Referring to Pollock and Mulla’s arguments and the 13th Law Commission Report’s suggestions, this article examines whether the surety should be entitled to creditor’s securities delivered over to him only after the creditor is entirely paid off.
This topic is of sufficient interest to the legal community because it highlights a major lacuna in the Indian Contract Act, 1872, due to which there have been several contradicting judements by different High Courts. Whether it is when the creditor’s debt is paid in full or the surety pays the total amount of guarantee. The Indian Contract Act does not indicate when the surety has the right to have the creditor’s securities transferred over to him. There is an evident distinction in the phrasing of the two sections. Section 141 on the other hand does not lay down the condition of payment or performance but states that “A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship was entered into” and the discharge is limited to the amount of the security.
Section 140 specifically states that the surety is eligible to the securities of the creditor “upon payment or performance of all that he is liable for” only to the extent that the principal debtor has defaulted. Section 140 of The Indian Contract Act,1872 lays down the rights of the surety on payment or execution and Section 141 lays down the surety’s right to benefit from the creditor’s securities.
0 kommentar(er)
