Published on: 09 October 2022 at 19:08 IST
Court – Supreme Court of India
Citation – Maitreya Doshi v. Anand Rathi Global Finance Ltd. 2022 SCC OnLine SC 1276
Hon’ble Supreme Court of India has distinguished between the Contract of Indemnity against the Contract of Guarantee.
- Contract of Indemnity: A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person. In a contract of indemnity, a promisee acting within the scope of his authority is entitled to recover from the promisor all damages and all costs which he may incur.
- Contract of Guarantee: A promise whereby the promisor promises to discharge the liability of a third person in case of his default. The person who gives the guarantee is called the surety. The person in respect of whose default, the guarantee is given is the principal debtor and the person to whom the guarantee is given is the creditor.
Para – 35
It is true, as argued by Mr. Vishwanathan that contract of indemnity, contract of guarantee and pledge are not one and the same. The contract of indemnity is a contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person.
In a contract of indemnity, a promisee acting within the scope of his authority is entitled to recover from the promisor all damages and all costs which he may incur. A contract of guarantee, on the other hand, is a promise whereby the promisor promises to discharge the liability of a third person in case of his default.
The person who gives the guarantee is called the surety. The person in respect of whose default, the guarantee is given is the principal debtor and the person to whom the guarantee is given is the creditor.
Anything done or any promise made for the benefit of the principal debtor may be a sufficient consideration to the surety for giving the guarantee. On the other hand, the bailment of goods as security for payment of a debt or performance of a promise is a pledge.
Court while drawing parity from the principle that approval of resolution plan against a corporate debtor does not discharge its guarantor, held that approval of a resolution in respect of one borrower cannot certainly discharge a co-borrower.
Drafted By Abhijit Mishra
Key Words – Corporate Debtor, Guarantor, Indemnity, Insolvency Resolution Plan.