INDEX
Difference between Indemnity and Guarantee:
Indemnity |
Guarantee |
Section 124 of Indian Contract Act: a contract by which one party promises to save others from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person | Section 126 of Indian Contract Act: a contract to perform the promise, or discharge the liability of a third person in case of his default. |
Two parties (Indemnifier and Indemnified) | Three parties (Principal Debtor, Creditor, Surety) |
To provide compensation for loss | To give assurance to the creditor in lieu for his money |
Indemnifier is the sole person liable | Liability shared between Principal Debtor (primary liability) and Surety (secondary liability) |
Liability arises only on occurrence of a loss | Fixed legal liability |
- Punjab national Bank Ltd. v. Bikram Cotton Mills & Anr. 1970 AIR 1973 [Summary] [Full Text]
- Ramchandra B. Loyalka v. Shapurji N. Bhownagree (1940) 42 BOMLR 550 [Summary] [Full Text]
Claiming Indemnity:
- Gajanan Moreshwar v. Moreshwar Madan (1942) 44 BOMLR 703 [Summary] [Full Text]
Implied Indemnity:
- Lala Shanti Swarup v. Munshi Singh 1967 SCR (2) 312 [Summary] [Full Text]
Subrogation:
Subrogation under Indian Contract Act means stepping into the shoes of the creditor(s). When a surety has already paid the guaranteed debt on its becoming due or has performed the guaranteed duty on the default of the principal debtor, he is invested with all the rights, which the creditor has against the debtor.
- Craythorne v. Swineburne 14 Ves. 160 [Summary]
- State of Madhya Pradesh v. Kaluram 1967 SCR (1) 266 [Summary] [Full Text]
Primary & Secondary Liability:
- Lakeman v. Mountstephen (1874) LR 7 HL 17 [Summary]
Suretyship:
The expression “security” in s. 141 of the Indian Contract Act is not used in any technical sense : it includes all rights which the creditor had against the property at the date of the contract. The surety is entitled on payment of the debt or performance of all that he is liable for, to the benefit of the rights of the creditor against the principal debtor which arise out of the transaction which gives rise to the right or liability.
- Radha Kanta Pal v. United Bank of India AIR 1955 Cal 217 [Summary] [Full Text]
- Amrit Lal Goverdhan Lalan v. State Bank of Travancore & Ors. 1968 SCR (3) 724 [Summary] [Full Text]
- State of Madhya Pradesh v. Kaluram 1967 SCR (1) 266 [Summary] [Full Text]
- State Bank of Saurashtra vs. Chitranjan Rangnath Raja and Anr. 1980 SCR (3) 915 [Summary] [Full Text]
- Charan Singh vs Security Finance (P) Ltd. AIR 1988 Delhi 130 [Summary] [Full Text]
- Aziz Ahmad vs. Sher Ali and Others AIR 1956 All 8 [Summary] [Full Text]
Bank Guarantee:
Bank guarantee is an independent and distinct contract between the bank and the beneficiary and is not qualified by the underlying transaction and the validity of the primary contract between the person at whose instance the bank guarantee was given and the beneficiary. Unless fraud or special equity present, the beneficiary cannot be restrained from encasing the bank guarantee even if dispute arises in performance of the contract.
- National Highways Authority of India v. Ganga Enterprises and Anr. AIR 2003 SC 3823 [Summary] [Full Text]
- Hindustan Steel Workers Construction Ltd. v G.S. Atwal & Co. (Engineers) Pvt. Ltd. 1995 SCC (6) 76 [Summary] [Full Text]
- Ansal Engg. Proj. Ltd. v. Tehri Hydro Development Corp. Ltd. & Anr. 1997 88 CompCas 149 SC [Summary] [Full text]
- ONGC v. SBI Overseas Branch, Bombay AIR 2000 SC 2548 [Summary] [Full Text]