Lala Shanti Swarup Vs. Munshi Singh & Ors (1967)

JurisPrism January 05, 2024

CASE BRIEF
Lala Shanti Swarup Vs. Munshi Singh & Ors (1967)

The respondents executed a simple mortgage in 1914 for Rs. 12,000.
Later, they sold half of the mortgaged property to the appellants.
The consideration included an amount to pay off the mortgage, which was left with the appellants.
The appellants took possession of the property but did not make any payment to the mortgagees.
A mortgage decree was passed against the respondents in 1937.
Respondents applied under the U.P. Encumbered Estates Act, and liability was apportioned between the appellants and respondents.
In 1943, the Collector directed the respondents to execute a self-liquidating mortgage for three-fourths of their half-share.
The respondents filed a suit in 1943 for the recovery of the loss they sustained due to the failure of the appellants to discharge the original mortgage of 1914.

The appellant argued that the claim was for compensation for breach of contract, and the period of limitation was six years from the date of the breach in 1920.
Respondents argued that there was an implied contract of indemnity due to the covenant to pay off the encumbrance, and the suit was within time under Art. 83 of the Limitation Act.

When a conveyance contains a covenant by a purchaser to pay off an encumbrance, it implies a contract of indemnity.
The vendor has a right to bring a suit on the contract of indemnity if they incur a loss due to the purchaser's failure.
Art. 83 of the Limitation Act applies to both express and implied contracts of indemnity.
The cause of action arises when the vendor is actually damnified.
In this case, the suit was within time as the sale deed was a registered document, and the respondents had six years from the date of actual damnification.
The mere fact of a mortgage decree in 1937 was not enough to start limitation; time starts running when there is actual damnification.
The appeal was dismissed, and costs were awarded to the respondents.