Business Law


By Satyam Kumar & Shivi Khare

Plaintiff: Gajanan Moreshwar Parelkar

Defendant: Moreshwar Madan Mantri


In this case the plaintiff had procured and brought possession of a plot from Bombay Municipal Corporation on lease of 999 years in 1934 but, since he didn’t make use of it, defendant entered into play and on defendant’s request the possession was handed over to him. He erected building over the land thus rendering the plaintiff to mortgage the land twice for rupees 5 thousand anytime to the artefact supplier. Finally, on the request of defendant and agreeing of plaintiff the lease of the plot was also transferred in his name. The defendant never paid to material supplier except a number of the interest over principle amount and some lease instalments to the municipal corporations. After passage of over one and half year previous the deadline the plaintiff was embarrassed and demanded the discharge deed against the mortgage from artefact supplier or /else deposit of mortgage amount with the court to make sure the repayment. Regarding the provision of Section 124, it has been stated that, it defines the contract of indemnity as the 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.


1. Whether the plaint discloses any cause of action? (since plaintiff has neither paid off the dues nor has been compelled to do so by some legal movement, suit or decision).

2. Whether the suit was premature?


Hon’ble justice chagla, on the idea of cases cited by defence attorney disagreed to the prematurity of the suit with the subsequent comments, He also opined the inadequateness of Sections 124 and 125 of the Indian Contract Act, 1872 in such cases. Indian Contract Act is both amending and consolidating Act and isn’t exhaustive of the law of contracts to be applied within the courts of India. “If the full law of indemnity was embodied in Sections 124 and 125 of the Indian Contract Act, there would be considerable force within the contention of Mr. Tendulkar, but that’s obviously not so. The Indian Contract Act is both an amending and a consolidating Act, and it’s not exhaustive of the law of contract to be applied by the Courts in India. Section 124 deals only with one particular reasonably indemnity which arises from a promise made by the indemnifier to avoid wasting the indemnified from the loss caused to him by the conduct of the indemnifier himself or by the conduct of the other person, but doesn’t cater to those classes of cases where the indemnity arises from. loss caused by events or accidents which don’t or might not rely on the conduct of the indemnifier or the other person, or by reason of liability incurred by something done by the indemnified at the request of the indemnifier. Within the present suit the indemnity arises because the plaintiff has become liable because of something which he has done at the request of the defendant and so, in my opinion, Section 124 doesn’t apply the least bit to the facts of this case. Further, Section 125, because the marginal note indicates, only deals with the rights of the indemnity-holder within the event of his being sued. Section 125 is by no means exhaustive of the rights of the indemnity-holder as I shall presently denote. The indemnity holder has other rights besides those mentioned in Section 125.” Regarding this case Shankar Nimbaji v. Laxman Supdu the facts of that case were that one Supdu accustomed 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 note of hand 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 just in case of deficit prayed for a decree against the estate of defendant No. 2 which was within the hands of his sons, defendant No. 2 having died during the pendency of the suit.


These facts therein led to the judgement that the plaintiffs 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 plaintiffs to choose repudiation of the mortgage wholly and recover the full amount from defendant no. 2 but the plaintiffs 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. 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.


Contract of Indemnity is that the kind of contract where one-person promisor agrees to form good for all the losses and costs incurred or to be incurred by the promisee in broad terms through the execution of such contract. Though quite many 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.55 Since section 124 applies when the promisee has got to bear the losses thanks to some act of promisor or a 3rd person and section 125 considers the case mature for legal suit only if promisee has actually procured the losses, both of them apply pretty elaborately within the case of indemnification. But they let down and will even pronounce injustice within the cases where the promisee is created fully liable after the deadlines of payment have already been crossed but the liability can’t be fixed over the promisor till the dues/ damages are literally incurred. Similarly when the payment to the concerned party isn’t made within the time-frame by the indemnifier, embarrassment of the indemnified is clear but any legal suit moved against indemnifier appears to be premature inconsiderately that what is going to happen if the promisee isn’t solvent or capable to pay at that point ? all told such cases consideration of comparable cases in various courts becomes necessary to deliver justice to promisee who files the case as a plaintiff. the selections within the country and people made abroad through application of Common English Law were of the identical view till in 1914 Court of Equity was of the opinion that “A Contract of indemnity would serve little purpose if the indemnity holder was made liable within the first instance”. Further this proposition of applying equitable principles became universally applicable within the present context but not all decisions were going properly considered rather several judgments trusted the facts of the case, the indirect evidence and plainly the appliance of sections 124 and 125 of the acts.

The judgement of Justice Chagla J within the case of Gajanan Moreshwar Parelkar v Moreshwar Madan Mantri56 realized the matter, thus he, besides commenting on the defence lawyer’s quoted cases opined that sections 124 and 125 don’t cover all the cases and hence for deciding the cases out of the purview of those sections, consideration to the Common English Law and therefore the Equitable Principles is completely necessary.

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