Co-extensive Liability

Rohit Beerapalli
Mind Map by Rohit Beerapalli, updated more than 1 year ago
Rohit Beerapalli
Created by Rohit Beerapalli about 6 years ago



Resource summary

Co-extensive Liability
  1. Surety is liable for the whole amount for which the principal debtor is liable, and no more.
    1. Surety is liable for not only the amount of the loan, but any interest or charges which may be due on it.
      1. Maharaja of Benares v. Har Narain Singh
        1. Trial court erred in stating that the surety was liable only for principal amount.
        2. Hargopal Agarwal v. SBI
          1. Where part of the principal has been recovered, liability of the surety goes down as well.
            1. Part of the loan was recovered by disposing of some goods owned by the company.
      2. Condition Precedent
        1. Partial recognition under Section 144
          1. 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.
          2. National Provincial Bank of England v. Brackenbury
            1. The defendant signed a guarantee that was intended to be a joint and several liability of three other persons with him.
              1. One of them did not sign the guarantee, therefore there was no guarantee.
                1. 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.
            1. Bank of Bihar Ltd. v. Damodar Prasad
              1. The creditor trying to make the debtor pay would defeat the object of the guarantee.
                1. It is the responsibility of the surety to make sure that the principal pays, not the creditor.
              2. Union of India v. Manku Narayan
                1. Overruled in SBI v. Indexport Registered
                  1. The decree can be executed, jointly, or severably, against the debtor, mortgaged property, and surety.
                    1. The decree holder cannot be forced to execute the mortgage decree, and only then proceed on the execution of the personal decree.
                  2. A creditor must proceed first against the mortgaged property, and only then against the surety.
                    1. Even if there is a composite decree against the debtor, surety, and mortgaged property.
                      1. Severability was not considered.
                2. The mortgaged property of the guarantor cannot be taken possession of without notice to him.
                  1. Amulya Lal v. Tripura Industrial Development Corporation Limited
                    1. Liability of the guarantor is only secondary. It does not arise until default by the principal-debtor.
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