THE SECRETARY OF STATE VS THE BANK OF INDIA

Citation:

(1938) 40 BOMLR 868

Court:

Bombay High Court

Bench:

Lord Wright, Sir Shadi Lal, Sir George Rankin

Date of Judgement:

02 May 1938

Introduction:

The Indian Contract Act,1872 deals with cases of implied indemnity under Sections 69, Section 145, and Section 222. But implied indemnity was identified by the Privy Council in this case.

Facts:

In this case, a lady named Gangabai was the indorsee and holder of a government’s promissory note for Rs 5000. A Broker named Acharya, forged her endorsement in his possession, in his favor, and endorsed it for value to the respondents. Respondents acting in good faith applied to Public Debt Office under the Indian Security Act, 1920, renewed the promissory note payable to them in exchange. The lady on becoming aware of the fraud practised by Acharya sued the appellant and recovered the damages. The appellant, in turn, sued the respondent, claiming to be indemnified against the loss sustained by him based on the principle that the Public Debt Officer has issued the renewed note on the request of the respondent and was accordingly entitled to be indemnified against the damage resulting from the fact that what had been done involved injury to the third party’s rights.

The question is whether the appellant is debarred from relying on an indemnity implied under the Common law of India. The statement of the principle under which such an indemnity is implied is stated by Lord Halsbury:

It is a 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 out to be injurious to the rights of a third party, the person doing it is entitled to an indemnity from him who requested that it should be done.

Judgement:  

It was held that the express indemnity clause is not necessary for the face of implied right to indemnify which is beforehand existing under the Indian Laws. Hence, the claim of the appellant was rejected to be indemnified by the respondent against a liability which he had incurred and been compelled to satisfy under the circumstance of the case.