HONOURABLE SRI JUSTICE P.S.NARAYANA A.S. No:973 OF 1993 Dated: 13.4.2010 Between: Economic Transport Organization, Fleet Owners and Transport Contractors, 1-3, New C.S.T. Road, Calcutta. ..Appellant And 1. United India Insurance Company Limited, rep., by its Divisional Manager, Divisional Office No.1, Surya Bagh, Visakhapatnam and another. .. Respondents This Court made the following HONOURABLE SRI JUSTICE P.S.NARAYANA A.S. No:973 OF 1993 JUDGMENT: The unsuccessful defendant in O.S.No.125 of 1987 on the file of the II Additional Subordinate Judge, Visakhapatnam had preferred the present appeal. Though the respondents had been served, none represents the respondents. 2. Sri Ch. Ramesh Babu, the learned Counsel representing the appellant had drawn the attention of this Court to the specific pleas taken on the aspect of limitation and also on the aspect of the maintainability of the suit and would maintain that the trial Court had not settled proper issues and hence, appropriate findings in this regard had not been recorded and on this ground alone, the appeal is to be allowed. While further elaborating his submissions, the learned Counsel also pointed out Sections 3,6 and 10 of the Carriers Act and would maintain that the trial Court was unable to appreciate the scope and ambit of these provisions in proper perspective. The learned Counsel also would further maintain that even otherwise, the quantum which had been fixed though is on higher side but the interest which had been granted is definitely on higher side and hence, the same is to be modified. The learned Counsel also placed strong reliance on certain decisions to substantiate his submissions. 3. As already aforesaid, though the respondents had been served, none represents the respondents. This Court on 17.4.1993 made the following order: “Interim stay on condition of the petitioner depositing the entire decree costs together with Rs.60,000/- with interest thereon at 9% per annum from the date of the suit within six weeks from today. Notice.” It is stated that the order had been complied with. 4. Before taking up the points for determination, which fall for consideration in this appeal and before proceeding to record the findings in the present appeal, it may be appropriate to have a glance at the respective pleadings of the parties, the issues settled, the evidence available on record and also the findings recorded by the trial Court as well. 5. The averments made in the plaint:- The respondents herein- plaintiffs pleaded in the plaint as hereunder: “ 3(a) The 1st plaintiff is a General Insurance Company and the 2nd plaintiff is a structural Engineering Factory at Visakhapatnam. The 2nd plaintiff not only manufactures heavy items required by various industries throughout India but also undertakes the jobs of erecting a structure at Barauni in Assam. For the purpose of said erection, the second plaintiff sent certain parts of a total value of Rs.2,00,009.75 p.s., from Visakhapatnam to Barauni. (b) The said consignment was entrusted to the defendant’s branch office at Visakhapatnam on 30.1.1985. The said consignment was got loaded by the defendant in truck No.APV 5093 and the defendant branch office at Visakhapatnam issued L.R.41-063 to the 2nd plaintiff. The said consignment should have reached Barauni in five days. The said consignment did not reach Barauni and was not delivered. (c ) Thereupon, the 2nd plaintiff lodged a claim and complained to the defendant in the 1st week of February, 1985. Thereupon, the defendant started enquiries through its branches at Patna and other places. To assure the 2nd plaintiff, the defendant-branch office sent a Photostat copy of the letter of their Patna Branch dated 11.2.1985. (d) The 2nd plaintiff took out a transport insurance policy from the 1st plaintiff, and the goods delivered to the defendant by the 2nd plaintiff were thus insured by the 1st plaintiff. After enquiries, the Tatanagar Branch Office of the defendant by letter dated 10.8.1985, which was also endorsed by the General Manager of the defendant at Calcutta, confirmed that the goods have been lost and the police FIR had been filed. Finally, the defendant-organization informed the 2nd plaintiff about the loss of goods. (e) Thereupon, the 2nd plaintiff addressed a letter to the defendant on 23.8.1985 requesting the defendant to pay the value of the consignment, but by mistake in the letter, the value of the consignment was mentioned as Rs.1,20,000/- though its value is Rs.2,00,009.75 ps. A further letter was also written by the 2nd plaintiff to the defendant claiming settlement of the amount. Even in this letter by mistake it is mentioned that the claim is for Rs.1,20,000/-. The defendant-company issued a certificate of non-delivery of the total consignment only on 14.11.1985. In this certificate in the prior paragraph, it is categorically noted that the value of the consignment was Rs.2,00,000/- but taking the undue advantage of the incorrect claim made by the 2nd plaintiff in the penultimate paragraph of the certificate, the estimated loss was shown as Rs.1,20,000/-. (f) The 2nd plaintiff made a claim on the 1st plaintiff who is under writer and insurer and asked him to pay the compensation. After processing the claim, the 1st plaintiff paid an amount of Rs.2,00,000/-to the 2nd plaintiff under cheque No.0252477, dated 29.8.1986 drawn on the Bank of India, Visakhapatnam. As an insurer and underwriter, under law, the first plaintiff subrogated into the shoes of the 2nd plaintiff. In fact, the 2nd plaintiff also executed a stamped letter of subrogation on 30.5.1986. This was also notarized. As such, the 1st plaintiff is entitled to the reimbursement of Rs.2 lakhs from the defendant. (g) Whatever it may be, the 2nd plaintiff is added as a party and also suing along with the 1st plaintiff to avoid any technical arguments by the defendant. The plaintiffs are therefore filing a suit for recovery of an amount of Rs.2 lakhs and interest thereon from 5.9.1986 the date on which the amount was paid by the 1st plaintiff to the 2nd plaintiff at the rate of 18% per annum, which the plaintiffs are entitled to under law and the rate being prevailing market rate.” 6. The averments made in the written statement are : “The cause of action mentioned in the plaint is not correct. Further, a plea was taken that the suit is time barred. It was also pleaded that the suit is not maintainable as the defendant is not liable to pay any amount to the 2nd plaintiff. The 1st plaintiff must put to strict proof of the person, who has signed the plaint, has got authority to sign the plaint as the plaint is silent about the signing of the plaint and their authority to sign the plaint. On this count itself, the suit has to be thrown out even without going into the merits of the case. The allegation that the 2nd plaintiff has sent certain parts of goods worth Rs.2,00,009-75 ps., from Visakhapatnam to Barauni is absolutely false and incorrect. According to the 2nd plaintiff, the value of the goods are Rs.1,20,000/-. The 2nd plaintiff has exaggerated the figure for the reasons best known to them. There is no list of the articles sent by the 2nd plaintiff enclosed to the plaint. Therefore, the defendant is keeping his right to file additional written statement after filing of the list. The allegation that the said consignment was entrusted to the defendant branch office at Visakhapatnam on 30th January, 1985 is not correct. There is no question of entrustment. The 2nd plaintiff has booked one consignment on 30th January, 1985 at owner’s risk through the defendant. The LR filed along with the plaint will clearly prove that the consignment was booked at owner’s risk. The 2nd plaintiff has kept quiet for so many months and never informed or made any claim on the defendant regarding the said consignment. Hence, for want of proper notice of claim, the 2nd plaintiff is not entitled to claim any amount from the defendant. Therefore, the allegation that the 2nd plaintiff lodged a claim and complaint to the defendant even in the 1st week of February, 1985 and the defendant-organization started enquiries through its Branch at Patna and other places is absolutely false and incorrect. The allegations that the defendant assured the 2nd plaintiff regarding the said loss is absolutely false, incorrect and created by the plaintiffs for their personal benefit. The correspondence between the plaintiffs and the defendant in fact will clearly establish that the defendant never agreed to pay any amount as the goods were sent at owner’s risk. The plaintiffs intentionally suppressed the said correspondence and also the exchange of lawyers’ notices. The suppression of lawyer’s notice and the correspondence will clearly prove that the plaintiffs with a malafide intention filed the above case for wrongful gain. It is a fact that the defendant had informed that the goods have been lost and a complaint was given to the police and this fact was also informed to the 2nd plaintiff. The allegations in para No.3(e) of the plaint that thereupon the 2nd plaintiff addressed a letter to the defendant on 23.8.1985 requesting the defendant to pay the value of the consignment but by mistake in that letter, the value of the consignment was mentioned as Rs.1,20,000/- though its value is Rs.2,00,009-75 ps., and further letter was also written by the 2nd plaintiff to the defendant claiming settlement of the amount and even in that letter, it is by mistake mentioned that the claim is for Rs.1,20,000/- and that it is only a mistake and that the defendant only on 14.11.1985 issued a certificate of non-delivery in the prior paragraph, it is categorically noted that the value of the consignment was Rs.2 lakhs but taking the undue advantage of an incorrect claim made by the 2nd plaintiff in the penultimate paragraph of the certificate that the estimated loss was shown as Rs.1,20,000/-, it is only taking the undue advantage of the mistake committed by the staff in noting the amount as Rs.1,20,000/- , are all absolutely false and incorrect. The value of the goods is Rs.1,20,000/- but not Rs.2,00,009-75 ps. The correspondence and the letters written by the 2nd plaintiff will clearly prove the value as Rs.1,20,000/- . Now they have no right to claim more than that amount and the defendant is not liable to pay any amount. The allegations mentioned in paragraph 3(f) of the plaint that the 2nd plaintiff made a claim on the first plaintiff, who is under writer and insurer and asked him to pay the compensation; after processing the claim, the first plaintiff paid an amount of Rs.2 lakhs to the 2nd plaintiff under cheque No.0252477, dated 29.8.1986 drawn on the Bank of India, Visakhapatnam, and as an insurer and underwriter, under law, the first plaintiff subrogated into the shoes of the 2nd plaintiff, in fact, the 2nd plaintiff also executed a stamped letter of subrogation on 30.5.1986; as such, the 1st plaintiff is entitled to the reimbursement of Rs.2 lakhs from the defendant, are all absolutely false and incorrect. When the defendant is not liable to pay any amount to the 2nd plaintiff, the question of liability of the defendant would not arise. The case is between both the plaintiffs but not with the defendant. The 2nd plaintiff is not entitled to claim any amount from the defendant and this fact was known to the 1st plaintiff. If really, the failure is in force, the 1st plaintiff has to pay the amount to the 2nd plaintiff and the said liability cannot be thrown on the defendant, as the defendant is not liable to pay any amount. The letter of subrogation and special power of attorney are not valid and it cannot be looked into for want of so many reasons. When the 2nd plaintiff knows very well that the defendant is not liable to pay any amount, the question of executing the letter of subrogation in favour of the 1st plaintiff would not arise. The creation of the said subrogation by both the plaintiffs will clearly establish that it is for recovery of amount from the defendant with a malafide intention. The defendant is not laible to pay any amount.” 7. The undernoted issues had been settled by the trial Court: 1. Whether the 2nd plaintiff has sent parts of total value of Rs.2,00,009.75 ps., to the defendant? 2. Whether the consignment was booked at owner’s risk? 3. Whether for want of proper notice claim by the 2nd plaintiff is not maintainable? 4. Whether the 1st plaintiff paid an amount of Rs.2,00,000/- to the 2nd plaintiff and the defendant is liable to pay the amount to the 1st plaintiff? 5. Whether letter of subrogation is valid and binding on the defendant? 6. Whether the defendant is entitled for compensatory costs? 7. To what relief ? 8. Evidence available on record: Oral Evidence: P.W.1: N. Nehamia, P.W.2 S. Subbarao and D.W.1. M.V. Raju. Documentary Evidence: Exs.A1 to A12. 9. Findings recorded by the trial Court in nutshell: The trial Court on appreciation of evidence of P.W.1, P.W.2 and Exs.A1 to A12 and also D.W.1 recorded findings in detail and held that the plaintiffs failed to prove that the value of the consignment entrusted by the 2nd plaintiff to the defendant under Ex.A2 is Rs.2,00,009-75 ps., and not Rs.1,20,000/- and accordingly, answered issue No.1. While answering issue No.2 the trial Court held that the consignment under Ex.A2 is not booked at owner’s risk and the defendant is liable for the loss of the consignment entrusted by the 2nd plaintiff to the defendant under Ex.A2. Further, on appreciation of evidence available on record, while answering issue No.3 at paragraph No.18, the trial Court held that there is proper notice under Section 10 of the Carriers Act, 1865 and hence, the suit is maintainable. While answering issue No.4, at paragraph No.19, Ex.A12 had been referred to and ultimately, it was held that the 1st plaintiff paid Rs.2,00,000/- to the 2nd plaintiff but the defendant is not liable to pay the entire amount of Rs.2,00,000/- to the 1st plaintiff. While answering issue No.5 at paragraph No.20, it was held that the letter of subrogation is valid and binding on the defendant. Thus, further findings had been recorded while answering issue Nos.6 and 7 at paragraphs No.21 and 22 and ultimately, the trial Court came to the conclusion that the suit is to be decreed in part against the defendant directing the payment of Rs.1,20,000/- with interest thereon at 18% per annum from 5.9.1986 till the date of suit with proportionate costs and subsequent interest thereon at 18% p.a., from the date of suit till realization as the transaction is a commercial transaction. Aggrieved by the same, the present appeal had been preferred. 10. In the light of the submissions made by Sri Ch. Ramesh Babu, learned Counsel representing the appellant, the following points arise for consideration in this appeal: (1) Whether non-framing of the issue relating to the maintainability of the suit would vitiate the findings and decree and judgment made by the trial Court in the facts and circumstances of the case ? (2) Whether the non-framing of the issue on the question of limitation had caused prejudice to the appellant and whether the decree and judgment made by the trial Court are vitiated by virtue of non-framing of the said issue? (3) Whether the findings recorded by the trial Court on the aspect of letter of subrogation and also on the aspect of the liability to pay the part of the amount are in any way viatiated or these findings are to be confirmed or to be set aside in the facts and circumstances of the case ? (4) Whether the interest granted by the trial Court can be said to be just and proper in the facts and circumstances of the case? (5) If so, to what relief the parties are entitled? 11.POINTS 1 TO 4: (I) For the purpose of findings, these points have to be discussed together. The parties herein after could be referred to as shown in the suit in O.S.No.125 of 1987 on the file of the II Additional Subordinate Judge, Visakhapatnam. (II) It is needless to say that the present appellant is unsuccessful defendant. The respondents are the plaintiffs in the said suit. Though the suit was partly decreed, the plaintiffs had not chosen to challenge that portion of the decree wherein part of the claim had been negatived and thus, the same had attained finality. Being aggrieved of the decreeing of the suit partly, the defendant had preferred the present appeal. (III) The suit is filed by the plaintiffs against the defendant for recovery of sum of Rs.2,16,500/- and subsequent interest and costs. The respective pleadings of the parties, the issues settled, the evidence available on record and the findings recorded by the trial Court had already been referred to supra and the same need not be repeated in elaboration further. (IV) It is not in serious controversy that the consignment of boiler components, beams, channels, pledges etc., were entrusted by the 2nd plaintiff to the defendant at Visakhapatnam in the premises of the 2nd plaintiff to deliver the same at Barauni in Assam and the defendant issued Ex.A2 consignment note and the consignment was loaded into a lorry bearing No.APV 5093 and that the said lorry with the said consignment was lost and was not traced. Thus, the 2nd plaintiff claims Rs.2,00,009-75 ps., from the defendant as the cost of the lost consignment entrusted to the defendant under Ex.A2. (V) The stand taken by the defendant is that the value of consignment entrusted to the defendant is only of Rs.1,20,000/-. The evidence of P.Ws. 1 and 2 and also D.W.1 is available on record. Ex.A1-copy of packing list, dated 30.1.1985, Ex.A2-lorry receipt dated 30.1.1985, Ex.A3-letter dated 10.8.1985, Ex.A4-non-delivery letter dated 25.9.1985, Ex.A5-non-delivery certificate dated 14.11.1985, Ex.A-6 to A9 are office copy of letters dated 23.8.1985, 24.8.1985, 19.11.1985 and 27.3.1986, Ex.A10-invoice dated 23.5.1986 and Ex.A11-receipt for Rs.2,00,000/- dated 5.9.1986 and Ex.A12-letter of subrogation and special power of attorney dated 30.5.1986, also had been relied on. (VI) Several of the facts appear to be not in serious controversy. No doubt, plea of privity of contract and the non-applicability of the doctrine of subrogation had been argued in elaboration. The findings in detail had been recorded by the trial Court in this regard. The principal submission by the learned Counsel representing the appellant is that the plea of limitation had been specifically taken, but no findings had been recorded in this regard since no issue as such had been settled. Yet another aspect that the suit itself is not maintainable in the light of Section 291 of the Companies Act and though this specific plea was taken in paragraph No.5 of the written statement, no specific issue in this regard had been framed by the trial Court and may be for that reason, no findings also had been recorded and thus, on both these grounds, the decree and judgment of the Trial Court having been vitiated, the same are liable to be set aside. (VII) The learned Counsel placed strong reliance on the judgment rendered in M/s. Nibro Limited Vs. National Insurance Company Limited[1] wherein the learned Judge of Delhi High Court at paragraph No.25 observed that “It is well settled that under Section 291 of the Companies Act except where express provision is made that the powers of a company in respect of a particular matter are to be exercised by the company in general meeting in all other cases the Board of Directors are entitled to exercise all its powers. Individual directors have such powers only as are vested in them by the Memorandum and Articles. It is true that ordinarily the court will not unsuit a person on account of technicalities. However, the question of authority to institute a suit on behalf of a company is not a technical matter. It has far reaching effects. It often affects policy and finances of the company. Thus, unless a power to institute a suit is specifically conferred on a particular director, he has no authority to institute a suit on behalf of the company. Needless to say that such a power can be conferred by the Board of Directors only by passing a resolution in that regard.” Further, strong reliance was placed on a judgment rendered in Ahmedabad Electricity Company Limited, Ahmedabad Vs. Sanghi Spinners (India) Limited, R.R. District, A.P. and another[2] , wherein the learned Judge of this Court observed, at paragraph No.31,32 and 33: “Section 291 of the Act provides the powers of the Board. As per the said provision, the Board of Directors of a company shall be entitled to exercise all such powers and to do all such acts and things, as the company is authorized to exercise and do. The exercise of such powers are restricted as per the proviso that are restricted under the provisions of any Act. Rule 21 of the Companies (Court) Rules, 1959 provides that every petition shall be verified by an affidavit made by the petitioner or by one of the petitioners and in the case of a body corporate by a director, secretary or other principal officer thereto. While considering the power to institute suits or legal proceedings on behalf of the company, it was held by the Delhi High Court in Nibro Ltd v. National Insurance Co. Ltd. , held that a director, as an individual director, has no power to act on behalf of the company. He is only one of a body of directors called the Board, and alone has no power except such as may be delegated to him by the Board or given to him by the articles. 32. This view was followed by the Madras High Court in Sankaranarayanan v. Shree Consultations and Services P. Ltd. (1994) 80 Co. Cases 558. The same view was even affirmed by a later decision of the same Court in Indian Commerce and Industries Ltd. v. S.S. Sangha (1998) 92 Co. Cases 719 (Mad.), and further affirmed in Swadharma Swarajya Sangha v. Indian Commerce and Industries Co. P. Ltd. (1999) 98 Co. Cases 151 (Mad-DB). 33. In view of the above legal position, it has to be considered whether the Company Secretary of the petitioner-Company was authorized to file the company petition as well as to give evidence by filing the verified affidavit and also to give evidence. Admittedly, no document, showing that there was any Board resolution of the petitioner-company authorizing the Company Secretary to file the company petition was filed. Except stating that he was having the authorization, the Company Secretary has stated nothing about the maintainability of the company petition. Even when it was suggested also when he was in the witness box, he did not produce any document showing that he had the authority to institute the company petition as well as to depose. In the absence of such evidence, there is no other option, except to take a view against the petitioner-Company that the company petition was instituted by a person, who is incompetent to institute the same. This issue is accordingly decided against the petitioner and in favour of the respondent-Company. (VIII) There cannot be any doubt or controversy relating to this proposition. This matter is of the year 1987. The suit was decreed on 18th January, 1993. It is pertinent to note that the suit was not decreed as prayed for. The suit was partly decreed. The appeal was preferred in the year 1993 and the same is pending disposal on the file of this Court sufficiently for a long time. On the ground that by virtue of non- formation of issue though specific plea had been taken in paragraph No.5 of the written statement, to make an order of remand at this length of time, in the considered opinion of this Court, may not be just and proper. Further, it is pertinent to note that the appellant-defendant had not taken appropriate steps by moving appropriate application before the trial