Upgrad LLM

sc judgements

Advocate

My client stands as surety for his collegues loan. Now his collegue refuses to pay the loan. The bank is directly approaching my client without taking any steps to recover from principal debtor.

Require Supreme Court Judgements

 
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See, the fundamental principle about the surety's liability, as laid down in sec.128 of the contract Act, is that the liabilty of the surety is co-extensive with that of the principal debtor. The surety may, however, by an agreement place a limit upon his liabilty.

So in the case in hand my question, is there any limitation upon the guarantor's liabilty in the contract of guarantee?

If there is no such condition precedent then bank is not bound to proceed against the principal debtor first instead of the surety for repayment of loan amount. In absence of a contract to the contrary the creditor can proceed against anyone first, he can sue only surety, he can sue only principal debtor, or he can sue both. This was pointed out by the Supreme Court in Bank of Bihar v. Damodar Prasad AIR 1969 SC 297 "THE VERY OBJECT OF THE GUARANTEE IS DEFEATED IF THE CREDITOR IS ASKED TO POSTPONE HIS REMEDIES AGAINST THE SURETY. .....SO & SO.....BEFORE PAYMENT THE SURETY HAS NO RIGHT TO DICTATE TERMS TO THE CREDITOR AND ASK HIM TO PURSUE HIS REMEDIES AGAINST THE PRINCIPAL IN THE FIRST INSTANCE. THE SURETY IS A GUARANTOR, AND IT IS HIS BUSINESS TO SEE THAT PRINCIPAL PAYS, AND NOT THAT OF THE CREDITOR."

Even if the court proceeds against the principal debtor first & obtains a decree against him, such decree can be executed against the surety.

Halsbury's Laws of England says' "IT IS NOT NECESSARY FOR THE CREDITOR, BEFORE PROCEEDING AGAINST THE SURETY, TO REQUEST THE PRINCIPAL DEBTOR TO PAY, OT TO SUE HIM, ALTHOUGH SOLVENT, UNLESS THIS IS EXPRESSLY STIPULATED FOR."

 

 
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ADVISOR

Very APPROPRIATE Reply

 
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Is there any SC judgement which defines the time limitation for filing of rovery claim after disposal of mortgaged property enforced and disposed off under the SARFAESI Act 2002

 
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