Nobo Kumar Bhuttacharjee & Ors. vs Kumar Nath Bhuttacharjee & Ors.
(1899) ILR 26 Cal 241
Case Summary
[Commencement of Indemnifier’s Liability]
Facts
The plaintiffs and defendants were originally part of a joint Hindu family. In 1884, the family partitioned, and an agreement (ekrarnama) was executed dividing the estate and liabilities. Prior to the partition, the plaintiff’s father had taken a loan of over Rs. 11000 from Srinath Roy. After his death, Srinath Roy brought an action to recover the mortgage debt from the plaintiffs which resulted in a decree against them. As per the ekrarnama, each party was to be responsible for half the debts of the joint estate including the mortgage taken by the plaintiff’s father.
In satisfaction of the decree, a property in Calcutta belonging to the plaintiff’s father was sold. The plaintiffs then brought a suit to claim indemnity for half the mortgage the defendants had to pay as part of their ekrarnama enforced during the partition.
Issues
When does the cause of action arise from claim of indemnity? Does it arise when the debt is incurred or when the plaintiff’s suffered loss by paying off the liability?
Key Legal Provisions
Indian Contract Act, 1872:
Section 124 – [Contract of Indemnity] A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a "contract of indemnity."
Section 125 – [Rights of Indemnity Holder when sued] The indemnity holder is entitled to recover all damages he was compelled to pay in a suit, all costs he may be compelled to pay in the suit, and any sums he may have paid under the terms of the compromise of any such suit.
Judgement
The Court held that the plaintiffs right to claim indemnity arose when they were damnified (suffered loss), i.e., when they paid off the mortgage debt to the defendants. The cause of action arose on behalf of the plaintiff’s since they had to pay off the mortgage debt on behalf of the other party as well and were entitled to be indemnified.
The ekrarnama was held to be a valid indemnity agreement where the defendants had agreed to contribute to any joint debts, including the mortgage taken by the plaintiff’s father. This made the defendant’s explicitly liable for half the mortgage debt.
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