Article 42: (Article 81 of the Act of 1908):
The period of limitation for a suit by a surety against the principal debtor is three years and the time of limitation starts to run when the surety pays the creditor.
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ADVERTISEMENTS:
As per Section 140 of the Contract Act, the surety paying off the debt guaranteed by him is entitled to all the equities which the creditor could have enforced not merely against the principal debtor but also against all the persons claiming under him. He can use every remedy permissible under the law.
The right of the surety against the principal debtor does not stand upon the contract, but upon the principle of natural justice.
The starting point of limitation under Art. 42 is the date of payment by the surety to the creditor and the suit against the debtor by the surety has to be filed within three years of the date. The word ‘pay’ means an actual payment in money or by transfer of property and not merely the incurring of pecuniary obligation in the shape of bond, promissory note or acknowledgement of liability.