Guarantee Of Honesty: Examining Its Legality

Shashank Pandey, B.A. LL.B. (Hons.), National University of Juridical Sciences, Kolkata

ABSTRACT

The concept of Guarantees of Honesty has a rich historical evolution. Over time, conventional bonding systems revealed flaws, leading to the emergence of insurance firms specialising in fidelity guarantees. This paper addresses the controversies surrounding Guarantees of Honesty, drawing insights from case laws such as Choudhuri Govinda Chandra Das v. Hayagriba Upadhaya and Imperial Bank of India v. V.P. Avanasi Chettiar. It clarifies distinctions between Guarantees of Debt and Guarantees of Honesty, emphasising the importance of examining the terms of the bond and the case's circumstances. The paper also highlights the statutory basis of Guarantee of Honesty under Section 126 of the Indian Contract Act, emphasising the requirement for three parties—principal debtor, creditor, and surety. Illustration (c) of Section 139 further supports the concept of guaranteeing honesty. In conclusion, the paper asserts that Guarantees of Honesty are valid, backed by legal precedents, statutory provisions, and contemporary practices like Fidelity Guarantee Insurance.