1) After discharging the liability of the principal debtor, the surety is entitled to all those rights which the creditor himself exercises against the principal debtor. This right of the surety is called “subrogation”.
Illustration: The right of the creditor to receive dividends from the official assignee when the principal debtor becomes bankrupt, can be exercised by the surety.
2) The surety can proceed against all those securities of the principal debtor, which the creditor himself can proceed against.
3) The surety is entitled to be indemnified for all payments rightfully made by him.
Illustration: B is indebted to C, and A is surety for the debt. C demands payment form 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.
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