Name of the Student : TANNU

Registration Number : 21DBLAW041

Programme :  BBA LLB(HONS)
Semester : 2st semester
Course Name : CONTRACT II
Course Code : 5BBL205
Date of Submission : 13 APRIL 2022
Submitted to : MS AAYUSHI SINGH TOMAR
 CASE STUDY ON –

GAJANAN MORESHWAR PARELKAR V.

MOREASHWAR MADAN MANTRI,
AIR 1942 Bom 302
Citation : (1942) 44 BOMLR 703

Court: Bombay high court

RELEVENT ACTS & CASE LAWS

● Section 125 in The Indian Contract Act, 1872
● Section 124 in The Indian Contract Act, 1872
● Osman Jamal And Sons Ltd. vs Gopal Purshottam on 19 July, 1928
● Section 68 in The Indian Contract Act, 1872
● The Transfer of Property Act, 1882

PARTIES INVOLVED -

● Gajanan Moreshwar Parelkar is the claimant/plaintiff.

● Moreshwar Madan Mantri is the defendant.
● Justice M. C. Chagla is the presiding judge.
● Mr. Keshavdas M. (a materials supplier) and the Bombay Municipal Corporation
(hereafter referred to as the 'BMC') are the other(s)

FACTS

The plaintiff (Mr. Gajanan Moreshwar Parelkar) and the BMC entered into a 999-year lease
agreement in 1934, under which the BMC gave the plaintiff a specific piece of land in
exchange for the lease amount. Mr. Moreshwar Madan Mantri, the defendant, subsequently
requested that the plaintiff transfer the benefit of the lease to him. As a result, the defendant
would be able to begin building work on the property straight away. For the same, the
plaintiff agreed and transferred the benefit of the lease to the defendant. The defendant began
construction and recruited a materials supplier named Mr. Keshavdas Mohandas. Following
it, a few things happened that became the critical and focus point of the case as a whole:

1. The supplies were provided by Mr. Keshavdas, but the defendant did not pay for
them. Mr. Keshavdas was owed INR 5000 as a result of this. The defendant asked the
plaintiff to mortgage the land (girvi rakhna) to Mr. Keshavdas for a year in order to
pay off the INR 5000 debt. Thus, the plaintiff did so on.

2. Mr. Keshavdas provided documents once more later. The defendant failed to pay the
money once more. Mr. Keshavdas owed another INR 5000. Defendant proposes that
 the plaintiff mortgage the land (girvi rakhna) with Mr. Keshavdas for a year in order
to pay off the INR 5000. The Plaintiff did it once more.

3. It is critical to recall that by mortgaging this land, the plaintiff (Gajanan Moreshwar)
exposes himself to the possibility that Mr. Keshavdas will simply refuse to deliver the
deed to the land. However, because he's doing it at the Defendant's request, there's an
implied assurance that the defendant will compensate the plaintiff for any losses.

4. When the second mortgage is taken out, the defendant agrees to protect the Plaintiff
against any claims made by Mr. Keshavdas and to pay off any mortgages and charges
on the property. There is no longer any implication of a guarantee. It is now an
express promise because there is a contract.

The Plaintiff now requests that the Defendant obtain his release from all claims brought by
Mr. Keshavdas Mohandas by paying the INR 10,000 (5000+5000) and retrieving the official
land deed. The Defendant refused to pay, claiming that the Plaintiff had experienced no
genuine loss and hence had no right to compensation from the Defendant. As a result, the
case was brought before the Indian Court of Law and heard.

 KEY ISSUE(S) RAISED

● Is there a requirement for an actual loss in order to receive compensation from the
indemnifier?
● Is this indemnification suit premature because the plaintiff has yet to suffer a loss?
● Also, is it true that the plaint automatically corresponds to / exposes any cause of
action?

HELD DECISION

The fact that the Court of Equity determined that if his liability had become absolute, he was
entitled to either have the indemnifier pay off the claim or pay into Court a sum adequate to
pay off the claim whenever it was brought. Finally, these factors led to a decision that the
plaintiff(s) could not sue the defendants in the expectation that the revenues from the sale of
the mortgaged property would be insufficient and that a deficit would remain. The note was
interpreted as an indemnity by the court. The plaintiff(s) also had the option of fully
repudiating the mortgage and recovering the whole sum from the defendant, but they chose to
recoup from the mortgaged property. As a result, because there was no genuine evidence of
anxiety that the proceeds from the sale of mortgaged property would be insufficient, the
decree could not be granted. The council refused to accept M. Madan's allegation that G.
Moreshwar had experienced no loss and hence had no right to compensation under Sections
124 and 125 of the Indian Contract Act, 1872. The Council determined that an indemnity
holder has rights in addition to those set forth in the preceding sections. If the indemnity
bearer has incurred a liability and the liability is absolute, he can contact the indemnifier and
demand that the liability be taken care of and paid off. As a result, M Madan was obligated to
indemnify G Moreshwar against all liabilities arising from the mortgage and deed of charge.

The court ruled in favour of the plaintiff, holding that Sections 124 and 125 of the Indian
Contract Act, 1872 do not cover all aspects of the law of indemnification, and that the courts
should adopt equitable principles similar to those used in English courts. The court rejected
the defendant's argument that the plaintiff had suffered no loss and hence had no right to sue.
And it was decided that the indemnification holder has rights in addition to those indicated in
the sections.

ANALYSIS 

One of the most important and significant outcomes of this landmark case was the
recognition of Contract of Indemnity as a type of contract in which a promisor agrees to
compensate the promisee for all losses and costs incurred or to be incurred by the promisee in
the broadest terms possible, through the execution of such cases of contract[s]. Though the
Indian Contract Act, 1872 has a variety of indemnification clauses, Sections 124 and 125 are
particularly important in judicial cases where the indemnified turns to the indemnifier for
payment of the liability.

Since Section 124 applies when the promisee is required to bear losses as a result of the
promisor's or a third party's specific act, and Section 125 only considers the case mature for
legal action if the promisee has actually procured the losses, both apply heavily, elaborately,
and broadly in this and many other indemnification cases. They do, however, occasionally
fall short and may even declare unfairness in circumstances where the promisee is regarded
completely culpable after the payment deadlines have passed, but the liability cannot be
affixed to the promisor until the dues / damages have been incurred. Similarly, when payment
to the concerned party is not made within the term provided by the indemnifier, the
indemnified's liability is evident, but any legal action taken against the indemnifier appears to
be unnecessarily hasty and unreasonable. What happens if the promisee is not solvent or
capable of paying at that point?

Having stated that, the consideration of similar instances in other courts becomes important in
such cases in order to bring justice to the promisee who files the action as a plaintiff. Until a
1914 Court of Equity held that "A Contract of indemnity would serve little use if the
indemnity bearer was declared accountable in the first instance," the instances within the
country and overseas through application of Common English Law were of the same mind.
Furthermore, while this proposition of applying equitable principles became universally
applicable in the present context, not all decisions were being delivered properly, given the
vast number of judgments that have trusted and relied on the facts of this pivotal case, the
evidence presented here, and simply the larger and broader applications of Sections 124 and
125 of the contract act(s) & laws represented by this case.