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.