PROJECT

On
FIVE CASE LAWS

In partial fulfilment of the requirements for Award of Degree of

LLB

Submitted To: AMIT DHALL

Supervisor
By: Kritika Matta
A3256121057
Section: B (3year LLB)
Sem: 2
 Amity Law School
AMITY UNIVERSITY UTTAR PRADESH
INDIA

ACKNOWLEDGEMENT

I owe my deep gratitude to our project supervisor Mr Amit Dhall who took keen
interest on our project work and guided us all along, till the completion of our
project work by providing all the necessary information for developing a good
system. I thank my supervisor Sir for all the help she provided me with this project
report.
 FIVE CASE LAWS
1. Gajanan Moreshwar vs Moreshwar Madan
2. Narayan Singh vs Chattarsingh
3. Balton vs lambert corporation
4. Chairmen Life insurance vs Rajiv Kumar Bhaskar
5. Ram Gulam vs Government of UP

INDEMNITY
Gajanan Moreshwar vs Moreshwar Madan
FACTS
In 1934, the plaintiff (Mr. Gajanan Moreshwar Parelkar) and
the BMC had a lease agreement for a period of 999 years, whereby BMC
gave the plaintiff a particular piece of land in exchange for the lease
amount.
The defendant (Mr. Moreshwar Madan Mantri) then asked the plaintiff
to transfer the benefit of that lease to him. This would consequently allow
the defendant to start construction work on that land right away. The
plaintiff agreed and transferred the benefit of lease to the defendant for the
same.
The defendant started construction and hired a Mr. Keshavdas
Mohandas as a materials supplier. Now, a few things developed thereafter,
which forms the critical and focal point of the case at large:

Mr. Keshavdas supplied the materials, but the defendant did not pay for
those materials. Subsequently, INR 5000 was due to Mr. Keshavdas
accordingly. The defendant requested the plaintiff to mortgage the land
(girvi rakhna) with Mr. Keshavdas, for one year, so that the INR 5000 will
get paid off. Thus, the plaintiff did so on.

Later, Mr. Keshavdas supplied materials again. Again, the defendant didn’t
pay up the money. INR 5000 was again due to Mr. Keshavdas.
Defendant again requests the plaintiff to mortgage the land (girvi
rakhna) with Mr. Keshavdas, for one year, so that the INR 5000 will get
paid off. The Plaintiff did so yet again.

It is highly crucial to clearly remember, that by mortgaging this land, the

plaintiff (Gajanan Moreshwar) is at risk, because Mr. Keshavdas may
simply refuse to return the deed to the land. But, since he is doing it at the
request of the Defendant, there is an implied promise that the defendant
will indemnify the plaintiff for any loss.
However, when the second mortgage occurs, the defendant signs
a contract that he will indemnify the Plaintiff against all claims from Mr.
Keshavdas and he will also pay off all mortgages and charges against the
land. The promise is no longer implied. Since there is a contract, it is now
an express promise.

Now, the Plaintiff asks the Defendant to secure his release, against all
claims from Mr. Keshavdas Mohandas, by paying off the INR 10,000
(5000+5000) and recovering the official deed to the land. The
Defendant refused to pay & argued that the Plaintiff had not suffered
an actual loss and therefore could not claim any money from the Defendant.
Hence, the matter was raised and heard before the Indian Court of Law.

KEY ISSUE(S) RAISED

Whether there needs to be an actual loss, to claim money from the

indemnifier?

Whether this suit of indemnity was premature, as the plaintiff had not
incurred any loss yet?

Additionally, & incidentally, whether the plaint automatically

corresponds / discloses any cause of action?

DECISION HELD
The fact that the Court of equity held that if his liability had become
absolute then he was entitled either to get the indemnifier to pay off the
claim or to pay into Court sufficient money which would constitute a fund
for paying off the claim whenever it was made.
Ultimately, these facts therein led to the judgement that the plaintiff(s)
couldn’t sue the defendants in anticipation that the proceeds realized by the
sale of the mortgaged property would be insufficient and there would be
some deficit left. The court construed the note as an indemnity.
The court also provided the plaintiff(s) to choose repudiation of the
mortgage wholly and recover the full amount from the defendant, but the
plaintiff(s) opted for the recovery from the mortgaged property. Thus, there
being no actual clue to the apprehension that the recovery from the sale of
mortgaged property shall be insufficient the said decree couldn’t be
awarded.
The council didn’t accept M. Madan’s stance that G. Moreshwar had
suffered no loss and thus couldn’t claim anything under Sections 124 and
125 of The Indian Contract Act, 1872.
The Council held that an indemnity holder has rights apart from those
mentioned within the Sections above. If the indemnity holder has incurred a
 liability and therefore the liability is absolute, he can address the
indemnifier to require care of the liability and pay it off.
Thus, G Moreshwar was entitled to be indemnified by M Madan against all
liability under the mortgage and deed of charge.

The court held in the favour of the plaintiff stating that Sections 124 and
125 of the Indian contract Act, 1872 are not exhaustive of the law of
indemnity and the courts would apply equitable principles as are applied in
courts of England. The court did not accept the defendant’s stance that the
plaintiff has not suffered any loss and thus couldn’t claim. And held that
indemnity holder has rights apart from those mentioned within the sections.

CRITICAL ANALYSIS
Perhaps one of the most crucial and critical consequences from this
historic case was that Contract of Indemnity was recognised as the kind of
contract wherein a promisor agrees to do good for all the losses and costs
incurred or to be incurred by the promisee in the broadest of terms possible,
through the execution of such cases of contract[s]. Though quite a number
of clauses are made within the Indian Contract Act, 1872 associated with
indemnity, Sections 124 and 125 have their significance in legal suits when
the indemnified turns to the indemnifier demanding the liability to be paid
off.
Since Section 124 applies when the promisee has got to bear the losses with
regard to some specific act of the promisor or a 3rd party and Section 125
considers the case mature for legal suit only if promisee has actually
procured the losses, both of them apply heavily, elaborately and extensively
within this and many other case(s) of indemnification.
However, they occasionally let down and may even pronounce injustice
within certain cases where the promisee is deemed fully liable after the
deadlines of payment have already been crossed but the liability can’t be
affixed over the promisor till the dues / damages are actually incurred.
Similarly, when the payment to the concerned party isn’t made within the
timeframe specified by the indemnifier, liability of the indemnified is clear,
but any legal suit moved against the indemnifier appears to be premature
inconsiderately & irrationally. Here, if the promisee is not solvent or
capable to pay at that point, then what?

GUARANTEE
Narayan Singh vs Chattarsingh
Money was given got bee-keeping, bees didn’t come, therefore, there
could not be any honey prepared
. Issues
i) When can surety be sued?
ii) Extent of liability Debtor’s debt reduced under Debt Relief Act
after decree for recovery of debt was passed, however surety
 ordered to pay full amount as he was not an agriculturalist.
Surety argued liability is co extensive hence cannot be asked to pay more.
Creditor argued that liability is co extensive only before decree is
passed, and therefore can proceed against surety even if principal has
claimed benefit under DRA.
Judgement
i) Extinction of a debt in whole or in part by operation of law would
definitely go to reduce the liability of the surety as per a bare reading of
sec 128
ii) Surety entitled to be reimbursed by principal debtor after debt is
paid. Hence any benefit claimed by debtor under the DRA will be
negated if surety compelled to pay full amount

AGENCY
Balton vs lambert
Bolton Partners v Lambert (1888) An agent of a company, purporting to act on the
company’s behalf but without its authority, accepted an offer by a TP. The TP then
withdrew his offer but the company ratified the agent’s acceptance.
Held: The ratification related back to the time of the agent’s acceptance prevent TP
subsequent revocation and hence TP was bound to the company
If the principal did not provide the agent with actual authority and does not
want to be bound by the contract, the third party can argue ostensible
authority to bind the principal to the contract.
This is a form of Estoppel. -
If the principal, by words or conduct, create an inference to the third party
that an agent has authority to act on the principal’s behalf, there is
ostensible authority even though no authority exists in fact.
To show that there is ostensible authority, all 3 conditions must be present:
-
1.Representation was made by the principal to the third party
-2. The third party relied on the principal’s representation [The third party
altered his position (by contracting with agent) resulting from the reliance.]
-3. The third party suffered loss
Example: The agent makes a name card that has a title which is misleading
to his authority, and the principal came to know about it. If the principal
pointed out the error in the title, he has by words cancelled the
representation. If the principal was aware of the error yet did not do
anything, he has by conduct affirmed the representation.
If P is bound by A’s apparent authority and suffers loss, P will have a right
of action against A for breach of agency or breach of fiduciary duties
Exception: If the third party knows of the agent’s lack of authority, the third
party cannot argue ostensible authority.
Exception 2: If the contract was procured under a bribe, it is against public
policy and the law would not argue ostensible authority in favour of the
third-party Breach of Warranty of Authority
If the agent did not have any actual authority, the principal refused to ratify
the contract and the third party cannot argue ostensible authority, the third
party can instead sue the agent for breach of warranty of authority.
Note: the third party cannot sue the agent on the contract, i.e., to make the
agent buy the cabinet and receive the money
Chairmen Life insurance vs Rajiv Kumar Bhaskar
Facts
In the case the appeal raised from the earlier judgment and order of a learned
single Judge of the same Court allowing the writ petition of the sole respondent
i.e., Rajiv Kumar Bhaskar with a direction to Life Insurance Corporation of India
(L.I.C.), to pay the sum under the insurance policy with interest at the rate of 12
per cent per annum from the date of death of employee and costs of Rs. 5,000.

The case under which writ was filed earlier who is the respondent here, stated, was
that respondent’s father late Upendra Sharma was a Lecturer in Ram Lakhan Singh
Yadav College, Aurangabad. In the year of 1992, he insured his life under the
‘Salary Savings Scheme’ for Rs. 1,00,000. According to the scheme the amount of
premium was to be deducted from his monthly salary by the college and deposited
with the Aurangabad branch of L.I.C. Upendra Sharma died due to heart attack on
9.7.1996. On 10.9.1996 the respondent i.e., his son claimed for the payment of the
amount and submitted the required papers in the branch office.

As the college authorities had not deposited the premiums of December, 1995 to
July, 1996, respondent deposited the amount due, summing Rs. 6,040, with the
college on 5.11.1996 which was forwarded to L.I.C. on the same day. Further, no
action was taken on the claim, on 20.12.1999 the respondent functioned legal
notice & on 24.1.2000 he functioned another notice.

By letter dated 2.2.2000 he was intimated by the Additional Executive Director of

the L.I.C. that the matter had been taken up with the Aurangabad Divisional office
and the claim will be decided soon.

When no decision was given to the respondent moved towards the District Forum
constituted under the Consumer Protection Act with a complaint but the said
complaint too was not proceeded further due to non-fulfilment of quorum as the
President of the Meeting had not been appointed.

When no direction was founded out the respondent moved into the Court in the
connected writ petition, looking for direction upon L.I.C. to settle the death claim
and pay the amount of insurance with suitable interest.

L.I.C. in the counter-affidavit submitted didn’t denied that Upendra Sharma had
taken life insurance policy for an amount of Rs. 1,00,000 beginning from
20.3.1992 under the Salary Savings Scheme. Agreeing to it, however, the
employer was responsible for deducting the premium amount every month from
the salary and submitting the same to it, it was the duty of the guaranteed person to
ensure payment of premium under the policy.
The amounts of premium outstanding for the period December, 1995 to July, 1996
were deposited only on 6.11.1996 which further proved that no premium was paid
for the aforesaid months and it was only after the death of the assured that the
payment was made by the respondent from his own cause.

The policy did lapse, the respondent was not entitled to the sum assured, excluding
the paid-up value of the deposits, i.e., Rs. 31,800 which L.I.C. ready to pay with
interest at the rate of 9 per cent per annum, moreover, refund of the amount
deposited on 6.11.96 i.e., Rs. 6,040.

As per L.I.C salary saving scheme the employer was to deduct the premium from
the salary of the employee and deposit with L.I.C. All the related procedures were
the accountability of the employer. Upon death of the concerned employee, the
successors found the employer had defaulted in payment causing policy to lapse.
L.I.C relied on a clause in the acceptance letter by the employer which said he
would act not as the agent of L.I.C but as an agent of his employees.

Issue Raised

1. Whether the employer to be treated as an agent of the L.I.C even though the
express agreement to the contrary?
2. Whether the employer is at fault or the employee for non-payment of premium
resulting in lapse of policy?
Arguments Raised
Arguments from the Appellant Side
The appellant contended that it was briefly stated in the policy and was conveyed
to the employer that in the event of non-payment of premium either by employee
or employer that would result in lapse of the policy and only the amount which
have been submitted by the way of premium would be returned back to the assured
at the decided percentage of interest.

Judgement
The Court held that, the method of collection of premiums was indicated in the
Scheme and the employer was already assigned the duty of collecting premium
and forwarding the same to L.I.C. As far as the employee as such is concerned, the
employer will act as an agent of L.I.C. It is a matter of common facts that
insurance companies employ agents. When there is no definition of insurance
agents in the regulations and the Insurance Act, the universal principles of the law
of agency as contained in the Contract Act are applied.
The submission made by the Counsel for the appellants, referring to the
famous case of Basanti Devi, 1999 CCJ 1465 (SC), under which the
employer failed to deposit the premium without information to the
employee.
In the present case as salary was not paid to Upendra Sharma from
December, 1995, it was to be presumed that he knew about the non-deposit
of the premium, for the premium could be deposited only after deducting
the amount from the salary and where salary itself is not paid there is no
question of deduction and, as such, the question of deposit does not arise.
This was the only difference in the fact-situation between Basanti Devi’s
case and the present case

. The question was whether in this situation L.I.C. can be permitted to deny
its liability? The Court opined that this does not substantially change in the
legal nature of the employer, college in the present case, as an agent of
L.I.C. merely because the salary is not paid on time to the employer. The
scheme didn’t expect that in such a situation the employee could hurry to
the needed Branch and pay the premium to discharge the liability of the
consequence of the non-payment.

The Court by considering that the Corporation did not make any express
offer to the employees neither did make any communication with them
regarding payment or non-payment of the premium or any other matter in
relation to the policy and the incapability of the employee to approach the
Corporation directly, show that they treated their employers as ‘agents’ of
the Corporation and the employer had an important role to play in this
whole matter. Additionally, even the terms and conditions of the policy
were to be completed only through the employer.

This only points to the fact that the employers would be the agents of the
Corporation.

Furthermore, The Court held that when the existence of an agency bond
would help to resolve an individual problem and the fact authorizes a court
to settle that such a bond existed at a measurable time, then whether or not
any express or implied consent to the formation of an agency may have
been given by single party to another, the Court is authorized to conclude
that such bond was in existence at that time for the matter in question.

Thereafter, it was seen that the college failed to pay the premium caused by
the failure to pay the salary was common and applicable to all the
employees who had enrolled to the scheme, the respondent’s father only
was not supposed to inform L.I.C. that the salary was not being paid,
therefore, as a result he thought that the deductions were not being made
and the premiums were not being deposited. The Court proceeded with the
lines that “it is a usual phenomenon in the State of Bihar that the salary is
not being paid regularly to the employees in various organizations including
public undertakings and Universities, but on that ground the scheme has not
been withdrawn by L.I.C. so far.”
 the Court concluded that “according to the terms and conditions of the
policy, like any insurance policy, premiums were supposed to be paid on
time. But it was outward that in the case of college and all such other
organizations, which have subscribed in to the Salary Savings Scheme,
L.I.C. had been accepting delayed payment for several months. This simply
amounts to waiver. In the present case, the problem raised due to the death
of the respondent’s father, if he had not died, the situation would not have
risen.
The consequences could had been be different only because in the
meantime one of the employees died giving rise to the claim. In the opinion
of the Court, till the scheme is taken back or the employee quits the
employment and concludes to be in employment of the employer, the
employer be going to remain responsible for making deductions from the
salary as and when the salary is paid to the employees and for the defaults
done by him, the L.I.C. can’t flew away from the liability under the
Scheme.

The Court accordingly held that the case was fully covered by the relation
of the decision in Basanti Devi’s case, 1999 CCJ 1465 (SC) and L.I.C.
became liable to pay the sum assured under the insurance policy”.

BAILMENT
Ram Gulam vs Government of UP
FACTS OF THE CASE
The suit for revision was instituted by plaintiff against the Government of
United Provinces so as to recover certain ornaments or their price.
Plaintiff’s ornaments got stolen. Subsequently, they were recovered from
another house. The police searched and seized the property by exercising
the powers conferred to it under the Code of Criminal Procedure.
Thereafter, they were kept in Collectorate Malkhana.But, this time again,
they were stolen and were untraceable.
The plaintiffs applied unsuccessfully to the Magistrate for an order for the
restoration of the ornaments. But, it was dismissed on finding that the
Government is not liable to compensate.
The plaint alleged that the plaintiffs have learnt that the ornaments are not
available at the Malkhana on account of the defendant’s servants, and that
they have not been returned in spite of notice and ended the prayer with
alternative reliefs.
ISSUES FRAMED BY THE COURT
Whether or not the Government was liable to indemnify the plaintiffs since
it was in the position of a bailee and the ornaments were lost through its
negligence or that of its servants?
Whether or not the Government was liable to indemnify the plaintiffs in
accordance with the rule that a master is liable for the tortuous acts of his
servants?
ISSUES OVERLOOKED BY THE COURT
Whether or not the Government was liable to indemnify the plaintiffs since
it was in the position of a bailee and the ornaments were lost through its
negligence or that of its servants?
No other issue was overlooked by the Hon’ble Allahabad High Court. All
the issues arising from the case were dealt with.
DECISION OF THE COURT
Given by Seth J.
In Ram Ghulam, the first issue was overlooked. Since, the obligation of a
bailee is a contractual obligation and cannot arise independently from a
contract. In the given case, the plaintiff did not hand over the ornaments to
the Government.
The rule embodied in the maxim “Respondent Superior “is a known
exception. Accordingly, master is not liable for the acts of the servants
which he performed in discharge of duty imposed by law. Therefore, the
Government is not liable to compensate for the stolen ornaments.
REASONS FOR THE DECISION OF THE COURT
The first issue was not seriously considered. Since, the obligation for a
bailee is a contractual one and shall not arise independently. In this case, the
ornaments were not made over to the Government under any contract. So,
the government never acquired the position of the bailee and is not liable to
indemnify the plaintiffs.
The second issue was considered as a substantial question of law.
Accordingly, Justice Seth said “Government is the political organizations
through which the sovereign will of the State finds expression, and through
which the State functions”. On reading the Section 176, Constitution Act,
1935 and Section 32, together it is found that such suits are only
maintainable against the Provincial Governments in respect of affairs of the
provinces, as could be maintained against East India Company before
Government of India Act, 1858.Therefore, it was determined whether a suit
for compensation was maintainable against East India Company for the
tortious acts of its servants.

East India company held a dual character till 1858. It was that of a trading
corporation and a body possessed of certain sovereign rights, although not
fully sovereign. This reference was made in the case to decide whether the
tortuous acts were committed to determine the responsibility of the
Company or Secretary of State pursuant to commercial or non-commercial
undertakings. Judicial opinion is divided on the point whether the immunity
extends in respect of torts committed in the performance of all transactions
carried on in the exercise of sovereign powers or is confined to particular
kinds of transactions only. The suit shall fail on the ground that the alleged
tortuous act was performed in discharge of an obligation imposed by law.

ANALYSIS OF THE DECISION

The issue of the Government being liable to indemnify the plaintiffs since it
was in the position of a bailee and the ornaments were lost through its
negligence or that of its servants was overlooked. The reasoning given by
the court is that since them did not exist any contractual obligation between
the parties. This reasoning is not correct. Since, for the creation of a
bailment, no longer the consent is required from the bailor.

“Where possession of personal property of another is acquired and held

under circumstances where the recipient, on principles of justice, ought to
keep it safely and restore or deliver it to the owner, as for instance, where
possession has been acquired accidentally, gratuitously, through mistake, or
by agreement since terminated for some other purpose than bailment, the
law, irrespective of any actual meeting of minds…imposes on the recipient
the duties and obligations of a bailee. Such bailments are known as
constructive or involuntary bailments.”