JUDGMENT

J. S. VERMA, J.

( 1 ) THE suit giving rise to this appeal was filed by the appellant - New India Assurance Co. Ltd. and Respondent 3 - NGEF Ltd. against the Union of India representing the Railway Administrations concerned, imploding the Bihar State Electricity Board as a pro forma defendant, to recover the sum of Rs. 1,97,864. 00 together with interest as compensation for loss of goods during transit by rail. The trial court decreed the suit against the Union of India for recovery of Rs. 1,97,864. 00 together with interest at the rate of 6 per cent per annum from the date of suit till payment. The first appeal filed by the Union of India against the plaintiffs has been allowed by the Karnataka High court and the judgment and decree of the trial court decreeing the suit have been set aside. Hence this appeal by special leave.

( 2 ) THE Bihar State Electricity Board (Defendant 3 placed an order with NGEF Limited (Plaintiff 2 for supply of one 20 MVA Transformer with accessories. NGEF Limited (Plaintiff 2 tendered the consignment on 15/6/1977 to the Railway Administration at Bangalore for carriage to and delivery at Hajipur in Bihar, naming the Bihar State Electricity Board (Defendant 3 as consignee. The consignment was covered by an open insurance policy issued by New India Assurance Company (Plaintiff 1 under which insurer was liable to reimburse the consignor NGEF Ltd. (Plaintiff 2 for non-delivery or loss of the consignment during transit by rail. The consignment reached the destination on 31/7/1977 but was found to be damaged. It appeared that the damage was caused to the consignment in transit during its transhipment from a broad-gauge wagon to a metre-gauge wagon. Open delivery of the consignment was given by the Railway on 31/8/1977 and a certificate of damage to this effect was issued by the Railway Administration. The damage caused to the consignment was also surveyed and the surveyor gave his report estimating the loss at Rs. 1,96,849. 00. The claim made by the Plaintiff 2 - NGEF Ltd. , the consignor, under the insurance policy was settled by the insurer by payment of Rs. 1,96,849. 00. The consignor Plaintiff 2 - NGEF Ltd. had written a letter in favour of the insurer Plaintiff 1 New India Assurance Co. Ltd. authorising the insurerto recover the damages from the Railway Administration. After the statutory notice. New India Assurance Company Ltd. as the insurer filed the suit for recovery of the said amount impleading the consignor as Plaintiff 2 and the consignee as the pro forma Defendant 3. The Consignee-Defendant 3 remained ex parte and did not contest the suit. The suit was contested only by the Union of India representing the Railway Administration.

( 3 ) THE defence of the Railway Administration was that ownership of goods was in the consignee-Bihar State Electricity Board (Defendant 3 and, therefore, the plaintiffs i. e. the insurer and the consignor had no right to sue. The liability for payment of compensation was also denied.

( 4 ) IT is significant that the Bihar State Electricity Board (Defendant 3 whose title to the goods was asserted by the Railway Administration, apart from not contesting the suit had also intimated the Railway Administration by a letter that it had no right or interest in the goods and, therefore, it had no objection to recovery of the amount by the plaintiffs from the Railway Administration. The letter Ex. P-9 dated 9/12/1978 sent by the consignee (Defendant 3 was addressed to the Railway Administration and countersigned by the Station Master of the destination station at the time of giving open delivery of the goods. There was thus no dispute of title to the goods or right to sue between the consignor and consignee.

( 5 ) THE trial court accordingly rejected this defence of the Railway Administration and held that the consignor (Plaintiff 2 had title to the goods and, therefore, was entitled to maintain the suit. It was also held that the damage to the goods was caused during