Scott, C.J:— The plaintiffs are the Standard Bank. In February 1913, a broker named Hemchand asked the Managing Director of the Bank to advance money on the security of shares in the Indian Specie Bank with the result that a transaction was recorded by him in the following terms:
“Bombay, 26th February 1913.
“I have arranged by your order and on your order account a loan for 12 months on 2,000 to 2,600 shares of the Indian Specie Bank, Ltd., at Rs. 60 per share, the loan to be given to Banshidhar Mangtulal at 7 percent and a margin of Rs. 16 per share to be maintained by the borrower; the shares to be transferred to the Bank's name. Money payable on or before 10th March 1913.”
2. On 10th March 1913, Bansidhar Mangtulal acting on behalf of an undisclosed principal defendant 1 Birdichand Jivraj executed a demand promissory-note in favour of the Bank for Rs. 1,25,000 and that sum was carried to a suspense account to be at the disposal of Banshidhar. Shares aggregating 2,500 were afterwards brought to the bank with blank transfers. On 4th April 1913, it was arranged through the same broker that the plaintiff Bank should advance a further sum of Rs. 45,000 on 1000 shares of the Indian Specie Bank. The note of the transaction was as follows:
“Bombay, 4th April 1913.
“I have this day arranged by your order and on your account a loan for Rs. 45,000 fixed for 12 months on 1,000 Indian Specie Bank Ltd., shares. A margin of Rs. 16 to be maintained at 7-1/2 per cent., payable on or about 9th April 1913.”
3. On 9th April, a demand promissory-note for Rs. 45,000 was passed to the plaintiff Bank by Banshidhar and the amount was carried partly to suspense account and partly to Banshidhar's account. The amount provided by these loans having been fully utilized Banshidhar wanted in October 1913 to overdraw his current account. This was allowed to the extent of Rs. 4,200 on a deposit of 105 more shares in terms of a formal printed overdraft agreement of which paras. 4 and 5 were as follows:
“4. I agree and undertake that the value of the shares deposited with you as security as aforesaid shall at all time exceed in value at the market price of the day the amount due by me to you so that the security may at the value aforesaid exceed the amount of my indebtedness to you by a margin of Rs. 15 per share and in the event of the said shares at any time becoming of less value at the market price of the day so as not to provide the margin agreed on as aforesaid I agree and undertake to forthwith make up such deficiency on demand by you either by depositing further security approved of by you sufficient to make up the security to the agreed amount or by making part payment of the moneys due by me an that my indebtedness may be reduced to an amount for which the security as deposited amounts to Rs. 15 per share in excess of the amount due by me. So that you may always be secured by shares or other security approved by you which at the market value thereof of the day shall at least exceed in value by Rs. 15 per share the amount of my indebtedness from time to time to you.
“5. That you or your Managing Director shall be at liberty in default of my paying the moneys for the time being due to you by me on demand, or in default of my keeping up the fill margin of security of the value as, aforesaid and without any consent or concurrence on my part; to sell the said shares or other security deposited from time to time by me or any of them by public auction or private contract and in such manner in all respects as you may think fit and out of the proceeds thereof to pay:
“(a) All expenses of and incidental to such sale and also all costs and expenses which may have been inourred by you in consequence of such default in payment of the said loan or in maintaining the full margin of value of the said shares as aforesaid, (b) The debt then due to you with interest. You shall be at liberty in the event of any default on my part in payment of such moneys on demand or in maintaining the full margin of value to purchase yourselves the said shares or any of them at the market price of the day on which such default shall have been made.”
4. All the shares deposited by Bansidhar were transferred to the plaintiff bank's name on the share register of the Specie Bank. Dividends when received were credited to the loan account. In September 1913, the Indian Specie Bank shares began to fall and on the 7th October, Bansidhar provided further securities as margin which realised about Rs. 20,000, but thereafter he failed to provide any further margin and eventually 181 shares were sold by the plaintiff bank of which 161 had been transferred before a winding up was male for the compulsory liquidation of the Specie Bank. In the liquidation the plaintiff bank has been placed on the A list of contributories for 3444 shares and on the B list for 161 of the shares deposited by Bansidhar. A call of Rs. 50 per share has been paid by the plaintiff bank in respect of the 3444 shares. Decrees have been passed at the suit of the plaintiff bank against both Bansidhar, the ostensible borrower, and Birdiehand his undisclosed principal, for debt and interest aggregating Rs. 3,50,500 which includes both the amount due for advances and interest and the amount paid by the plaintiff bank on the call made on the Specie Bank shares. The decree also declares that the plaintiff bank are entitled to be indemnified for any claim which may be made against them in respect of the 161 shares for which the plaintiffs are entered as contributories on the B list in the liquidation proceedings of the Specie Bank.
5. The only question now in dispute in this appeal is whether the plaintiffs can recover from the defendants as a debt the amount paid in respect of the call and whether they are entitled to an indemnity in respect of the 161 shares as declared by the decree. It is not now contended that there was any special agreement to indemnify the plaintiffs in respect of the uncalled liability of the Specie Bank shares at the time of the deposit. It has been held by the lower Court that the evidence adduced fails to establish any such agreement and no exception is now taken to that finding. Substantially the argument for the plaintiffs was confined to the suggestion of an implied agreement by the borrower to indemnify the lender in respect of a security which might be onerous. It was said this must have been the business understanding between the parties and that no lender would lend except upon such an agreement to indemnify. It is pretty certain however that the possibility of the Indian Specie Bank going into compulsory liquidation during the continuance of the loan transaction never entered into the contemplation of the parties and even in October 1913, after the share had begun to fall in value, the plaintiffs were still willing to allow an overdraft on a deposit of some of the same shares carrying the same uncalled liability. Had the possibility of calls on the shares been considered the plaintiffs would either have left them in the name of the then registered owner or if they wished to take a transfer, would have refrained from doing so except upon an express indemnity.
6. It is not unreasonable to suppose having regard to the magnitude of the transactions that the plaintiffs, had they realised the risk attaching to such shares, would have taken the ordinary precautious suggested by business experience: see Davidson's Conveyancing Vol. 2, part 11, p. 1203. So much for the suggested implication of fact.
7. Nor can it be successfully contended that as a matter of law it is a part of the contract that the mortgagor should indemnify the mortgagees against the consequences of holding property which they held for their own security and not for the benefit of the mortgagor. The mortgagees received the dividends on the shares in excess of the interest on the loan, and or edited such excess in reduction of their debt and they must be supposed to have contemplated all the liabilities to which the holding of such shares might subject them.
8. It was held in Phene v. Gillen (1) that there is not at law any such implied contract of indemnity. It is impossible to contemplate the mortgagors in such a case as the present attempting to redeem the Specie Bank Ishares, and I doubt if a forced payment of a call by the registered holder of shares Upon a compulsory liquidiation could be regarded as an expenditure for the preservation of the security or expenditure contemplated in Cl. 5 of the overdraft agreement. The mortgagees in the present case did not in my opinion occupy the position of trustees for the mortgagors at the time of paying the calls and cannot therefore be entitled to an indemnity as trustees.
9. The decree of the lower Court must therefore be varied by limiting the sum decreed to the amount of the advances, interests and costs and deleting the declaration as to indemnity. Defendants must pay the costs of the appeal up to and including the 20th July. The plaintiffs must pay the subsequent costs of the appeal but the parties must bear their own costs of the remand and findings thereon since they were rendered necessary by the defendant's oversight at the original hearing. The order as to costs an the original Court will stand.
G.P/R.K
10. Decree varied.