Gajanan Moreshwar Parelkar vs Moreshwar Madan Mantri
(1942) 44 BOM LR 703
Case Summary
[Rights of the Indemnity Holder]
[Cause of Action]
Facts
In 1934, the plaintiff (Gajanan) entered into an agreement with the Municipal Corporation of Bombay for the lease of a plot. At the request of the defendant (Moreshwar) the plaintiff transferred the benefit of the lease to him. The defendant commenced construction of a building on the plot and incurred liabilities of over Rs. 5000 in the process. At request of the defendant, the plaintiff mortgaged the property twice to cover construction costs.
The plaintiff requested the defendant to discharge him of the mortgage liabilities, but he failed to do so. Furthermore, the defendant didn’t pay the accumulated interest and ground rent to the Municipal Corporation.
Issues
Whether the suit is premature as the plaintiff has yet not suffered any loss since the mortgagee has yet to file a suit against the plaintiff.
Key Legal Provisions
Indian Contract Act, 1872:
Section 124 – [Contract of Indemnity] A contract where one party promises to save the other from loss caused by the conduct of the promisor or any other person.
Section 125 – [Rights of Indemnity-Holder when sued] The indemnity-holder is entitled to recover: i) Damages he may be compelled to pay in a suit ii) Any costs of the suit iii) All sums paid under a compromise
Judgement
The court held that while Sections 124 and 125 of the Indian Contract Act specify conditions for indemnity in the event of loss caused by another's actions, they do not cover every type of indemnity contract. The plaintiff’s indemnity arises because of his liability, which became absolute upon mortgaging the property at the defendant's request.
The court ruled in favour of the plaintiff and stated that an indemnity-holder has the right to sue when their liability has become absolute, even if they have not yet made a payment on it. The suit was not premature as contended by the defendant.
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