Assignment I

(a)_ Section 140 of the Indian Contracts Acts states that-The surety after paying
the creditor or fulfilling his obligation under the contract takes the place of the
creditor. He has all rights vested in him which the creditor had against the
principal debtor. It also explain that “when the surety has carried out all his
obligations under the contract, he is conferred with all the rights which the
creditor had against the principal debtor. The surety steps into the shoes of the
creditor.”
In Babu Rao Ramchandra Rao v Babu Manaklal Nehmal: “If the liability of
the surety is coextensive with that of the principal debtor, his right is not less
coextensive with that of the creditor after he satisfies the creditor’s debt’’.
However in the given contractual situation the surety has guaranteed only a
specific part of the debt.
As per the case of Parveteneni Bhushayya vs Pothuri Suryanarayana it was held
that when a surety is only liable for some portion of debt and surety has paid
that debt than the surety is liable to receive the amount only which he has given.
But the surety who has liability of limited amount has no right of subrogation
till the time creditor has recover the whole amount.
According to the Section 141 of the Indian contract Act. “A surety is entitled
to the benefit of every security which the creditor has against the principal
debtor at the time when the contract of surety ship is entered into, whether the
surety knows of the existence of such security or not; and if the creditor loses,
or without the consent of the surety, parts with such security, the surety is
discharged to the extent of the value of the security”.
Therefore it’s summarized that when the surety has paid only a specific portion
of the debt on the behalf of the principal debtor, even if the liability is fulfilled,
the surety is not entitled to have the right of securities till the time creditor has
recover the whole debt.