Case: Union Of India Vs. Sri Sarada Mills Ltd

is ineffective. The reason is that a bare right of litigation cannot be assigned.......The only decision to the contrary is that of the Privy Council in King v. Victoria Insurance Co. Ltd., 1896 AC 250 which should not be followed." (see the argument at p. 108).The Court overruled the argument and held that the decision in 1896 AC 250 correctly lays down the law. After reviewing the case law on the subject, Roskill, J. speaking for the Court observed :"So much, then for the authorities. What is the principle to be adduced from them? I think it can be stated in this way. Where, before 1873, equity would have compelled the assignor to exercise his rights against the contract breaker or tort-feasor for the benefit of the assignee, those rights can, since 1873, be made the subject of a valid legal assignment and, subject to due compliance with the requirements of the statute as to notice, can be enforced at law. Equity always, before 1873, compeldsled an assured to lend his name to enforce his underwriters rights of subrogation against a contract breaker or tort-feasor. It follows, therefore, that the only possible object to such rights being now enforceable at law is that such enforcement would involve the enforcement of a bare cause of action in contract or in tort. But as Mr. Littman urged upon me, if that is so, why did equity act as equity did not before 1873 in relation to the enforcement of subrogation right? I think the answer is because the enforcement of such rights was never regarded as the enforcement of a bare cause of action, but as the enforcement of a cause of action legitimately supported by the underwriters interest in recouping himself in respect of the amount of the loss which he had paid under the policy as a result of the acts, neglects or defaults of the actual contract breaker or tort-feasor."47. In Ansons Law of Contract Twenty-third edition, edited by A.G. Guest, p. 417, it is stated that although an assignment of a bare right to litigate has been held invalid, the principle is necessarily subject to qualification. One such qualification is"Supreme an insurer, who has indemnified his insured under a policy of insurance and in consequence been assigned the insureds right of action in respect of a breach of contract, sues to enforce this right of action against the contract-breaker. Could he be met by the plea that he is the assignee of a bare right of action? In (1965) 1 QB 101 Roskill, J. held that the enforcement of such a right is not the enforcement of a bare right of action, but of a right of action legitimately supported by the insurers interest in recouping the loss sustained by paying out on the policy".48. In the Law of Contract by Cheshire and Fifoot, Seventh edition, p. 472, the case of (1965) 1 QB 101 is quoted as authority for the proposition that if goods shipped on a vessel are delivered in a damaged condition, the consignee, after being indemnified for his loss by the insurers can assign to the latter his right to recover damages from the owner of the vessel.49. The real reason why a mere right to sue cannot be assigned is that such an assignment would offend the rule of champerty and maintenance. Now, as in this case where an insurance company has been subrogated to all the rights and the remedies of the assured by virtue of Section 135-A, the reason for the rule against assignment of a mere right to sue does not obtain because the insurance company is clothed with all the rights and remedies of the assured and the only thing lacking is the capacity to sue in its own name. If the right is capable of being assigned, and is assigned, it would no longer be logical to say that the assignor can still sue, for, whatever right the assignor had in the subject matter had passed to the assignee. It is impossible to understand, how, after the assignment, the assignor can still maintain a suit.50. This question was considered by the Madras High Court in AIR 1965 Mad 159 and the Court said :"However, an assignment or a transfer implies something more than subrogation, and vests in the insurer the assureds interest, rights and remedies in respect of the subject matter and substance of the insurance. In such a case, therefore, the insurer, by virtue of the transfer of assignment in his favour will be in a position to maintain a suit in his own name against third parties (22 Halsburys Laws of England, Simond Edn. paras 512-513 and Shawcross on Motor Insurance)."Normally, an assignment of a right of action for a tort is not valid under Section 6 (e). But cases of subrogation as applied to insurance for indemnity are an exception to the rule and assignments by the assured to the insurer of his rights and remedies being more than a transfer of a mere right to sue are permissilbe and are valid. But express assignment by the assured of all his rights is necessary and subrogation by itself will not enable the insurer to sue in his own name (1896 A.C. 250; (1883) 11 QBD 380)."It is regrettable that the attention of the High Court was not drawn to the above decision.51. I think the reasoning in the decisions above referred to is correct, that the assignment conveyed to the insurance company, the entire right in respect of the subject matter of the insurance, including the right of the assured to sue in its own name and that, after the assignment, the assured had no cause of action to institute the suit against the Railway Administration for recovery of damages.52. I would allow the appeal and set aside the judgment and decree of the High Court and restore the decree passed by the Subordinate Judge Coimbatore, dismissing the suit, without any order as to costs.

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

Explanation:
0[ds]15. A chose in action for breach of contract was not assignable at law of contract was not assignment at law but was assignable at equity. A chose in action in tort was assignable neither in law nor in equity. A bare right of action is not assignable. When however the right of action is one of the incidents attached to the property or contract assigned it will not be treated as a bare right of action.16. In ErtelBieber and Co. v. Rio Tinto Co., 1918 A.C. 260Lord Sumner treated a cause of action for damages for breach of contract as chose in action, a form of property. The reason for holding a cause of action for damages for breachd of contract to be a form of property is that the assignee is seeking to enforce a right which is incidental to property or a right to a sum of money which theoretically is part of the property.17. The common law was not inclined in favour of assignment of contractual rights and liabilities. A person to whom rights were assigned could not sue in his own name at common law. In equity both legal and equitable choses in action have been subject to assignment. Contractual rights being legal choses in action could generally be assigned. It is not these reasoning that the term thing in action in the Law of Property Act has been interpreted in the Victoria Insurance Co. 1896 SC 250 and the Pacific Steam Navigation Co. (1965) 1 QB 101 cases (supra) to include any right which the common law looked on as not assignable by reason of its being chose in action but which a court of equity dealt with as assignable.18. In the present case, the insurance company has not sued to enforce any assignment. The documents which is described as letter of subrogation also uses the words of assigning rights against the Railway Administration. It is not necessary to express any opinion whether the letter of subrogation amounted to an assignment in the present case, because the insurance company has not sought to enforce any assignment.19.The respondent mill will give a valid discharge of the Railway Administration in respect of loss and damages. This decree will be a bar to the institution of any suit by the insurance company in respect of the subject matter of the suit. The respondent mill is answerable and accountable dto the insurance company for the moneys recovered in the suit to the extent the insurance company paid the respondent mill.20. The High Court expressed the view that even if the assignment is valid the right of action residing in the assignor has not ceased. The respondent mill sued the Railway Administration for breach of contract of carriage and damages for negligence. The letter of subrogation did not divest the mill of its cause of action against the Railway Administration for loss and damages.21. The defence of the Railway Administration was that the mill realised from the insurance company the damages and "as such the plaintiff (meaning thereby the respondent mill) has no right to claim any sum in this action". If the specific plea of assignment had been taken in the written statement the respondent mill would have impleaded the insurance company. The Court could have in those circumstances been in a position to afford full and complete relief to the parties.22. In the present case the insurance company and the mill proceeded on the basis that the insurance company was only subrogated to the rights of the assured. The letter of subrogation contains intrinsic evidence that the respondent would give the insurance company facilities for enforcing rights. This issuance company has chosen to allow the mill to sue. The cause of action of the mill against the Railway Administration did not perish on giving the letter of subrogation.