(ASSIGNMENT)

Indian Contract Act, 1872

Surety has the following rights against his creditor:

1. Rights in Case of Fidelity Guarantee

In case of fidelity guarantee i.e., guarantee as to good behavior, honesty, etc., of the principal
debtor, the surety can ask the employer to dispense with the services of the employee if the
latter is proved to be dishonest.

2. Before the Payment of the Debt Guaranteed

A surety may, after the debt has become due but before he is called upon to pay, require the
creditor to sue the principal debtor to recover the debt. But, in such cases, the surety must
undertake to indemnify the creditor for any risk, delay or expense resulting there from.

3. Right to Claim Securities

After payment of the debt to the creditor or the performance of the promise of the principal
debtor, the surety can recover all the securities which the creditor had with him either before
or after the contract of guarantee was entered into. This right is available to the surety
whether or not he knows about the existence of such security. He is entitled to all of them.

4. Right of Equities

After paying the amount due to the creditor, the surety is entitled to all equities of the creditor
that he had against the debtor as well as any other person with regard to the debt.

5. Right of Set-off

Sometimes, the principal debtor is entitled to certain counter claim or deductions from the
loan obtained from the creditor. In such cases, the surety is entitled to the benefit of such
counter claim or deductions, if the creditor files a suit against the surety.

Case laws:
1. Craythorne v Swinburne (1807) 14 ves jun 160; 33 ER 482
2. Industrial Finance Corporation of India ltd v Cannanore SPG and Wvg Mills, (2002) 5
SCC 54; AIR 2002 SC 1841