23 Jan
Hi
Sarkari Naukari is a great place for all updates for competitive exams. In case, you don’t already subscribe to to it, I suggest you do so. It has all the exam details and application information you will need for Judicial Exams, UPSC, Defense and other PSU jobs/posts.
Kudos to Ms. Manisha who runs it. There is a link to it: http://sarkari-naukri.blogspot.com/. Else you can just Google Sarkari Naukari.
Hope 2012 is a good year for the hard working aspirants!
4 Jul
The following is the syllabus prescribed for the examination in 2010. In my opinion, the same syllabus should stand applicable. But please do verify the same with the syllabus made available with your forms.
Preliminary Examination: A two hour objective type examination with multiple choice. There will be 125 questions of 04 marks each and there is negative marking of 01 mark for each wrong answer. The questions will be from the syllabus of the main examination. The candidate is expected to have a general and basic overview of the mains subjects and the ability to answer questions on current events of national and international importance, Indian legal and consitutional history and goverance. The analytical skills and aptitude of the candidate will also be tested.
Main Examination: There are six papers – five written papers and one viva voce. The main examination is a subjective/narrative paper that will bez conducted in English except for the language paper. Each paper will of three hours duration. Bare legislative enactments will be provided. The standard for language paper is that of Matriculation Examination of the Board of School Education, Haryana.
Paper I – Civil Law I (200 marks): Code of Civil Procedure, Punjab Courts Act, Indian Contract Act, Indian Partnership Act, Sale of Goods Act, Specific Relief Act, Indian Evidence Act.
Paper II – Civil Law II (200 marks): Hindu Law, Mohammaden Law and Customary Law, Law of Registration and Limitation.
Paper III – Criminal Law (200 marks): Indian Penal Code, Criminal Procedure Code and Indian Evidence Act
Paper IV – English (200 marks): This paper is broken down into following sections:
a) English Essay of 1000 to 1100 words for 100 marks
b) Precis for 25 marks
c) Words and phrases for 25 marks
d) Comprehension for 25 marks
e) Corrections for 25 marks.
Paper V – Language – Hindi in Devnagari script (100 marks): This paper is broken down into following sections:
a) Translation of English passage into hindi for 20 marks
b) Explanation of hindi passage in prose and poetry in the same language for 30 marks
c) Composition (Essay), idioms and corrections for 50 marks
Paper VI – Viva Voce: Conducted in English, the viva voce is to judge the personal qualities of the candidate and relates to the the matters of general interest. The candidate’s alterness, intelligence and general outlook will be tested.
1 Mar
Within Sections 118 to 166 of the IEA, 1872 we will cover the primary requirements of witnesses, their competency and their examinations.
WITNESS
As per Bentham, witnesses are the eyes and ears of justice. Often oral evidence is needed to clarify or help determine the rights and liabilities of the parties in a legal proceeding. Witnesses can be the people or experts with valuable input for the case. It is through witnesses and documents that evidence is placed before the court. Even the genesis of documents can be proved by the witnesses. Thus, the law has to be very clear with regards to certain issues like who is a competent witness? How many witnesses are needed to prove a fact? Can a witness be compelled to answer every question posed? How can the credibility of the witnesses be tested? Whether a witness can refer to notes to refresh his memory and what are the judges standing with respect to the witnesses.
In India, it is a common problem that many do not come forward as witnesses whether due to unreasonable delay in police or court proceedings or fear of persecution can not be determined that easily. In some countries like the USA, Canada and China, ‘Protection of Witnesses’ Acts have been enacted to offer protection and equity to a person who is a witness.
The Jessica Lal Murder case and Nitish Kataria murder case served to bring the up the issues regarding witnesses, their protection and conduct to the forefront. There are a lot cases, national and international, that an interested student can pursue for the sake of learning the practical application of law relating to witnesses, investigations and how it affects the outcome of a case.
WHO IS A WITNESS?
A witness is a person who gives evidence or testimony before any tribunal.
Section 118 of the IEA generically lays down who may testify: All persons shall be competent to testify unless the Court considers that they are prevented from understanding the question put to them, or from giving rational answers to those questions, by tender years, extreme old age, disease, whether of body or mind, or any other cause of the same kind.
Explanation to Section 118 states that a lunatic is not incompetent to testify, unless he is prevented by his lunacy from understanding the questions put to him and giving rational answers to them.
Prima facie, the section says that every one is competent to be a witness as long as they can understand and respond to the questions posed and the Court is expected to pay special attention to the capability of the witnesses. This section is not concerned with the admissibility of the testimony of the witnesses or their credibility; it deals with competency of parties to be witnesses.
The plain and simple test of competency is whether a witness can understand the questions being posed to him and answer accordingly in a rational manner. Competency of witness to testify is actually a prerequisite to him being administered an oath.
In RAMESHWAR vs. STATE OF RAJASTHAN AIR 1952 SC 54, it was held that an omission to administer an oath, even to an adult, goes only to the credibility of the witness and not to his competency.
CHILD WITNESS
In SURESH vs. STATE OF UTTAR PRADESH AIR 1981 SC 1122, it was decided that a child as young as 5 years can depose evidence if he understands the questions and answers in a relevant and rational manner. The age is of no consequence, it is the mental faculties and understanding that matter in such cases. Their evidence, however, has to be scrutinized and caution has to be exercised as per each individual case. The court has to satisfy itself that the evidence of a child is reliable and untainted. Any sign of tutoring will render the evidence questionable as decided in CHANGAN DAM vs. STATE OF GUJRAT 1994 CrLJ 66 SC. If the court is satisfied, it may convict a person without looking for collaboration of the child’s witness. It has been stated many a times that support of a child’s evidence should be a rule of prudence and is very desirable.
A child witness is a privileged witness and he may not have to take an oath. In M SUGAL vs. THE KING 1945 48 BLR 138, it was decided that a girl of about ten years of age could give evidence of a murder in which she was an eye-witness as she could understand the questions and answer them frankly even though she was not able to understand the nature of oath. The same principle has been applied in India too through QUEEN vs. SEWA BHOGTA 1874 14 BENG and PRAKASH SINGH vs. STATE OF MP AIR 1993 SC 65.
A VOIRE DIRE test (Here, the Court puts certain preliminary questions that are unconnected to the case just in order to know the competency of the child witness) of a child witness is not essential but desirable. A judge may ask a few questions and get them on record so as to demonstrate and check the competency of the child witness. It can be presumed that this is a duty imposed on all the judges by the Section 118 of the IEA, 1872. The judge can ask questions also to find out whether the child has a rough idea of the difference between truth and falsehood.
In SURESH vs. STATE OF UP case, it was held that a child who is not administered oath due to his young years and is not required to give coherent or straight answers as a privileged witness can give evidence but this evidence should not be relied upon totally and completely.
In the 90’s a trend emerged where the Courts started recording their opinions that child witnesses had understood their duty of telling the truth to lend credibility to any evidence collected thereof. The Supreme Court has also commended this practice.
LUNATIC
A LUNATIC can depose during the period of lunacy. During the lucid interval, the person is able to understand and give rational answers. The Court has to check whether the witness possesses the required capability and intelligence to understand the questions being put to him and answer them in a rational manner. In R vs. HILL 1851 20 LJMC 222, a patient at a lunatic asylum gave evidence at a trial for manslaughter as it was proved that only with respect to his delusions, he was a lunatic and otherwise, he was a person capable of giving rational answers.
PEOPLE OF EXTREME OLD AGE
Generally, the Courts put questions to determine the coherency as well as clarity of thought of aged witness. If found to be fit, there is no bar for the elderly to be witnesses.
DUMB WITNESS
Section 119 of the IEA states that a witness who is unable to speak may give his evidence in any other manner in which he can make it intelligible, as by writing or by signs; but such writing must be written and the signs made in open Court. Evidence so given shall be deemed to be oral evidence. It is said open court because a commissioner may define the movements or gestures as he understood them and probably not as the witness intended it. Plus, no description can be 100 % accurate. If the witness is literate, he may choose to write down the answers too.
This Section applies to those people too who can speak but do not want to. For example, a person may have vowed not to speak on a particular day (s) or to observe silence can give evidence through the means of writing, signs and gestures.
A person competent to give rational answers is not barred to testify on account of tensions with wife or being mentally upset as per the Section. Even an accomplice or an accused can be competent witnesses as discussed at the end of this chapter in Section 133. In UGAR AHIR vs. STATE OF BIHAR AIR 1965 SC, it was held that the maxim ‘falsus in uno, falsus in omnibus’ is not a rule of law or practice but places a duty on the courts to carefully separate the grin from the chaff.
A person who has a personal interest in conviction of an accused or is related to one of the parties is not ineligible to be a witness though his testimony/evidence should be scrutinized carefully to prevent any miscarriage of justice. The Supreme Court has even held that a woman not meeting the standards of morality of the society is no reason to discard her as a witness or not consider her evidence. The importance of rational and close evaluation of evidence in each of such scenarios is stressed time and again by the Supreme Court.
In conclusion it can be stated that the court can exercise discretion with respect to children, lunatics, elderly people, deaf or blind witnesses. The court can check for a level of understanding in these witnesses and then decide to refrain from taking evidence from them.
24 Feb
He who seeks equity must do equity
DOCTRINE OF PART PERFORMANCE
The Doctrine of Past Performance, based on principle of equity, developed in England and was subsequently added to the Transfer of Property Act, 1882 via the Amendment Act of 1929. In law of contracts (for e.g., a contract for sale), no rights pass to another till the sale is complete But if a person after entering into a contract performs his part or does any act in furtherance of the contract, he is entitled to reimbursement or performance in case the other party drags its feet.
Section 53A says that if a person makes a agreement with another and lets the other person act on the behalf of the contract; such a person creates an equity himself that can not be resisted on the mere grounds of absence of formality in the evidence or contract of such a transfer. Thus, if the contract has not been registered or completed in the prescribed manner, the transferor can still not go against the transferee or anyone claiming under him. However, the deed should not be unsigned or unstamped. Nothing in this section affects the rights of a transferee for consideration even if he had no notice of contract of part performance.
Illustration: A contracts with B to sell his plot for X amount of money. A accepts the advance from B towards the sale of the plot and hands over the possession of the said plot to B. After some time, B is ready to pay the remaining sale amount but A refuses to accept the same. Further A asks B to hand over the plot back to him.
Here B is ready to perform his part of the contract but A is not. In such a case, B can bring a case requiring specific performance from A. It does not matter that the sale was not registered.
As per law, a transfer of immovable property valued over Rs. 100 has to be registered. But it was believed that strict compliance may lead to extreme hardships especially where one party has already performed his part in the confidence that the other party will honor the agreement. If such registration or other formalities have not taken place, the doctrine of part performance will be applicable. If such a transferee takes possession of the property, he can not be evicted due to an unregistered contract.
The section is a defense as well as a right that helps protect the possession against any challenge. It tries to prevent fraud on the mere basis of ineffective evidence of the transfer. The section does not confer a title upon the transferee in possession but it imposes a statutory bar on the transferor.
Equity looks to the intent rather than to the form
ESSENTIALS OF THE DOCTRINE OF PART PERFORMANCE
a) There must be a written contract for transfer of an immovable property signed by or on behalf of the transferor. The doctrine can not be applied if there is a void agreement or no agreement.
b) There must be consideration;
c) The contracts should give out the terms of the transfer with reasonable certainty;
d) The transferee must have taken possession as a result of this contract or continued in possession if he was already in possession of the property;
e) The transferee must have done some act in furtherance of the contract. Acts done prior to the agreement or independent of it can not be deemed to be part performance of the contract; and
f) The transferee should have performed his part of the deal or be willing to perform it.
WALSH vs. LONGSDALE and MADDISON vs. ALDERSON are two of the major cases that have helped develop the doctrine of part performance in England. In India, this doctrine has been enacted with a few modifications.
MADDISON vs. ALDERSON 1888
B was A’s servant. A had promised B a certain property as life estate, meaning B could enjoy the property during his life time. B served A for years upon this promised life estate. The will bequeathing such interest and property to B failed due to want for proper attestation. After A died, one of his heirs brought action to recover the property from B.
It was held that the act of part performance could not be proof of the contract since the performance was a condition precedent to the contract. The heir of A was able to recover the said property.
WALSH vs. LONGSDALE 1882 21 Ch d 9
Walsh took a cotton mill on lease for 7 years from Longsdale, the owner of the mill. The agreement was prepared but not signed. In the meantime, rent arrears started to accumulate as Walsh could not keep up with the quarterly payments of rent. An advance of one year’s rent could be demanded by Longsdale as per the contract. Lonsdale demanded the advance rent for one year and seized some goods of Walsh when he defaulted. Walsh sued for damages.
The House of Lords decided in favor of Lonsdale stating that by running the mill, Walsh had admitted he was a lessee and evidence of his consent to the unsigned lease deed.
The rule laid down in Walsh vs. Longsdale is not applicable in India – as it did not constitute the doctrine of part performance.
Prior to the enactment of the Transfer of Property Act, 1882, the English law of Part Performance was applied. Before Section 53A was inserted in the Transfer of Property Act, 1882, there were different views upon such application. After the Transfer of Property Act, 1882 came into force, some thought that Sections 54 and 59 which required registered documents were necessary for sale of immovable property or regarding mortgage respectively. While others argued that requiring strict compliance would be detrimental to the rights of the impoverished masses of India who could be duped by scrupulous individuals taking advantage of the law.
The Privy Council in MOHD MUSA vs. AGHOR KUMAR GANGULI AIR 1914 PC 27 (30) held that doctrine of part performance is applicable in India. There were divergent views a few years later stating that doctrine can not be used to override statutory provisions. Finally in 1929, the Transfer of Property Act was amended and the English law of part performance became a part of Indian Laws though a little modified.
Equity on that as done as which ought to have been done.
Section 53A of the Transfer of Property Act, 1882
Part Performance – Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some Act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract.
The proviso is an exception of sorts stating that the interests and rights of a subsequent transferee for consideration will be protected as long as he had no notice of the contract leading to the part performance due or the part performance thereof.
In India, the doctrine is used only as a shield and not to enforce rights as laid down by the Supreme Court in Delhi Motors case. But it must be noted that the aggrieved party can either be the plaintiff or the defendant in a suit as the case maybe.
ENGLISH AND INDIAN LAW
The English Law of Part Performance
1) The contract need not be written or signed by the transferor
2 The right under the doctrine is an equitable right
3) It can be used for enforcing the right as well as defending the right; and
4) It creates a title in the transferee.
The Indian Law of Part Performance
1) Section 53A deals with the Doctrine and state that the contract has to be written as well as signed by the transferor
2) It is a statutory right;
3) It can only be used to defend the possession of the transferee; and
4) It does not create a title in the transferee.
After 2001 amendment to Section 53A, the application of the section has seen dilution – it no longer serves as a ‘substitute’ for registration. It should still hold good for defects other than registration. But, registration of sale of immovable property is compulsory and Section 53A has been amended to incorporate the same.
27 Dec
Merry Christmas (Belated, sorry!) and a very Happy New Year to one and all.
I hope everyone has had a great year and that 2011 will bring even more joy, happiness as well as success (sic) for each and everyone.
Enjoy the season to be jolly and happy.
Take care and have a delightful holiday season and a much more happening year ahead.
Bye
25 Nov
i) Partner by holding out or Partner by Estoppel.
The rule of agency by Estoppel has been extended to the case of partnership too. Holding out is merely application of the principle of Estoppel which is a rule of evidence wherein a person is prevented or ‘estopped’ from denying a statement he made or existence of facts that he makes another person believe. Holding out refers to course of action or omission that leads others to believe that one possesses an authority which in fact one does not.
Simply put, if a person represents that he is a partner of a particular firm, he is estopped from denying this representation later on.
Section 28 says that a person is held liable as a partner by holding out if:
a) he represented himself or knowingly allowed himself to be represented as a partner.
b) such representation may be by spoken or written words, by conduct or by knowingly permitting others to make such representation by words or conduct.
c) the other party on the faith of such representation gave credit to the firm.
For example, A and B are partners in a firm. Another person C manages the firm on their behalf; places all the orders, makes the payments due etc. If C places an order, A and B will have to pay for the same as they have allowed C to function as a partner and did not to inform the suppliers or the customers that C was only a manager.
But a person who is aware that C is not a partner can not sue A and B to make good losses incurred by dealing with C.
A partner by holding out is liable to the person giving credit, to make good the loss which any third party may suffer. But he does not acquire any claim over the firm. A person does not become a ‘real’ partner but he does become liable for compensation to the third party whom he induced as a partner by holding out and caused such man loss or injury. The real partners of the firm are safe unless the partner by holding out has acted on their orders or with their consent.
SCARF vs. JARDINE is an important case for the principle of holding out wherein the importance of notice of retirement was highlighted. A partner must give notice of his retirement from a firm the same way the notice of a new member to the firm is made to the public so that people know about his status or rather the absence of participation of such retiring person in the firm. Otherwise, he might be treated as partner by holding out no matter how long back he retired from the firm without notice.
Thus, the liability of a retired partner to old creditors or customers continues till a notice of his retirement is given. Similarly, the firm will also be liable for the retired partner, should just a situation arise, if the notice has not been give. It is immaterial whether the retiring partner gives the notice or the other partners.
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SCARF v. JARDINE 1882 7 APP CAS 345 – 198, 371, 431 435
FACTS: A firm consisted of two partners, Scarf and Rodgers. Scarf retired and Beach joined in his place. The business was carried on as before and no public notice about the change of partners was given to the customers of the firm. Jardine was an old supplier to the firm. He supplied the goods ordered without any idea about the change. He came to know about the change when the firm failed to pay the dues and he was considering a legal action against the firm. He preferred to sue the new firm which subsequently went bankrupt. Then he sued the earlier partner, Scarf. HELD: He had a right against Scarf provided he had proceeded against the old firm and partners in the first instance itself. Now he had acknowledged the new firm, he could not reject its identity and sue Scarf. It was held that novation might involve either a change of parties with the contract remaining the same or a change in the contract between the same parties. An implied agreement is presumed from the fact that the creditor, after the knowledge of the change, has brought a suit against the new firm. Jardine knew of the change of the constitution of the firm when he sued and he chose to sue the new firm. Now he could not sue the older firm for the same cause of action as it is against principles of natural justice as well as Partnership Act.
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There are exceptions to the rule established in the SCARF vs. JARDINE case as given below:
a) Death of a partner constitutes sufficient notice by itself.
b) Insolvency of a partner is also sufficient notice and attracts Section 42 of the Indian Partnership Act.
c) If one has been a dormant or sleeping from beginning to end, notice can be dispensed with as neither the customers nor the clients know of his participation in the firm.
In English law, Partnership by holding out is referred to as apparent partnership instead and the legal provisions in both countries are very similar.
In SMITH vs. BAILEY 2 QB 432, it was decided that the liability on the principle of Estoppel extends only on account of credit given to the firm and not to torts or civil wrongs committed on behalf of the firm.
ii) Dormant or Sleeping Partner
A dormant partner does not take active part in the business, but he is liable like any other partner. Likened to an undisclosed principal, the moment he is discovered to be a partner, he can be made liable. He is not required to give notice in order to absolve himself from the liability for the acts of other partners after he ceases to be a partner.
iii) Nominal Partner
A nominal partner is a partner only in name. He is not entitled to share the profits of the firm but is liable for all the acts of the firm as if he was a real partner.
iv) Sub Partner.
He comes into existence when one of the partners agrees to share the profits derived by him from the firm with a stranger. He is not a partner in law and has no rights against the firm and is not liable for the debts of the firm.
v) Working Partner
A partner, due to his special qualifications, may be assigned the management and control of the business. He normally receives a fixed amount of salary, besides his share in the profits. For all his acts, the other partners will be liable to third parties.
vi) Incoming Partner
He is a person who is admitted as a partner in an already existing firm with the consent of all the existing partners as under Section 31. He is not liable for any act done by the firm before his admission. Where he specifically agrees to bear the past liabilities, he will be liable to the other partners for the same. But third parties cannot hold him liable as there is no privity of contract between the new partner and the creditors.
vii) Outgoing or retiring Partner
A partner who leaves a firm in which the rest of the partners continue to carry on the business is an outgoing partner. A partner can retire by the consent of all the partners (Section 31), by agreement between the partners (Section 3) and by notice as per Section 32, by death (Section 35), insolvency (Section 34) or by expulsion under Section 33.
He has to retire as per Section 36(1). He is liable to the third parties for all the acts of the firm until public notice is given about the retirement. Such notice can be given by the outgoing partner himself or by any member of the new firm. He does not cease to be liable for debts and obligations of the firm incurred before his retirement. He is also liable to a third party for transactions of the firm begun but unfinished at the time of his retirement. However, Section 36 also acknowledges a retiring partner’s right to compete as long as he:
a) does not use the name of the firm for the firm from which he has retired.
b) does not represent that he is working for the firm from which he has retired.
c) does not solicit the clients of the firm from which he has retired.
He may be discharged from any liability to any third party for the acts of the firm done before his retirement if it is so agreed with the third party and the partners of the reconstituted firm. Such agreement may be implied from the course of dealing between the firm and the third party after he had knowledge of the retirement.
Section 33 further provides that though a partner may retire, he cannot be expelled unless such a power is conferred by the contract between partners and exercised in good faith. Grounds of expulsion in the contract can include, committing a criminal act, becoming insolvent, not investing the required share in the firm or causing loss to the firm die to grossly negligent act. A retiring partner is also entitled to a share in the subsequent profits if his account has not been finally settled as per Section 30 of the IPA. In case of death, his legal representatives have a right to the same.
Section 38 says that the continuing guarantee by the outgoing partner given to the firm or a third party can be revoked with respect to future transactions in the absence of a contract to the contrary.
viii) Minor as a partner
Partnership arises of a contract and minors are deemed incompetent to contract as per Section 11 of the Indian contract Act, 1872. Thus, a person domiciled in India under the age of 18 years or 21 years if covered under Guardianship Act, can not enter into a partnership. In Mohribibee vs. Dharmodas Ghose [1903] ILR 30 CAL 539, it was held that a minor cannot enter into a contract and minor’s contract is void.
However, if all the partners agree, a minor may be admitted to the benefits of an already existing firm. There can be no partnership firm with just one adult and all other partners being minor.
A minor does not become a full fledged partner. He is not personally liable; only his share in the partnership is. As per Section 30, he
a) has a right to such share of the property and of the profits of the firm as may be agreed upon by the partners.
b) may have access to and inspect and copy any of the accounts of the firm. Since the word used is ‘may’, it seems that right of minor to inspect accounts can be restricted by agreement among partners. Trade secrets of the firm are, however, not accessible to a minor.
c) has a share in the property and profits of the firm and therefore, these are liable to the acts of the firm but the minor is not personally liable and neither is his private property liable.
d) has no right to file a suit against the other partners for accounts or for payments of his share in the profits or property of the firm while he continues to be a member. He can do so only when he has or is the process of severing the connection with the firm.
e) may file a suit for severing his connections with firm and his share will be determined by the valuation according to the principles laid down in Section 48 for making accounts of a dissolved firm. This severance can be effected by a guardian on behalf of the minor. If the firm dissolves, the share of the minor will determined along with the share of the other partners.
f) can at any time within 6 months of attaining majority or of him obtaining the knowledge that he has been admitted (whichever is later) give a public notice that he has or he has not elected to become a member of the partnership. This proceeds on the presumption that a minor may not actually know that he has been admitted to the benefits of a partnership and gives him the right to elect whether he wants to be a partner or not. Failure to give notice within 6 months will give rise to the presumption that he is a partner in the firm.
During the six months, the position of the minor remains the same i.e., a minor admitted to the benefits of the partnership but without any personal liability.
g) may have his share in the firm attached for the acts of the firm.
h) may be liable for holding himself out as a partner despite the fact he elected not to be a partner after attaining majority.
i) During minority, the privilege of minority or infancy can be used only as a shield and therefore, a minor is liable under tort.
j) If a minor does decide to become a partner after attaining majority, he will become personally liable to third parties for all acts of the firm done from since he was first admitted to the benefits of partnership. The share in property and profits he was entitled to as a minor will continue when he has elected to be a partner.
k) If a minor decides not to be a partner, his rights and liabilities (as those of a minor in benefits of partnership) will continue till the date of his public notice of his decision. His share will not be liable for any act of the firm after the date of the notice and he can sue for his share in the property and profits.
If he elects to be a partner or if he fails to give a public notice that he does not elect to be a partner, he will be liable for the debts of the firm contracted since the time he was admitted to the benefits of the partnership.
25 Nov
Liabilities of a partner arise from non-compliance with his duties under the Indian Partnership Act.
Section 9 says that a partner is liable in the following cases:
i) for not carrying on the business of the firm to the greatest common advantage.
ii) for not being just and faithful to other partners.
iii) for failure to render true accounts and full information of all things affecting the firm to any person or his legal representative.
Section 10 deals with the duty to indemnify the firm for the loss caused to it by his fraud in the conduct of the business of the firm. Section 13 says that a partner is liable for his wilful neglect and the losses caused to the firm consequently.
A partner is liable to contribute equally for the losses of the firm in the absence of a contract to the contrary.
Section 18 says that a partner is an agent of the firm for the purposes of the business of the firm. Taking the same concept ahead, Section 25 says that every partner is liable jointly with all other partners and also severally for all acts of the firm done while he is a partner. ‘Joint and several’ means each partner is liable for all acts. Thus, if amount due cannot be recovered from other partners, any one partner will be liable for payment of entire dues of the firm.
Where a promise has been made by the partners, the opposite party can compel one or more of the joint promisors i.e., one or more of the partners to perform the promise unless there is a contract to the contrary. If only one or few of the partners have been compelled to perform the promise, such partner(s) can require equal contribution from the other partners for the performance of the promise.
Section 2 (a) defines an act of the firm as ‘any act or omission by all the partners or by any person or agent of the firm which gives rise to a right enforceable by or against the firm.
The legal successors of a deceased partner can not be held liable for goods delivered for the use of the firm after the death of the partner. At the same time, a debt owed to a firm before its dissolution will not vanish upon such dissolution and will have to be paid to the ex-partner(s) of the erstwhile firm.
But in England, the liability is only joint and not joint and several except where
i) the wrong has been committed during the ordinary course and with authority causing harm to a third party.
ii) a person is guilty of misappropriation of money or property received by him while acting within the scope of his authority or while they are in the custody of the firm in the ordinary course of its business.
Section 20 says that limitation contract is of no use if the third party is not aware of
such a contract between the partners. Generally, the partners are liable only for the acts of the firm and that to if the act was done while the person was still a partner in the firm. Section 32(2) is of importance here that states a retiring partner is freed from any liability to third parties for acts done before his retirement by an agreement with the third party as well as the partners of the firm. Such an agreement can be express or implied. Plus, a retiring partner is also required to give public notice of such retirement to cut himself from the future actions of the firm.
Section 45 of the IPA, 1932 makes it clear that unless a public notice is given of dissolution, liabilities of the partners will continue. There is also a liability to share personal profits earned after the dissolution of the firm unless there is a contract to the contrary between the partners.
A dormant partner is also liable to an unlimited extent for all the debts of the firm.
The unlimited liability of partners for the debts and liabilities of the firm is seen as a major disadvantage of the IPA. Any partner can bind the firm and the firm is liable for all liabilities incurred by any partner on behalf of the firm. If property of partnership firm is insufficient to meet liabilities, personal property of any partner can be attached to pay the debts of the firm.
If a partner commits a criminal offence, the other partner(s) or the firm will not be held responsible. For cases of torts, rules of vicarious liability as well as respondent superior are applied. Since agency is the basis of partnership, a firm will be liable for a tort committed by its partner(s).
LIABILITY OF A FIRM FOR THE ACTS OF ITS PARTNERS
Sections 26 and 27 deal with the liability of a firm for the wrongful acts of a partner and liability of a firm for misapplication by a partner respectively.
Where, by the wrongful act or omission of a partner acting in the ordinary course of the business or with authority, loss or injury is caused to any third party or any penalty is incurs, the firm will be liable to the same extent as the partner. For example, if a partner, within his authority, receives money or property from a third party and mis-applies it, the firm is liable too. If a firm gets money or property and one of the partners misapplies it while it is in the custody of the firm, the firm is liable to make good the losses.
ESSENTIALS
a) The act or omission must take place during the course of the business on behalf of the firm
b) There must be consent of the partners. Even consent by action is accepted.
c) A third party suffered a loss as a result of the act or omission.
d) A damage or a penalty has to be paid.
For example, a newspaper is run by three partners of whom one is a sleeping partner who had only invested his share. If the newspaper is sued for libel, all three partners will be liable if found guilty.
► Illustration: A, a partner in a firm, takes a house on rent for the business purposes of the firm. If A does not pay the rent, the landlord can recover the rent from all the partners of the firm.
Section 28 gives out the liability for holding out. Here a person who is not a partner is also held liable as a partner.
| The Law of Partnership is an extension of the Law of Agency | |||
| Indian Contract Act, 1872 | Indian Partnership Act, 1932 | ||
| Sections 182 and 226
Section 189 Section 211 to 214 Sections 216 and 218 Sections 222 and 223 Section 229 Section 237 |
corresponds to
corresponds to corresponds to corresponds to corresponds to corresponds to corresponds to |
Sections 2(a) and 18
Section 21 Section 9 Section 16 Sections 10, 13(e) and 13(f) Section 24 Sections 28 |
|
25 Nov
In the pre-Islam Arabia, the laws were favourable towards males and discriminatory against the women. Polygamy had to be accounted for in a very few blood relationships like in marriage with one’s real mother or sister. Marriages were of different kinds and divorce was simple and easy for the man. With absolute rights vested in men and no checks led to men denying the women their basic rights.
Islam brought with it a due status for women and regarded them as dignified members of the society. ‘Nikah’ literally means ‘to tie up together’ and referred to the Islamic marriage. It is a matrimonial contract as well as an institution that gives the women a particular and high status in the society. Nikah was to ensure stability in a married life as it bound both the partners together for an indefinite period and also required the woman to be honoured with the mahr.
Islam allows limited polygamy, i.e. four wives at a time. This was allowed as during the numerous wars during the Prophet’s time in Arabia, many Muslim men lost their lives. Thus, the women outnumbered the men. The war-widows and orphans became destitute as they had no standing in the society and lead miserable lives. In order to prevent injustice, Quran allows limited polygamy through the following Ayat: “marry of the women, who seem good to you, two or three or four, if you fear that you cannot do justice to so many, then one.”
Justice refers to equal love and affection as well as boarding and lodging. The Quran has another Ayat that “you will not be able to deal equally between your wives however much you wish to do so”. Thus, it can be safely inferred that though Islam permits four wives at a time it is actually in favour of monogamy. The Motazila Muslims follow monogamy strictly. But Muslims all over the globe follow the traditions of the Prophet and practise polygamy.
As per the statistics, Indian Muslims seem to prefer monogamy. Though they are allowed to have four wives as per the law, the Muslim government servants require the government’s permission before contracting the second marriage. Muslim countries like Turkey and Tunisia have laws for monogamy. Pakistan has discouraged polygamy by implementing laws that makes it difficult to marry two or more times.
Hedaya says that “Marriage implies a particular contract used for the purpose of legalising children.
Justice Mahmood has defined the Muslim marriage as “a purely civil contract”.
The object of a Muslim marriage is to legalise children and to a large extent to regulate and validate the sexual relations. Apart from being a civil contract, it is also a social and religious institution.
Legally speaking a Muslim marriage is a contract for it has a few elements of a contract. The parties have to be competent and offer, acceptance and free consent form an important part. Within a limit, the parties can decide the terms of the marriage and in case of breach; there are provisions for the rights and obligations of the parties. It can be safely said that marriage is very similar to a contract.
Marriage is a social institution and a social method to give an equal status to women. The dower, which is essential for a Muslim marriage, provides a security net for the woman in case of need. Limited polygamy helps raise the woman’s standing and dignity in the society. By placing prohibitions on the marriage, the relationships of families can be regulated and the ill effects of in breeding are avoided.
Marriage is the tradition of the prophet as well as present in the words of Quran. Thus, a person who marries gets religious benefits and the abstainer would have committed a sin. In ANIS BEGAM v MOHD. ISTAFA (1933)55 All, 743, it has been held to be a religious sacrament.
A marriage is a valid marriage or Sahih only if it is recognised by the courts to be lawful.
a) Age of Puberty
For marriage, dower and divorce, the age of majority under the Muslim law is the age of puberty and not 18 years of age. Though Hedaya says the minimum age of puberty for a boy is 12 years and for a girl it is 9 years; it has been fixed at 15 years of age by the Privy Council in the year 1916. Thus, a boy or a girl of 15 years of age will be presumed to have attained the age of puberty unless the contrary is proved.
Under Muslim law, a person under 15 years of age is presumed to be a minor and has no capacity to give consent for marriage. Unless and until the guardian’s consent is not obtained the marriage will be void. Guardians for marriage are different from guardians appointed by the court. The order of the priority is as follows:
i) Father;
ii) Paternal Grandfather, how ever high;
iii) Brother or other male members of the father’s family;
iv) Mother; and
v) Maternal uncle, aunt or other maternal relatives.
A remoter guardian for marriage can not get the minor married off with out actually following the prescribed order and such a marriage will be void.
Shia Law says that only the father or the paternal grand-father how ever high can be the guardians for marriage.
The Child Marriage Restraint Act, 1929 provides that a child marriage exists and will be valid but the guardians and others who conduct it can be punished. A child marriage can be prevented by an injunction.
Option of Puberty (Khyar-ul-Bulugh)
Under Muslim marriage, a minor on attaining the age of puberty can exercise the option of puberty wherein the minor can approve or disapprove the marriage contracted by the guardian who is not the father or the grand father. If he disapproves, the marriage will dissolve with immediate effect. If the minor says nothing, it will be presumed that he has approved the marriage. As per the Shia law, a minor has to approve his marriage upon attaining the age of puberty.
If the father or the grandfather has contracted marriage fraudulently or negligently, the minor can repudiate the marriage on attaining the age of puberty. A wife can exercise the right even if the marriage was contracted by her father or her grandfather. There can be no unreasonable delay in the exercise of the option of puberty. The husband will lose his right to the option of puberty if the marriage has been consummated. The wife will also lose her right unless the consummation has taken place when the wife was still a minor and against her consent.
b) Soundness of Mind
Lunatics can get married during the lucid intervals for they can understand the consequences. Idiots on the other hand can not do so. Idiocy refers to an abnormal state of the mind wherein the person can not understand the consequences of their actions.
Marriage of insane persons
A person can contract a lawful marriage through a guardian. On recovering reason the said person can repudiate the marriage.
c) Religion of the parties
The parties can marry any Muslim irrespective of sects or sub sects.
Under Sunni law, a male can marry a Muslim girl of any sect/ sub sect or even a Kitabia girl. A Kitabia female is one who belongs to a community that originated in a book revealed by the heavens. Thus, the Jews and the Christians can be wed to a Sunni male. A marriage with a non-Muslim or non-Kitabia female, the marriage is merely irregular. Under Shia law, a marriage with a non-Muslim or a Kitabia woman is not permitted. However, a Muta marriage may be contracted with a Kitabia or Parsi female.
A Muslim female has no right to contract a marriage with a non-Muslim even if he is a Kitabia or Parsi. Such a marriage will be void.
The Special Marriage Act, 1954 allows any man or woman to get married to each other whether a Muslim or a non-Muslim. The succession will be governed under the Indian Succession Act, 1925.
II) FREE CONSENT OF THE PARTIES
If the parties are sane and adults, they can give consent on their own and the marriage will be a valid one. If the parties or one of them is either a minor or insane, the consent has to be obtained by the guardian. The consent will be deemed free when it is made at will and given voluntarily and not under any coercion or fraud.
Coercion is when the party is made to consent under the threat of harm to self or a loved one. All sects and schools render a marriage under coercion to be void. The Hanafi School is the only exception. It is believed in the school that three things can not be undone ever even if committed as a joke. The three things are marriage, divorce and taking back.
Fraud refers to a dishonest concealment of facts or presentation of false facts or statements to obtain consent. The moment the party whose consent was obtained by fraud comes to know of such fraud, he or she may accept the marriage as a legal one or altogether reject it.
Mistake of Fact is when the parties agree but not on the same thing. Consent refers to the meeting of the minds on the same issue. Where the identity of the bride to be, for example, is mistaken, the marriage will be void.
III) FORMALITIES IN THE MARRIAGE
Under Muslim law, religious ceremonies are not essential for validating a marriage. The only essential formalities are that of offer and acceptance.
Offer or Ijab signifies the willingness of a party to contract marriage with another. The offer comes in form of a declaration from the boy or his guardian. This offer has to be accepted by the girl or her guardian. This is referred to as acceptance or Qubool. Though no specific form exists, the words must show the unequivocal intention of the parties orthe guardians to marry the parties. It may be oral or written. When written down, it is referred to ass the Kabinnamah.
It is essential that the offer and acceptance occur at the same sitting. Thus, simultaneous actions must become a joint whole. For example, the groom to be has to send the offer through another. The bride must accept it in presence of others and then the marriage will be a valid one.
Reciprocity is another important aspect. The acceptance has to be for the proposal word to word, as it is and without any variations.
Conditional or Contingent Marriage is void even if the event that they are made dependent upon does in fact occur.
Presence of Witnesses is not essential under the Shia law. Under the Sunni law, the offer and acceptance needs to two competent witnesses. A Muslim male who is of sound mind and has attained the age of puberty is a competent single witness. Two sane Muslim females who have reached the age of puberty can also be treated as competent witnesses. Thus, two Muslim women along with a competent Muslim male witness will be regarded as competent witnesses for the marriage. Four females will not be regarded as competent witness. The term ‘witnesses’ does not refer to any one specifically asked or invited for this purpose only.
Registration under Muslim law is not essential for the validity of the marriage. But certain enactments provide for registration in the matters of marriage as well as divorces. The acts do so because then there exists a proof of the marriage. But even then the registration is optional only and not mandatory. It has also been held in a few cases that if the community custom requires registration, even if it is in a different format, the marriage has to be registered then. Under the Indian Christian Marriages Act, 1872, the registration of marriage will be essential if the marriage is between a Muslim and a Christian.
IV) ABSENCE OF PROHIBITION
Prohibition refers to the impediments or restrictions placed on a person with respect to another person or an action. The Muslim law provides that the marriage should not be a marriage against Islam or have any other impediments to it. Absence of prohibition refers to the freedom to marry a person for they do not stand in a particular relationship to each other. For example, a father cannot marry his own daughter.
Absolute Prohibitions
They are mandatory and have to be followed or else the marriage will be void. If a person is within the prohibited relationship of the other party, the marriage cannot take place.
Whether a person is within the prohibited relationship or not can be decided on the following basis:
a) Consanguinity is relationship by Blood.A Muslim cannot marry one’s own descendant, however high or descendents of one’ father or mother no matter how low. Similarly brothers and sisters of one’s ascendants howsoever high can not be married to. However, there is no prohibition in the marriage of cousin brothers or sisters.
b) Affinity refers to relation by marriage. A Muslim can not marry the ascendant or descendant of one’s spouse or the spouse of one’s ascendant or descendant.
c) Fosterage refers to the relationship of nurture and feeding. A child is breast fed during its infancy. If the person providing the feeds is someone other than the biological mother, the infant or child will still stand in a prohibited relationship with her.
Where the compliance is not mandatory but non-compliance will be frowned upon. Any marriage in violation will be only irregular and not void. As per Shia law, the marriage will be either perfectly valid or void and not irregular.
a) Unlawful Conjunctions
A Muslim can not have two wives at the same time if the wives are related to each other in a way that would have made their marriage void if they had been of opposite sex. As per the Sunni law, a marriage against this condition is irregular. The Shia law will treat violation as a void marriage. The only exception will be if the marriage is with the wife’s consent.
b) Marriage with the fifth wife
If a Muslim man has more than five wives, it is merely irregular with respect to the fifth wife. If he divorces a wife or a wife dies, the irregularity will be removed with respect to the fifth wife.
c) Marriage with a non-Muslim has been discussed early on in the chapter.
d) Marriage without witnesses is irregular as per Sunni law.
e) Marriage during Iddat is irregular as per the Sunni law and void as per the Shia law.
Iddat refers to the period that a woman undergoes after divorce or the death of her husband. It literally means counting. This period is essential to ascertain whether the wife/widow is pregnant or not. During this time, the woman leads a simple and chaste life. The circumstances where she has to observe Iddat and how are as follows.
1) Dissolution of Marriage by divorce
If the marriage was a valid one and consummated, the duration of Iddat is three monthly courses. The marriage could have been dissolved through Talaq, Ila, Zihar or under the Dissolution of Muslim Marriage Act, 1939. If the woman is pregnant, the period of Iddat extends till the delivery or abortion of the foetus. If the marriage has not been consummated, the woman is not required to observe Iddat.
2) Divorce of marriage by the death of the husband
If the marriage was a valid one, the period of Iddat extends up to 4 months and 10 days irrespective of the fact whether the marriage was consummated or not. If the woman was pregnant at the time, the period of Iddat is on till the delivery or the abortion or the earlier specified period, which ever is longer.
3) Death if husband during divorce Iddat
If the husband dies during the divorce Iddat, the wife has to start a fresh Iddat of 4 months and 10 days from the date of death of the husband.
4) Commencement of Iddat
The period of Iddat starts from the date of divorce or death and not from the date of the wife receiving a notice of the same. Thus, if the wife gets the notice of such an even after the specified period of Iddat has expired, she does not have to observe Iddat.
Under Shia law, Iddat need not be observed if the wife is past the childbearing age or if she has not even attained puberty.
Valid Retirement refers to when a couple spends time together in private and there is no moral, social or legal restriction in their intercourse. As per Sunni law, a valid retirement raises the presumption of consummation of the marriage. Thus, Iddat will have to be observed even if there was no actual consummation but a valid retirement has been proved. Shia law does not recognise the concept of valid retirement.
Husband is prohibited from remarrying during iddat if and only if he already has four wives. Thus, he can not marry another woman till the iddat period is over. In case, such a marriage does take place, it will be merely irregular and not void.
a) Marriage during pilgrimage is void as per Shia law only.
b) Rule of Equality refers to the society’s prohibition on marriage wherein the husband and wife must be of the same standing and equal therefore. The marriage in violation of this rule can be invalidated by the Qazi. The Shia law does not recognise this rule.
c) Re-marriage between the divorced couple is allowed provided a procedure if followed. The divorced wife has to marry another man fulfilling all the requisites of a valid marriage. The marriage has to be consummated. Then the present husband has to divorce her voluntarily and the wife has to observe Iddat. Then she may marry her first or former husband. If the procedure is not followed, the marriage will be merely irregular.
d) Polyandry is not permitted and the second marriage will be void under Shia and Sunni law.
Under all schools of Muslim law, the basic requirements have to be fulfilled, i.e. the parties are competent, the consent of the parties is free consent and the offer and acceptance has been duly made.
i) The co habitation of the parties becomes lawful and not immoral;
ii) The children born to a lawfully wedded couple are legitimate and can inherit accordingly;
iii) For the couple itself, mutual rights of inheritance arise;
iv) The wife can claim dower and has a right to maintenance and simultaneously the obligation to observe Iddat is bestowed upon her;
v) Prohibited relations are created due to the marriage;
vi) The legal identity or status of a Muslim woman does not blend in with her husband’s identity after marriage; and
vii) The parties have rights to regulate the movements of each other but they can not refrain each other from maintaining a relationship with their respective families or visits to then.
Void Marriage or the Batil Marriage
It is an illegal union that exists not in law. Thus, a marriage in violation of absolute prohibitions or polyandry is a void marriage. Shia law provides a few additional grounds like marriage during a pilgrimage or marriage with a non-Muslim or a woman observing Iddat.
No mutual rights or obligations are created for the parties in this union. The children born to such a couple are deemed illegitimate and the wife has no rights to dower or maintenance. The parties can actually marry any one they wish for this marriage does not exist in law or in fact.
An incomplete marriage where the deviation from procedure or a flaw can be removed, it is called an irregular marriage. For example, the marriage with the fifth wife or with a woman observing Iddat will be treated as an irregular marriage.
The cohabitation is lawful and the children are legitimate and can inherit the properties of their parents. Mutual rights of inheritance do not arise. After consummation only, can the wife claim dower. The wife does not have to observe Iddat if the marriage is not consummated.
It is a unique form of marriage recognised only under the Ithna Asharia School. It is a union for a particular time only with consideration as a pre-requisite. The roots can be
traced back to the early Arabia, where men had to travel long and far. To confer legitimacy on the offspring produced during the travels, the Prophet allowed this Muta or enjoyment marriage for some time. Later, he prohibited it absolutely.
It is essential that the parties must be competent to contract marriage because the guardians cannot contract for a Muta marriage. The Muslim male can contract Muta marriage with a Muslim,
Kitabia or Parsi woman but the Muslim woman can contract the same only with Muslim men. Any number of Muta wives can be contracted with.
The formalities of free consent, offer and acceptance as well as absence of prohibition have to be followed. The dower must be specified at the time of marriage otherwise the marriage will be deemed void. The duration of the Muta marriage must be specified or else it will be deemed as a permanent marriage.
Legal Effects of Temporary Marriage
The cohabitation between parties becomes lawful and consequently even the children are legitimate children. There will be no mutual rights of inheritance between the husband and wife. The husband has to pay the whole dower amount if he leaves without finishing the duration of the marriage. If the wife were to leave before the expiry of the specified time, the husband can deduct a proportionate amount from her dower.
Maintenance is not available to the wife as a right. There is no divorce in Muta marriages. It ends on the prescribed time or departure of one of the parties. Iddat has to be observed for two months if the marriage has been consummated, else it is not needed. If the marriage dissolved due to death, 4 months and 10 days is the iddat period.
Marriage Agreements are allowed under Muslim law. Even subsequent to the marriage, a couple can enter into an agreement for regulation of their relationship. If the guardians have made such agreements when the parties are not competent to do so, the agreement will be binding on them. Any agreement working against Islam is void. For example a marriage agreement wherein the wife is not allowed to claim her dower or the couple can stay separately without any reasonable cause would be illegal.
Marriage agreements are binding on the parties as long as they are legal. For example an agreement wherein the husband can not contract another marriage during the subsistence of the first is a valid agreement. Similarly, an agreement stating that the husband shall not stop the wife from receiving her relatives at his house at any time is also valid.
Breach of a Marriage Agreement if the agreement was a valid one gives rise to rights of refusal for restitution, dower related rights and in extreme scenarios, dissolution of the marriage.
Restitution of conjugal rights refers to giving back the right to one party to stay with the spouse. As a couple is entitled to stay together and enjoy each other’s company, if one spouse stays away without reason, the other can file a suit to move back with the aggrieved party. The courts have to look into the circumstances of each case and then decide. A wife can claim defences against her husband’s claim as given below:
a) He falsely accused her of adultery;
b) Her prompt dower was not paid on demand;
c) The husband has been expelled from the caste;
d) Cruelty, physical or emotional, by the husband; and
e) Husband converted from Islam to another religion or used objectionable words against the Prophet, etc.
The Dissolution of Muslim Marriages Act, 1939 has widened the defences even more.
25 Nov
NATURE OF CONTRACT OF INDEMNITY
Indemnity can be treated as a sub-species of compensation and a Contract of Indemnity is a species of contracts. The obligation to indemnify is a voluntary obligation taken by the indemnifier.
Mere possibility of loss occurring will not make the indemnifier liable. Loss to the indemnity holder is essential, otherwise, the indemnifier cannot be held liable. Plus, the loss must arise due to the conduct of the indemnifier or any other person related. Strictly speaking this does not cover the acts of God; otherwise various insurance transactions will be rendered untenable. Under Indian law, the definition of contract of indemnity is restricted to cases wherein the loss is caused by human agency. Losses from other causes are covered in other chapters of the Indian Contract Act, 1872.
Contract of Indemnity should have all the essentials of a valid contract like free consent, legality of object, etc. Consideration in this case can be anything done, or any promise made which serves as motivation behind the contract. It is sufficient inducement that the person for whom the indemnifier has promised indemnity has received a benefit or that the indemnity holder has suffered an inconvenience of doing what the indemnifier asks.
A contract of indemnity is one of the species of contracts.
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ADAMSON vs. JARVIS [1827] 4 BING 66
FACTS: Adamson was an auctioneer who was given cattle by Jarvis to be sold at an auction. Adamson followed the instructions and sold the cattle. But Jarvis was not the owner of the cattle. The real owner of the cattle sued Adams for conversion and was successful. Adamson had to pay damages and he then sued Jarvis to be indemnified for the loss that he suffered by way of damages to be paid to the real owner.
HELD: Adamson carried out Jarvis’s instructions and was entitled to presume that if anything went wrong as per instructions, he would be indemnified. Jarvis was ordered to pay damages to Adams.
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Indemnity, as per English Law, is a promise to save another harmless from the loss caused as a result of a transaction entered into at the instance of the promisor. It is not necessary under English law that the loss be due to the conduct of a person; the loss could be caused by accidents or forces beyond one’s control. Thus, the scope of application under English law of indemnity is wider.
The Law Commission of India recommended expansion of scope of law of indemnity in its 13th Report but no amendment has been made executing the same.
A contract of Indemnity may arise by:
a) Express Promise. There can be an agreement between parties to indemnify one party.
b) Operation of Law. Under Section 145 of the ICA, 1872 if the surety pays the creditor, the principal debtor in lieu of whom the surety had to pay has to indemnify the surety.
Similarly, under Section 13 of the Indian Partnership Act, 1932 a firm is bound to indemnify an agent who suffers a loss by doing a lawful act of the firm. There are provisions in the Negotiable Instruments Act, 1938 as well as Indian Companies Act, 1952.
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In GAJAN MORESHWAR vs. MORESHWAR MADAN AIR 1942 BOM 302, it was decided that law relating to indemnity is by no means exhaustive and thus, the Courts in India shall follow the English Law. In the same case, English equity law was discussed; whether requiring an indemnity holder to actually pay and clear the damages before claiming them from the indemnifier places an undue burden on the indemnity holder. Thus, if the liability of an indemnity holder became absolute, he was held entitled to get the indemnifier to pay off the claim or to pay the court sufficient amount of money for making a fund to pay the claim as and when it was made.
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The contract of indemnity is an actionable claim. Of course, it must not be against public policy or unlawful to valid. If a contract of indemnity for indemnifying bail in a criminal case is invalid. For example, if A publishes a libel at the request of B and suffers damage due to such publication, A cannot sue B to indemnify him.
A right of indemnity exists where one party is obliged to make good certain losses suffered by the other party. The losses which the indemnifying party must make good will depend on the wording of the indemnity.
No third person or a stranger to the contract of indemnity cannot sue the indemnifier due to the principle of privity of contract as decided in the case of NATIONAL PETROLEUM COMPANY vs. POPAL LAL by the Bombay High Court.
Generally, a contract of insurance is not treated as a contract of indemnity in India. But contracts of marine insurance, fire insurance or motor insurance are deemed to be contracts of indemnity. The reasoning offered is that a life insurance as a contract does not offer to make good a loss but offers a particular sum of money upon the death of the policy holder. But when we look at policies where a policy is taken by a creditor on the principal debtor, he becomes entitled to an exact amount of money. Thus, courts look deeply into the terms and conditions of contracts in such cases.
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GAJAN MORESHWAR vs. MORESHWAR MADAN 1942 BOM 302,
FACTS: G Moreshwar got a plot in Bombay for a long lease period. He transferred the lease to M Madan for a limited period. M Madan started construction over the said plot and got his supplies from a K D Mohan Das. When Mohandas asked for payment, the defendant could not pay up. Upon request of M Madan, G Moreshwar executed a mortgagee deed in favor of K D Mohan Das. Mohandas, the supplier. Interest rate was decided and G Moreshwar put a charge over his properties. A date was set for the return of the principal amount. M Madan had agreed to pay the principal amount, the interest and to get the mortgage deed released before a certain date. M Madan did not pay anything to K D Mohan Das; it was G Moreshwar who paid some interest.
When despite repeated request, M Madan did not pay the principal amount, interest or get the mortgage deed released, G Moreshwar sued him for indemnity.
HELD: The Privy Council did not accept M Madan’s stance that G Moreshwar had suffered no loss and thus could not claim anything under Sections 124 and 125. The Council held that an indemnity holder has rights other than those mentioned in the Sections above. If the indemnity holder has incurred a liability and the liability is absolute, he can turn to the indemnifier to take care of the liability and pay it off. Thus, G Moreshwar was entitled to be indemnified by M Madan against all liability under the mortgage and deed of charge.
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A contract of indemnity identifies the parties, describes the types of losses covered and clarifies whether legal expenditure in the filing or fighting a suit is included. Generally, the contract will also make clear the ‘triggering event’; happening of which will make the indemnifier liable. The triggering events are described with help of terms like “arise out of”, “in connection with,” or “occasioned by”, “acts or omissions” or “negligence.” The contract also makes clear the extent of indemnification due.
RIGHTS OF INDEMNITY HOLDER
The rights of the indemnity holder are dependent on the terms of the contract of indemnity as a general rule. Section 125 of the Indian Contract Act, 1872 comes into play when the indemnity holder is sued i.e., under specific situation.
The indemnity holder is entitled to recover the:
a) all the damages that he may have been compelled to pay in any suit in respect of any matter to which the promise of the indemnifier applies.
For example, if A contracts to indemnify B against the consequences of any proceedings which C may take against B in respect of a particular transaction. If C does institute legal proceeding against B in that matter and B pays damages to C, A will be liable to make good all the damages B had to pay in the case.
b) all the costs of suits that he may have had to pay to the third party provided he acted as a man of ordinary prudence and he did not act in contravention of the directions of the indemnifier or if he had acted under the authority of the indemnifier to contest such a suit.
In the case of ADAMSON vs. JARVIS [1827] 4 BING 66, Adamson was entitled to recover the money he had to pay to the true owner of the cattle as well as any expenses incurred by him to get a legal counsel, etc.
c) All the sums that he may have paid under the terms of any compromise of any such suit provided such compromise is not contrary to the indemnifier’s orders and was a prudent one or if he acted under authority of the indemnifier to compromise the suit.
The indemnity holder is also entitled to losses due to change of law not foreseen by the parties when they entered into such contract of indemnity
RIGHTS OF THE INDEMNIFIER
The rights of the indemnifier have not been mentioned expressly anywhere in the Act. In JASWANT SINGH vs. SECTION OF STATE 14 BOM 299, it was decided that the rights of the indemnifier are similar to the rights of a surety under Section 141 where he becomes entitled to the benefit of all securities that the creditor has against the principal debtor whether he was aware of them or not. Where a person agrees to indemnify, he will, upon such indemnification, be entitled to succeed to all the ways and means by which the person originally indemnified might have protected himself against loss or set up his compensation for the loss.
The principle of subrogation i.e., substitution is founded in equitable principles. Once the indemnifier pays for the loss or damage caused, he will step into the shoes of the indemnified. Thus, he will have all the rights with which the original indemnifier protected himself against loss or damage. The principle of subrogation is applicable due to both the ICA, 1872 itself and principles of equity.
Contract of Indemnity, When enforceable
In England, under common law, it was essential for an indemnity holder to first pay for the losses and then claim indemnity. With time, Court of Equity softened the law and in 1911 with the RE: RICHARDSON, EX PARTE THE GOVERNORS OF ST THOMAS HOSPITAL case, indemnity before payment by the indemnity holder was made the norm. Further in 1914, in the case of RE LAW GUARANTEE & ACCIDENTAL case, it was stated that ‘to indemnify does not mean merely to reimburse with respect to the money paid but to save from loss with respect to liability for which indemnity has been given’. A Contract of indemnity would serve little purpose if the indemnity holder was made liable in the first instance. What if he is unable to meet the claim in the first instance?
In India, there is no specific provision which states when a contract of indemnity is enforceable. There have been confliction judicial decisions throughout. OSMAL JAMAL & SONS LTD vs. GOPAL PURUSHOTHAM [1728] ILR 56 CAL 262, was amongst the first Indian cases where right to be indemnified before paying was recognised. But now, a consensus of sorts has been formed in favour of the opinion of Equity Courts. In K BHATTACHARJEE vs. NOMO KUMAR 1899 26 CAL 241, SHIAM LAL vs. ABDUL SALAL 1931 ALL 754 and GAJAN MORESHWAR CASE, it has been decided that the indemnified may compel the indemnifier to place him in a position to meet liability that may be cast upon him without waiting until the promisee (indemnified) has actually discharged it.
Indemnity requires that the party to be indemnified shall never be called upon to pay. Thus, the liability of the indemnifier commences the moment the loss in form of liability to the indemnified becomes absolute.
ConCLUSION
Simply put, indemnity requires that one party indemnify the other if certain expenses spoken of in the contract of indemnity are incurred by him. For example, car rental companies stipulate that the person hiring will be responsible for damage to the rental car caused by his reckless driving and will have to indemnify the rental company.
Most attention of late has been given to development of indemnity contracts in the IT industry. There are some circumstances in which the existence of an indemnity would make a significant difference while in others, a contract of indemnity will have little or no role to play. Another new concept called ‘Indemnity Lottery’ can be found in the law of contract that implies that in civil cases of indemnity results can never be predicted. Brazilian jurist Leonardo Castro is credited for coining the term. These topics are dealt with in more detail in the textbook available for Contracts II.
A simple indemnity clause is not the answer to liability issues. The law leans disfavouably towards for those who try to avoid liability or seek exemption from liability of their actions. The underlying reasoning is that a negligent party should not be able to completely shift all claims and damages made against it to another, non-negligent party. For example, many a times a ticket to an amusement park may claim that a person entering the park will not hold the management liable. Rarely will such a defense work in a court of law because it is not based on a contract. Most people hurt on an amusement park ride are able to sue for damages quite successfully.
