·  RIGHTS OF A SURETY

§  Right Against the Creditor

1.      Right arises on notice:

In the English leading case of Rouse v. Bradford Banking Co.[1] It was held that the right of a surety arises on notice and not under contract. In other words, even wear a shirt he has originally joined the principal debtor, can we subsequently notice given to the creditor that the relationship has altered and he’s only a surety. But the position in India is different. The S.182 deals with it and it is contrary to this principle. The creditor is not affected by the altered relationship of the two debtors even to the creditor has subsequent notice of the fact that one of the debtors is only a surety.

2.      Right before payment:

Before payment The surety can file an action for declaration that the principal debtor is the person bound to pay the amount. Again in the case of fidelity guarantee the surety can call upon the creditor or the employer to dismiss the servant whose fidelity he has guaranteed in case of proved dishonesty of the servant. He has also got the right to be discharged from the liability as a surety can be certain modes of conduct of the creditor.

3.      Rights when paying:

At the time of payment as surety has got the right to ask the creditor to marshal his securities that is when the creditor has got two or more securities given in respect of the same debt, the surety can compel the creditor to resort to securities first which are exclusively the debtor’s.

§  Rights againt the principal debtor

1.      Rights to subrogation (S.140):

After payment the surety stands in the place of the creditor and is subrogated to all the rights which the creditor had against the principal debtor. In other words, the surety steps into the shoes of the credit and will be able to exercise as against the principal debtor all those rights and remedies which are available to the creditor.

2.      Right against securities (S.141):

A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the same time the contract of surety ship is entered into, whether the surety is aware of such security or not. If the creditor loses or parts with which such security without the consent of the surety, is discharged to the extent of the value of the security. According to Indian law a surety is entitled only to those securities which existed at the time of contract of the surety ship. But in English law after taken securities are also equally available to the surety

3.      Right to be indemnified (S.145):

In every contact of guarantee there is an implied promise by the principal debtor to indemnify the security and the surety is entitled to recover from the principal debtor water was some he has rightfully paid under debtor guarantee.

§  Rights against Co-sureties

1.      Right to Contribution:

Where a surety has paid more than his proportionate part of the burden or has had judgement against him at the suit of the creditor for more than his share of burden, then he is entitled to contribution from the co-sureties were equally bound to pay with him. Where one surety becomes insolvent it would be the duty of other co sureties is to contribute equally.

When The co-sureties have agreed to contribute different sums, they are bound to contribute equally as far as the limits of their respective obligations permit. But according to English law the co-sureties are bound to pay ratably.

In State Bank of India v. GJ Herman,[2] Kerala High Court held that in the case of a composite decree, the court or the co-surety cannot insist that the creditor should proceed against other sureties before proceeding against him. It is creditors option to decide for himself against whom would he proceed first. The creditor can sue either both of them together or each of them individually. ( Bank of Bihar v. Damodar Prasad )[3]

[1] [1894] AC 586.

[2] AIR 1998 Ker 161

[3] AIR 1969 SC 297

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