135. Discharge of surety when creditor compounds with, gives time to, or agrees not to sue principal debtor.---A contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor discharges the surety, unless the surety assents to such contract.

Contract to give time to principal debtor.---A nominal giving of time may have the effect, in substance, of accelerating the creditor's remedy, as where, having commenced an action against the principal debtor, the creditor took a recorded acknowledgment of the debt, and undertook not to enforce it before a certain day, which, however, was earlier than the time at which he could have obtained judgment in the action in the ordinary course. In Such a case the surety, being manifestly not prejudiced, is not discharged.

A contract whereby the creditor promises to give time to the principal debtor must be distinguished from an unconditional contract not to sue him. In the former case, the remedy of the creditor is merely suspended until the determination of the fixed period ; in the latter case the principal debtor is completely released from his obligation so as to entitle the surety to a discharge under S. 134, apart from the specific provisions of this section. In either case, the mere formation of the contract is sufficient to operate as a discharge of the surety irrespective of any forbearance that may be exercised under it. The reason of this rule appears 16 be that a surety has a right, immediately on the debtor becoming due, to insist upon proceedings being at once taken by the creditor against the principal debtor, and any contract that would prevent the creditor from suing him would be inconsistent with that right (S. 139). But the contract must be a binding one supported by consideration ; forbearance to sue, therefore, exercised in pursuance of an agreement without consideration, would not discharge the surety, as it does not amount to anything more than "mere forbearance" within the meaning of S. 137. A consent decree, made without the surety's consent, for payment by installments of the sum due from the principal debtor discharges the surety. It is not necessary that the contract should be express: a tacit or implied contract inferred from the acts of the parties is equally binding as an express one. Thus the acceptance of interest in advance by a creditor operates as a general rule as an agreement to give time to the principal debtor and consequently as a discharge to the surety; for the creditor is in that event precluded from suing the principal until the time covered by the payment in advance has expired.

It has been said that in an ordinary surety bound under S. 55 (4), Civil Procedure Code, the principal creditor is not the decree-holder, but the Court, and it is really in the discretion of the Court to enforce the bond or not. Sections 133, 135 and 139 cannot in terms apply to transactions where the bond is given to the Court, in view of the fact that there is no creditor as required by S. 126, but the equitable principles underlying these sections can be applied, and if the Court to which the security has been given has itself been responsible for varying the terms, the surety is justified in applying to the Court to be relieved, and the Court will exonerate him if his position has been materially affected.

If the effect of the compromise is to give time to the principal debtor, the surety is discharged unless he consented.

Where surety not personally liable.---The general rule that a surety is discharged if any material alteration is made in the contract between the creditor and the principal debtor without reference to the surety applies to a surety who is under no personal liability but has merely deposited documents by way of security.

Part payment by surety.---If the surety has paid part of the debt, and subsequently there is a compromise between the principal debtor and the surety, the surety cannot recover such part payment from the creditor under S. 135, for as regards such payment he is no longer a surely but a principal creditor, as the effect of part payment is to transfer to him so much of the cause of action against the principal debtor.

Contrary agreement.---The operation of the rule as to giving time to the principal debtor may be excluded by express agreement. If the instrument creating the debt and the suretyship declares, that the surety or sureties shall be taken, as between themselves and the creditor, to be principal debtors, and shall not be released by reason of time being given, or of any other forebearance, act, or omission of the creditor which, but for this provision, would discharge the sureties, then any defence on these grounds is effectually barred, and it is unnecessary to consider whether the facts would otherwise raise it. If the agreement creating the suretyship includes a terms that the guarantee is not to be avoided by the creditor giving time to the principal debtor, but the creditor must inform the surety if any payment is more than thirty days overdue, the surety is released if time is given by the creditor and the surety is not informed when the payment is more than thirty days overdue.

Consent of surety is imperative for grant of extention of time to repay loan by creditor to debtor. Consent for extension not given by surety, guarantee, held, stands discharged.

136. Surety not discharged when agreement made with third person to give time to principal debtor.---Where a contract to give time to the principal debtor is made by the creditor with a third person, and not with the principal debtor, the surety is not discharged.

Illustration

C, the holder of an overdue bill of exchange drawn by A as surety for B, and accepted by B, contracts with M to give time to B A is not discharged.

It is clear that when the creditor enters into a binding contract with the principal debtor to give him time without the assent of the sureties, and without reserving his remedy against the sureties, such giving of time discharges the sureties. But, to produce this result, two things are necessary. There must be a binding contract to give time, capable of being enforced; and the contract must be with the principal debtor. If merely made with a third party it will not do.

137. Creditor's forbearance to sue does not discharge surety.---More forbearance on the part of the creditor to sue the principal debtor or to enforce any other remedy against him does not in the absence of any provision in the guarantee to the contrary, discharge the surety.

B owes to C a debt guaranteed by A. The debt becomes payable. C does not sue B for a year after the debt has become payable. A is not discharged from his suretyship.

"Mere forbearance."---S. 135 deals with the case in which a surety is discharged by a contract between the creditor and the principal debtor, entered into without the surety's consent, to give time to, or not to sue, the principal debtor. This section deals with the case of "more forbearance" to sue, as distinguished from forbearance springing from a contract, and provides that the surety shall not be discharged in such a case. Now the forbearance to sue, which does not arise from a contractual obligation, may be exercised for a period short of the period of limitation prescribed for the still, or it may continue until the expiration of the limitation period. The illustration to the section affords an instance of the former case, the limitation period for the suit being three years, and the forbearance exercised only for a year. The surety is not discharged in such a case, and it is equally clear that he would not be discharged even if the forbearance continued for a longer period, provided it fell short of the period of limitation. It seems moreover, according to the weight of decision and English opinion, that it makes no difference if the forbearance continues until the period of limitation has elapsed.

138. Release of one cosurety does not discharge others---Where there are co-sureties, a release by the creditor of one of them does not discharge the others; neither does it free the surety so released from his responsibility to the other sureties.

Release of one of several sureties.---This section is a necessary consequence of the principle laid down in S. 44, and must be taken as a deliberate extension of a rule which in the common law is limited to the case of co-sureties contracting severally and not jointly. Only where co-sureties have contracted jointly---that is, where the joint suretyship of the others was part of the consideration for the contract of each---does a release of one of them by the creditor discharge the others. The release of a surety discharges a joint co-surety, but not a co-surety severally bound.

The present section appears to abolish this distinction.

139. Discharge of surety by creditor's act or omission impairing surety's eventual remedy.---If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged.

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

(b) C lends money to B on the security of a joint and several promissory note 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 discharge of the note. Subsequently, C sells the furniture, but, owing to his misconduct and willful negligence, only a small price is realised. A is discharged from liability on the note.

(c) A puts M as 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 makes up the cash. B omits to set this done, as promised, and M embezzles. A is not liable to B on his guarantee.

Act or omission of creditor tending to impair surety's remedy.---It may be observed that the injurious quality to be considered is tendency to diminish the surety's remedy or increase his liability. Transaction having an immediate tendency to cause or permit the principal debtor to make default are only one species of those to which the surety may object. In almost every case where the surety has been released either in consequence of time being given to the principal debtor, or of a compromise being made with him, it has been contended that what was done was beneficent to the surety, and the answer has always been that the surety himself was the proper judge of that, and that no arrangement different from that contained in his contract is to be forced upon him; and bearing in mind that the surety, if he pays the debt, ought to have the benefit of all the securities possessed by the creditor, the question always is whether what has been done lessens that security.

But mere passive acquiescence by the creditor in irregularities on the part of the principal debtor such as laxity in the time and manner of rendering accounts by a collector of public moneys whose fidelity is guaranteed, will not of itself discharge the surety.

Neither is the surety discharged from liability for the principal debtor's default in a manner within the terms of the guarantee. Because that default would not have happened if the creditor had exercised all the powers of superintending the performance of the debtor's duty which he could have exercised consistently with the contract. The employer of a servant whose due performance of work is guaranteed does not contract with the surety that he will use the utmost diligence in checking the servant's work. A surety cannot claim to be discharged on the ground that his position has been altered by the conduct of the person with whom he has contracted where that conduct has been caused by a fraudulent act or omission against which the surety by the contract of suretyship has guaranteed the employer.

Act or omission impairing surety's eventual remedy.---The case in which a party is discharged by an act or omission of the creditor, of which the legal consequence is the discharge of the principal debtor, has been dealt with in S. 134, above. Under the present section a surety will be discharged by acts or (subject to the caution above given) omissions of the creditor specified therein which, though not having the legal consequence of discharging the principal, impair the eventual remedy of the surety against him.

Where the liability of a surety guaranteeing payment by a judgment debtor of the amount of a decree by installments was expressly made dependent on the execution of the decree by the decree-holder on the occurrence of a single default, it was held that the omission to execute the decree on the happening of the default until execution had become time-barred discharged the surety under the provisions of this section. The decision was based on the ground that the decree-holder owed a duty to the surety under the terms of the guarantee, and that the failure to perform that duty until the decree became defunct by lapse of time must necessarily have impaired the "eventual remedy" of the surety against the judgment debtor.

As to negotiable instruments, it is specially provided by the Negotiable Instruments Act, 1881, S. 40, that "when the holder of a negotiable instrument, without the contract of the indorser, destroys or impairs the indorser's remedy against a prior party, the indorser is discharged from the liability to the holder to the same extent as if the instrument had been paid at maturity."

Goods pledged as security with Bank---Security lost by act of Bank---Subsequent surety is discharged.---Where the earlier security by way of pledge of goods was lost by the Bank by its own act and as the value of the goods pledged was approximately Rs. 1,26,000, which greatly exceeded the outstanding loans due to the Bank, the failure of the Bank to pursue its remedy against that security completely discharged the liability of the surety who had provided security subsequently, and who could not pursue any remedy against the pledged goods which were no longer available.

140. Rights of surety on payment or performance.---Where a guaranteed debot has become due, or default of the. principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.

This section lays down a general principle of which the most important practical application is to be found in S. 141. It seems that the intention of the Act is to keep alive for the surety's benefit any right of the creditor, under a security or otherwise, which would otherwise have been extinguished at law by the payment of the debt or performance of the duty. The whole doctrine of principal and surety, with all its consequences of contribution, etc. rests upon the established principles of a Court of Equity, not upon contract, except as it may be so represented upon the implied knowledge of those principles. There is no express contract for contribution, the bonds generally, if not universally, being joint and several, creating several obligations by each. The general reason of the equitable doctrines is that a surety is to be entitled to every remedy which the creditor has against the principal debtor; to enforce every security and all means of payment; to stand in the place of the creditor, not only through the medium of contract, but even by means of securities entered not without the knowledge of the surety, having a right to have those securities transferred to him, though there was no stipulation for that, and to avail himself of all those securities against the debtor. This right of a surety also stands not upon contract, but upon a principle of natural justice.

On the same foundation stands the right of the surety who has paid the debt, or the portion of it which he guaranteed, to stand in the creditor's place in the administration of the debtor's estate. The principle is undoubted, and the only difficulty is to be sure whether the surety has really guaranteed only a certain part of the debt, or is surety for the whole, but with a limit of liability.

When a surety is only a surety for a part of the debt, and has paid that part of the debt, he is entitled to receive the dividend which the principal debtor pays in respect of that sum which the surety has discharged. In such a case it may be said that "the right of the surety arises merely by payment of the part, because that part, as between him and the principal creditor, is the: whole." But a surety who has become such, though with limited liability, in respect of the entire debt, has no rights by way of subrogation or in preference to the creditor until the creditor is fully paid.

Moreover, the benefit of this principle is extended to persons who, though not actually sureties, are in an analogous position. The indorser of a bill of exchange is primarily liable as principal on the bill, and is not strictly a surety for the acceptor; but he has this in common with a surety for the acceptor, that after notice of dishonour "he is entitled to the benefit of all payments made by the acceptor, and is entitled, on paying the holder, to be put in a situation to have a right to sue the acceptor".

141. Surety's right to benefit of creditor's securities.---A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and, if the creditor loses, or, without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security.

(a) C advances to B, his tenant, 2,000 rupees on the guarantee of A. C has also a further security for the 2,000 rupees by a mortgage of 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, receives also 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.

(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 or the same debt. Subsequently, C gives up the further security. A is not discharged.

One cannot help suspecting that this is not deliberate policy, but merely codification of equity some what out of date. The law here is, however, as stated in illustration (c). But it has been held that this section does not enable the creditor to withhold from the surety any security actually held by him at the time when the debt is paid by the surety: this section merely gives the creditor the right to surrender a security not held by him at the time of the contract provided he exercises that right before payment by the surety.

The rule is not confined to securities in any technical sense. A surety is entitled to the benefit of the principal debtor's set-off against the creditor, if it arises out of the same transaction; this follows from the surety's right to be indemnified by his principal, combined with the equitable maxim of avoiding circuity of action.

The High Court of Bombay has cited the reason of the present rule: "I take it to be, because as between the principal and surety, the principal is under an obligation to indemnify the surely; and it is, as I conceive, from this obligation that the right of the surety to the benefit of securities held by the creditor is derived."

"To the extent of the value of the security."---Where a creditor sued the principal debtor and the surety on a mortgage bond, and in his plaint formally relinquished his claim against part of the mortgaged property which was worth the amount guaranteed by the surety, it was held that the surety was discharged.

When surety becomes entitled to benefit of creditor's securities.---Under S. 140, a surety is invested with the rights of the creditor as against the principal debtor upon payment or performance of all that he is liable for. The words last italicised are not repeated in the present section. The Act does not lay down at what point of time the surety is entitled to have the creditor's securities made over to him wholly or in part, whether it is when the debt of the creditor is paid off, or when the surety pays the amount of his guarantee.

Joint promisors.---Joint promisors are not sureties under S. 126 and S. 141 has therefore no application if one of two joint promisors pays the entire debt.

142. Guarantee obtained by misrepresentation invalid.---Any guarantee which has been obtained by means of misrepresentation made by the creditor, or with his knowledge and assent, concerning a material part of the transaction, is invalid.

The English authorities on the subject-matter of this and S. 143 will be dealt with together under that section.

143. Guarantee obtained by concealment invalid.---Any guarantee which the creditor has obtained by means of keeping silence as to material circumstances is invalid.

(a) A engages B as 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 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 guarantee to C payment for iron to be supplied by him to B to 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.

Guarantee obtained by misrepresentation or concealment---It, is settled law that, although the contract of suretyship is "one in which there is no universal obligation to make disclosure" that is, it is not, like a contract of insurance, liable to be avoided by the mere non-disclosure of any material fact whatever, still the surety is entitled to know so much as will tell him what is the transaction for which he is making himself answerable; and he will be discharged if there is either active misrepresentation of the matter by the creditor, or silence amounting in the circumstances to misrepresentation. Very little said which ought not to have been said, and very little not said which ought to have been said, would be sufficient to prevent the contract being valid.

It is the duty of a party taking a guarantee to put the surety in possession of all the facts likely to affect the degree of his responsibility; and if he neglects to do so, it is at his peril. A surety ought to be acquainted with the whole contract entered into with his principal.

Thus where a surety guarantees an agent's existing and future liabilities in account with his employer, and the agent is in fact already indebted to the employer for more than the full amount of the guarantee and the statements made about his position are calculated to mislead, though not false in terms, this is evidence of material misrepresentation on the credior’s part.

But it is not every disclosure that a surety can require. Where a customer's credit with his bankers is guaranteed, the fact that the new credit is to be applied to paying off an existing debt of the customer to the bank is not such as need be disclosed. For this is nothing out of the ordinary course of business, but rather to be expected. The test is whether there is anything that might not naturally be expected to take place between the parties who are concerned in the transaction, that is, whether there be a contract between the debtor and the creditor to the effect that his position shall be different from that which the surety might naturally expect". The creditor's description of the transaction to be undertaken, if it makes no mention of any such circumstance, implies a representation that there is none.

Accordingly the creditor is not bound to tell the surety that the intended guarantee is to be in substitution for a former one given by some one else. Where the solvency of a surety for a debt is guaranteed in turn, the terms of the loan as between the creditor and the original debtor are not material for the last-mentioned guarantor's risk, and non-disclosure of them is no defence to an action on his guarantee.

The expression "keeping silence," clearly implies intentional concealment as distinguished from mere non-disclosure, which no doubt is of itself a fatal objection in insurance policies, and virtually, we think, expresses that the withholding must be fraudulent, which necessarily must be the case when a material circumstance is intentionally concealed.

"Material circumstance."---As to what amounts to this, further illustrations are afforded by the following cases:---

1. A becomes surety to a bank for B's conduct as khajanchi, whose duties are to examine, verify, and guarantee all native signatures or documents for money. Before his appointment as khajanchi B held the office of an ordinary clerk in the bank, and ,it was arranged between B and the bank that he should continue to fill that office also. The bank do not acquaint A with this part of the agreement. A is liable-as surety.

2. In the above case, after B assumes the office of Khajanchi, the bank discovers that the names on certain bills discounted with them are forged, and they make a claim upon B, but B repudiates his liability. The bank do not acquaint A with this fact, and B is allowed to continue in his office, and subsequently makes defalcations. A is liable as a surety, for it could not have been assumed that B was infallible in detecting forgeries, and the guarantee could not be said to be founded on that assumption.

3. A purchases an abkari farm from Government subject to his furnishing the required security for the due fulfillment of the conditions of the lease. A fails to furnish the security, and the farm is resold at his risk and on his account at a loss of Rs. 4,000, for which he becomes liable. A purchases the farm at the resale, and B stands surety for the performance of the conditions of the lease. B is not informed by Government of A's liability for Rs.4,000. B is liable as a surety, the guarantee not extending to the liability for Rs. 4,000.

4. A was appointed manager of a Society in 1929. From 1929 to 1931, A's conduct, if not dishonest, would have justified his dismissal. The Society considered that A's conduct entitled them to ask him for further security. B, who furnished the additional security, was not informed of A's past conduct. On A making defalcations, it was held that B was not liable.

The language of these two sections, 142 and 143, is not very well fitted to exclude doubts whether they go beyond the English authorities or not. S. 143 might be read so as to impose on the creditor an unqualified duty of giving the surety full information of all material facts. But the words "obtained by means of keeping silence," appear to limit the operation of the section to cases of willful concealment which in fact amounts to a misrepresentation of what the surety is undertaking.

144. Guarantee on contract that creditor shall not act on it until co-surety joins.---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.

A surety who entered into the obligation upon the understanding and faith that another person would also enter into it...has a right in equity to be relieved on the ground that the instrument has not been executed by the intended co-surety. Whether such a contract is to be inferred from the transaction as a whole is conceived (apart from the construction of any written document) to be purely a question of fact. The rule will not be extended to cases of joint and several obligation where the transaction is not really a guarantee, though that word may be used, but a primary undertaking.

Overdraft---Goods pledged by party as security for over draft---Fixed deposit receipts. of wife pledged as additional security---Bank adjusting overdraft against F.D. receipts---Wife entitled to adjustment against pledged goods.---Where T pledged goods with the bank for overdraft and then as additional security deposited with the Bank fixed deposit receipts of his wife and her minor daughter, and the Bank proceeded to satisfy the overdraft out of the receipts rather than the goods pledged.

Held; the bank certainly showed preference for T in suggesting to the liquidation judge that the overdraft accounts of T should be satisfied against the additional security furnished by the fixed deposit receipts. We have no doubt that section 141, Contract Act, is fully applicable and that since the earlier security easily exceeded the overdraft accounts, the fixed deposit receipts belonging to Z and her minor daughter should not have been adjusted against those accounts.

145. Implied promise to indemnify surety.---In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety; and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but no sums which he has paid wrongfully.

(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 ground 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.

(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 actually supplied.

COMMENTS

Surety's right to indemnity.---The proposition that, as soon as his obligation to pay is become absolute, a surety has a right in equity to be exonerated by his principal. In the second clause of the section the words "rightfully" and "wrongfully" do not seem felicitous. There is nothing wrongful in paying money which one need not have paid, and for which therefore, one cannot have a remedy over against the principal debtor. One would rather have expected "reasonably" and "unreasonably". Here, again, a wider rule is applied it is special case of the contract of suretyship. Further it is settled law that a surety is entitled to come to the Court "to compel the principal debtor to pay what is due from him," provided that an ascertained debt is actually due; and this relief is not limited, as at one time supposed, to cases where the creditor has refused to sue the principal debtor, nor need the creditor even have demanded the sum from the principal debtor.

It is not to be inferred from the language of this section that the surety might not, in an appropriate case, be entitled to recover for special damages beyond the sum he has actually been compelled to pay. His right is not merely a right to stand in the creditor's place, but is founded on an independent equity.

On the other hand, the surety's only claim is to be fully indemnified. He cannot compound the debt for which he is liable, and then proceed as if he stood in the creditor's place for the full amount. "Where a surety gets rid of and discharges an obligation at a less sum than its full amount, he cannot, as against his principal, make himself a creditor for the whole amount; but can only claim, as against his principal, what he has actually paid in discharge of the common obligation.

"Whatever sum he has rightfully paid."---This expression includes "not only coin, but also property, of whatever kind, which is parted with in lieu of money, but not the mere incurring of a pecuniary obligation of the creditor in lieu or discharge of the debt owing to him". The giving, therefore, by the surety of a promissory note jointly with a third party as his surety, though accepted by the creditor as payment of the debt and not as a more collateral security therefore, cannot be treated as payment as between the surety and the principal debtor. The reason is that, the principal debtor being bound to indemnify the surety, the cause of action cannot be merely the procuring by the surety of the principal debtor's exoneration from liability to the creditor, but must also include the surety being himself damnified; and the surety cannot be said to be damnified unless the payment is actually made.

Guarantee without concurrence of principal debtor.---Where a. person becomes a surety without the knowledge and consent of the principal debtor, the only rights which he acquires are those given by Ss. 140 and 141, and not those given by this section.

There are conflicting opinions on the question whether a surety paying a debt which is barred by limitation can be said to have paid "rightfully" within the meaning of this section.

The surety is liable to pay at the suit of the creditor, even though a suit against the debtor may be barred (see notes on S. 134, above);. and in these circumstances it would seem impossible to say that payment by the surety is anything but rightful. The rights given to the surety by S. 145 arise from the discharge of his own liability to the creditor and not from the liability of the debtor.

146. Co-sureties liable to contribute equally.---Where two or more persons are co-sureties for the same debt or duly, 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, in the absence of any contract to the contrary, 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.

(a) A, B and C are sureties to D for the sum of 3,000 rupees lent to E. E makes 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 or 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 default in payment. As between the sureties, A is liable to pay 250 rupees, B 250 rupees, and C 500 rupees.

Contribution by co-sureties.---This has long been elementary. The earliest case usually cited settled that the co-sureties .need not be bound under the same contract and laid down that the right to contribution is independent of any agreement for that purpose.

It must be observed that a surety has no claim against his co-sureties until he has paid more than his share of the debt to the principal creditor, for only then does it become certain that there is ultimately any case for contribution at all. But a judgment against the surety at the suit of the creditor for the full amount of the guarantee (or an equivalent process, such as the allowance of a claim for the sum in the administration of the surety's estate) will have the same effect as payment for this purpose, and entitle the surety or his representatives to a declaration of the right to contribution; it seems that this is a matter of purely equitable jurisdiction. The like principles apply to contribution among co-trustees.

All the co-sureties are entitled to share in the benefit of any security or indemnity which any one of them has obtained from the principal debtor, and this whether they knew of it or not. The surety bringing in, under this rule, what he receives from his security, may resort again to that security for the liability to which he remains subject, and the co-sureties may again claim the benefit of participation and so on until the co-sureties have been fully reimbursed or the counter-security exhausted.

There is no right of contribution between persons who become sureties not for the same debt, but by distinct and Separate obligations for different portions of a debt. Nor is there any such right between an ultimate surety for payment of a debt and a person who, though a surety as between himself and the principal debtor, has authorised the creditor to treat him as a principal. Where B joined with A in a mortgage of A's property to Z, and agreed to be considered, as regards Z, as a principal debtor for the whole, though as between A and himself he was a surety, and the debt was insured with M, who knew the terms of B's engagement, in the name of Z. M undertaking to pay the debt on notice that Z's power of sale had become exercisable, it was held that M was n guarantor to Z against the default of both A and B, and was not a co-surety with B. An express contract between Z and M that M was to be a surety for, but not with, B by way of "collateral security," would have the same effect.

147. Liability of 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.

(a) A, B and C as sureties for D, enter into three several bonds, each in a different penalty, namely, A in the penalty of 10,000 rupees, B in that of 20,000 rupees, C in that of 40,000 rupees, conditioned for D’s duly accounting to E.D. makes default to the extent of 30,000 rupees. A, B and C are each liable to pay 10,000 rupees.

(b) A, B and C, as sureties for D, enter into three several bonds, each in a different penalty, namely, A in the penalty of 10,000 rupees, B in that of 20,000 rupees, C in that of 40,000 rupees, conditioned for D’s duly accounting to E.D makes default to the extent of 40,000 rupees. A is liable to pay 10,000 rupees, and B and C 15,000 rupees each.

(c) A, B and C as sureties for D enter into three several bonds each in a different penalty, namely, A in a penalty of 10,000 rupees, B, in that of 20,000 rupees, C in that of 40,000 rupees, conditioned for D’s duly accounting to E.D makes default to the extent of 70,000 rupees. A, B and C have to pay each the full penalty of his bond.

The wording of this section and its effect as shown by the illustrations are perfectly clear, and the question why it says "equally" and not "rateably" thus making what seems an arbitrary departure from the rule as previously understood, is not one which we have any means of answering. There is no variation between this section and the original draft.