1. The facts are somewhat complicated and therefore we must state them before dealing with the questions of law arising in the case. Defendants 1 and 2 and one Krishnamma were members of an undivided family. Krishnamma died leaving a son Narainaswamy. The first defendant sold his share in the family property to the plaintiff by Exhibit A in 1898. The plaintiff conveyed that share to one Subbarayudu by Exhibit B in 1899. Subbarayudu brought a suit to recover the one-third share belonging to the first defendant. To that suit defendants 1 and 2 and Narainaswamy were made parties. The second defendant in that suit pleaded that as there were family debts without apportioning the debts the share of one of the brothers purchased from the first defendant should not be partitioned. There were other pleas also raised by him. In these circumstances the parties agreed to refer their disputes to arbitration during the pendency of the suit. To this reference the first and second defendants and Narianaswamy were all parties. An award was given by the arbitrators Exhibit E. 1 in 1900. Thereupon a decree E. 2 was passed in the suit. Naturally the decree only related to that portion of the claim which Subbarayddu wanted to enforce. The portion of the award which dealt with the rights of the members of the family inter se was not embodied in the decree but was simply recorded. One of the terms of the award which is the clause we have to consider is in these terms: 'that the second defendant do himself bear all the debts alleged to have been incurred by him for family purposes; that the debts incurred by defendants 1 and 3 be borne by themselves that the second defendant himself do bear the debts he had agreed to pay the debts which he undertook in writing, and the debts referred to by him in his statement and lists A.B.C. and D filed by him and defendants 1 and 3 shall have nothing to do with them.' That is in para 10. Another portion of the award which must be referred to is in para 14 and it is in these terms ' The share of the first defendant must be put in possession of the plaintiff in the place of the first defendant,' and this award was given in 1900. Subbarayudu subsequent to this award and decree after obtaining possession of his one-third share re-conveyed the property to the plaintiff by Exhibit F. That was in the year 1901.
2. In 1901 one K. Venkata Reddy alleging that there was a mortgage debt due to him from the second defendant who had contracted the debt on behalf of the family brought a suit O.S. No. 481 of 1901. To that suit the mortgagor, 2nd defendant was a party. A decree was obtained and in pursuance of that decree Venkata Reddy purchased the property and became the owner. Meanwhile the plaintiff had recourse to another of the transactions with which this case has been complicated, namely he sold the property to one Veeraswami in 1902. After the purchase by Venkata Reddy of the property mortgaged he brought a suit for the delivery of the one-third share of the mortgagor, the second defendant. This was in 1905. To this suit Veeraswami the purchaser from the plaintiff was a party. Venkata Reddy obtained a decree in 1902 and obtained possession in April 1911 and in consequence of that decree Veeraswami was deprived of possession and thereupon Veeraswami brought a suit against the plaintiff for damages for breach of covenant and he obtained a decree in 1915. Plaintiff had to pay Rs. 838 and odd in satisfaction of the decree. The present suit was instituted by the plaintiff against the second defendant in 1916 for damages for breach of the obligation imposed in the second defendant by the award and for damages which have been caused to him by being obliged to compensate Veeraswami, Two questions arise for decision under these circumstances. The first is, is there a cause of action to the plaintiff against the second defendant? The second is, is the suit against the second defendant barred by limitation? The first Court dismissed the suit holding that the suit was barred by limitation and that there was no cause of action to the plaintiff against the second defendant. The Subordinate Judge reversed that decree and decree the plaintiff's claim. This second appeal is against the decision of the Subordinate Judge.
3. Mr. Somasundaram in a very elaborate argument contended that the plaintiff had no cause of action against the second defendant. His contention is that the covenant if there is one, in Exhibit E. 1, the award, is a personal one, that the first defendant alone is entitled to take advantage of it, that it would not pass to an assignee of the first defendant and that consequently there is no privity of contract between the plaintiff and the second defendant. He relies on Ittipanku Menon v. Dharman Achan I.L.R. (1890) Mad. 488 in which a majority of the Judges of this Court have held following Tweeddle v. Atkinson 124 R.R. 610 that the mere fact that a benefit accrued is not a ground for giving a third party a right of suit on a contract to which he was no party. There is no doubt that the principle is well recognised that a mere benefit secured by a document would not give the party to whom the benefit is given a cause of action against a person who is placed under an obligation. Vide also Raghubans Rai v. Jaig Raj I.L.R. (1911) All. 429 and Gopala Aiyar v. Ramaswami Sastrigal (1911) 22 M.L.J. 207. But in the present case it is not a case of mere benefit being secured to the plaintiff as against the second defendant. The second defendant expressly pleaded in the suit that without apportioning the family debts to the various members of the family a decree for the share of the first defendant should not be given to the plaintiff. It was in these circumstances that the matter was referred to the decision of arbitrators. It was not denied by Mr. Somasundaram that if there was a suit for partition to which, the alienees were made parties and if under the decree in that suit the equities between the alienees and the members of the family were adjusted by embodying a covenant of this kind the alienees would be entitled to bring a suit for the breach of it. We fail to see why because a portion of the award could not be embodied in the decree of the Court for the reason that the subject-matter of the suit was not dealt with in that portion there should be any difference in principle. The award of the arbitrator is as binding on the parties to the reference as if it were a decree of Court. No doubt, if it becomes a decree of Court it could be executed. Barring that, an award is binding on the parties as if there has been a decree of Court. In these circumstances we are of opinion that there was a covenant in this case to which the second defendant has submitted himself and that covenant enured to the benefit not only to the first defendant but to all persons claiming under the first defendant. The plaintiff in terms was given the share of the first defendant by the award. For these reasons we are of opinion that there was a cause of action to the plaintiff against the second defendant.
4. The second question is whether the suit is barred by limitation. The learned Vakil for the appellants mainly relied upon Dorasinga Thevar v. Arunachellam Chetty I.L.R. (1899) Mad. 441 and the decisions following it, and argued that if there was an obligation under the award it was broken as soon as it was made or within a reasonable time after the promise and that the suit ought to have been brought within three years of the promise or three years after the lapse of a reasonable time from the date of the award. As was pointed out already this class of cases stands upon a peculiar footing. They must be understood as if there was the relationship of principal and agent between the contracting parties and it must be taken that it was held in the decisions referred to that where an agent does not carry out the terms of the contract the principal is entitled to recover the money. Therefore if without waiting to see whether he was damnified the principal brings a suit, such a suit should not be regarded as premature. This is the ratio decided in Dorasinga Thevar v. Arunachella Chetti I.L.R. (1899) Mad. 441. The same observation applies to Raghunatha Chariar v. Satagopa Chariar I.L.R. (1911) Mad. 348 and Gopala Aiyar v. Ramaswami Sastrial (1911) 22 M.L.J. 207. The question for our consideration in this case is what is the nature of the undertaking which the second defendant entered into under this award--is it purely a personal undertaking or a covenant in the language of Sadasiva Aiyar, J., in Bhavani alias Rukmani Amma v. Ananta Kamthi : (1916)31MLJ556 undertaking to do an act absolutely within a particular period. In the latter case it was held that if the absolute obligation was not fulfilled there would be a cause of action immediately and a suit should be brought within three years. But in our opinion the undertaking given in this case is not an undertaking to do an act absolutely and within a particular time. Therefore Dorasinga Thevar v. Arunachallam Chetti I.L.R. (1899) Mad. 441 and Gopala Aiyar v. Ramaswami Sastrigal (1911) 22 M.L.J. 207 have no direct bearing upon the case.
5. Then it was argued by citation of English authorities that the moment there was a breach of the covenant the liability to pay compensation arose and that the plaintiff was not entitled to wait until he was damnified. In the first place the English cases refer to two classes of covenants one covenant which is in the nature of a contract for the breach of which there would be a cause of action at once; the second which is in the nature of a stipulation for quiet enjoyment in which case the cause of action would arise not at the moment when the covenant is entered into but only when the breach of the stipulation occurs. Battley v. Faulkner (1820) 3 B. & Ald. 288 : 106 E.R. 669 Howell v. Young (1826) B & C. 259 : 108 E.R. 97 Smith v. Fox (1848) 6 Hare and East India Company v. Oditchurn Paul (1849) 7 M.P.C. 85 are all cases belonging to this class. But the present covenant does not come under either of the above two categories. It is really in the nature of an indemnity clause; and as was pointed out in Venkataramayya v. Lanka Ramabrahmam : (1918)35MLJ124 the cases of indemnity differ materially from cases of covenants; in the former case it is only when the parties are damnified or when damage is sustained a cause of action arises. It was also pointed out in that case following Jacob v. Down (1900) 2 Ch. 156 that a mere breach of one of the terms in the indemnity clause does not start the cause of action at once but that is open to the party to waive the right and to wait until he is damnified. In the present case the covenant was entered into to relieve the first defendant and his assignees from all liability for debts contracted on behalf of the family. It is only when a suit was brought by the creditor to enforce an obligation which is binding on the, family that the cause of action can be said to have arisen. Regarding the clause in question as an indemnity clause it is only when the plaintiff actually suffered damages he became entitled to sue for reparation, It was not therefore until. Veeraswami brought a suit to recover damages and the plaintiff was compelled to meet that decree that he was damnified. That was in 1915 and the suit was brought within three years from that date. The article applicable to this case is Article 83 and the suit having been brought within three years of the damages it is within time.
6. Mr. Somasundaram raises lastly the question of quantum of damages and contends that what was awarded by the lower court was excessive. His argument is a the second defendant's undertaking was to pay the debts he was only bound to pay the amount of debt and interest thereon. But as Mr. Narayanamurthi points out under Section 124 of the Contract Act the costs which a man incurs in meeting a litigation are a portion of the damages which he is entitled to recover from the party who is bound to indemnify him. Therefore the amount of damages awarded is not excessive in this case.
7. For all these reasons we agree with the lower Appellate Court and dismiss this second appeal with costs.