M. Satyanarayana Murthy, J.

The 1st defendant in OS No.948 of 1989 on the file of the Court of IV Senior Civil Judge, City Civil Court, Hyderabad (for short, "the trial Court"), preferred this appeal against the impugned decree and judgment dated 17.8.1999, whereby and where under the 1st defendant was directed to pay loss sustained by the plaintiff to a tune of Rs. 4,45,701.60/- ps., together with interest @ 21% p.a., from the date of suit till the date of decree and 6% p.a., from the date of decree till realization. The appellant was the 1st defendant and the 1st respondent was the plaintiff and respondent Nos. 2 and 3 were defendant Nos. 2 and 3 respectively before the trial Court and they will hereinafter be referred as arrayed before the trial Court for convenience.

2. The plaintiff filed this suit for recovery of a total sum of Rs. 4,45,701.60/-ps., against defendant Nos. 1 and 2 only towards loss sustained by the plaintiff in a fire accident since the 3rd defendant was only a formal party.

3. The plaintiff is a manufacturer of wax coated paper for the purpose of wrapping of biscuits and other products. In the course of its business, the plaintiff used to purchase paper from market so also wax which is a byproduct in the fractional distillation of petroleum and other raw material such is ink etc.,. The paper will be printed with designs and description of biscuits to be contained in it and thereafter, wax is coated by special process by virtue of which it is evenly spread.

4. In addition to purchase of raw material directly by the plaintiff, the plaintiff also receives stock belonging to biscuit manufactures and certain other third parties for whom the plaintiff does job work. The job work undertaken by the plaintiff was only printing and wax coating. During the said process, material belonging to third parties will be lying in the premises of the plaintiff only and the plaintiff alone is responsible for damage if any caused. The plaintiff obtained loan for working capital from the 1st defendant supplying raw material, finished products and goods in process lying in the premises of the plaintiff. To secure interest of the 1st defendant, the appellant bank, by following banking procedures, issued raw material and finished products lying at the premises of the plaintiff with the 2nd defendant. However, the plaintiff is the direct beneficiary and the amount paid towards premium by the 1st defendant to the 2nd defendant will be debited to the account of the plaintiff. Accordingly, a policy covering risk to a tune of Rs. 8,00,000/- was obtained against fire and other risks.

5. The 1st defendant also obtained a policy for a sum of Rs. 5,00,000/- vide policy bearing No.090800/01/1/00863 with the 2nd defendant valid from 26.1 1.1984 to 26.11.1985. While the matter stood thus, stock in trade of the plaintiff was reduced to Rs. 3,57,000/- by 31.3.1985. In addition to the plaintiffs material, there was stock approximately value of Rs. 1,80,000/-belonging to third parties. Thus, the total value of the material lying in the premises is more than Rs. 5,00,000/-. As the plaintiff already insured stock with Secunderabad Branch of United India Insurance Company for a sum of Rs. 8,00,000/-, obtaining any other policy for the period covering from 26.11.1984 to 26.1 1.1985 became unnecessary. Accordingly, the plaintiff addressed letter dated 24.12.1984 to the 1st defendant requesting the above referred policy obtained by the 1st defendant from the 2nd defendant be cancelled and for refund of amount. The said letter was immediately forwarded to the 2nd defendant by the 1st defendant with a request to cancel the policy and for refund of premium. The 2nd defendant did not act upon the letter of the 1st defendant and no steps were taken to cancel the policy or for refund of premium. However, the plaintiff again requested the 1st defendant for cancellation of policy and remittance of premium collected by letter dated 27.5.1985. In pursuance