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Q. What are the rights of a surety?

Answer: Rights of a surety may be classified under three heads:

·        Rights against the principal debtor
·         Rights against the creditor,
·          Rights against co-sureties.


Rights against the principal debtor:
Right of subrogation – Section 140 provides that where a surety has paid the guaranteed debt on the due date or has performed the guaranteed duty on the default of the principal debtor, he/she is invested with all rights that the creditor has against the debtor. In other
words, the surety is subrogated to all rights that the creditor had against the principal debtor. Hence, if the creditor loses or without the consent of the surety parts with any securities (whether known to the surety or not), the surety is discharged to the extent of the value of such securities (Section 141). Further, the creditor must hand over to the surety the securities in the same condition as they formerly stood in his/her hands.
Right to be indemnified – The surety has a right to recover from the principal debtor the amount that he/she has rightfully paid under the contract of guarantee.

Rights against the creditor: In case of fidelity guarantee, the surety can direct a creditor to dismiss the employee whose honesty he/she has guaranteed, in the event of proven dishonesty of the employee. The creditor’s failure to do so will exonerate the surety from his/her liability.

Rights against co-sureties

Right of contribution – Where a debt has been guaranteed by more than one person, they are called co-sureties. Section 146 provides for a right of contribution between them. When a surety has paid more than his/her share or a decree has been passed against the surety for more than his/her share, he/she has a right of contribution from the other sureties who are equally bound to pay with him/her.

Example: A, B and C are sureties to D for Rs. 3,000 lent to E. E defaults in making the payment. A, B and C are liable to pay Rs. 1,000 each, and if any one of them has to pay more than his/her share, i.e. Rs. 1,000, he/she can claim contribution from the others.

Where the co-sureties have guaranteed different sums, they are bound under Section 147 to contribute equally, subject to the limit fixed by their guarantee and not proportionately to the liability undertaken.

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