property falls within "borrower" under Section 2(f) of the SARFAESI Act, 2002, so the 13(2) notice and possession steps reach it directly. The common errors are not serving the guarantor at all, allowing the guarantee to lapse on limitation separately from the borrower's debt, or releasing security in a way that discharges the surety. Well-advised creditors confirm the guarantee is subsisting and properly invoked before filing.