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Section 146: Co-sureties liable to contribute equally

Indian Contract Act • Official Statutory Text & Practice Guide

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Act 1872
Section 145 All 266 Sections of Indian Contract Act Section 147

Legal Commentary & Landmark Judgments: Section 146

Section 146 of the Indian Contract Act, 1872 codifies the equitable doctrine of contribution among co-sureties, establishing that where two or more persons are co-guarantors for the same debt, they are liable as between themselves to contribute equally to the payment of the debt, unless their contracts provide otherwise. It ensures that the burden of a defaulting borrower does not fall arbitrarily on whichever guarantor the creditor chooses to target.

  • Parity of Contribution: Co-sureties are liable to contribute equally to the satisfaction of the debt, regardless of whether they signed the same instrument or separate instruments, and whether they were aware of each other's existence.
  • Same Debt or Duty Nexus: The rule applies only where the co-sureties are bound for the identical debt or performance obligation of the principal debtor.
  • Right of Action Upon Disproportionate Payment: A co-surety who has paid more than his proportionate share acquires an immediate, independent cause of action to compel his co-sureties to contribute their equal shares.
Key Landmark Precedents:
  • Dering v. Earl of Winchelsea (1787) 1 Cox Eq Cas 318: The foundational equity ruling codified in Section 146, establishing that the right of contribution between co-sureties does not arise from contract between them, but is founded upon principles of universal equity and natural justice requiring equality of burden.
  • Ramanujam v. S.N. Ramanujam AIR 1964 Mad 477: The Madras High Court held that under Section 146, a co-surety who pays the whole debt to the creditor is entitled to sue the other co-sureties for their rateable contribution without having to exhaust remedies against the insolvent principal debtor first.
Courtroom Practice & Strategic Litigation Guidance:

When a bank executes a decree against one guarantor alone, advise the client to satisfy the decree and immediately institute a civil suit against the co-guarantors under Section 146 for their rateable shares. If one of three co-sureties is insolvent, the remaining solvent co-sureties must divide the burden equally among themselves.

Section 145 All 266 Sections of Indian Contract Act Section 147