B) Whether Bezos Can Argue That His Liability Is Secondary and Will Arise Only After Ambani and Adani Fail To Pay? (5 Marks)

B)Whether Bezos can argue that his liability is secondary and will arise only after Ambani and
Adani fail to pay? (5 Marks)
1. this is a situation of guarantee
a. Recoverable debt
b. Consideration
C. There is no misrepresentation and concealment
2. Identify surety and PD and Creditor
3. Extenet of surety’s liability- Section 128- —The liability of the surety is co-extensive with that of
the principal debtor, unless it is otherwise provided by the contract.
He is liable for the whole of the amount for which the principal debtor is liable and he is liable for no
more.- Nandlal Chogalal v Surajmal Gangaram, AIR 1932 Nag 62
4. Proceeding against surety without exhausting remedies against debtor
Where the liability is otherwise unconditional, the court cannot of its own introduce a condition into
it. This was pointed out by the Supreme Court in Bank ofBihar Ltd v Damodar Prasad
The defendant guaranteed a bank's loan. A default having taken place, the defendant was sued. The
trial court decreed that the bank shall enforce the guarantee in question only after having exhausted
its remedies against the principal debtor. The Patna High Court confirmed the decree. But the
Supreme Court overruled it. Explaining that a condition of this kind would defeat the parties' inten
tion, the court said: "The very object of the guarantee is defeated if the creditor is asked to postpone
his remedies against the surety
5. Since in this case there is transfer of property as well, the that the creditor must proceed against
the mortgaged property first and then only against the surety for the balance.
In the case of SBI v Indexport Registered a composite decree was passed against the surety, the
borrowerand the mortgaged property of the borrower.The High Court of Delhi^° directed that the
decree-holder should first proceed against the mortgaged property and levy execution against the
surety only for the bal ance The decree is simultaneous and it is jointly and severally (passed) against
all the defendants including the guarantor. It is the right of the decree-holder to proceed with it in a
way he likes." The court conceded that the way in which a decree is drawn up is an important fact to
be considered. "If the composite decreeis a decree which is both a personal decree as well as a
mortgage decree, without any limitation on its execution, the decree-holder, in principle, cannot be
forced to first exhaust the remedy by way of execution of the mortgage decree alone and toldthat
only if the amount recovered isinsufficient, he can bepermittedto take recourse to the execution of
the personal decree
Nikunja Kishore Pradhan v SBI, (1990) 70 Cut LT 416. - Where, on the other hand, the sale proceeds
of the hypothecated truck were already realised and adjusted against the decreed amount, it was
held that the guarantor had no right to say that the decree-holder should have first tried to recover
the balance of the decreed amount by enforcing the decree against the guarantor. The decree-
holder may at his choice enforce the decree either against the principal debtor or surety.
6. Panpori v Central Bank of India, (2002) 1 ICC 838 1 (P&H).- An opposing view has been given by
Punjab and Haryana High Court has the effect of introducing a human aspect. The court said that if
the principal debtor isfinancially well off and can discharge his liability under the decree, the creditor
should in the first instance require him to pay and only then he may be allowed to proceed against
the surety
c) Whether Bezos can claim to be discharged as a guarantor? (3 Marks)
BoB pledged the paintings further to Royal Bank of Scotland for 20 crores.
1. Under section 139- If the creditor does any act which is inconsistent with the right 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.
The following right of surety against creditor are violated in the present case-
a. S. 141. Surety's right to benefit of creditor'ssecurities. — A surety is enti tled 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, ifthe creditor loses, or, without the consent of the
surety, parts, with such security, the surety is dis charged to the extent of the value of
the security.
Industrial Finance Corpn ofIndia Ltd v Cannanore Spg & Wvg Mills Ltd- the surety is
entitled to every remedy which the creditor has against the principal debtor, including
enforcement of every security.
Forbes v Jackson - The right exists irrespective of the fact whether the surety knows of
the existence of such security or not. "It is the duty of the creditor to keep the securities
intact; not to give them up or to burden with further advances."
Wuff& Billing v Jay - The plaintiffs lent to B and P, who were traders, £ 300 for the
payment of which the defendant became surety. At the time of the loan B and P
assigned by deed as security for the debt, the lease of their business prem ises and
plant, fixtures and things thereon. The plaintiff had the right to sell on default by giving a
month's notice. The default took place, but the defendant did not enter into possession.
He received notice of the debtors' insolvency but allowed them to continue in
possession. Consequently the assets were seized and sold by the receiver. It was held
that the plaintiffs, by their omission to seize the property assigned on default, had
deprived themselves of the power to assign the security to the surety. He was,
therefore, discharged to the amount that the goods were worth.
i) Can the weavers of Patan ask Adani to indemnify? (3 Marks)
Facts- few craftsmen of the village Patan in Gujarat were approached by Ambani and had weaved 2
dozens of Patola sarees for worth 11 lakh each however they were not paid for it. After this report
got the limelight, there were many handicrafts associations that made a similar claim.
1. There is a contract of indemnity under Section 124

2. Promise of indemnity can be implied
Dugdale v Lovering-The plaintiffs were in possession of certain trucks which were claimed
both by the defendants and one K.P. Co. The defendants demanded deliv ery and the
plaintiffs asked for an indemnity bond, but received no reply. Even so they delivered the
trucks to the defendants. K.P. Co, having successfully sued the plaintiffs for conversion of
their property, the plaintiffs were held entitled to recover indemnity from the defendants on
an implied promise as evidenced by the fact that by demanding an indemnity, they made it
quite clear that they had no intention to deliver except on indemnity.
An illustration of implied indemnity is the decision of the Privy Council in Secy ofState for
India in Council v Bank ofIndia Ltd. A note with forged indorsement was given to a bank
which received it for value and in good faith. The bank sent it to the Public Debt Office for
renewal in their name. The true owner of the note recovered compensa tion from the State
and the State was allowed to recover from the bank on an implied promise of indemnity.

B) Whether Bezos Can Argue That His Liability Is Secondary and Will Arise Only After Ambani and Adani Fail To Pay? (5 Marks)

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B) Whether Bezos Can Argue That His Liability Is Secondary and Will Arise Only After Ambani and Adani Fail To Pay? (5 Marks)

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B)Whether Bezos can argue that his liability is secondary and will arise only after Ambani and

Adani fail to pay? (5 Marks)

1. this is a situation of guarantee

C. There is no misrepresentation and concealment

2. Identify surety and PD and Creditor

4. Proceeding against surety without exhausting remedies against debtor

c) Whether Bezos can claim to be discharged as a guarantor? (3 Marks)

i) Can the weavers of Patan ask Adani to indemnify? (3 Marks)

1. There is a contract of indemnity under Section 124

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