This refers to the report "Guarantor can also be named wilful defaulter" (September 10). It may appear as though the Reserve Bank of India (RBI) has acted tough with the guarantors. But Section 128 of the Indian Contract Act already states that the liability of the surety is co-extensive with that of the principal debtor. Although lenders should proceed against the borrower first and after exhausting all means of recovery, should proceed against the guarantor, the choice of selecting a borrower or guarantor first has been left to the lenders. With RBI's clarification, it looks as if we are back to the first lessons as far as the liability of the guarantor is concerned.
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K V Rao Bangalore
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number