The right to sue on a contract of indemnity accrues to the promisee only upon being damnified and suffering loss.

JUDGMENT - 1. This is an appeal on behalf of the original plaintiff from the judgment and decree dated November 16, 1966, of Mr. Judge Kapadia of the City Civil Court, Bombay, whereby the learned Judge tried the issue of limitation as preliminary issue and upon finding that the suit was barred by the Law of Limitation dismissed the same with costs.

2.The relevant facts are as follows:-

3.Between October 11, 1957 and January 3, 1958, the plaintiff had sold and delivered to the defendants certain different goods and had also recovered the price thereof. In the letter dated October 11, 1957, the defendants stated : "In respect of the transactions under your invoice x x x x x dated 25th September 1957 we do hereby indemnify you against any amount of sales tax that may be levied by the authorities with or without any guarantee thereof, as the case may be, as and when charged". Similar letter of indemnity was executed by the defendants on January 3, 1958. There is no dispute between the parties that in respect of the goods sold and delivered by the plaintiff to the defendants during the above period a contract of indemnity in the terms contained in the above letters existed.

4.In connection with the sales tax relating to the goods sold by the plaintiff to the defendants as mentioned above, the sales tax authorities issued an order dated February 28, 1963, calling upon the defendants (plaintiff ?) to pay Rs. 3,101.25 by way of sales tax and Rs. 378/- as penalty. The plaintiff called upon the defendants to deposit the amount of tax and penalty, but the defendants failed to do so. An appeal filed by the plaintiff was dismissed on November 12, 1963. The revisional application filed by the plaintiff was dismissed in July 1963. Prior to the institution of the above appeal, between April 27, and July 1, 1963, the plaintiff deposited the aggregate sum of Rs. 3,479.25 with the sales tax authorities. To recover that amount the plaintiff filed the present suit on April 13, 1966. The parties were agreed before the learned Judge below that the claim in suit was governed by the provisions in Article 113 in the Schedule to the Limitation Act of 1963 which runs as follows :-

"113. Any suit for which no period of limitation three years. When the right to sue accrues is provided elsewhere in this Schedule."

Relying upon certain observations of Chagla J. (as he then was) in the case of Gajanan Moreshwar v. Moreshwar Madan, 44 Bom LR 703, the learned Judge below held that in the present case the right to sue that in the present case the right to sue had accrued in favour of the plaintiff when the order dated February 28, 1963, demanding and / or levying sales tax and penalty was issued. As three years period had expired from that date prior to the date of the institution of the suit, he held that the suit was barred and dismissed the same.

5.Mr. Malkani for the plaintiff has submitted that the above finding of the learned Judge is contrary to the decision of the Supreme Court in the case of Shanti Swarup v. Munshi Singh, AIR 1967 SC 1315. The effect of the observations of the Supreme Court in this case, according to Mr. Malkani, was such that in the present case the right to sue on the contracts of indemnity between the parties should be held to have accrued to the plaintiff only upon the plaintiff being damnified and suffering loss of the sum of Rs. 3,479.25 by deposit and payment thereof between April 27 and July 1, 1963. He, therefore, submitted that the suit that was filed before expiry of three years from April 27, 1963, was within the prescribed period of three years and was not barred by the Law of Limitation.

6.Mr. Jhaveri for the defendants has submitted that on a true construction of the contracts of indemnity contained in the two letters mentioned above, the plaintiff became entitled to be indemnified immediately upon the levy of the sales tax and penalty. The levy was made by the order dated February 28, 1963. In fact, in accordance with the contr

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