What did the court decide about indemnity in this case?

The Bombay High Court held that Sections 124–125 are not exhaustive. If the indemnity-holder's liability becomes certain, they can demand the indemnifier to pay or secure the amount without waiting for actual loss.

Why was the suit not premature?

Because the plaintiff’s liability under the mortgages had become absolute. Waiting for actual payment would create unfair hardship, so equity allows early relief.

Which law does this case interpret?

It interprets the law of indemnity under the Indian Contract Act, especially Sections 124 and 125, using equitable principles from English law.

What are the quick facts students should remember?

Bombay High Court, AIR 1942 Bom 302, indemnity-holder can sue once liability is absolute, equity fills gaps beyond Sections 124–125.

Gajanan Moreshwar v. Moreshwar Madan 1942

Q: How is this case useful for exams?

Use it to show that indemnity is proactive: when liability is fixed, the indemnity-holder can seek payment or a court deposit immediately.

Gajanan Moreshwar v. Moreshwar Madan (AIR 1942 Bom 302)

Indemnity under the Indian Contract Act — clean, classroom-style explainers with timeline, IRAC, and mnemonics.

Bombay High Court 1942 Single Bench AIR 1942 Bom 302 Indemnity (ICA) ~6 min read

Author: Gulzar Hashmi · India · Published: 26 Oct 2025

Quick Summary

In this case, the court explained how indemnity works when the indemnity-holder’s liability is already certain. The court said: do not force the indemnity-holder to first pay money and suffer. If the liability is fixed, the indemnifier must either pay the creditor or place enough money in court to cover the claim. The court also clarified that Sections 124–125 of the Indian Contract Act are not the whole law on indemnity; equity can fill the gaps.

Issues

Was the suit for indemnity premature because the plaintiff had not yet paid any money?
Can courts grant relief before actual loss when the indemnity-holder’s liability has become absolute?

Rules

Equitable Indemnity

If the indemnity-holder’s liability is absolute, they may ask the indemnifier to pay the third party or deposit funds in court to meet the claim when it falls due.

ICA ss. 124–125

These sections state basic rights and duties, but they are not exhaustive. Courts can apply equitable principles to prevent unfair hardship.

Facts (Timeline)

1934: Plaintiff took a 99-year lease from Bombay Municipal Corporation and got possession.

At defendant’s request, plaintiff agreed to transfer the benefit of the lease; defendant took possession and began building.

Materials were supplied by Keshavdas Mohandas for over ₹5,000; he demanded payment from the defendant.

14 Jan 1937: At defendant’s request, plaintiff created an equitable mortgage (deposit of title deeds) to secure ₹5,000 with interest, payable on 14 Jan 1938.

A further ₹5,000 became due for construction; plaintiff again created a further charge for this amount, payable on the same date.

30 Jul 1939: Defendant asked for transfer in his name and said he would clear the mortgage. Sanction followed on 26 Aug 1939.

Defendant enjoyed rents and profits but paid only small interest; large sums remained unpaid.

Plaintiff sued, asking the court to make the defendant indemnify him for all mortgage liabilities.

Arguments

Appellant / Plaintiff

Acted on defendant’s request and created mortgages; liability is now certain.
Should not be forced to first pay out of pocket; indemnifier must clear or secure dues.
Equity should protect the indemnity-holder from unfair burden.

Respondent / Defendant

Suit is premature because the plaintiff has not yet paid any loss.
Sections 124–125 should control; no relief before actual payment.

Judgment

Held: For the plaintiff. The suit was not premature. When liability is fixed, the indemnity-holder can demand that the indemnifier pay the creditor or deposit sufficient money in court.

Important Note: Sections 124–125 are not exhaustive. Indian courts may use equitable principles (as in English law) to prevent hardship.

Ratio Decidendi

If the indemnity-holder’s liability has become absolute, waiting for actual payment is unnecessary and unfair. Courts can order the indemnifier to perform now—by paying the creditor or by securing the amount—so the indemnity-holder is protected from loss.

Why It Matters

Sets the standard that indemnity is preventive, not only compensatory after payment.
Confirms that equity supplements the Indian Contract Act on indemnity.
Useful where contractors, guarantors, or partners face certain third-party claims.

Key Takeaways

Suit is not premature once liability is fixed.
Indemnifier may be ordered to pay or secure the claim.
ICA ss.124–125 are not exhaustive; equity applies.
Good precedent for mortgage/contract construction disputes.

Mnemonic + 3-Step Hook

Mnemonic: “Fixed? Then Fund it.”

Fixed liability → no waiting.
Fund the claim → pay or deposit.
Fairness via equity → beyond ss.124–125.

IRAC Outline

Issue

Is a suit for indemnity premature without actual out-of-pocket loss?

Rule

When liability is absolute, indemnifier must pay or secure funds; equity supplements ICA ss.124–125.

Application

Mortgages were created at defendant’s request; dues remained; plaintiff faced certain liability.

Conclusion

Sued not premature; plaintiff entitled to relief now.

Glossary

Indemnity: A promise to protect someone from loss caused by another’s act.
Absolute Liability: When the duty to pay has become certain and unavoidable.
Equitable Mortgage: Mortgage by deposit of title deeds, recognized in equity.