Co Sureties

Right of a surety against the co-surety (Sec 146):

Where two or more persons are co-sureties for the same debt or duty, either jointly or severally and whether under the same or different contracts, and whether with or without the knowledge of each other, the co-sureties, are liable, as between themselves to pay each an equal share of the whole debt or of that part of it which remains unpaid by the principal debtor.

Illustrations:

1. A, B and C are sureties to D for the sum of Rs 3,000 lent to E. E makes default in payment. A, B and C are liable between themselves to pay Rs 1,000 each.
2. A, B, and C are sureties to D for the sum of Rs 1,000 lent to E, and there is a contract between A, B, and C that A is to be responsible to the extent of one quarter, B to the extent of one quarter and C to the extent of one-half. E makes default in payment. As between the sureties, A is liable to pay Rs 250, B Rs 250, and C Rs 500.

The co-sureties are entitled to share in the rights which any one of them has obtained from the principal, for example, share in the right to benefit of creditor’s securities or indemnity. Claim of one co-surety against other co-sureties arises only when —

i) he has paid more than his share of the debt to the principal debtor; or
ii) suit is decreed for full amount against one of co-sureties, and any payment by him will entitle him to contribution from other co-sureties.

Co-sureties bound in different sums: Co-sureties who are bound in different sums are liable to pay equally as far as the limits of their respective obligations permit (Sec 147)

Illustrations:

1. A, B, and C as sureties for D, enter into three several bonds, each in a different penalty, namely A in the penalty of Rs 10,000, B in that of 20,000, C in that of Rs 40,000, conditioned for D’s duly accounting to E. D makes default to the extent of Rs 40,000. A is liable to pay Rs 10,000.
2. A, B, and C as sureties for D, enter into three several bonds, each in a different penalty, namely, A in the penalty of Rs 10,000, B in that of 20,000 rupees, C in that of Rs 40,000 conditioned for D’s duly accounting to E. D makes default to the extent of Rs 40,000 A is liable to pay Rs 10,000 and B and C Rs 15,000 each.
3. A, B, and C as sureties for D, enter into there several bonds, each in a different penalty, namely, A in a penalty of Rs 10,000, B, in that of Rs 20,000, C in that of Rs 40,000 conditioned for D’s duly accounting to E. D makes default to the extent of Rs 70,000. A, B, and C have to pay each the penalty of his bond.

As discussed above, release by the creditor of one co-surety does not discharge the other co-sureties. It does not either free the surely so released from his responsibility to the other sureties (Sec 138). Released co-surety will remain liable to others for contribution in the event of default.

Where a person gives a guarantee upon a contract that a creditor shall not act upon it until another person has joined in it as co-surety, the guarantee is not valid if that other person does not join (Sec 144).

It should be further noted that any undertaking between debtors at the time when debt was contracted or subsequently that one of them shall only be liable as a surety, will not affect the rights of the creditor in any way even if the creditor knew of the agreement between the debtors.

Illustrations:

A and B make a joint and several promissory note to C, A makes it in fact as surety for B, and C knows that at the time when the note is made. The fact that A, to the knowledge of C, made the note as surety for B is no answer to a suit by C against A upon the note.

Rights (1) and (3) above are the rights of surety against the principal debtor. Right (2) is the right of surety against a creditor and right (4) is the right of a surety against his co-surety.

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