@ unacademy RIGHTS OF SURETY Against the Co- Securities Against the Against the Creditor Debtor Right to all Right of Right to equal securities subrogation contribution Liability of co- pr f securities secures sold fede pred y different sums.. Right of set- off SHEEMAL BHAGI (MCOM, NET)@ unacademy RIGHT OF SURETY AGAINST THE CREDITOR (SEC 141) ’ Right to all securities (Sec141): As per section 141, a surety is eligible to the benefit of every security which the creditor has against the principal debtor. This holds true even if at the time of entering into the contract of guarantee the surety was unaware of the existence of such a security. Example: C, advances to B, his tenant, 2,000 rupees on the guarantee of A. C has also a further security for the 2,000 rupees by a mortgage of B’s furniture. C, cancels the mortgage. B becomes insolvent and C sues A on his guarantee. A is discharged from liability to the amount of the value of the furniture @ SHEEMAL BHAGI (MCOM, NET)@ unacademy ’ Right to set -off: if the debtor had some counter claim against the creditor, then the surety has the right to set off such a claim against the claim of the creditor against the debtor. Example, (Foevtor was liable to pay%2000 on v guarantee given by surety | = ‘ Previous debt 71000 ) | The creditor had to pay a previous debt of 7800 to debtor. Held, the surety was liable for 31000 only. SHEEMAL BHAGI (MCOM, NET)RIGHT OF SURETY AGAINST TR @ unacademy DEBTOR © Right of Subrogation (Sec 140): Once the surety discharges the debt, i.e the surety steps into the shoes of creditor and he obtains the rights of a creditor against the principal debtor. He can now sue the principal debtor for the amount of debt paid by him to the creditor due to the default of the principal debtor. © Right to Indemnity(Sec 145): In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety and the surety is entitled to recover from the debtor whatever sum he has rightfully paid under the guarantee. Example: Customer took a loan of %1,00,000 on guarantee given by X. Customer refuses to repay the loan. The bank charged @10% for delayed payment. X repays the loan and interest theron. X can recover all payments made by him to bank from the customer: = 1,00,000 @ Cots SHEEMAL BHAGI (MCOM, NET)@ unacademy RIGHT AGAINST THE CO- SURETIES © Right Of Equal Contribution(Sec146): In a contract of guarantee if there are more than one surety, they are called co-sureties. Co- sureties are equally liable Creditor can sue one or all. If only one surety is sued and he has to paid the debt then he may demand co-sureties to contribute. Example: A, B and C are sureties to D for the sum of 3,000 rupees lent to E. E makes default in payment. A, B and C are liable, as between themselves, to pay 1,000 rupees each. SHEEMAL BHAGI (MCOM, NET)@ unacademy © Liability of Co- Sureties bound in different sums (Sec147): where the co sureties have agreed to contribute different sums, they all contribute subject to the maximum amount guaranteed by each one. Example: A, B and C are sureties to D, enter into three several bonds, each in different penalty, namely A in penalty of 10,000, B of % 20,000, C of %40,000, conditioned for D’s duly accounting to E. D makes default to the extent of 40,000. A is liable to pay ~ 10,000 and b and C % 15,000 each., as between themselves, to pay 1,000 rupees each. SHEEMAL BHAGI (MCOM, NET)Y unacademy Right of surety if creditor parts with the security: 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. Example: Landlord advances 5000rs to his tenant on guarantee given by Rohit (the surety) (Toa of t5000- =" The landlord has a security worth %3000 pledged by tenant. Tenant does not pay the loan of $5000 and the landlord sells the security. Landlord sues Rohit for payment. Held, Robit ie only e@ liable for &2000. 'SHEEMAL BHAGI (MCOM, NET)