Ranganath v. Pachusao
AIR 1935 Nag. 117
Case Summary
[Commencement of Indemnifier’s Liability]
Facts
The plaintiff had sold two fields to the defendant for Rs. 1200. He was to repay this by paying Rs. 500 to Budhmal and Rs. 700 to Ganeshdas who were creditors to the plaintiff. No deadline was set for these payments. The defendant paid Budhmal but failed to pay Ganeshdas even after repeated requests from the plaintiff. The plaintiff’s passed an acknowledgement in favour of Ganeshdas agreeing to pay Rs. 700 with 1% interest per month. The plaintiff’s filed a suit to recover Rs. 700 and Rs. 285 as interest.
Issues
Whether the suit to recover Rs. 700 was premature and could the defendant be called upon to indemnify the plaintiff before any loss had occurred.
Key Legal Provisions
Indian Contract Act, 1872:
Section 124 - 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.
Judgement
The appellate court held that the plaintiff’s suit was premature and therefore untenable. The plaintiffs could not sue the defendant under the contract of indemnity until they had made an actual payment to Ganeshdas or until Ganeshdas had obtained a decree against them. That is, the plaintiffs hadn’t suffered any loss by the defendant’s conduct or by the conduct of any third party. Therefore, since no payment had been made to Ganeshdas by the plaintiff and no legal action had been taken by Ganeshdas against the plaintiffs, the suit was deemed premature.
Liability on behalf of the Indemnifier commences only when an actual loss has been suffered by the promisee and not in cases of anticipated loss.
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