Section 137 of ICA : Section 137: Creditor'S Forbearance To Sue Does Not Discharge Surety

Explanation using Example

Imagine that Sarah takes out a loan from a bank, and her friend Tom acts as a surety, guaranteeing repayment of the loan. The loan becomes due, but Sarah faces financial difficulties and cannot pay it back on time. The bank, however, decides to wait an additional six months before taking any legal action against Sarah, hoping she will be able to repay the loan by then. According to Section 137 of The Indian Contract Act, 1872, Tom's obligation as a surety is not discharged simply because the bank chose to wait before suing Sarah. Tom remains liable for the debt if Sarah ultimately fails to pay, unless there was a specific agreement stating otherwise.