Table of Contents

 Acknowledgement…………………………………………....2
 Declaration……………………………………………………3
 Aims and Objective…………………………………………..4
 Hypothesis…………………………………………………….4
 Research Methodology……………………………………….4
 Introduction…………………………………………………..5
1. Definition & nature…………………………………….5
 Case Analysis……………………………………………….….7
 Conclusion…………………………………..……..………….12
 Bibliography……………………….……………………...……1

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 Acknowledgement
A project is a joint endeavour which is to be accomplished with utmost compassion, diligence
and with support of all. Gratitude is a noble response of one‘s soul to kindness or help
generously rendered by another and its acknowledgement is the duty and joyance. I am
overwhelmed in all humbleness and gratefulness to acknowledge from the bottom of my
heart to all those who have helped me to put these ideas, well above the level of simplicity
and into something concrete effectively and moreover on time.

This project would not have been completed without combined effort of my revered Faculty-
in-charge of the subject Dr.TanayaTarai (OSD Academics and Publications) and Md Yusuf
Hayath (Asst. Professor of law) whose support and guidance was the driving force to
successfully complete this project. I express my heartfelt gratitude to them. Thanks are also
due to my parents, family, siblings, my dear friends and all those who helped me in this
project in any way. Last but not the least; I would like to express my sincere gratitude to our
Law teacher for providing us with such a golden opportunity to showcase our talents. It was
truly an endeavour which enabled me to embark on a journey which redefined my
intelligentsia, induced my mind to discover the intricacies involved.

Moreover, thanks to all those who helped me in any way be it words, presence,

Encouragement or blessings...

- SOUMIKI GHOSH

- 3rdSemester

- B.A. LL.B (Hons.)

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 Declaration
I hereby declare that the work reported in the B.A.LL.B (Hons.) Project entitled ― “CASE
ANALYSIS- Gajanan Moreshwar Parelkar v Moreshwar Madan Mantri” submitted at
Maharashtra National Law University, Aurangabad is an authentic record of my work carried
out under the supervision of Dr.Tanaya Tarai and Md. Yusuf Hayath. I have not submitted
this work elsewhere for any other degree or diploma. I am fully responsible for the contents
of my Project Report. This work has not been previously submitted to any other university in
any examination and is not copied from any book or websites.

SOUMIKI GHOSH

Maharashtra National Law University, Aurangabad

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 Aims and objectives
The aim and objectives of this research project are:

 The project tends to throw light on the topic Indemnity.

 The researcher tends to throw light on Section 124 with the help of case
analysis.

Hypothesis
This project summarises the topic of CASE ANALYSIS- Gajanan Moreshwar
Parelkar v Moreshwar Madan Mantri and also discusses the significant
prospective of the same. The project will help us in enhancing our knowledge
about the topic ‘Indemnity’ and its significance in Law of Contract.

Research Methodology
For this study, doctrinal research method was utilised. Various articles, e-
articles, reports and books from library were used extensively in framing all the
data and figures in appropriate form, essential for this study.

The method used in writing this research is primarily analytical.

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 Introduction
Definition& Nature of Indemnity
The term Indemnity literally means “Security against loss”. In a contract of indemnity one
party – i.e. the indemnifier promise to compensate the other party i.e. the indemnified against
the loss suffered by the other.

The English law definition of a contract of indemnity is – “it is a promise to save a person
harmless from the consequences of an act”. Thus it includes within its ambit losses caused
not merely by human agency but also those caused by accident or fire or other natural
calamities.

The definition of a contract of indemnity as laid down in 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.”

In common law Indemnity was established in case of Adamson v. Jarvis1. The plaintiff an
auctioneer sold certain cattle on the instruction of the defendant. It subsequently turned out
that the livestock didn’t belong to the defendant, but to another person, who made the
auctioneer liable and the auctioneer in turn sued the defendant for the loss he had thus
suffered by acting on the defendant’s direction. The court laid down that the plaintiff having
acted on the request of the defendant was entitled to assume that, if, what he did turned out to
be wrongful, he would be identified by the defendant.

As pointed out by Chitty:

The term indemnity is used in the law in several different cases. In its widest sense it means
recompense for a loss or liability which one person has incurred, whether the duty to
indemnify comes from an agreement or not. In its widest sense a contract of indemnity
includes all contracts of insurance, in its narrow sense, a contract of indemnity includes all
contracts of insurance, in its narrow sense, a contract of indemnity is used in contrast to a
contract of guarantee.

1
(1827) 4 Bing 66.

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Under English law, an indemnity is a contract, express or implied to keep a person, who has
entered into or who is about to enter into, a contract or incur any other liability indemnified
against loss, independently i.e. of the question whether a third person makes a default as
stated in Halsbury's Laws of England. Thus under English law the term indemnity includes
promises to save the promises harmless from loss caused by events or accidents which do not
or may not depend on the conduct of any person or by liability arising from something done
by the promisee at the of the promisor: in the latter case a promise of indemnity may be
inferred as a fact from the nature of transaction.

Under English law promise to indemnity may be express or implied. A leading case on the
point is Dugdale v. Lovering.2 In this case, certain trucks were in possession of the plaintiff.
The defendant as well as a company claimed them. On the demand of delivery of trucks by
the defendants, the plaintiff demanded an indemnity bond, but no reply was received, yet they
delivered the trucks to the defendants. Subsequently, the said company (K. P. Co.) sued the
plaintiff for conversion of property and succeeded in the suit. It was held that the defendants
were liable to indemnify the plaintiff for in the opinion of the Court the demand of indemnity
bond led to the creation of an implied promise. Similarly, in Sheffield Corp v. Barclay3 the
court held:

“Where a person invested with a statutory or common law duty of a ministerial character is
called upon to exercise that duty on the request, direction or demand of another……whether
any default on his own part acts in a manner which is apparently legal but is, in fact illegal
and breach of the duty, and thereby incurs liability to third parties, there is implied by law a
contract by the person making the request to keep indemnified the person having the duty
against any liability which may result from such exercise of the supported duty.”

2
(1975) 13 LRCP 196.
3
(1905) A.C. 392.

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 CASE ANALYSIS
Gajanan Moreshwar Prelkar v Moreshwar Madan Mantri on 1 April, 1942

Equivalent citations: (1942) 44 BOMLR 703

(Section 124 of Indian Contract Act, when indemnity can be claimed)

Facts-

Plaintiff (P) got a plot of land on lease from municipal corp. of Mumbai. P allowed
Defendant (D) to erect building on that land. D, in this course, incurred debt of Rs.5ooo from
building material supplier (K), twice. On both the occasion, P mortgaged part of the land to
K. P, on D’s request transferred the land to D, on the consideration that he (P) would be
discharged of all the liabilities arising out of that land. D failed to adhere to his consideration.
P filed a suit for discharge of liabilities on him, alleging D to be indemnifier.

Issues- Whether the suit for indemnity was premature as P had not yet incurred any loss as
such?

1) Can the indemnified ask for performance of the contract of indemnity without suffering
actual loss? 2) Whether the obligation of the plaintiff was absolute.

CONTENTIONS (Defendant):

1. As per s. 124, the promisor promises to safeguard the other from the damage
that is caused to him, not the damage which may be caused to him. Since there is no
damage to the plaintiff as yet, P is not entitled to sue the indemnifier. (Shankar Nimbaji
vs. Laxman Supdu4, Chand Bibi vs. Santoshkumar Pal5 )
2. The liability of the plaintiff is not absolute but contingent. There is nothing to show that
if the mortgagee was to sue to enforce his mortgage and the property was sold, there
would be any deficit for which the plaintiff would be liable.

4
(1940) 42 Bom LR 175
5
AIR 1933 Cal 641

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Held (HIGH COURT) - S 124,125 do not apply, as said sections do not cover the
transaction. ICA is not exhaustive, and principles of equity will allow the indemnified to
enforce said contract of indemnity without having suffered actual loss, when the obligation of
the indemnity holder is absolute. Here, obligation is absolute.

Author: Chagla.
Bench: Chagla

1. (w.r.t 1st contention of D) ICA is both an amending and a consolidating Act, and it
is not exhaustive of the law of contract. Section 124 deals only with one particular kind
of indemnity in which the loss is caused by the conduct of the indemnifier himself or of
other person, but does not cover the cases outside this or cases when liability arises
because of something done by the indemnified at the request of the indemnifier. S. 124
talks about subsequent conduct but here the liabilities were past, i.e. prior to the date
when the contract was actually entered into force. Earlier to this contract, all the acts
were done merely on request and without any consideration and hence, were not
binding. Therefore s.124 is inapplicable here.
2. (w.r.t 2nd contention of D) Under both the mortgage and the further charge there is a
personal covenant by the plaintiff to pay the amount due, and it would be open to the
mortgagee to sue the plaintiff on the personal covenant reserving his rights under the
security. Therefore, the liability of the plaintiff under the personal covenant is absolute
and unconditional.
3. Principles of equity (as applied in English Courts) can be applied here to relieve P from
all the liabilities (as ICA is not exhaustive of the law of indemnity).

RATIO: There exist contracts of indemnity, which do not fall within the ambit of S 124,125.
Contracts of indemnity can be enforced without the actual loss of the indemnified so long as
there is an absolute liability of the type covered by the contract of indemnity.)

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The scope of Section 124 is narrower than the concept of indemnity under English Law. As
observed by the Bombay High Court in Gajanan Mareshwar v. Madan Mantri6 Section 124
deals 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
indemnifier himself, or by the conduct of any other person or 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. Thus we see that while in England, nature of loss is not restricted to the
conduct of some person but also include events and accident not connected with the conduct
of any party in India it is restricted to the conduct of some person.

An agreement to compensate loss due to change of law is not a contract of indemnity as

defined in section 124 of the Contract Act since such loss is neither due to conduct of or
omission nor to the conduct of promisor nor to the conduct of any third party.

Section 124 deals with one particular kind of indemnity which arises from a promise made by
an 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 depend upon the conduct of indemnifier or any other person. [Moreshwar v Moreshwar]

Nature of Contract of Indemnity –

A contract of indemnity may be express or implied depending upon the circumstances of the
case, though Section 124 of the Indian Contract Act does not seem to cover the case of
implied indemnity.

A broker in possession of a government promissory note endorsed it to a bank with forged

endorsement. The bank acting in good faith applied for and got a renewed promissory note
from the Public Debt Office. Meanwhile the true owner sued the Secretary of State for
conversion who in turn sued the bank on an implied indemnity. It was held that – it is 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 to be

6
AIR 1942 Bom. 302

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injurious to the rights of a third person, the person doing it is entitled to an indemnity from
him who requested that it should be done. [Secretary of State v Bank of India7].

Contract of indemnity when enforceable –

The question whether the liability of indemnifier commences only when the indemnified has
actually suffered loss or when there is an apprehension that the indemnified by all chances is
likely to suffer it.

The former view was held in cases like – Shankar Nimbaji v Laxman Sapdu8 / Chand Bibi v
Santosh Kumar Pal.9

The plaintiff filed a suit to recover Rs. 5,000/- and interest from defendant by the sale of a
mortgaged property and, in case of deficit, for a decree against the estate of defendant 2
which was in the hands of his sons, the defendant 2 died during the pendency of the suit. It
was held that plaintiff cannot sue the defendant in anticipation that the proceeds realized by
the sale of the mortgaged property would be insufficient and there would be some deficit.
[Shankar Nimbaji v Laxman Sapdu]10

The defendant’s father while purchasing certain property covenanted to pay off mortgage
debt incurred by the plaintiff and also promised to indemnify him if they were made liable for
the mortgage debt. The defendant’s father failed to pay off the mortgage debt and plaintiff
filed an action to enforce the covenant. It was held as the plaintiff had not yet suffered any
damage, the suit was premature so far as the cause of action on indemnity was concerned.
[Chand Bibi v Santosh Kumar Pal]11

A different point of view was held by the Courts in the following cases –

Plaintiff company agreed to act as commission agent for the defendant firm for purchase and
sale of “Hessian” and “Gunnies” and charge commission on all such purchases and the
defendant firm agreed to indemnify the plaintiff against all losses in respect of such
transactions. The plaintiff company purchased certain Hessian from one Maliram Ramjidas.

7
(1938) 40 Bom LR 868
8
(1940) 42 Bom LR 175
9
AIR 1933 Cal 641
10
(1940) 42 Bom LR 175
11
AIR 1933 Cal 641

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The defendant firm failed to pay for or take delivery of the Hessian. Then Maliram Ramjidas
resoled it at lesser price and claimed the difference as damages from the plaintiff company.
The plaintiff company went into liquidation and the liquidator filed a suit to recover the
amount claimed by Maliram from the defendant firm under the indemnity. The defendant
argued that in as much as the plaintiff had not yet paid any amount to Maliram in respect of
their liability they were not entitled to maintain the suit under indemnity. It was held negative
and decided in plaintiff’s favour with a direction that the amount when recovered from the
defendant firm should be paid to Maliram Ramjidas. [Osmal Jamal & Sons Ltd. v Gopal
Purushotham]12

12
AIR 1929 Cal 208, 118 Ind Cas 882
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 Conclusion

After the landmark decision in the case of Gajanan Moreshwar v Moreshwar Madan Mantri it
has been well established that the liability of the indemnifier commences as soon as the loss
of the indemnified becomes absolute, certain or imminent. It is not necessary that the
promisee should pay for the loss. It may, however, be noted that Section 124 is not exhaustive
and it has been held that the courts would apply the same principles that the courts in England
do.

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 BIBILIOGRAPHY
The researcher has consulted following sources to complete the rough proposal:
PRIMARY SOURCES

Dr. Justice Barukha G.C., Mulla on The Indian contract Act, Twelfth Edition,
Lexis NexisButterworths, Wadhwa Nagpur.
Cheshire, Fifoot&Furmstone, Law of Contract, 15th Edition, Oxford University Press.
Saharay, H.K. Dutt on Contract, Tenth Edition, Eastern Law House, Allahabad.
Pollock and Mulla: Indian Contract Act and Specific Relief Act, Ninth Edition (1972),
Chitty on contract, 23rd Edition, Vol. II
Halsbury Laws of England, Vol. 15

SECONDARY SOURCES
www.manupatra.com
www.indiankanoon.com

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