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SUPREME COURT OF INDIA
21st December 1950
H.J. KANIA, C.J.I. PATANJALI SASTRI AND S.R. DAS, JJ.
Pannalal Jankidas, a firm-Appellants
Versus
Mohanlal and another -Respondents.
Civil Appeal No. 71 of 1949.
Advocates appeared
Shri Rang Behari Lal. Senior Advocate, (Shri Rajeswar Nath Nigam, Advocate, with him) instructed by Shri Mohan Behari Lal, Agent - for Appellants. Shri M G Setalvad, Senior Advocate, (Shri Rama Ditta Mal and Shri B Sen, Advocate with him) instructed by Shri I.N. Shroff, Agent - for Respondents.
The appellants (plaintiffs) were a firm of commission agents in Bombay. The respondents (defendants) were their constituents. The plaintiffs purchased and consigned to the defendants firm piece goods and yarn. In January, 1944, restrictions were imposed against the consignment of piece goods and/or yarn outside Bombay by rail without obtaining the necessary .previous permit from the Textile Commissioner at Bombay. In course of these transactions 92 bales were stocked by the plaintiffs in a go down in Bombay pending the receipt of permit for consigning the same to the defendants. On 14-4-1944 there occurred a big explosion in the Bombay harbour which destroyed these bales also. Thereupon the plaintiffs filed a suit to recover the price of these 92 bales from the defendants on the ground of the agents right to indemnity. The defendants pleaded that the plaintiffs were their pucca adatiyas, that the property in the goods did not pass to them, that they were not liable for the price till delivery of the goods was given to them, and that it had been agreed earlier between their representative and the plaintiff that the goods were to remain insured till despatched according to their instructions. It was also contended that if their plea that the plaintiffs were pucca adatiyas was not accepted and the plaintiffs were held to be their commission agents, the plaintiffs were guilty of negligence and misconduct in the business of agency as in spite of specific instructions and agreement they had failed to insure the goods. The defendants counterclaimed also damages for loss due to negligence of the plaintiff in not insuring the goods.
Two months after the explosion, the Bombay Explosion (Compensation) Ordinance, 1944, was passed, under which the Government was to pay, in respect of uninsured merchandise fifty percent of the compensation and if goods had been insured by the plaintiffs then full compensation under S. 14 of the Ordinance. The amount of compensation recovered by the plaintiff from Government was agreed to be credited to the defendants. The dispute we in respect of the remaining half.
Held: (per Kania C. J. and Das J., Patanjali Sastri J. dissenting) : (I) In the case of the agents negligence he is liable to make good the damage directly arising from his neglect but not indirectly or remotely caused by such neglect or misconduct. In the present case it was the duty of the appellants to insure the goods, as they had agreed to do. Once misconduct is admitted or proved, the fact that the Ordinance did not exist and could not have been in the contemplation of the parties is irrelevant for deciding the question of liability. The liability was incurred by reason of the breach of their duty and the appellants made themselves liable to pay damages. The measure of damages was the loss suffered by the defendants on account of the goods not being insured. The effect of the Ordinance section 18 01 which gave it retrospective effect, was merely to substitute a new basis for assessing compensation for the ordinary basis for assessing unliquidated damages. The compensation under the Ordinance was payable on proof of the existence of the insurance policy irrespective of the terms of the policy. The non-recovery of half the amount of the respondents claim from the Government under the Ordinance because of the absence of are-insurance policy, thus directly arose from the neglect of the appellants to insure the goods, as they had been instructed to do or agreed to do and which In fact they represented they had done. These were not indirect or remote damages.1
(2) The conter-claim of the defendants was not barred by S. 15(2) of the Ordinance for the reason that they were not claiming to recover the money from the plaintiff otherwise than under S. 18 (1) of the Ordinance. The cause of action for the claim was the plantiffs misconduct. It was not for compensation arising from explosion.
(3) The quantum of damages was not a part of the cause of action. It was a matter to be ascertained by the court according to well laid down principles of law.
Per Patanjali Sastri J.: Even if the plaintiffs had taken out a fire insurance policy in ordinary form it would not have covered the lose for fire due to explosion would be an excepted peril. So the appellants failure
1. Section 18 of the Ordinance ran as follows :
"Nothing in this ordinance shall prevent the recovery of compensation for death or personal injury under the Workmans Compensation Act, 1923 (VIII of 1923), or under any policy of life insurance or against personal accident or under any other contract or scheme providing for the payment of compensation for death or personal injury, or for damage to property under any policy of miscellaneous insurance.
Save as provided in Sub-s. (1) no person shall have, or deemed ever to have had, otherwise than under this Ordinance any right whether in contract or in tort or otherwise to any compensation or damages for any death, personal injury or damages to or loss of any property, rights or interests, due to or in any way arising out of the explosion: and no suit or other legal proceeding for any such compensation or damage, shall, save as aforesaid, be maintainable in any Court against the Crown, the Trustees of the Port of Bombay or the Municipal Corporation of the City of Bombay or against any servants or agents of the Crown or of the said Trustees or Municipal Corporation or against any other person whoever ; and no act or omission which caused or contributed to the explosion shall be deemed to have been done or omitted to be done otherwise than lawfully.
No suit, prosecution or other legal proceedings whatsoever shall lie against any person for anything in good faith done or ordered to be done in combating or mitigating the effects of the explosion, or for anything in good faith done or intended to be done in pursuance of this Ordinance or any rules or orders made thereunder." .
to keep the goods insured no direct consequence for which damages could in law be claimed. The respondents inability to recover full value, from the Government did not arise directly or naturally in the usual course of things out of the appellants failure to insure.
Judgment
Kania, C.J.I.(On behalf of himself and Das J.)-This is an appeal from a judgment of the H. C. at Bombay. Although the record is heavy & many points were argued in the trial Ct. & in the Ct. of appeal at Bombay, the important point argued before us in only one.
2. The applts. (pltfs.) area firm of commission agents in Bombay. The resps. (defts.) were their constituents. Accounts between the parties in respect of their dealings were made up & settled upto 30-10-1943. Piecegoods & yarn continued to be purchased & consigned by the pltfs. to the defts. joint family firm thereafter. One bale of piecegoods was purchased & despatched in Nov. 1943. In Jan. 1944 restrictions were imposed against the consignment of piecegoods and/or yarn outside Bombay by rail without obtaining the necessary previous permit from the Textile Commr. at Bombay. On or about 6-2-1944 Mohanlal of the defts joint family firm came to Bombay & the plfts. purchased on their behalf 278 bales of piecegoods. Ninety-four out of those were desptached according to the defts. instructions. The plfts. according to the defts. instructions, applied for & obtained permit to consign several more bales. On the permits being issued, they were despatched on 14-2-1944 to destinations given by the defts. On 10-4-1944, the plfts. after obtaining the necessary permits, despatched more bales as directed by the defts. The dispute between the parties relates to the remaining 92 bales which were stored in godown NO.424 Baroda Street, Argyle Road, Bombay, pending the receipt of permit for consigning the same.
3. On 14-4-1944, there occurred a big explosion in the Bombay harbour which destroyed several immovable properties & godowns with movable property covering a large area, near the port. Fires were caused by the explosion & they also caused considerable destruction of movable & immovable properties. These 92 bales purchased by the pltfs. on account of the defts, were also destroyed either by the fire or the explosion. The pltfs. filed a suit to recover the price of these 92 bales from the defts. on the ground of the agent s right to indemnity. The defts. contended that the plfts. were their pucca adatiyas, that the property in the goods did not pass to them & that they were not liable for the price till delivery of the goods was given to them. In the alternative, in para. 4 of their written statement, they pleaded that when Mohanlal of the defts . firm was in Bombay & the pltfs. stated that the goods could not be railed until permits were obtained, it was agreed between the pltfs. & the defts. that the defts. were to pay annas four per bale per month to the pltfs. for insurance charges 146 & the goods were thus to remain insured till despatached according to their instructions. In para. 21 of their written statement, they contended that if their plea that the plaintiffs were pucca adatiyas was not accepted & the plfts. were held to be their commission agents, the plfts. were guilty of negligence & misconduct in the business of agency as in spite of specific instructions & agreement they had failed to insure the goods. They contended that owing to this negligence & misconduct the plffs. were not entitled to the indemnity claimed. In the alternative they contended that the pltfs. were liable to make good the loss caused to the defts by their failure to insure the said bales. They contended that they were entitled to set off this loss against the claim for the price. They also counter -claimed the same amount if their set-off was not allowed. On these pleadings the parties went to a hearing. Issue to covered the defts . plea about the pltfs . negligence & misconduct in not insuring the 92 bales & the counter-claim arising therefrom.
4. Numerous witnesses were called before the trial Ct. & the learned Judge after considering their demeanour & hearing their evidence came to the conclusion that the plfts . witnesses were unreliable, except when they were corroborated by document
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