Indemnity

Indemnity

1. Position in English Law

   • A plaintiff, having acted on request of a defendant, is entitled to assume that if the act was wrongful, he will be indemnified by the defendant.
     • Adamson v. Jarvis
       • Plaintiff sold defendant's cattle, which did not belong to him.
         • Auctioneer held liable by original owner.
           • Plaintiff having acted on the request of the defendant, was entitled to assume that he would be indemnified by the defendant.
     • Indemnity wide enough to include loss arising any cause whatsoever.
     • Dugdale v. Lovering
       • Plaintiffs were in possession of trucks claimed by two defendants and K.P. Co.
         • Plaintiffs delivered trucks to defendant after asking for indemnity and getting no reply.
           • Entitled to recover on an implied promise, by demanding indemnity, made clear that no intention to deliver without.
     • Sheffield Corporation v. Barclay
       • Corporation Registered transfer of Stock on request of banker.
         • Transfers were discovered to be forgeries.
           • Entitled to recover from banker.

2. Position in Indian Law

   • Section 124
     • Definition
       • Scope is much narrower than in English Law
         • Loss arising from accidents excluded in definition.
           • Situations involving instructions from wrongful owner, like Adamson v. Jarvis, will fall under Section 223. (Principle-Agent indemnity)
       • One party promising to save the other due to loss caused by the promisor, or any other party.
         • Secy of State for India in Council v. Bank of India Ltd.
           • A person delivered a forged endorsement to a Bank, which received it in exchange for money.
             • Bank sent the note to Public Debt Office to renew in their name.
               • True owner of the note recovered compensation from the State.
                 • State was allowed to recover from the Bank on an implied promise of indemnity.
   • Section 125
     • Rights of Indemnity Holder when sued.
       • When does liability commence?
         • Gajanan Moreshwar v. Moreshwar Madan Mantri
           • Explained the departure from the idea that action was not maintainable until actual loss was incurred.
             • The indemnified had to wait till a judgement and satisfy it before he could use on his indemnity.
               • Sometimes threw an intolerable burden on indemnity holder.
                 • Might not be in a position to satisfy judgement, but could not avail of indemnity until he had done so.
                   • Court of Equity stepped in and said that the indemnified was entitled to sue as soon as his liability became absolute.
         • Richardson Re, Ex Parte the Governors of St. Thomas's Hospital.
           • Indemnity is not given by repayment after payment, it requires that the indemnified shall never be called upon to pay.
           • Indian Cases on this principle.
             • Osman Jamal v. Gopal Purshottam
               • A company was the commission agent for the defendant firm, and it bought certain goods in that capacity.
                 • Supplier was entitled to recover from the company, but it went into liquidation before paying.
                   • Held that Official Liquidator could recover from defendants, even though the company had never paid. Money had to be set aside for full payment to vendors.
             • Abdul Hussain v. Bombay Metal Syndicate
               • Plaintiffs had sold goods to defendants. Defendants provided a letter indemnifying plaintiff from sales tax.
                 • When asked to pay tax, plaintiff asked defendants to do so, they did not.
                   • Plaintiff deposited money himself, filed suit to recover money more than 3 years after getting tax notice.
                     • Plaintiff is entitled to wait and institute suit after damnification and sufferance of loss. Within period of limitation as period starts from date of payment of tax.