GAJANAN MORESHWAR V.

MORESHWAR
MADAN, A.I.R. 1942 Bom, 302
 • The Plaintiff is Gajanan Moreshwar Parelkar and the Defendant is
Moreshwar Madan Mantri.
• In 1934, the plaintiff had a lease agreement with the BMC for a period of 999
years in exchange for a certain lease amount. The defendant, Mr. Moreshwar
Madan Mantri then asked the plaintiff to transfer the benefit of that lease to

FACTS: him which would consequently allow the defendant to start construction work
on that land right away for a certain amount of rent.
• The defendant started the construction and hired a Mr. Keshavdas
Mohandas as a material supplier for the same.
• Mr. Keshavdas supplied the materials, but the defendant did not pay for those
materials and subsequently, INR 5000 was due to Mr. Keshavdas. The
defendant thereby, requested the plaintiff to mortgage the land with Mr.
Keshavdas, for one year, so that the INR 5000 will get paid off. Thus,
the plaintiff did so.
• Later, Mr. Keshavdas supplied materials for the second time. Again, the
defendant didn’t pay up the money and a sum of INR 5000 was again due to
him. Defendant again requested the plaintiff to mortgage the land with Mr.
Keshavdas, for one year, so that the INR 5000 will get paid off. The Plaintiff
did so yet again.

• However, when the second mortgage occurred, the defendant signed a contract
with the plaintiff indemnifying the plaintiff against all claims from Mr.
Keshavdas and stating that he will also pay off all mortgages and charges
against the land. The promise which was earlier implied turned into an
expressed one after the signing of the contract.

• Now, the Plaintiff asked 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 Bombay High Court.
 • When the suit was called on, the
defendant admitted all the facts alleged
by the plaintiff in the plaint.
ISSUE: Following issues to the suit are raised:
(1) whether the plaint discloses any
cause of action?
(2) whether the suit was premature?
(3) whether there needs to be an actual
loss to claim money from the
indemnifier?
 • Section 124 of Indian Contract Act, 1872

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.

• Section 125 of Indian Contract Act, 1872

RULE: The promisee in a contract of indemnity, acting within the scope of his authority, is entitled to
recover from the promiser-

(1) all damages which he may be compelled to pay in any suit in respect of any matter to which
the promise to indemnify applies;

(2) all costs which he may be compelled to pay in any such suit if, in bringing or defending it,
he did not contravene the orders of the promiser, and acted as it would have been prudent for
him to act in the absence of any contract of indemnity, or if the promiser authorised him to bring
or defend the suit;

(3) all sums which he may have paid under the terms of any compromise of any such suit, if the
compromise was not contrary to the orders of the promiser and was one which it would have
been prudent for the promisee to make in the absence of any contract of indemnity, or if the
promiser authorised him to compromise the suit.

• Judgment relied upon: Osman Jamal & Sons, Ltd. v. Gopal Purshattam
 Analysis of Issue 1:
• If the whole law of indemnity was embodied in Sections 124 and 125 of the
Indian Contract Act, there would be considerable force in the contention of
the defending counsel who says that unless and until the indemnified has
suffered a loss he is not entitled to sue the indemnifier and, according to
him, the plaintiff has not gone through the actual loss due to which the cause
of action does not arise; but that is obviously not so. The Indian Contract

ANALYSIS: Act is both an amending and a consolidating Act, and it is not exhaustive of
the law of contract to be applied by the Courts in India. Section 124 deals
only with one particular kind of indemnity which arises from a promise
made by the indemnifier to save the indemnified from the loss caused to him
by the conduct of the indemnifier himself or by the conduct of any other
person, but does not deal with those classes of cases where the indemnity
arises from loss caused by events or accidents which do not or may not
depend upon the conduct of the indemnifier or any other person, or by
reason of liability incurred by something done by the indemnified at the
request of the indemnifier.
• In the afore mentioned case the indemnity arises
because the plaintiff has become liable owing to
something which he has done at the request of the
defendant and therefore, Section 124 does not
apply at all to the facts of this case.
Further, Section 125, only deals with the rights of
the indemnity-holder in the event of his being
sued. Section 125 is by no means exhaustive of the
rights of the indemnity-holder. The indemnity-
holder has other rights besides those mentioned
in Section 125.
 Analysis of Issue 2:
• 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. Liability can be attached to the promisor even if the
debts or losses have not actually been incurred. Similarly, when
the payment to the concerned party isn’t made within the timeframe
specified by the indemnifier, and the liability of the indemnity holder is
clear, any legal suit moved against the indemnifier shall not be
considered premature taking into account the promisee's absolute
liability.
 Analysis of Issue 3:
• The original English rule was that indemnity was payable only after the
indemnity-holder had suffered actual loss by paying off
the claim. However, it was soon realized that an indemnity might be
worth very little indeed if the indemnified could not enforce his
indemnity till he had actually paid the loss. The Court of equity stepped
in and held that if the liability had become absolute then the indemnity-
holder 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. One of the most significant
outcomes from this historic case was perhaps the recognition of the
Contract of Indemnity as the type of contract wherein a promisor
commits to make good for all losses and expenses incurred or to
be incurred by the promisee in the broadest terms conceivable.
 • 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
:
CONCLUSION 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.
THANK YOU.
Presented by- Group 1:
Vrinda Yadav
Anna Sardana
Arushi Agrawal
Ridhima Mittal
Shivika Gupta
Vanshika Gera