1 IN THE HIGH COURT OF BOMBAY AT GOA FIRST APPEAL NO. 6 OF 2004 1. M/s. Rajaram N.S. Bandekar & Company Pvt. Ltd., a Private Limited company constituted and incorporated under the Companies Act, 1956, having its registered office at Nitin Chambers, Swatantra Path, Vasco-da-Gama and through its Managing Director Shri Narayan R. Bandekar, major, married, businessman, residing at Vasco-da-Gama. 2. M/s. Gopiganga Ore Carriers, a Partnership Firm, duly registered under the Partnership Act, 1932, having its registered office at Usnori Building, 2nd floor, Kharewadda, Vasco-da-Gama and through is Managing Partner Shri P. Rajendra Prasad, S/o. Shri Gopinath Nair, major, married, resident of Vasco-da-Gama, Goa. .... Appellants V/s 1. The Oriental Insurance Company Ltd. subsidiary of General Insurance Corporation of India, having its registered office at Oriental House, P.B. No. 7037, A-25/27 Asaf Ali Road, New Delhi 110 002 and through its Divisional Office and Divisional Manager, Salgaocar Annexe 2 Building, P.O. Box 105, Vasco-da-Gama, Goa. 2. M/s. Kenkre Gude Shipping Pvt. Ltd. a private limited company constituted and incorporated under the Companies Act, 1956 having its registered office at 17-A, D. Kossambi Building, Vasco-da-Gama, Goa. .... Respondents Mr. A.F. Diniz, Advocate for the Appellants. Mr. E. Afonso, Advocate for Respondent No.1. Mr. R.G. Ramani, Advocate for Respondent No.2. CORAM : A.P. DESHPANDE & N.A. BRITTO, JJ. DATE :14 th NOVEMBER, 2008 JUDGMENT : (Per N.A. BRITTO, J.) This appeal is directed against that part of the judgment/decree dated 10/09/2003 of the learned Civil Judge, Senior Division, at Vasco-da-Gama by which plaintiffs' suit to recover an amount of Rs. 12 lacs with interest at the rate of 18% per annum from defendants no. 1 and 2, has been dismissed. The parties hereto shall be referred to in the names as they appear in the cause title of the civil suit. 2. The claim of the plaintiffs arose out of sinking of a barge known as 3 “M.V. Nitin” and having registration No. MRH 477 on the night of 13/14th of July, 1987 which was entrusted for major repairs to the yard of defendant no. 2 and which barge was owned by plaintiff no.1 and was handed over by plaintiff no. 1 to plaintiff no.2 pursuant to an agreement of sale dated 8/09/1986, as it could not be sold because it was hypothecated by plaintiff no.1 to Madgao Urban Co-operative Bank, Margao-Goa towards a loan taken by plaintiff no.1. There is no dispute that it is plaintiff no.2 who took the said barge to the repair yard of defendant no.2 on 13/12/1986 after defendant no. 2's quotation was accepted by plaintiff no.2 which, inter alia, stipulated that defendant no.2 would not be liable for natural calamities and the repairs would be carried out at the owner's risk though the yard of defendant no.2 would take all possible precautions while the vessel was in their care. Clause (d) of quotation (Exhibit P 39) reads thus: “The repairer does not hold himself responsible for any delays arising out of strikes, riots, natural calamities, and any unavoidable circumstances. Repairs will be carried out at the owner's risk, whereas the yard undertakes all possible precautions while the vessel is in their care.” 3. There is also no dispute that at the instance of defendant no.2, the plaintiff no.2 insured the said barge by filing a proposal form on 10/06/1997 and the proposal was accepted by by letter dated 17/06/1987 (Exhibit P1 Colly) but the cheque towards premium was dishonoured and, as a result, cash payment of premium was made on 13/06/1987 by PW2/Vassu Nair on behalf of plaintiff no.2 and who is an employee of plaintiff no.1 and brother- 4 in-law of Rajendra Prasad, the latter being also the employee of the plaintiff no.1. The plaintiff no.1 is a company of which Mr. & Mrs. Bandekar appear to be the only share holders and directors. Likewise, the plaintiff no.2 is a firm of which Mr. & Mrs. Rajendra Prasad are the sole partners. In a situation like this, eyebrows were bound to be raised as regards the claim of the plaintiffs. No policy document was however issued and the learned trial Court has held that, the payment of premium having been made on 13/06/1987 the liability of defendant no.1 would start from the previous midnight i.e. 12/13th July, 1987 and has further held that defendant no.1 had failed to prove that the barge had sunk on 13th July, 1987 prior to the payment of premium. 4. The learned trial Court has also come to the conclusion that the agreement of sale under which possession was given by the plaintiff no.1 to plaintiff no.2 is fictitious since the firm of plaintiff no.2 came to be registered only on 31/03/1987 and in case there was such an agreement plaintiff no.2 would not have written letter dated 6/07/1987-Exhibit DW1/Y by which certain terms in connection with the purchase of the said barge were made to plaintiff no.1 and plaintiff no.1 was required to sign the duplicate copy of the said letter as proof of acceptance of the said terms. No such letter was placed by the plaintiffs on record and therefore the learned trial Court concluded that the barge was towed to the yard of defendant no.2 by the said Rajendra 5 Prasad at the instance of plaintiff no.1 and, as such, there was no concluded contract or sale of the barge by plaintiff no.1 to plaintiff no.2. 5. Admittedly, the suit was filed by both the plaintiffs and the plaint was signed and verified by the plaintiff no.2 through its partner the said Rajendra Prasad and on behalf of plaintiff no.1 pursuant to a power of attorney given by the Chairman and Managing Director of plaintiff no.1 but without there being any resolution to that effect taken by the said plaintiff no.1 which is a registered company. Neither of the two Directors of plaintiff no.1 nor either of the partners of plaintiff no.2 stepped in the witness box to support the allegations of the plaintiffs but who appeared on behalf of both the plaintiffs is one Minanath Porob who claimed to be the Administrative Manager of plaintiff no.1. He deposed before the Court stating that he was the constituted power of attorney holder of the plaintiffs but did not produce any such power, and, in fact Shri Ramani, the learned Counsel on behalf of defendant no.2 has submitted that the evidence of PW1/Minanath Porob could not be looked into as he had not produced any authority on behalf of either of the plaintiffs to depose on their behalf. Although a power of attorney is seen in the records having been executed by the Chairman and Managing Director of Plaintiff no.1 in favour of the said Minanath J. Porob (PW1) in the absence of its production by PW1, we are inclined to accept the submission made by Shri Ramani that in the absence of any power having 6 been produced by the said Minanath Porob from either of the plaintiffs, the evidence given by him could not have been accepted by the learned trial Court. In fact, the witnesses examined on behalf of either of the parties are not eye witnesses to the occurrence of the accident of sinking of the suit barge and the entire case is based on hearsay evidence and some documents which are not disputed. 6. Be that as it may, we will first consider whether the defendant no.2 was liable to pay any damages to any of the plaintiffs. At the outset we must note that there was no privity of contract between plaintiff no.1 and defendant no.2 and the correspondence exchanged was between the plaintiff no.2 and defendant no.2 in regard to the repairs as well as the sinking of the barge. Initially after the barge sank, neither of the plaintiffs had any grievance against the defendant no.2 that the barge had sunk due to the negligence of defendant no.2 and although the first letter dated 6/12/1986-Exhibit P39, giving the quotation by defendant no.2 was addressed to the said Mr. Prasad, C/o. the address of plaintiff no.1, the subsequent letter dated 18/12/1986- Exhibit P43 was addressed to Mr. Prasad on behalf of the plaintiff no.2. It can be seen also from letter dated 5/12/1986-Exhibit 42 that it is plaintiff no.2 who had informed the Deputy Captain of Ports, Mormugao Harbour, that plaintiff no.2 had taken over the barge from plaintiff no.1 for annual service and repairs. It is only after the defendant no.1 informed the plaintiff no.2 by 7 letter dated 17/07/1987-Exhibit P4 that they should raise a claim against defendant no.2 that the plaintiff no.2 by letter of the same date-Exhibit P5 informed defendant no.1 that since the repairs were going under their direct supervision they should have taken proper care of the barge and further alleged that the accident had taken place on account of their total negligence and therefore they would hold them responsible for loss and other consequences. However, the plaintiff no.2 abandoned the said claim of negligence of defendant no.2 in their letter dated 22/07/1987-Exhibit P9 addressed to the defendant no.1, when they stated that the accident was caused due to uprooting of bollards due to the strong wind and heavy tide without mentioning anything about the negligence of defendant no.2. The position seen from the report dated 26/11/1987-Exhibit P25 belatedly filed by the plaintiff no.2 to the Captain of Ports is not different, where no negligence is attributed to defendant no.2 at all. 7. The defendant no.2 would be liable to make good the loss caused to the plaintiff no.2 in case defendant no.2 was negligent. The position of defendant no.2 as a repairer is that of a bailee, and, Section 151 of the Contract Act provides that in all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quantity and value as the goods bailed. Section 152 further provides that the 8 bailee, in the absence of any special contract, is not responsible for the loss, destruction or deterioration of the thing bailed, if he has taken the amount of care of it described in Section 151. It is well settled that in all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances. 8. There can be no doubt that in a suit of recovery of damages, the burden will not lie on the plaintiff-owner to prove that the loss or damages to the goods was caused owing to negligence of the bailee but the same will lie on the bailee, but, certainly such a burden can be discharged by the bailee by leading his own evidence or taking benefit of the evidence led by the plaintiffs. The Apex Court in Nath Bros. Exim International Ltd. V/s. Best Roadways Ltd. (2000 (4) SCC 553) has stated that; Sections 151 and 152 of the Contract Act in effect, embody the English common law rule as to the liability of the bailee and the measure of care required of the person to whom the goods are bailed, is the same as a man of ordinary prudence would take of his own goods. If a person is negligent and does not take as much care as he would have taken of his own goods, he would be liable in damages and these principles are applied in our country. 9. The Apex Court in N.R. Srinivassa Iyer v/s. New India Assurance Co. Ltd., Madras (AIR 1983 SC 899) has stated when the custody is of the bailee or the sub-bailee, the burden is on them to show how they handled the car. The Apex Court had referred to Morris's case (1965-2 All ER 725) and 9 reiterated the position that: “Once a man has taken a charge of goods as a bailee for reward, it is his duty to take reasonable care; to keep them safe; and he cannot escape that duty by delegating it to his servant. If the goods are lost or damaged, whilst they are in his possession, he is liable, unless he can show - and the burden is on him to show - that the loss or damage occurred without any neglect or default or misconduct of himself or of any of the servants to whom he delegated his duty.” 10. The learned trial Court observed that there was some negligence on the part of defendant no.2 which resulted in sinking of the barge as the bottom of barge had developed holes which resulted in water percolating in the double bottom on account of which the barge sank. However, in our view, that is not the conclusion which could have been arrived at, in the light of the various admissions secured by defendant no.2 from the said Minanath Porob, the only witness examined on behalf of the plaintiffs. The said Minanath Porob had admitted that the barge was tied to the bollards and the bollards were pulled up due to the storm as a result of which the barge sank along with the material which was kept inside the barge. He had also admitted that attempts were made to pump out the water accumulated in the barge but the efforts were in vain. He had also admitted that the defendant no.2 by reply dated 20/07/1987-Exhibit P6 had written to them that they had taken all due care for the safety of the barge and the accident was due to heavy rains and accumulation of the water in the body of the barge. He also admitted that the plaintiffs had accepted the terms of defendant no.2 that the repairs would be 10 carried out at owner's risk. He also admitted that defendant no.2 had taken all precautions as per the said conditions of repair quotations dated 6/12/1986- Exhibit P39. He had further admitted that the proximate cause of accident was due to heavy and continuous rains and further admitted that the plaintiff no.2 had taken steps to claim damages against defendant no.2 at the instance of the defendant no.1. It is also seen that he admitted that defendant no.2 had no privity of contract with plaintiff no.1 and plaintiff no.2 knew fully well that the barge sank due to the act of God and perhaps they were trying to recover losses from defendant no.2 as at the relevant time the barge was in their custody. Last but not least he had admitted that he could not point out any instance of negligence against defendant no.2 and had further admitted that it was not stated in the report that the cause of accident was due to the negligence of defendant no.2. Learned Counsel on behalf of the plaintiff submits that in case there was heavy rains and electricity had failed on account of which water from the barge could not be pumped out then the defendant no.2 ought to have made provision for backup facilities. We are afraid we are not in a position to accept such a submission in view of the admission of the plaintiffs' witness that he could not point out any instance of negligence against defendant no.2 and that being the position, the finding of the learned trial court that there was some negligence on the part of defendant no.2 cannot be sustained and in the absence of any negligence on behalf of defendant no.2 the plaintiff no.2 would not be entitled to recover any 11 damages from defendant no.2. We reiterate that there was no privity of contract between plaintiff no.1 and defendant no.2 and as such plaintiff no.1 was not entitled to recover any damages from defendant no.2. In the above view of the matter, the dismissal of suit against defendant no.2 could not be faulted. 11. The next point to be considered is regarding the repudiation of the liability by defendant no.1 under the policy issued in favour of plaintiff no.2 concerning the said barge. After much correspondence between plaintiff no.2 and defendant no.1, the policy was repudiated by defendant no.1 by their letter dated 2/05/1987-Exhibit P35 stating that the plaintiff no.2 had no insurable interest, their claim was false and the policy was obtained under misrepresentation without disclosing material facts and the alleged sinking of the barge was a great fraud. In the written statement filed, the defendant no.1 contended that the policy was obtained by plaintiff no.2 by misrepresentation of the facts (i) that they were the owners, (ii) that the barge was sea-worthy and (iii) the barge was manned at all times by a licenced tandel and for non- disclosure of the fact that; (i) the barge was refused to be insured by any other company, (ii) the barge was flooded with water and had started sinking/sliding on 12/07/1987 and in fact sunk on 13/07/1987 at 13.00 hrs., 4 hrs. before the premium was paid and (iii) the barge was rescued from sinking by defendant no.2 some 8 days prior to the actual date of sinking. 12 The defendant no.1 had led evidence of their Divisional Manager Shri Olavo D’Souza who, inter alia, had stated that on the day of sinking of the barge, the barge was in a state of total disrepair and required major structural repairs including replacement of plates in large quantity, complete overhauling of the engine and other machinery, replacement of pipings, etc. 12. The learned trial Court came to the conclusion that the plaintiff no.2 had no insurable interest in the barge but we proceed on the assumption that the plaintiff no. 2 had an insurable interest as plaintiff no.2 had taken over the barge from plaintiff no.1 as a bailee for the purpose of repairs and had accordingly informed the Captain of Ports vide letter dated 5/12/1986-Exhibit 42 that he was taking over the barge, though, none of the terms and conditions of the agreement dated 8/09/1986-Exhibit P38 between both the plaintiffs were complied with. The said agreement vide clause 18(i) also mentions that plaintiff no.2 would hold the said vessel as bailee of the owners. The learned trial Court had concluded that the plaintiff no.2 misrepresented to defendant no.1 that proposal form-Exhibit D1 that plaintiff no.2 was the owner of barge when in fact it was the plaintiff no.1 who was the owner. The fact that plaintiff no.1 was the owner of the barge as well as the registered owner is a fact which is born out by various documents produced on record. For example the accident report dated 26/11/1987- Exhibit P 25 submitted by plaintiff no.2 mentions the name of the owner as 13 that of plaintiff no.1. Even in their letter dated 24/02/1988-Exhibit P28 the plaintiff no.1 did not dispute his ownership in respect of the barge in question and when plaintiff no.1 was told to remove the said barge by letters dated 4/12/1987 and 17/12/1988 by the Captain of Ports, all that the plaintiff no.1 did by the letter dated 24/02/1988- Exhibit P28 is to seek more time to remove and refloat the barge. Plaintiff no.1 did not deny that he was the owner of the barge in question and in fact plaintiffs’ witness has admitted that plaintiff no.1 is the owner of the suit barge and on second thought has further admitted that the plaintiff no.2 does not claim to be the owner of the barge based on the said agreement dated 8/09/1983. If that be so, how did plaintiff no. 2 fill in the proposal for insurance showing that the plaintiff no.2 was the owner of the barge? In case the plaintiff no.2 had correctly shown that plaintiff no.1 was the owner, the defendant no.1 might have considered of not issuing the policy in favour of plaintiff no.2 when someone else was owner of the barge. This is one instance of misrepresentation. Secondly, the plaintiff no.2 filed the proposal as if the barge was a seaworthy and seagoing vessel and in fact even stated that the barge was capable of having a cruising speed of 7 knots and was being used for transportation of ore and was in charge of a licensed tandel when the admitted position is that from the year 1985 itself the suit barge was laid of uninsured as it required major repairs. At the time of the filing of the proposal as well as the at the time of payment of premium in cash, the barge was almost a wreck as the hull was damaged, 14 the bottom was under replacement and the engines were not working. It has been admitted by the plaintiffs' witness that the suit barge required bottom replacement, cargo handling and other carpentry works as well as other works which he did not remember and the repair works were going on till the barge sank on 14/07/1987. That the barge was not a sea going vessel and was given for repairs as it required major repairs including repairs to the hull and engines was a fact which was suppressed by plaintiff no.2 in the proposal from. It was certainly the duty of plaintiff no.2 to have informed these facts to the defendant no.1 at the time of obtaining the policy of insurance but these facts were completely suppressed and had the defendant no.1 known these facts they would not have certainly insured the barge for the value it did. In fact, it appears that the barge at the time of its sinking was not worth even more than Rs. 6 lacs since that was the estimate submitted for refloating of the barge and any prudent business man would have got it refloated and minimized his losses in case it was worth more than Rs. 6 lacs. Admittedly, the plaintiffs abandoned refloating of the said barge as it was economically not viable. The fact that the barge was salvaged a week prior to the actual sinking was also another fact which was not disclosed to the defendant no.1. The learned trial Court has also held that there was no tandel is another fact which was suppressed by the plaintiff no.2 and in fact it appears as already stated that the plaintiff no.2 had mentioned in the policy that the barge had a registered tandel only to give an impression that it was a seagoing vessel. 15 13. Section 19 of the Marine Insurance Act, 1963 states that: A contract of marine insurance is a contract based upon the utmost good faith, and if the utmost good faith be not observed by either party, the contract may be avoided by the other party. Sub-section 1 of Section 20 further stipulates that: The assured must disclose to the insurer, before the contract is concluded, every material circumstance which, is known to the assured, and the assured is deemed to know every circumstance which, in the ordinary course of business, ought to be known to him. If the assured fails to make such disclosure, the insurer may avoid the contract. Sub-section 4 of Section 20 provides that: Whether any particular circumstance, which is not disclosed, be material or not is, in each case, a question of fact. 14. In the case of Vijaykumar Motilal V/s. New Zealand Insurance Co. Ltd. (1954 BCI (0) 154) this Court has held that a policy of insurance can be vitiated by any breach of warranty, fraud or misrepresentation. But failure on the part of the assured to disclose the nature of his interest in the goods cannot be said to amount to a breach of warranty. All that is required is that the assured should have insurable interest in the subject-matter. Even the interest of a bailee is sufficient to establish an insurable interest and it was not disputed that an unpaid vendor of the goods has an insurable interest in the property which is the subject matter of the contract of insurance. 16 15. The