Case: State Of Orissa Vs. United India Insurance Co. Ltd.Represented By Divisional Of

has been defined in S. 2(a) to mean a contract of marine insurance as defined by S. 3, "Marine Adventure" has been defined under S. 2(d) to include any adventure where any insurable property is exposed to maritime perils. "Maritime perils" has been defined in S. 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 say, 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-sec. (2) and the explanation thereto are not relevant for the purpose of this case, hence omitted. 5. 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 for the reason that the contract of insurance under Ex. A-22 is a composite one. It reads 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 agrees 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." 6. It is also seen, as extracted by the High Court, that the insurance was from port to port, in other words, from the port in Yugoslavia to the port 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 by the Insurance Company. But before that undertaking came to be effective, a notice was issued by the Insurance Company cancelling the same. One of the clauses in the contract is that "this contract is subject to 7 days notice of cancellation by either side in writing." Thus, it is a mutual right to be exercised by the parties to cancel the contract duly entered into. 7. 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 S. 237 of the Contract Act, which reads 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 such third persons to believe that such acts and obligations were within the scope of the agents authority." 8. It is found, as a fact, that he had no authority to undertake such liability by subsequent incorporation into the policy of such underwriting and, therefore, by operation of S. 237 of the Contract Act, the Insurance Company was not bound by such act of the manager. 9. A contract of Indemnity is a contract by which one party promises to save the other from loss caused to him by the conduct of any other person as contemplated in S. 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 person. 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. 10. In view of the fact that the Branch Manager 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 had 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 in General Assurance Co. v. Chandumull Jain, 1966(3) SCR 500. 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." 11. Therefore, the High Court has not committed any error of law warranting interference. 12.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]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 by the Insurance Company. But before that undertaking came to be effective, a notice was issued by the Insurance Company cancelling the same. One of the clauses in the contract is that "this contract is subject to 7 days notice of cancellation by either side in writing." Thus, it is a mutual right to be exercised by the parties to cancel the contract duly entered into.In view of the fact that the Branch Manager 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 had 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 in General Assurance Co. v. Chandumull Jain, 1966(3) SCR 500. Therein, this Court had held thuscondition gives mutual rights to the parties to cancel the policy at any time. To the assurer it gives a right to cancel the policy atthe High Court has not committed any error of law warranting interference.