Summary
- The Supreme Court has ruled that allowing a borrower to withdraw beyond the sanctioned limit without surety consent results in only a partial discharge of the guarantor under Section 133 of the Indian Contract Act, 1872.
- The Court overturned the Gujarat High Court's judgment, clarifying that liability cannot be treated as all or nothing and that a surety remains liable for amounts up to the original sanctioned limit.
- Justice B.V. Nagarathna and Justice Ujjal Bhuyan emphasized that the surety's remedy must be impaired for full discharge to apply, which was not demonstrated in this case.
- This decision reinforces the principle that variations in contract terms without surety consent only affect future transactions, leaving past liabilities intact.
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