State of
Orissa Vs. United India Insurance Co. Ltd.
[1997] INSC 365 (1 April 1997)
K.
RAMASWAMY, D.P. WADHWA ACT:
HEAD NOTE:
O R D
E R This appeal by special leave arise from the judgment of the Division Bench
of the Andhra Pradesh High Court, made on April 21, 1976 in Appeal No. 157/73.
The
admitted facts are that Vijay Commercial Corporation submitted a proposal for
insurance to cover certain risks, viz., supply of 12 Bulldozers of Yugoslavian
make, under Ex.A-22 dated July 23, 1966, which was subsequently extended by
fresh policy, Ex.A-3, dated July 27, 1966, wherein the Chief Engineer of State
of Orissa was also included as one of the insured. The insurance coverage was
for Rs. 27 lakhs. Before commencement of the contract for said supply, a notice
was issued on December
6, 1966 cancelling the
insurance. Since the appellant has claimed under the insurance policy, the
Insurance Company, namely, Hindustan Ideal Insurance Company Ltd. laid a suit
in the trial Court for declaration that the insurance coverage was duly
cancelled and for consequential injunction. The trial Court granted the decree.
On appeal, the High Court confirmed the same by the above judgment. Thus, this
appeal by special leave.
The
only question is : whether the appellant is entitled to damages from the
Insurance Company for non- supply of 12 bulldozers through their agent, Vijay
Commercial Corporation, who had the insurance from the Insurance Company. The
High Court extracted all the relevant clauses in the contract of insurance and
held that it was a "Marine and Transit Insurance" policy under
Ex.A-22 and non- supply of bull-dozers was not a condition of this policy and
further, since under the contract the insurer was entitled to terminate the
contract in terms of the insurance, the cancellation thereof was valid in law
and that the respondents were not liable for damages for non-supply of the
goods.
Section
3 of the Marine Insurance Act, 1963, Act (11 of 1963) (for short, the `Act')
contemplates that a contract of marine insurance is an agreement whereby the
insurer undertakes to indemnify the assured, in the manner and to the extent
thereby agreed, against marine losses, that is to say, the losses incidental to
marine adventure. The expression "Contract of Marine Insurance" has
been defined in Section 2(a) to mean a contract of marine insurance as defined
by Section 3. "Marine Adventure" has been defined under Section 2(d)
to include any adventure where any insurable property is exposed to maritime
perils. "Maritime perils" has been defined in Section 2(e) and means
the perils consequent on, or incidental to, the navigation of the sea, that is
to say, perils of the seas, fire, war perils, pirates, rovers, thieves,
captures, seizures, restraints and detainments of princes and peoples, jettisons,
battery and any other perils which are either of the like kind or may be
designated by the policy. Section 3 of the Act envisages that :
"A
contract of marine insurance is an agreement whereby the insurer undertakes to
indemnify the assured, in the manner and to the extent thereby agreed, against
marine losses, that is to stay, the losses incidental to marine
adventure." Section 4 of the Act is a composite policy as regards mixed
sea and land risks. It contemplates thus:
"
"4(1) A contract of marine insurance may, by its express terms, or by
usage or trade, be extended so as to protect the assured against losses on
inland waters or on any land risk which may be incidental to any sea
voyage." Sub-section (2) and the explanation thereto are not relevant for
the purpose of this case, hence omitted.
The
question, therefore, is: whether the insurance coverage under Ex.A-22 includes
non-supply of 12 bulldozers contracted by Vijaya Commercial Corporation, which
had undertaken to supply the same to the appellant. Though it is contended that
the insurance liability starts only from destination Calcutta Port to any place in Orissa, we cannot accept the same of the
reason that the contract of insurance under Ex.A-22 is a composite one. It read
as under:
"Risk
to attach only when the goods hereby insured are inspected and certified as
sound by a representative of the Insurer before dispatch from Calcutta." "The said Company
promises and agree that the insurance aforesaid shall commence from the time
when the goods and Merchandise shall laden on board the said ship or Vessel
Craft or Boat as above. And continue until the said Goods and Merchandise be
discharged and safely landed at as above." It is also seen, as extracted
by the High Court, that the insurance was from part to part, in other words,
from the part in Yugoslavia to the part in Calcutta. Thus, it could be seen that for
the insurance to be operative, it is a transit policy and when non-supply
during the transit occurs, the liability is undertaken came to be effective, a
notice was issued by the Insurance Company cancelling the same. One of the clause
in the contract is that "this contract is subject to 7 days' notice of
cancellation by either side in writing." Thus, it is mutual right to be
exercised by the parties to cancel the contract duly entered into.
The
High Court has recorded the finding that the Branch Manager of insurance
company exceeded his authority as an agent by underwriting in the policy the
guarantee for the non-supply of bulldozers. The principal is not bound by such
an undertaking, by operation of Section 237 of the Contract Act, which read
thus:
"When
an agent has, without authority, done acts or incurred obligations to third
persons on behalf of his principal, the principal is bound by such acts or
obligations if he has by his words or conduct induced subh third persons to
believe that such acts and obligations were within the scope of the agent's
authority." It is found, as a fact, that he had no authority to undertake
such liability by subsequent incorporation into the policy of such under
writing and, therefore, by operation of Section 237 of the Contract Act, the
Insurance Company was not bound by such act of the manger.
A
contract of Indemnity is a contract by which one party promise to save the
other from loss caused to him by the conduct of any other person as
contemplated in Section 124 of the Indian Contract Act. But indemnity, as
applicable to marine insurance, must not be an indemnity, as contemplated by
the Indian Contract Act, as the loss in such a contract is covered by the
contract itself and such loss is not caused to the assured by the conduct of
the insurer nor by the conduct of any other persons. Brett. L.J., observed,
with regard to this indemnity, thus:
"this
contract means that the assured, in case of loss against which the policy has
been made, shall be fully indemnified, but shall never be more than fully
indemnified. That is the fundamental principle of insurance, and if ever a
proposition is brought forward which is at variance with it, that is to say,
which either will prevent the assured from obtaining a full indemnity, or which
will give to the assured more than a full indemnity, that proposition must
certainly be wrong." vide Marine Insurance by Banerji.
In
view of the fact that the Branch Manger was not authorised to cover the risk of
the loss on account of non- supply, the agent, namely, the Insurance Company is
not liable for any damages. But in view of the fact that the contract has been
duly terminated under the insurance itself, the declaration sought, viz., for
that the contract was duly cancelled, is clearly within the power and legal
competence. This controversy is covered by the judgment of a Constitution Bench
of this Court is General Assurance Co. vs. Chandumull Jain [(1966 (3) SCR 500
at 512]. Therein, this Court had held thus:
"This
condition gives mutual rights to the parties to cancel the policy at any time.
To the assurer it gives a right to cancel the policy at will." Therefore,
the High Court has not committed any error of law warranting interference.
The
appeal is, therefore, dismissed. No costs.
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