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1921 Supreme(SC) 63
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD ATKINSON, LORD PHILLIMORE, AND SIR JOHN EDGE.
SACHINDRA NATH ROY - Appellant
Versus
MAHARAJ BAHADUR SINGH - Respondents
On appeal from the High Court at Calcutta.
Decided On : July. 12. 1921.
Solicitors for appellants :Chapman Walker & Shephard. Solicitor for respondent: G. C. Farr.
A broad covenant of indemnity covering all losses and claims allows recovery of payments made to remove an encumbrance created by the indemnifier, even if the specific decree used to enforce that encumbrance was barred by limitation.
Headnote:(A) Indian Limitation Act, 1877 - Article 179 - Indian Limitation Act, 1908 - Article 182 - Transfer of Property Act, 1882 - Sections 88 and 89 - Period of limitation for executing a decree runs from the date of the decree and not from the date of dismissal of an appeal for want of prosecution - A formal order dismissing an appeal for want of prosecution does not judicially deal with the matter of the suit and cannot be regarded as an order adopting or confirming the decision appealed from; it merely recognizes that the appellant failed to comply with the conditions of the appeal, leaving the party in the same position as if no appeal had been filed.
(B) Covenant of Indemnity - Scope and Application - Where a covenant provides indemnity against all losses, damages, actions, and claims resulting from an act, the cost incurred to remove an encumbrance created by the indemnifier is recoverable, even if the payment was "voluntary" in the sense that the specific decree enforcing the encumbrance was barred by limitation - The expenditure to remedy the damage done to the property by the indemnifier's act of pledging deeds falls within the scope of a wide indemnity covenant.
Facts of the case:
Mortgagors were protected by a wide covenant of indemnity against all losses, damages, actions, and claims arising from the act of the indemnifier depositing mortgage deeds as security for an equitable mortgage. Subsequently, decrees were passed to enforce this equitable mortgage. The mortgagors paid the assignee of these decrees to satisfy the debt and clear their title. The respondents argued that the payment was voluntary and therefore not recoverable under the indemnity because the decrees were barred by limitation under the applicable law.
Findings of Court:
The court found that the decrees were indeed barred by limitation and the payment made to satisfy them was voluntary in the sense that the decree-holder could not have legally compelled payment through execution proceedings. However, the court held that the payment was made to remove an encumbrance created by the indemnifier's act of pledging the mortgage deeds.
Issues: Whether a payment made to satisfy a time-barred decree is recoverable under a broad covenant of indemnity intended to protect the indemnified party from all claims and losses arising from the indemnifier's acts.
Ratio Decidendi: The wide language of the indemnity covenant, covering all losses and claims, allows the indemnified party to recover costs incurred to cure the injury caused by the indemnifier's act of encumbering the property. The fact that the specific decree used to enforce the encumbrance was unenforceable due to limitation does not preclude recovery, as the payment was made to remedy the damage (the encumbrance) created by the indemnifier.
Result: Appeal allowed.
Legal Category Hierarchy
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property law
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mortgages
- equitable mortgages
- redemption
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mortgages
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contract law
- indemnity
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practice and procedure
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limitation
- execution of decrees
-
limitation
Judgement
Appeal (No. 74 of 1919) from a judgment and decree of the High Court (July 21, 1916) reversing a decree of the Subordinate Judge of Murshidabad.
The suit was instituted by the appellants on September 9, 1912, against the respondents, the representatives of one Dhanpat Singh, deceased, under a covenant of indemnity contained in a deed executed by Dhanpat Singh on April 23, 1894. The facts of the case and the terms of the deed appear from the judgment of the Judicial Committee. Shortly stated, the plaintiffs sought to recover with interest a sum which they had paid on February 2, 1910, to discharge a preliminary mortgage decree made by the High Court at Calcutta on August 26, 1905. The appellants had appealed against the decree to the Privy Council, but had paid the sum in question in settlement and had ceased to prosecute the appeal, which was dismissed for want of prosecution on April 16, 1910.
The Subordinate Judge made a decree in favour of the appellants. He was of opinion that the defendants having received notice of the application to enter up satisfaction of the decree, it was not open to them to contend that the decree was barred by limitation, and that consequently the payment by the applicants was voluntary.
The High Court reversed the decision of the trial judge. The learned judges (Chitty and Richardson JJ.) held that the payment made by the plaintiffs was a voluntary payment, as the claim on the decree was barred by limitation. They referred to the two decisions of the Privy Council cited in the present judgment as showing conclusively that a claim to enforce the decree would have been barred. Referring to the ground of the decision of the trial judge they said that the statement to the Court that the decree had been satisfied could not in any way affect the defendants rights in the present suit.
1921. June 10, 13. Sir George Lowndes K.C. and Parikh for the appellants. The appellants were entitled to recover under the deed of indemnity. The payment which they made on February 2, 1910, was not a voluntary payment. At the time when the payment was made the High Court at Calcutta had consistently taken the view that an application for an order absolute for sale was not governed by art. 179 of Sch. II. of the Indian Limitation Act see Puma Chandra Mandal v. Radha Nath Dass . (( 1906) I. L. R. 33 C. 875.) It was therefore reasonably prudent on the part of the appellants to pay. The decisions of the Privy Council in 1914 in Abdul Majid v. Jawahir Lal (( 1914) I. L. R. 36 A. 350.) and Batuk Nath v. Munni Dei (( 1914) L. R. 41 I. A. 104.) do not affect that contention. Further, the respondents were not at the date of payment barred from applying for an order to sell. The decree did not become effective until the expiration of the time allowed for payment—namely, six months. Time does not run until a decree is effective Maharaja of Darbhanga v. Homeshvar Singh . (( 1920) L. R. 48 I. A. 17.) Consequently, on January 1, 1909, when Sch. I. of the Indian Limitation Act, 1908, came into force the time allowed under the Act of 1877 had not expired. Art. 182 of Sch. I. of the Act of 1908 introduced a new provision by clause 2—namely, that where there was an appeal from a decree or order and the appeal was withdrawn time for executing the decree or order was to run from the date of the withdrawal. The decisions of the Board above referred to were under the Act of 1877, which did not contain the provision in art. 182 (2.). But even if the equitable mortgagees were barred at the date of the payment from enforcing the decree in their favour, the appellants were entitled to recover the deeds from their possession and so to clear their title. The terms of the deed of indemnity render the respondents liable for expense incurred by them for that object.
Kenworthy Brown for the respondents. The last contention is now advanced for the first time ; it was not put forward even in the appellants case upon this appeal. It is conseque
