Basil Scott, C.J.
1. The question in this appeal is as to the liability of the defendant in respect of certain loans granted by the respondents on a security of shares of the Indian Specie Bank which were not fully paid and upon which on liquidation of that Bank a large liability in respect of the calls has resulted. It is conceded on behalf of the appellant that no question was raised in the lower Court either in the issues or the argument disputing the liability of the first defendant to indemnify the plaintiffs against the liability incurred by them as contributories in respect of the said shares in the winding up. And it is stated that it was not realized in the lower Court that the liability of the first defendant can be successfully disputed upon legal grounds.
2. The question is one of great importance as may be seen from the decree which provides for a sum aggregating Rs. 1,72,200 in respect of calls already paid in the liquidation and there is a further decree against the first defendant to indemnify the plaintiff Bank against further calls.
3. The plaintiffs allege that the question is not merely one of law but will turn largely on the question of fact, because they say that there was or were a conversation or conversations in which the first defendant, or his agent undertook to indemnify the plaintiff Bank in respect of any calls which might be made upon the shares.
4. We think that if the legal issue is allowed to be tried, the issue of fact must also be tried, and having regard to the importance of the case, we do not think that we can rightly dispose of the suit without a decision on the issues. Therefore under Order XLI, Rule 25, we frame the following issues:
(1) Whether the first defendant by his agent did not agree to indemnify the plaintiff Bank with regard to any unpaid calls on these shares?
(2) Whether in any event the first defendant is not liable to indemnify the Bank with regard to such calls?
5. We refer these issues for trial to the lower Court and direct it to take such additional evidence as may be required and return the evidence and the findings and the reasons therefor, in due course to this appeal Court.
6. With regard to the first question argued as to the election of the plaintiffs, we are of opinion that there can be no election in a case where the principal who is now the first defendant has deceived the plaintiffs.
7. Costs costs in the appeal.
8. The issues sent down were tried by Macleod J. His Lordship heard further evidence and found both issues in the negative. The reasons recorded for finding on the second issue were as follows:
The only direct authority which has been cited on this question is Phene v. Gillan (1845) 5 Hare 1. The defendant had borrowed money on shares in a banking company which had been transferred to the plaintiff as security for the loan. The loan was repaid but before the re-transfer of the shares could be effected a creditor recovered judgment against the public officer of the company and threatened execution against the mortgagee as one of the shareholders. It was held that the defendant was bound to indemnify the plaintiff on the ground that he having elected to exercise his right to redeem he became, the owner and the mortgagee became trustee of the shares for the mortgagor in equity. The original transfer of the shares as security for the loan gave no right to an indemnity. This should be sufficient to decide the point, but it was contended that a mortgagee was in the same position as a trustee, but I do not think this is so. A mortgagee is entitled to add to the principal debt moneys spent in protecting the security and if the Bank had made the call, the plaintiffs if they had paid it to prevent a forfeiture of the shares would be entitled to a charge on the shares for the amount paid but it can scarcely be said that payment of a call by the Liquidator would be made to protect the security.
In my opinion the second issue should be answered in the negative.
Whether the Bank having paid the call can add it to the mortgage debt in their accounts and after deducting the value of the security can sue the defendants for the balance as a personal debt is a question which does not appear to arise in the present suit.
9. The appeal was finally heard by Scott C.J. and Heaton J.
10. Kanga with Jardine, for the appellant.
11. Strangman with Setalvad and. Desai, for the respondent.
12. Reference was made to the following during argument: Ex parte Fewings, In Re Sneyd (1883) 25 Ch. D. 338 ; Phene v. Gillan (1845) 5 Hare 1. Hobbs v. Wadet (1887) 36 Ch. D. 553; Lacey v. Hill I.L.R. (1874) Eq. 182 ; Hardoon v. Belilios  A.C. 118, Davidson's Conveyancing, Vol. II, Pt. II, p. 1203; Fisher on Mortgage, 6th Edn. p. 894; Halsbury's Laws of England, Vol. XXI, p. 169; Coote on Mortgage, Edn. 7, Vol. I, p. 291.
13. 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, 36th February 1913.
I Have arranged by your order and on your account a loan for twelve months on 2,000 to 2,500 shares of the Indian Specie Bank, Limited, at Rs. 50 per share; the loan to he given to Bansidhar Mangtulal at 7 per cent, and a margin of Rs. 15 per share to be maintained by the borrower; the shares to be transferred to the Bank's name. Money payable on or before the 10th March 1913.'
14. On the 10th March 1913, Bansidhar Mangtulal acting on behalf of an undisclosed principal, the first defendant 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 Bansidhar. Shares aggregating 2,500 were afterwards brought to the Bank with blank transfers.
15. On the 4th of April 1913, it was arranged through the same broker that the plaintiff Bank should advance a further sum of Rs. 45,000 on 1,000 shares of the Indian Specie Bank.
16. 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, Limited, shares.
A margin of Rs. 15 to be maintained at 71/2 per cent. Payable on or about 9th April 1913.
17. On the 9th April, a demand promissory note for Rs. 45,000 was passed to the plaintiff Bank by Bansidhar and the amount was carried partly to suspense account and partly to Bansidhar's account.
18. The amount provided by these loans having been fully utilized Bansidhar 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 shfefes 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 times 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 rupees 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 so that my indebtedness may be reduced to an amount for which the security so 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 full 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 incurred by you inconsequence 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.
19. 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.
20. In September 1913, the Indian Specie Bank shares began to fall and, on the 7th October, Bansidhar provided farther 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 made for the compulsory liquidation of the Specie Bank. In the liquidation the. plaintiff Bank has been placed on the A list of contributories for 3,414 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 3,444 shares.
21. Decrees have been passed at the suit of the plaintiff Bank against both Bansidhar, the ostensible borrower, and Birdichand 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.
22. 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.
23. It is not now contended that there was any special agreement to indemnify the plaintiffs in respect of the uncalled liability on 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.
24. 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.
25. It is pretty certain, however, that the possibility of the Indian Specie Bank going into compulsory liquidation daring the continuance of the loan transaction never entered into the contemplation of the parties and even in October 1913 after the shares 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.
26. 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. 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 precautions suggested by business experience: see Davidson's Conveyancing, Vol. II, Part II, p. 1203. So much for the suggested implication of fact.
27. Nor can it be successfully contended that as a matter of law it is 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 credited 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. It was held in Phene v. Gillan (1845) 5 Hare 1 at p. 10 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 shares and I doubt if a forced payment of a call by the registered holder of shares upon a compulsory liquidation could be regarded as an expenditure for the preservation of the security or expenditure contemplated in Clause 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.
28. The decree of the lower Court must, therefore, be varied by limiting the sum decreed to the amount of the advances, interest and costs and by deleting the declaration as to indemnity.
29. Defendants must pay the costs of the appeal up to and including the 20th of 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 in the original Court will stand.