GAJANAN MORESHWAR PARELKAR Vs. MORESHWAR MADAN MANTRI

JUDGEMENT

(1.) THIS is a suit by the plaintiff to enforce an indemnity. It seems that in the year 1934 the plaintiff entered into an agreement with the Municipal Corporation for the City of Bombay for the lease of a plot of land bearing No.226A of the Dadar Matunga Estate for a term of 999 years. In pursuance of the agreement the plaintiff was put in possession of that plot of land. At the request of the defendant the plaintiff agreed to transfer the benefit of the agreement for lease with the Municipal Corporation to the defendant. Thereupon the defendant entered into possession of the plot of land and commenced to erect a building thereon. The materials for the construction of the building were supplied by one Keshavdas Mohandas, and the amount therefor exceeded Rs. 5,000. Keshavdas Mohandas made pressing demands upon the defendant for the payment of that amount, and at the request of the defendant the plaintiff mortgaged the property to Keshavdas Mohandas by depositing the title deeds relating thereto to secure payment of a sum of Rs. 5,000 by a writing dated January 14, 1937. Under the terms of the writing the plaintiff covenanted to pay to Keshavdas Mohandas on January 14, 1938, the sum of Rs. 5,000 and interest thereon at the rate of ten annas per Rs. 100 per Gujarati month with monthly rests. In connection with the construction of the said building a further sum exceeding Rs. 5,000 became payable by the defendant to Keshavdas Mohandas. The plaintiff again at the request of the defendant effected a further charge on the property in favour of Keshavdas Mohandas to secure a further sum of Rs. 5,000 and interest by a writing dated March 23, 1937. The due date for the payment of this sum was also January 14, 1938. Under this writing the rate of interest was the same as under the previous writing. On July 30, 1939, the defendant gave a writing to the plaintiff stating that in connection with the building transferred by the plaintiff to the defendant's name, the defendant would be responsible for discharging the mortgages on the same and that the defendant would execute another mortgage deed in favour of the mortgagee in place of those executed by the plaintiff. On July 29, 1939, the plaintiff at the request of the defendant wrote a letter to the Bombay Municipality asking them to transfer the plot of land to the name of the defendant. The transfer was duly sanctioned by the Improvement Committee of the Bombay Municipality on August 26, 1939. No formal lease has up till now been executed by the Bombay Municipality in favour of the defendant. The plaintiff thereafter on several occasions called upon the defendant to procure from Keshavdas Mohandas a release of the plaintiff from his liability under the mortgage and the deed of further charge, but the defendant failed to do so. The plaintiff alleges in the plaint that the defendant is in possession of the property and in enjoyment of the rents and profits thereof, and he has paid some interest to the mortgagee from time to time ; but a large amount of interest is in arrears and remains unpaid. The defendant has also failed to pay ground rent to the Bombay Municipality and to get the property duly insured. The plaintiff submits that he executed the mortgage and the deed of further charge at the request of the defendant because the agreement for lease stood in the name of the plaintiff and, therefore, the defendant is liable to indemnify the plaintiff in respect of all liability under the mortgage and the deed of further charge. He, therefore, prays that the defendant be ordered to procure from the mortgagee a release of the plaintiff from all liability under the deed of mortgage and further charge and also that the defendant may be ordered to pay into Court the sum required to pay off the whole amount due to the mortgagee under the mortgage and further charge and that the amount so brought into Court be utilised for the purpose of paying off the mortgage and further charge.

(2.) WHEN the suit was called on, Mr. Tendolkar for the defendant admitted all the facts alleged by the plaintiff in the plaint and raised only two issues to the effect (1) whether the plaint discloses any cause of action and (2) whether the suit was premature. Mr. Tendolkar argues that unless and until the indemnified has suffered a loss he is not entitled to sue the indemnifier and, according to him, as in this case there is no averment in the plaint that he has suffered any actual loss, there is no cause of action on which the plaintiff can sue and in any event the suit is premature. Mr. Tendolkar relies for his arguments on Sections 124 and 125 of the Indian Contract Act, 1872. Section 124 defines the contract of indemnity as a contract by which one party promises to safeguard the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person. Mr. Tendolkar argues that what the promisor promises to save the promisee from is the loss caused to him and not loss which may be caused to him. Further, under Section 125 all that the promisee is entitled to recover from the promisor are damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies. Mr. Tendolkar contends that until the mortgagee files a suit against the plaintiff and obtains judgment which the plaintiff is compelled to satisfy the plaintiff is not entitled to sue the defendant.

(3.) MR. Tendolkar has further relied on two decisions, one of our Court and the other of the High Court of Calcutta. In Shankar Nimbaji v. Laxman Supdu (1939) 42 Bom. L.R. 175 an appellate bench of this Court held that under a contract of indemnity the cause of action arises when the damage which the indemnity is intended to cover is suffered, and a suit brought before actual loss accrues is premature. The proposition of law stated in these wide terms undoubtedly supports the arguments of MR. Tendolkar. But if one examines the facts of that case, the decision there did not require the enunciation of the law in these very extensive terms, and I am not prepared to extend the principle of that case beyond the facts proved there and for the decision of which it was necessary. The facts of that case were that one Supdu used to deposit monies with defendant No.2. After the death of Supdu, defendant No.2 withdrew Rs. 5,000 from Supdu's khata and lent them to defendant No.1 on a mortgage bond in his own favour. The plaintiffs, who were the sons of Supdu, protested against this and after some correspondence, defendant No.2 passed a promissory note for Rs. 5,000 in favour of the plaintiffs. The plaintiffs then filed a suit to recover Rs. 5,000 and interest from defendant No.1 by sale of the mortgaged property and in case of deficit prayed for a decree against the estate of defendant No.2 which was in the hands of his sons, defendant No.2 having died during the pendency of the suit. On these facts the Court held that the plaintiffs could not sue the defendants in anticipation that the proceeds realised by the sale of the mortgaged property would be insufficient and there would be some deficit left. The Court construed the promissory note as an indemnity given by defendant No.2 to the plaintiffs in case any loss was caused to them by his unauthorised meddling with their money. As pointed out in the judgment, it was open to the plaintiffs to repudiate the mortgage transaction altogether and claim the whole of the amount] from defendant No.2, leaving him to file a suit against defendant No.1 to recover the mortgage amount; but the plaintiffs chose to accept that mortgage transaction and to treat defendant No.2 as their benamidar and, therefore, all that they claimed to recover from defendant No, 2 was the loss, if any, that they might suffer in consequence of the mortgage transaction. It is, therefore, clear that if the plaintiffs recovered their full claim from the mortgaged property, defendant No.2 would not be liable at all and, therefore, till the mortgaged property was sold and the deficit, if any, ascertained it was impossible to say whether the plaintiffs had suffered any loss which defendant No.2 could be called upon to indemnify. Therefore, on the peculiar facts of that case it was necessary that the plaintiffs should suffer actual loss before they could maintain their action on the indemnity. But I am not prepared to read this judgment to mean that in no case can an indemnity-holder maintain an action against an indemnifier unless he has suffered actual loss.