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INDEMNITY AND GUARANTEE

Table of Contents

(Ss. 124 to 147)

QUESTION BANK.

Q.1 What are the rights of the surety on payment or performance by him of guaranteed debt or duty?

Q.2. Discuss fully various modes of discharging surety from liability.

Q.3. “Between Co-sureties there is equality of burden and benefit” Comment.

Q.4 Distinguish between contract of Indemnity and contract of Guarantee. Illustrate your answer.

Q.5 What are the rights and liabilities of a surety against the (i) Principal Debtor (ii) Creditor (iii) the co-sureties?

Q6. What is a continuing guarantee? When and how it is revoked?

Q7. Discuss the concept of consideration in contract of Guarantee.

Q8. Explain the Liability of surety is Co-extensive.

Q.9. Explain the rights of the surety in detail

Q.10. What is contract of Indemnity and contract of guarantee? Distinguish between the two. Nov. 09.

Q.11. What is contract of indemnity? How does it differ from contract of guarantee?

Q.12 What is contract of indemnity? Illustrate your answer.

Q.12 Define indemnity. What are the rights of indemnity holder?

Q.13 “The surety is favoured debtor”. Explain.

Q.14 What is contract of guarantee? Discuss the different circumstances when surety is . discharged from liability.

SHORT NOTES.

Surety’s liability. Apr.2000, 2008 , Nov.2006
Right of Indemnity holder.Oct.2001,Apr.2001
Continuing Guarantee .

SYNOPSIS

Contract of Indemnity (S. 124)

Implied Indemnity

Rights of an Indemnity holder (S. 125) as to

1) All Damages.

2) All Costs.

3) All Sums.

Contract of Guarantee ( or Suretyship). (S. 126)
Essentials of the contract of Guarantee.
1. Principal Debt.
2. Consideration (S. 127)
3. No misrepresentation or concealment (S. 142, 143)
4. Writing not necessary.
5. Distinction between Contract of ‘Indemnity’ and ‘Contract of ‘Guarantee’.
Parties to the contract.
Nature of Liability.
What is Guarantee?
As to the interest.
Discharge of liability.

iii. Nature of surety’s liability.

Secondary Liability.
Co- extensive with the Principal Debtor (S. 128).
Kinds of Guarantee.
Specific Guarantee.
Continuing Guarantee.(S. 129).
Rights of surety.
a) Right against the creditor.
1. Right to securities (S. 141).
2. Right to share reduction.
Right to set-off.
Right against Principal Debtor.
1. Right to subrogation. (S. 140).
2. Right to indemnity. (S. 145).
3. c) Right against co-sureties.
4. Right when co-surety is released (S. 138).
Right to contribution (S. 146).
Discharge of Surety.

Invalidation of contract (Ss. 142, 143).
Conduct of the creditor (Ss. 133, 144).
Revocation (S. 130).
Death of Surety (S. 131).
Composition, extension of time and promise not to sue (S. 135).

I. CONTRACT OF INDEMNITY (S. 124).

124 of the Indian Contract Act defines a Contract of Indemnity as,- “A contract whereby one party promises to save the other from the loss caused to him by the conduct of the promisor himself or by the conduct of any other person.”[1].

In Indemnity, the possibility of risk of any loss happening is only contingent against the indemnifier.

Illustration.

a) ‘A’ contracts to indemnify ‘B’ against any consequences of any proceeding which ‘C’ may take against ‘B’, regarding a certain sum of Rs. 200. This is a contract of indemnity.
b) ‘X’ is a friend of ‘Y’. Y is a shopkeeper who wants an honest boy as a servant. X sends ‘Z’ for service and assures ‘Y’ that if any loss or misappropriation is caused by ‘Z’, he will pay for that. It is the contract of Indemnity, wherein X promises to save Y from any loss caused to him by the conduct of Z[2].

Some other agreements held by the court as’ indemnity agreements’ are the vendor’s promise to the vendee to be liable if title to the land is disturbed and the bond executed by the employee to serve the master for a particular period.

There are two parties in the contract of indemnity: the ‘Indemnifier’ or ‘Promisor’, who promises to save the other from losses, and the ‘Indemnified’ or ‘Promisee’, who is a person so saved. The contract of indemnity becomes enforceable when the other party suffers from the transaction covered by the contract of indemnity.

The above definition covers the loss caused by the conduct of ‘promisor himself’ or by the ‘conduct of any other person’ but does not cover loss caused by events or accidents, which do not depend upon the conduct of the indemnifier or on the conduct of any other person.

The definition, unlike English law, excludes from its purview cases of loss arising from accidents like fire, flood, perils of sea etc. Some human agency must cause the loss, unlike English law, which covers loss by external forces like fire, flood, etc. Therefore, in England, a contract of Insurance (except life insurance) is a contract of Indemnity. But in India, the Contract of Insurance is a contingent contract and not an indemnity[3].

Implied Indemnity[4] :

A Contract of Indemnity may be expressed (by words spoken or written) or implied from the facts of the case. Following is the illustration of implied indemnity.

Illustration

If ‘A’ hires a horse from ‘B’ for riding purposes, if, due to A’s negligence, an accident occurs and the horse gets injured, it is A’s responsibility to indemnify ‘B’ for injuries to the horse, even though there is no express contract of indemnity.

Indemnity obligation is generally created by a bond secured by ‘bond money’.

Situations of implied indemnity.

Despite specific agreements in several situations, the courts have held defendants liable for implied indemnity. Viz.

In Adamson v Jarvis [5]

Facts—The Plaintiff, an auctioneer, sold certain cattle on the defendant’s instruction. Subsequently, it turned out that the livestock (cattle) did not belong to the defendant. The auctioneer claimed indemnity due to the loss he had suffered by acting on the defendant’s directions.

Held– Defendant is liable under an implied indemnity.

Similarly, the clause in a registered sale deed that “if upon the objection of anyone any damage or loss accrues to the vendee, the vendor will be liable” amounts to a contract of indemnity and is not a mere covenant for the title and quiet possession.; Employees of the Bank agreeing to see repayment of irregular loans granted by them within a month or to repay the amount themselves- is an indemnity agreement.

Indemnity By Government.

The government also enters into several indemnity agreements. In inter-state or international transactions, the contract of indemnity entered into by the Government is important. In today’s liberalism (free trade at the international level), the number of foreign companies establishing their business in collaboration with any of the State governments in India has increased. It requires the Central Government’s indemnity to make good any loss such a company may sustain by breach of contract by any state. A recent example of this is the Enron Project. Enron Project, with the guarantee of the Central Government, was established at Dabhol (Maharashtra). Enron is an America-based multinational company that was established to produce electricity. For that purpose, it has established its business with the collaboration of the Maharashtra Government. The government of India had given a guarantee to the same transaction. Maharashtra State Electricity Board contracted to purchase electricity produced by the Enron Company. In fact, the electricity produced by Enron was very costly; hence, the Government of Maharashtra decided to repudiate the contract. In this move, Enron threatened to invoke the guarantee the Government of India gave. In other words, the Government of India has to indemnify the loss sustained by Enron due to the non-performance of the contract by the Maharashtra Government.

Rights of an Indemnity holder (S. 125).

125 lays down the nature and extent of liability of the indemnifier. The indemnity holder (promisee) in a contract of indemnity is entitled to recover from the promisor (indemnifier)-
All damages[6] he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies.
All costs[7] which he may be compelled to pay in any such suit.
All sums[8] which he may have paid under the terms of any compromise or any such suit if the compromise was not contrary to the order of the promisor.

Illustration

Due to an accident of a vehicle of A by B, the court ordered A to pay Rs. 10,000 damages and Rs. 1000 as a cost of the suit to the injured person. Here, A can recover Rs. 10000 damages and Rs. 1000 costs from him (B).

Commencement of the liability of indemnifier[9].

The question, in many cases, comes as to exactly when the liability of the indemnifier to pay occurs. Originally, the English rule was that the indemnifier’s liability would arise only after the indemnity-holder had suffered actual loss by paying off the claim. But this would cause injustice to the indemnity holder. Therefore, the law has now changed. Now, the indemnifier needs to pay compensation first[10].

II. “CONTRACT OF GUARANTEE” OR “SURETYSHIP”[11]: –

S.126 of the Indian Contract Act defines the contract of guarantee as “a contract to perform the promise or to discharge the liability of a third person in case of his default.[12]”

The person who gives the guarantee is called the “Surety” the person in respect of whose default the guarantee is given is called the “Principal Debtor” or “Debtor” and the person to whom the guarantee is given is called the “creditor”. A guarantee may be either oral or written. We have been discussing this topic in respect of ‘Surety’. Therefore, it is also called an agreement of ‘Surety-ship’.

Illustration

If A requests B to pay Rs.1000 to C and guarantees that if C fails to pay, B will pay. This is the contract of guarantee, wherein A is surety, B is the creditor, and C is the ‘principal debtor’ or a ‘debtor’[13].

i. Essentials of the contract of Guarantee: –

Following are the essentials of a contract of Guarantee.

(1). Principal Debt[14]: –

The purpose of the guarantee is to secure payment of debt or performance of liability. Therefore, the existence of ‘legally recoverable debt’ is the essence of the guarantee contract. Therefore, the debt or liability must be valid and not void or voidable.

(2). Consideration[15] (S. 127): –

‘Anything done’, or ‘any promise made’ for the benefit of the principal debtor by a creditor, is sufficient consideration to surety for giving the guarantee.

Therefore, the contract of guarantee is not without consideration. It may be said that it is an indirect consideration that surety receives for his guarantee. Though he does not receive anything directly, whatever is done or any promise made for the Debtor’s benefit is a good consideration for surety for his guarantee. Consideration in this way is logical and not actual.

But if the guarantor pays, he can recover it from the Debtor.

Illustration

(a) B requests A to sell and deliver the goods to him on credit. A agrees to do so, provided C will guarantee the payment of the price of the goods. C promises to guarantee the payment in consideration of A’s promise to deliver the goods. This is sufficient consideration for C’s promise.

(b) A sells and delivers goods to B.C afterwards requests A to forbear to sue B for the debt for a year and promises that, if he does so, C will pay for them in default of payment by B. A agrees to forbear as requested. This is sufficient consideration for C’s promise.

(c) A sells and delivers goods to B. C afterwards, without consideration, agrees to pay for them in default of B. The agreement is void.

(3). No misrepresentation or concealment[16] (S. 142,143): –

Guarantee obtained by a creditor by misrepresentation or concealment, as to material circumstances, is invalid.

Illustrations

(a) A engages B as a clerk to collect money for him. B fails to account for some of his receipts, and A, in consequence, calls upon him to furnish security for his duly accounting. C gives a guarantee for B’s duly accounting. A does not acquaint C with B’s previous conduct. B afterwards makes default. The guarantee is invalid.

(b) A guarantees to C the payment for iron to be supplied by him to B up to the amount of 2000 tons. B and C have privately agreed that B should pay five rupees per ton beyond the market price, such excess to be applied in liquidation of an old debt. This agreement is concealed from A. A is not liable as a surety

In London General Omnibus Co. vs Holloway[17]

Facts: – The defendant was invited to give a guarantee as to the servant’s faithfulness. The employer had earlier dismissed him from service for dishonesty but did not disclose this fact to the surety. The servant committed another fraud.

Held: – The surety is not liable because his guarantee was caused by concealing a material fact of previous dishonesty.

(4). Writing not necessary: –

126 provides that the guarantee may be either oral or written; therefore, it may be express or implied, unlike English law, which recognises only written guarantee.

ii. Distinction between a contract of “Indemnity” and a Contract of ‘guarantee’: –

There are the following points of distinction between these two, viz.

1. Parties to the contract.

The contract of indemnity has two parties: the indemnified (promisor) and the indemnifier (promisee). In contrast, the contract of guarantee has three parties: the creditor, the principal debtor (the debtor), and the surety.

2. Nature of liability-

The liability of the indemnifier to the indemnified is primary.

Whereas the surety’s liability is secondary (i.e. arises on default of the principal debtor).

3. What is guaranteed: –

In a contract of indemnity, the indemnifier’s liability arises only if any loss is caused to the indemnified by a contingent event, whereas in a contract of guarantee, there is an existing debt or duty, the performance of which is guaranteed by the surety.

4. As to the Interest: –

In a Contract of Indemnity, the Indemnifier has some interest in the transaction, whereas the guarantor has no such interest in the transaction.

5. Discharge of liability: –

Liability of Indemnifier is discharged by happening or non-happening of contemplated event, whereas surety is discharged automatically when the principal debtor is discharged.

iii. Nature of surety’s liability: –

The nature of the surety’s liability may be discussed

1. Secondary Liability[18]: –

Surety’s liability is often considered secondary, accessory, or contingent liability. It is in the sense that surety is liable only on default by the principal debtor.

In Vijay Singh Padoae V. SICOM

(2001 BOM L, R.)

Held: – that on default of a Principal Debtor, the creditor can directly exhaust his remedies against the surety instead of the principal debtor. Notice of default of the debtor is not necessary to be given to the surety because it is his duty to see that the principal debtor pays or performs his obligation.

A surety is called a ‘favoured debtor’ because he enjoys some favour at law as well as at equity. Therefore, any inconsistency in the contract of Suretyship by creditor and debtor excludes surety from liability.

2. Co-extensive with the principal debtor[19] (S. 128): –

The liability of the surety is co-extensive with that of the principal debtor. Co-extensive means similar in quantum.

Illustration

A guarantee to B the payment of a bill of exchange by C, the acceptor. The bill is dishonoured by C. A is liable not only for the amount of the bill but also for any interest and charges that may have become due[20].

iv. Kinds of Guarantee: –

A contract of guarantee may be of two kinds, viz.

Specific Guarantee[21]: –

When the guarantee is given for a single debt, it is called a specific guarantee.

Illustration

A guarantee of the debt of Rs. 5000 by the bank to B. In this case, the guarantee is specific for a loan of Rs. 5000.

Continuing Guarantee[22] (S. 129): –

A guarantee that extends to a series of transactions is called a continuing guarantee.

Illustration

(a) A, in consideration, that B will employ C in collecting the rent of B’s zamindari promises B to be responsible, to the amount of 5,000 rupees, for the due collection and payment by C of those rents. This is a continuing guarantee.

(b) A guarantees payment of 100 to B (a tea dealer) for any tea which he may time-to-time supply to C. Here, the liability of A is for 100, and not more than that, even though B has time-to-time supplied tea of 200 pounds.

(c) A guarantees payment to B of the price of five sacks of flour to be delivered by B to C and to be paid for in a month. B delivers five sacks to C. C pays for them. Afterwards, B delivers four sacks to C, which C does not pay for. The guarantee given by A was not a continuing guarantee, and accordingly, he is not liable for the price of the four sacks.

A continuing guarantee is intended to cover a number of transactions over a period of time. A surety is liable to the creditor for his dealings with the debtor for a specific period.

Revocation of continuing guarantee (S. 130):

The continuing guarantee is revoked by giving notice to the creditor by a surety or by the death of the surety.

(i) By Notice to Creditor:

A continuing guarantee may be revoked by the surety at any time by notice to the creditor as to future transactions.

Illustrations

(a) A, in consideration of B’s discounting, at A’s request, bills of exchange for C, guarantees to B, for twelve months, the due payment of all such bills to the extent of 5,000 rupees. B discounts bills for C to the extent of 2,000 rupees. Afterwards, at the end of three months, A revokes the guarantee. This revocation discharges A from all liability to B for any subsequent discount. But A is liable to B for the 2,000 rupees, on default of C.

(b) A guarantees to B, to the extent of 10,000 rupees, that C shall pay all the bills that B shall draw upon him. B draws upon C. C accepts the bills. A gives notice of revocation. C dishonours the bill at maturity. A is liable upon his guarantee.

(ii) Revocation of continuing guarantee by surety’s death. (S. 131) –

The death of the surety operates, in the absence of any contract to the contrary, as a revocation of a continuing guarantee so far as regards future transactions.

v) RIGHTS OF SURETY: –

The surety has the following rights: –

A. Rights against the creditor: –

1. Right to securities[23] (S. 141):

A surety is entitled to every security that a creditor has with him or the debtor at the time of entering into a contract of Suretyship.

Illustrations.

(a) C advances to B, his tenant, 2,000 rupees on the guarantee of A. C also has further security for 2,000 rupees through a mortgage on B’s furniture. C cancels the mortgage. B becomes insolvent, and C sues A on his guarantee. A is discharged from liability to the amount of the value of the furniture.

(b) C, a creditor whose advance to B is secured by a decree, also receives a guarantee for that advance from A. C afterwards takes B’s goods in execution under the decree and then, without the knowledge of A, withdraws the execution. A is discharged[24].

2. Right to share reduction[25]: –

A surety is entitled to reduce its share if the creditor receives any amount from the principal debtor or from his liquidator in case of insolvency.

3. Right to set-off[26]: –

If the creditor sues the surety, the surety may have the benefit of the set-off that the principal debtor had against the creditor[27].

B. Right of Surety against Principal Debtor: –

1. Right of Subrogation[28] (S. 140): –

Right of subrogation means the right by which surety enjoys all the rights that the creditor has against the principal debtor after paying off the creditor.

So, in other words, it is stepping into the shoes of the creditor and enjoying all rights he has.

2. Right to indemnity (S. 145): –

In every contract of guarantee, there is an implied promise by the principal debtor to indemnify the surety for whatever sum he has paid lawfully under the guarantee.

Illustration

(a) B is indebted to C, and A is surety for the debt. C demands payment from A and, on his refusal, sues him for the amount. A defends the suit, having reasonable grounds for doing so, but is compelled to pay the amount of the debt with costs. He can recover from B the amount paid by him for costs, as well as the principal debt.

(b) C lends B a sum of money, and A, at the request of B, accepts a bill of exchange drawn by B upon A to secure the amount. C, the holder of the bill, demands payment of it from A and, on A’s refusal to pay, sues him upon the bill. A, not having reasonable grounds for so doing, defends the suit and has to pay the amount of the bill and costs. He can recover from B the amount of the bill but not the sum paid for costs, as there was no real ground for defending the action[29].

C. Right against co-sureties: –

Where the debt is guaranteed by more than one surety, they are called co-sureties.

1. Right when co-surety is released (S. 138): –

Release of one of the co-sureties by the creditor does not discharge the others. It does not free the surety so released from his responsibility to the other sureties for contribution.

2. Right to contribution[30] (S. 146): –

Co-sureties are liable to pay equally in the absence of a contract to the contrary.

Illustrations

(a) A, B and C are sureties to D for the sum of 3,000 rupees lent to E. E makes a default in payment. A, B and C are liable, as between themselves, to pay 1,000 rupees each.

(b) A, B and C are sureties to D for the sum of 1,000 rupees 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 a default in payment. As between the sureties, A is liable to pay 250 rupees, B 250 rupees, and C 500 rupees.

vi). Discharge of Surety: –

A surety is said to be discharged from the liability when his liability comes to an end by-

1. Invalidation of contract (Ss. 142 and 143):-

Guarantee obtained by misrepresentation or concealment by the creditor as to the material circumstance is invalid and discharges surety.

Illustrations

(a) A engages B as a clerk to collect money for him. B fails to account for some of his receipts, and A consequently calls upon him to furnish security for his duly accounting. C gives his guarantee for B’s duly accounting. A does not acquaint C with B’s previous conduct. B afterwards makes default. The guarantee is invalid.

(b) A guarantees to C payment for iron to be supplied by him to B in the amount of 2,000 tons. B and C have privately agreed that B should pay five rupees per ton beyond the market price, such excess to be applied in liquidation of an old debt. This agreement is concealed from A. A is not liable as a surety.

2. Conduct of the creditor (Ss. 133 and 134): –

Surety ‘in law’ as well as ‘inequity’ a favoured debtor; therefore, if the creditor makes any variations in terms of the contract of Suretyship or if not joined co-surety as agreed, the surety is discharged.

Illustrations

(a) A becomes surety to C for B’s conduct as a manager in C’s bank. Afterwards, in the B and C contracts, B’s salary shall be raised without A’s consent, and he shall become liable for one-fourth of the losses on overdrafts. B allows a customer to overdraw, and the bank loses a sum of money. A is discharged from his Suretyship by the variance made without his consent and is not liable to make good this loss.

(b) A guarantees C against the misconduct of B in an office to which B is appointed by C, and the duties are defined by an Act of the Legislature. By a subsequent Act, the nature of the office is materially altered. Afterwards, B misconducts himself. A is discharged by the change from future liability under his guarantee, though the misconduct of B is in respect of a duty not affected by the later Act[31].

3. Revocation (S. 130): –

The surety may at any time revoke a continuing guarantee as to future transactions by giving notice to the creditor.

Such revocation becomes effective for future transactions while the surety remains liable for transactions already entered.

4. Death of Surety (S. 131): –

The death of surety revokes the continuing guarantee[32].

5. Composition, Extensions of Time, and promise not to sue (S. 135)[33] : –

The contract between debtor and creditor by which the creditor makes any composition with or promises to give time to or not to sue a principal debtor discharges surety.

6. Impairing surety’s Remedy (S. 139)[34]: –

If the creditor’s act or omission impairs the remedy of surety against the principal debtor, the surety is discharged.

Illustrations

(a) B contracts to build a ship for C for a given sum, to be paid in instalments as the work reaches a certain stage. A becomes surety to C for B’s due performance of the contract. C, without the knowledge of A, prepays to B in the last two instalments. A is discharged by this prepayment.

(b) C lends money to B on the security of a joint and several promissory notes made in C’s favour by B and by A as surety for B, together with a bill of sale of B’s furniture, which gives power to C to sell the furniture and apply the proceeds in the discharge of the note. Subsequently, C sells the furniture, but owing to his misconduct and willful negligence, only a small piece is realised. A is discharged from liability on the note.

(c) A puts M as an apprentice to B and gives a guarantee to B for M’s fidelity. B promises on his part that he will, at least once a month, see M make up the cash. B omits to see this done, as promised, and M embezzles. A is not liable to B on his guarantee.”

*****

[1] नुकसान भरपाईचा करार म्हणजे ‘‘असा करार की, ज्यामध्ये एक पार्टी दुस-या पार्टीस स्वतःच्या कृतीमुळे होणा-या अथवा इतर व्यक्तीच्या कृतीमुळे होणा-या नुकसानीची भरपाई करुन देण्याचे वचन देते.’’ [क्षतिपूर्ति का करार/अनुबंध “एक करार है जिसमें एक पक्ष दूसरे पक्ष को अपने स्वयं के कार्य या किसी अन्य व्यक्ति के कार्य के कारण होने वाले नुकसान के लिए क्षतिपूर्ति करने का कार्य करता है”।]

[2] उदा.: G हा L चा मित्र आहे. L एक दुकानदान असून, त्यास एका प्रामाणिक कामगार मुलाची गरज आहे. G र्हा H ला L कडे नोकरीस पाठवितो व L ला वचन देतो कीर्, H ने कोणतेही नुकसान अथवा अफरातफर केल्यास G त्याची भरपाई करुन देईल.

[‘X’, ‘Y’ का मित्र है। Y एक दुकानदार है जो नौकर के रूप में एक ईमानदार लड़का चाहता है। X सेवा के लिए Z को भेजता है और Y को आश्वासन देता है कि यदि Z के कारण कोई नुकसान या हेराफेरी होती है तो वह उसके लिए भुगतान करेगा। यह क्षतिपूर्ति का अनुबंध है, जिसमें X, Y को Z के आचरण से होने वाले किसी भी नुकसान से बचाने का वादा करता है]

[3]In The New India Assurance Co. Ltd. Vs. State Trading Corporation of India. AIR 2007 (NOC) 517 (Guj)

Held: – Almost all insurance other than life and personal accident insurance are contract of indemnity. Insurance Companies liability to indemnify is absolute one. If indemnity-holder had incurred any liability and that liability is absolute, he is entitled to call upon indemnifier to save him from that liability and pay it off.

[4] अभिप्रेत नुकसान भरपाईचा करार/ व्यक्तीच्या कृत्यावरुन नुकसान भरपाईचा करार अभिप्रेत करणे. [निहित क्षतिपूर्ति]

[5] (1827)

[6] सर्व नुकसान भरपाई. [सभी मुआवजा।]

[7] सर्व खर्च. [सभी खर्चे।]

[8] सर्व रकमा. [सभी राशियाँ।]

[9] वचन कर्त्याची नुकसान भरपाईची जबाबदारी कधी सुरु होईल. [नुकसान के लिए वचनग्रहीता का दायित्व कब शुरू होगा।]

[10] In Re Richardson, Ex part, The Governors of St. Thomas’s Hospital Buckley (LJ) observed “Indemnity is not necessarily given by repayment after payment. Indemnity requires that the party to be indemnified shall never be called upon to pay”.

[11] हमीचा करार. [गारंटी का अनुबंध।]

[12] हमीचा करार म्हणजे असा करार की, ज्यामध्ये हमीकर्ता हमी देनारास अषी हमी करतो की, ज्याच्यावतीने हमी दिली जात आहे, त्या व्यक्तीने त्याचे वचन पाळले नाही अथवा जबाबदारी पाळली नाही तर ते वाचन अथवा जबाबदारी हमिकर्ता पूर्ण करेल.-[ गारंटी के अनुबंध का अर्थ है एक कारर जिसमें ज़मानत यह सुनिश्चित करने का वचन देता है कि यदि वह व्यक्ति जिसकी ओर से गारंटी दी जा रही है, अपने वादे या दायित्व को पूरा करने में विफल रहता है, तो ज़मानत उस वादे या दायित्व को पूरा करेगा।-]

[13] A, B ला विनंती करतो की, त्याने C ला 1000 रु. द्यावेत आणि A हमी देतो की, जर C ने ते A ला परत दिले नाहीत तर तो स्वतः ती रक्कम A स देईल. अषा प्रकारात ‘‘हमी देणार’’, ‘‘धनको’’ व ज्याच्याबद्दल हमी दिली जाते असा ‘‘कर्जदार’’. किंवा ‘‘ऋणको’’ अशा तीन पार्टी असतात. [A, B से C को 1000 रुपये देने का अनुरोध करता है। और ए यह वचन देता है कि यदि सी इसे ए को वापस नहीं करता है, तो वह स्वयं ए को राशि का भुगतान करेगा। आशा प्रकार में, “गारंटी”, “लेनदार” और “उधारकर्ता” वह व्यक्ति जिसके विरुद्ध गारंटी दी गई है। या “देनदार” तीन पक्षकार हैं।]

In South India Wire Ropes Ltd. Vs. Usha Martin Industries Ltd.

Held: Banker who issues Bank Guarantee is in position of surety.

[14] मुख्य कर्ज. [मूल ऋण।]

[15] मोबदला. [नुकसान भरपाई]

[16] कोणत्याही प्रकारे विपर्यास अथवा महत्त्वाच्या गोश्टी लपवून हमी घेतलेली नसली पाहिजे. [गारंटियों को किसी भी तरह से विकृत या छिपाया नहीं जाना चाहिए।]

[17] 1992 K.B

[18] दुय्यम जबाबदारी. [माध्यमिक दायित्व]

[19] ऋणको एवढीच किंवा त्याच्या मुळ कर्जाषी व्यस्त प्रमाणात जबाबदारी. [मूल ऋणी के साथ सह-व्यापक]

[20] In Aditya Chawdhari V. Bank of India (AIR 2000 Pat.)

Held: – the surety cannot be held liable beyond the liability of principal debtor and beyond the terms of contract.

[21] विशिष्ठ

[22] अविरत हमी / जिम्मेदारी. उदा. A, B ला [की, जो चहा विक्रेता आहे]. त्यास विनंती करतो की, त्याने C ला वेळोवेळी चहा पुरवावा की, ज्याच्या 100 पाऊंड पर्यंतच्या किमतीस तो जबाबदार राहील. इथे A ची जबाबदारी फक्त 100 पाऊंड पर्यंतची आहे. जरी B ने C ला 200 पाऊंडचा चहा दिला असेल तरी. [असीमित वारंटी/जिम्मेदारी। उदा. A, B को [ जो चाय बेचने वाला है]। उससे समय-समय पर सी को चाय की आपूर्ति करने का अनुरोध करता है, जिसकी लागत के लिए वह £100 तक का उत्तरदायी होता है। यहां A की देनदारी केवल 100 पाउंड तक है। भले ही B, C को 200 पौंड की चाय दे दे।]

[23] ऋणकोचे तारन स्वतःकडे घेण्याचा अधिकार [प्रतिभूति को अपने अधिकार में लेने का ऋणी का अधिकार-]

[24] (c) A, as surety for B, makes a bond jointly with B to C, to secure a loan from C to B. Afterwards, C obtains from B a further security for the same debt. Subsequently, C gives up the further security. A is not discharged.

[25] अपूर्ण भरलेली रक्कम कमी करण्याचा अधिकार. [अपूर्ण भुगतान राशि को कम करने का अधिकार।]

In Syndicate Bank V. Pamidi Somaiah(A.I.R. 2002 A.P.)

Held – On paying off creditor, the surety steps into his shoes and get the right to have securities if any, which the creditor has against principal debtor.

[26] व्यवहारातून वजा-वाटप करण्याचा अधिकार. [लेन-देन से कटौती-वितरण का अधिकार।]

[27] Set-off (adjustment of accounts). If ‘A’ a Debtor owe Rs. 10000 to bank at the same time the bank has deposit of A of Rs. 6000, if Z is surety he can claim set-off and pay remaining Rs. 4000 to bank.

[28] हमीकर्त्यास, ऋणको ऐवजी प्रतिस्थापित होण्याचा अधिकार. [देनदार के बदले में गारंटीकर्ता का अधिकार प्रतिस्थापित किया जाना]

[29] (c) A guarantees to C, to the extent of 2,000 rupees, payment for rice to be supplied by C to B. C supplies to B rice to a less amount than 2,000 rupees, but obtains from A payment of the sum of 2,000 rupees in respect of the rice supplied. A cannot recover from B more than the price of the rice already supplied.

[30] सह हमी कत्र्याकडून वर्गणीचा अधिकार. [सह-गारंटी से सदस्यता का अधिकार]

[31] (c) C agrees to appoint B as his clerk to sell goods at a yearly salary, upon A’s becoming surety to C for B’s duly accounting for money received by him as such clerk. Afterwards, without A’s knowledge or consent, C and B agree that B should be paid by a commission on the goods sold by him and not by a fixed salary. A is not liable for subsequent misconduct of B.

(d) A gives to C a continuing guarantee to the extent of 3,000 rupees for any oil supplied by C to B on credit. Afterwards B becomes embarrassed, and, without the knowledge of A, B and C contract that C shall continue to supply B with oil for ready money and that the payments shall be applied to the then existing debts between B and C. A is not liable on his guarantee for any goods supplied after this new arrangement. [AIR 1990 Mad.]

Illustrations of S.134: –

(a) A gives a guarantee to C for goods to be supplied by C to B. C supplies goods to B, and afterwards B becomes embarrassed and contracts with his creditors (including C) to assign to them his property itl consideration of their releasing him from their demands . . Here B is released from his debt by the contract with C, and A is discharged from his suretyship.

(b) A contracts with B to grow a crop of indigo on A’s land, and to deliver it to B at a fixed rate, and C guarantees A’s performance of this contract. B diverts a stream of water which is necessary for irrigation of A’s land and thereby prevents him from raising the indigo C is no longer liable on his guarantee.

(c) A contracts with B for a fixed price to build a house for B within a stipulated time, B supplying the necessary timber. C guarantees A’s performance of the contract. B omits to supply the timber. C is discharged from his suretyship.

In Indian Bank vs. Krishna Swami A.I.R. 2007 (NOC) 315 (Kar)

Facts: – After disclosing shortfall in security given to Bank by Debtor, the Bank took another security from him. This fact is not disclosed to surety.

Held: – Surety is discharged.

[32] In Karnataka State Finance Corp. vs. Janakaian Naidu AIR 2007 (NOC) 315 (Kar).

Facts: – Original loan transaction was altered without making surety a party. Principal borrower agreed for rescheduling of payment of loan amount and also rate of interest.

Held: – As surety was not a party to revised transaction, liability of surety stands discharged.

[33] धनकोने, ऋणको बरोबर केलेली तडजोड, अथवा रक्कम भरणेस वाढवून दिलेला कालावधी अथवा वसुलीपोटी दावा दाखल न करण्याचे वचन. [लेनदार द्वारा देनदार के साथ समझौता, या भुगतान के लिए समय का विस्तार या वसूली के लिए मुकदमा नहीं करने का वादा।]

[34] ऋणको ने धनको कडे ठेवलेले तारण नश्ट करने की ज्यावर हमिकर्ताचा अधिकार प्रस्थापीत झालेला होता. [देनदार द्वारा लेनदार के पास रखी गई सुरक्षा को नष्ट करने के लिए जिस पर गारंटीकर्ता का अधिकार स्थापित किया गया था।]