MADHAVDAS JETHABHAI Vs. SITARAM RAMNARAYAN

JUDGEMENT

(1.) In this case certain Shah Jog hundis were drawn by a firm upon defendants No. 1 in favour of the plaintiffs. As is usual in the case of Shah Jog hundis, the hundis were not presented to the drawees for acceptance before payment. The hundis eventually came into the hands of defendants No. 2 who are admittedly Shahs, and were presented by them to defendants No. 1 for payment, and were duly paid. Subsequently, it was discovered that, owing to the dishonesty of a third party,, defendants No. 2 had no title to the hundis, since the indorsements under which they claimed had been forged. Thereupon, the plaintiffs, as the true owners of the hundis, sued defendants No. 1 as the drawees, and defendants No. 2 as the Shahs to whom payment had been made, for recovery of the amounts of the hundis, and judgment was given against both the defendants. Defendants No. 1 issued a third party notice against defendants No. 2 claiming indemnity against loss suffered by them through payment of the hundis, and upon that notice Mr. Justice Kania gave judgment for defendants No. 1, but he held that the moneys payable to them under the implied indemnity of defendants No. 2 did not cover the costs incurred by defendants No. 1 in defending the original suit. From the latter part of the judgment defendants No. 1 appeal, whilst defendants No. 2 have filed cross-objections contending that the third party proceedings were misconceived, since there was no liability upon them to indemnify defendants No. 1.

(2.) So far as regards the appeal of defendants No. 1, I feel no doubt that if defendants No. 2 are under an obligation to indemnify defendants No. 1 against the loss sustained by them through payment of the hundis, that loss must include the costs of defendants No. 1 incurred in defending the suit. The correspondence before action shows that defendants No. 2 were not prepared to make any admissions or assume any liability, and, in the circumstances, defendants No. 1, in my judgment, had no option except to defend the suit, and if they are entitled to indemnity, such indemnity must cover the costs properly incurred in so doing.

(3.) The cross-objections of defendants No. 2 involve a more difficult question. The learned Judge based his view that defendants No. 2 were liable to indemnify defendants No. 1 upon the principle of law laid down in Dugdale V/s. Lovering (1875) L.R. 10 C.P. 196 and approved by Lord Halsbury in Sheffield Corporation v. Barclay [1905] A.C. 392 in the following terms (p. 397): It is a general principle of law, when an act is done by one person at the request of another, which act is not in itself manifestly tortious to the knowledge of the person doing it, and such act turns out to be injurious to the rights of a third party, the person doing it is entitled to an indemnity from him who requested that it should be done.