Gajanan Moreshwar v. Moreshwar Madan

Gajanan Moreshwar v. Moreshwar Madan

 (1942) 44 BOMLR 703

(Section 124 of Indian Contract Act, when indemnity can be claimed)

FACTS:

Plaintiff (P) got a plot of land on lease from municipal corp. of Mumbai. P allowed Defendant (D) to erect building on that land. D, in this course, incurred debt of Rs.5ooo from building material supplier (K), twice. On both the occasion, P mortgaged part of the land to K. P, on D’s request transferred the land to D, on the consideration that he (P) would be discharged of all the liabilities arising out of that land. D failed to adhere to his consideration. P filed a suit for discharge of liabilities on him, alleging D to be indemnifier.

ISSUE: Whether the suit for indemnity was premature as P had not yet incurred any loss as such?

CONTENTIONS (Defendant):

1. As per s. 124, the promisor promises to safeguard the other from the damage that is caused to him, not the damage which may be caused to him. Since there is no damage to the plaintiff as yet, P is not entitled to sue the indemnifier. (Shankar Nimbaji vs. Laxman Supdu, Chand Bibi vs. Santoshkumar Pal )
2. The liability of the plaintiff is not absolute but contingent. There is nothing to show that if the mortgagee was to sue to enforce his mortgage and the property was sold, there would be any deficit for which the plaintiff would be liable.

HELD (High Court):

Justice Chagla

1. (w.r.t 1^st contention of D) ICA is both an amending and a consolidating Act, and it is not exhaustive of the law of contract. Section 124 deals only with one particular kind of indemnity in which the loss is caused  by the conduct of the indemnifier himself or of other person, but does not cover the cases outside this or cases when liability arises because of something done by the indemnified at the request of the indemnifier. S. 124 talks about subsequent conduct but here the liabilities were past, i.e. prior to the date when the contract was actually entered into force. Earlier to this contract, all the acts were done merely on request and without any consideration and hence, were not binding. Therefore s.124 is inapplicable here.
2. (w.r.t 2^nd contention of D) Under both the mortgage and the further charge there is a personal covenant by the plaintiff to pay the amount due, and it would be open to the mortgagee to sue the plaintiff on the personal covenant reserving his rights under the security. Therefore, the liability of the plaintiff under the personal covenant is absolute and unconditional.
3. Principles of equity (as applied in English Courts) can be applied here to relieve P from all the liabilities (as ICA is not exhaustive of the law of indemnity).