Rights of surety

According to the syllabus of B.com 1st year


Prepared by-
Ms. Neetu Kushwaha
Research Scholar
Department of Commerce

1. RIGHTS OF SURETY Course Co-Ordinator: Neetu Kushwaha

2. Surety gets various rights against the following parties: Against the Creditor Against the Principal Debtor Against the Co-sureties

3. 1- Rights Against the Creditor: Right to get Securities: [Sec. 141]  If Surety makes payment to creditor, surety can get all securities into his possession from creditor.

4. CONT……. Right to ask for Set-off:  Surety can give advice to creditor to sell away the security and to utilize the amount thus realized for set off.

5. Rights of Subrogation:   [Sec.140] A surety steps in the shoes of the creditor. A surety subrogate all the rights of the creditor against the principal debtor. However, the right is subject to the condition precedent that the surety must have himself discharge liabilities under the contract. CONT……….

6. CONT…. Right to Equities:   Upon discharge of the guarantee obligation, the surety is entitled to all the equities available to the creditor no only against the principal debtor but also against all persons claiming through him.

7. CONT……… Right to Discharge: A surety has right to be discharged from the further obligation under the fidelity guarantee, if the misconduct or dishonesty of the employee is proved, for whom he has given guarantee.

8. CONT….. Right to dismissal of employee: In case of fidelity guarantee, a surety can ask the employer to dismiss the employee who has proved guilty of misconduct or dishonesty.

9. Right of Subrogation: Upon the discharge of the guarantee obligation, a surety steps into the shoes of the creditor. He gets all the rights of the creditor against the principal debtor. Thus, he is subrogated to all the rights of the creditor against the principal debtor. 2- Rights Against Principal Debtor

10. CONT……. Right to Indemnity: [ Sec. 145] In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety. Therefore, the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee.