Question 3

if we go by literal interpretation of the act, any modification releases the surety.

CA Suraj Lakhotia

Admin

03-Oct-21 13:13

But it also says where modification doesn't affect surety...surety won't be discharged...so what to write in exams

Thread Starter

Gauri Shete

CA Final

★ 5K+

03-Oct-21 20:34

It's a material / substantial variation, even when it seems beneficial because there was a financial difficulty and contract was varied. May be insolvency could have been avoided. So, consulting P was important. Thus, M can't sue. Note that general rule given in Section 133 is mostly applicable i.e. Where there is any variance in the terms of contract between the principal debtor and creditor without surety's consent, it would discharge the surety in respect of all transactions taking place subsequent to such variance. Though in the ICAI material, there is an exception mentioned that Variation which is not substantial or material or which is beneficial to the surety will not discharge him of his liability. That exception is very specific to the case law mentioned alongside. So, unless there is a question which is very similar to the facts of the case, general rule will mostly apply. I also suggest you to check out this question Nov 2020 question - 2d(iv) on pg 6 https://resource.cdn.icai.org/63943bos51397interp2.pdf

Sahibdeep Singh

CA Inter

★ 14K+

03-Oct-21 20:45

Thank you sir

Thread Starter

Gauri Shete

CA Final

★ 5K+

03-Oct-21 20:48