Rights of Surety

Rights of Surety

Rights of Surety can be classified into three
groups, as follows;

1. Rights against Principal debtor.
2. Rights against Creditor.
3. Rights against Co-Sureties.

Rights against Principal Debtor

Right to give Notice: When
ever creditor comes to surety,
for the purpose of seeking
payment, surety can give a
notice to principal debtor to
settle the debt.

Rights of Sub-rogation: Sub
rogation is a process where
rights will get shifted from one
person to the other. If surety
makes payment to creditor,
surety gets all rights of
creditor by sub-rogation and
from then onwards surety can
behave like a creditor.

Right of Indemnity: Principal
of indemnity operates between
principal debtor and surety
where principal debtor
becomes implied indemnifier
and surety becomes implied
indemnity holder. Therefore,
surety can make principal
debtor answerable for all
sufferings.

Right to get Securities: In
case where surety makes
payment to creditor, surety
has right to get the securities
given by principal debtor to
creditor.

Right to ask for Relief: From
the date of guarantee, besides
creditor, surety also can bring
pressure on principal debtor
in connection with settlement
of debt.

Rights against Creditor

Right to get Securities: If
Surety makes payment to
creditor, surety can get all
securities into his possession
from creditor.

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.

Rights of Sub-rogation: When
ever surety makes payment to
creditor, creditor foregoes or
looses all of his rights in his
capacity as creditor and those
rights will be attained by
surety.

Right to advice to Sue
Principal Debtor: Surety has
right to give advice to creditor
to proceed legally against
principal debtor for the
purpose of recovering the
amount.

Right to insist on
Termination of Services: In
case where guarantee is with
regard to conduct of an
employee, surety can insist on
termination of services of
employee. Here employees
status is equal to that of
creditor and employee’s status
is equal to that of principal
debtor.

Rights against Co-Sureties

Right to ask for
Contribution: Surety can ask
his co-sureties to contribute
the amount when principal
debtor comes across default.
If they have given guarantee
for equal amounts, they have
to contribute equally. In case
where guarantee is given for in
equal amounts, the mode of
contribution differs from
England law to Indian law. As
per England law contribution
is to be made in the ratio of
guarantee amounts. But as per
Indian law the deficit amount
is to be distributed to all
sureties equally and every
surety will contribute share of
deficit or guarantee amount
which ever is less.

Right to claim Share in
Securities: When co-Sureties
make payment to creditor,
they get securities from
creditors procession. Then
every surety can claim his
share in those securities.