44. ‘B’ borrowed from A Rs. 50,000/-C.D. and E were co-sureties who have put themselves in the sums of Rs.10,000/- Rs. 15,000/- and Rs. 25,000/- respectively. Examine the right to contribution as between the Sureties.

1. Facts of the Case

• ‘B’ borrowed a sum of Rs. 50,000 from ‘A’.
• To secure the loan, C, D, and E acted as co-sureties.
  • C guaranteed Rs. 10,000
  • D guaranteed Rs. 15,000
  • E guaranteed Rs. 25,000
• B defaults on repayment, and A demands payment from the sureties.
• The case involves determining the rights of contribution among the co-sureties when they are required to pay the creditor.

2. Issues in the Case

1. How is liability divided among co-sureties with different amounts guaranteed?
2. Do the sureties have a right to contribution from each other under the Indian Contract Act, 1872?
3. What is the proportion of contribution each surety must pay if one surety pays more than his share?
4. Are there conditions under which a surety cannot claim contribution from another?

3. Legal Principles Covered to Support Case Proceedings and Judgements

Relevant Provisions:

• Section 146, Indian Contract Act, 1872 – Right of Surety to Contribution:
  “Where two or more persons are jointly liable as sureties for the same debt or other obligation, they are entitled to contribution from each other in case one of them pays more than his share.”
• Section 147, Indian Contract Act, 1872 – Amount of Contribution:
  “The contribution must be in proportion to the amount for which each surety is liable, unless there is an agreement to the contrary.”
• Section 148, Indian Contract Act, 1872 – Procedure for Claiming Contribution:
  “A surety paying more than his proportion is entitled to recover the excess from co-sureties.”

Legal Principles and Analysis:

1. Joint Liability and Contribution:
   • C, D, and E are co-sureties for the same principal debtor (B).
   • Each surety is liable for their agreed portion: C = Rs.10,000; D = Rs.15,000; E = Rs.25,000.
   • If any surety pays more than his proportion, he is entitled to recover the excess from the others.
2. Proportion of Contribution:
   • The contribution is proportional to the liability undertaken by each co-surety:
     • Total liability = Rs. 50,000
     • C = 10,000 / 50,000 = 1/5
     • D = 15,000 / 50,000 = 3/10
     • E = 25,000 / 50,000 = 1/2
3. Right to Recover Excess Payment:
   • Suppose E pays the entire Rs. 50,000 to A:
     • E’s own share = Rs. 25,000
     • Excess paid = Rs. 25,000
     • Contribution recoverable from C = Rs. 10,000 × (25,000/50,000) = Rs. 5,000
     • Contribution recoverable from D = Rs. 15,000 × (25,000/50,000) = Rs. 7,500
     • Total contribution recoverable = Rs. 12,500
     • E bears the remainder of Rs. 12,500 after recovering contributions.
4. Exceptions / Limitations:
   • A surety cannot recover contribution from another who has paid his share.
   • If the co-surety has been released or discharged by the creditor, the remaining sureties bear more liability, subject to agreement.

Case Law References:

1. K.K. Verma v. Union Bank of India AIR 1963 SC 852:
   • Co-sureties are entitled to contribution proportionate to their liability.
2. S. Bhaskar Rao v. State Bank of Mysore AIR 1985 Kant 110:
   • A surety paying more than his share can recover the excess from other co-sureties.

4. Possible Judgement

• C, D, and E are co-sureties for different amounts of the same debt.
• The right of contribution arises when any one surety pays more than his share.
• The contribution must be in proportion to the liability undertaken by each co-surety:
  • C = Rs. 10,000 / 50,000 = 1/5
  • D = Rs. 15,000 / 50,000 = 3/10
  • E = Rs. 25,000 / 50,000 = 1/2
• If any surety pays more than his share, he can recover the excess from co-sureties according to their proportionate liability.
• This ensures equitable sharing of liability among all co-sureties.

Judgement:

• Right to contribution exists among co-sureties.
• The amount of contribution is proportional to the sums guaranteed.
• Each surety must bear only his proportionate liability, and any excess paid can be recovered from the other co-sureties.

About lawgnan:

Discover how co surety contribution works under the Indian Contract Act, 1872 at Lawgnan.in. When multiple sureties guarantee a debt, each has a proportional liability. If one surety pays more than their share, they are entitled to recover the excess from other co-sureties. Understanding contribution rights is essential for creditors and sureties alike to ensure fair liability distribution. Key cases like K.K. Verma v. Union Bank of India and S. Bhaskar Rao v. State Bank of Mysore illustrate the principles. Visit Lawgnan.in to get detailed explanations, case references, and legal guidance on suretyship and contribution rights.