IMPORTANT POINT
The court established that a bailee's duty of care is heightened in circumstances involving sophisticated goods, and that insurance policies covering a bailee's interest in goods must be interpreted broadly to fulfill the reasonable expectations of the parties involved.

JUDGMENT :

(Judgment of the Court was delivered by R.SUBRAMANIAN, J.)

Prayer : Appeal filed under Section 96 of the Code of Civil Procedure, against the judgment and decree of the VII Additional City Civil Court at Chennai dated 28.03.2018 in O.S.No.5947 of 2015.

The 1st defendant is on appeal, aggrieved by the decree and judgment in O.S.No.5947 of 2015 on the file of the VII Additional City Civil Court, Chennai.

2. The said suit was launched by the 1st respondent herein seeking a decree for a sum of Rs.10,88,707/- with interest at 18% per annum from the date of plaint till date of realization towards damages to the goods belonging to the 1st respondent that were entrusted with the appellant herein, a Container Freight Station. The 2nd respondent herein, a General Insurance Company was impleaded, as the appellant had insured the said goods in its custody with the said Company.

3. Henceforth, the parties will be referred to as per their rank in the suit for the sake of convenience.

4. The plaintiff sued for damages contending that the goods imported by it were entrusted with the 1st defendant, a Container Freight Station for custody till such time the customs duty payable on the goods is paid by the plaintiff. The entrustment of the goods was also acknowledged by the 1st defendant. The storage charges included the insurance premium payable to the 2nd defendant for covering all risks for the goods that were stored with the 1st defendant. Unfortunately, due to the heavy rains that lashed Chennai during October 2005, the entire warehouse, where the goods were stored got inundated, resulting in damage to the goods.

5. The plaintiff was informed of the loss by the 1st defendant and a survey was conducted by a qualified surveyor on 03.11.2005. The surveyor assessed the damage to the goods and the 1st defendant lodged a claim with the 2nd defendant in respect of the goods lying in the warehouse. The plaintiff also on its part lodged a claim on 21.11.2005. A joint survey was conducted on 29.11.2005 and some of the goods belonging to the plaintiff were found to have been damaged and the value of the damaged goods was assessed at Rs.10,88,707/-. The 1st defendant referred the claim to the Commissioner of Customs, since the goods damaged were dutiable goods. The Commissioner of Customs lodged a claim with the 2nd defendant under the insurance policy dated 21.06.2005. The 2nd defendant did not settle the claim. Since the goods were urgently required by the plaintiff for its manufacturing purposes, the plaintiff had paid the customs duty under protest and cleared the goods.

6. Contending that the cargo was damaged due to the negligence of the 1st defendant and the 1st defendant as a bailee was duty bound to protect the goods in terms of Section 151 and 152 of the Indian Contract Act, 1872, the plaintiff laid the suit impleading the Insurance Company as the 2nd defendant, since according to it, the 1st defendant is entitled to indemnity from the 2nd defendant as there was a valid insurance policy, which covered the risk of damage to the goods at the relevant point of time.

7. The suit was resisted by the 1st defendant contending that it had taken all necessary care that was expected of a bailee as required under Section 151 of the Act. It was contended that if the goods are damaged despite the bailee having exercised due care as expected of it under Section 151 of the Contract Act, it cannot be held liable for any loss to the goods. It was the further contention of the 1st defendant that in any event the goods having been insured with the 2nd defendant under the all risk policy at the relevant point of time, it is the 2nd defendant, which would be liable to pay the damage that had occurred to the 1st defendant.

8. The 2nd defendant resisted the claim contending that the cover under the policy does not extend to the loss of goods. According to the 2nd defendant, the coverage is available only in respect of liability to pay customs duty and the benefici