Co-extensive Liability

Co-extensive Liability

1. Surety is liable for the whole amount for which the principal debtor is liable, and no more.

   • Surety is liable for not only the amount of the loan, but any interest or charges which may be due on it.
     • Maharaja of Benares v. Har Narain Singh
       • Trial court erred in stating that the surety was liable only for principal amount.
     • Hargopal Agarwal v. SBI
       • Where part of the principal has been recovered, liability of the surety goes down as well.
         • Part of the loan was recovered by disposing of some goods owned by the company.

2. Condition Precedent

   • Partial recognition under Section 144
     • If there is a condition that the creditor shall not act on a guarantee until a co-surety joins, the guarantee is not valid till that person joins.
   • National Provincial Bank of England v. Brackenbury
     • The defendant signed a guarantee that was intended to be a joint and several liability of three other persons with him.
       • One of them did not sign the guarantee, therefore there was no guarantee.
         • Alternately, it would be valid if the bank and sureties had an agreement to dispense with the signature.

3. No need to exhaust remedies against debtor before proceeding against surety.

   • Bank of Bihar Ltd. v. Damodar Prasad
     • The creditor trying to make the debtor pay would defeat the object of the guarantee.
       • It is the responsibility of the surety to make sure that the principal pays, not the creditor.
   • Union of India v. Manku Narayan
     • Overruled in SBI v. Indexport Registered
       • The decree can be executed, jointly, or severably, against the debtor, mortgaged property, and surety.
         • The decree holder cannot be forced to execute the mortgage decree, and only then proceed on the execution of the personal decree.
     • A creditor must proceed first against the mortgaged property, and only then against the surety.
       • Even if there is a composite decree against the debtor, surety, and mortgaged property.
         • Severability was not considered.

4. The mortgaged property of the guarantor cannot be taken possession of without notice to him.

   • Amulya Lal v. Tripura Industrial Development Corporation Limited
     • Liability of the guarantor is only secondary. It does not arise until default by the principal-debtor.