Subrogation of Surety to the Rights of creditor on payment.

When a surety makes a payment to a creditor on behalf of the principal debtor in case of a default, he acquires the rights of a creditor against the principal debtor. He can recover the entire amount that he has paid to the creditor. This is called the right of subrogation. Section 140 of the Indian Contract Act, 1872 invests a surety with all the rights which the creditor has against the principal debtor, where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety has made the payment or performed all that he is liable for.