Case: Pannalal Jankidas Vs. Mohanlal And Another

relations between the parties are of a principal and an agent and the agent is found to have committed breach of his duty, it is correct to take a narrow view of the situation. The agent chose to gamble in not insuring the goods and desired to charge the agreed premia, on the footing that the goods were covered by insurance. If so, he must take the consequences of his default. The argument that their liability as an agent who had agreed to insure should be ascertained as on the date of the explosion is no answer to the claim of the resps. The position would be this. Assuming that the applts. had insured the goods on the terms of the usual fire insurance policy, the resps. could ask them either to assign the policy to the resps. or ask them to file a suit against the insurance co. contending that the fire, and not the explosion, was the cause of the loss and was covered by the policy of insurance. Before the Ct. could decide the rights of the parties, the Ordinance promulgated by the Governor General prevented the decision of the dispute, but the Govt. undertook to pay the loss on the footing that the policy covered the risk. The misconduct gave rise to the liability to make good the damage and to put the resps. in the same position in which they would have been if their goods had been insured.(19) On behalf of the applts. it was urged that because of the Govt. intervention in issuing the Ordinance they were sought to be made liable under a new liability. Their liability has been and exists on the basis that a fire insurance policy existed, as they were instructed to insure the goods and which they represented they had done. The liability arises not because of the Ordinance but because of the breach of their duty in failing to insure, which has taken place apart from the Ordinance and which is not affected by the Ordinance. The utmost that they could urge is that the extent of their liability arising from their misconduct was not anticipated by them when they agreed to perform their duty. That, however, is no defence in law if the damages directly flow from the breach of duty. The Ordinance only quantifies the damages instead of leaving the unliquidated damages to be assessed in the usual way. The Ordinance lays down the yardstick for fixing the damages under different circumstances, which cover all alternative situations, and the liability for failure to insure must now be measured by the new basis. It does not create any new liability. The applts. contention on this point therefore must be rejected0.(20) The only other point urged before us was based on the construction of S. 18 of the Ordinance. It was argued on behalf of the applts. that apart from what could be recovered under cl. (1) of S. 18 the Ordinance extinguished all right, whether in contract or tort or otherwise to any compensation or damage for loss of any property due to or in anyway arising out of the explosion and provided that no suit or other legal proceedings for any such compensation or damages shall, save as aforesaid, be maintainable in any Ct. against the Crown or against any other person whatsoever. It was urged that in establishing their claim the resps. must plead the right to recover the amount due to explosion and that was barred under S. 18 (2 ). In our opinion, this contention is unsound. The applts. have filed this suit to recover the price of the goods on the ground of indemnity. The resps. answer is that the applts. are not entitled to the indemnity because they are guilty of a breach of duty in the business of the agency. They contend that they could be liable to pay for the goods only if the applts. give them the goods or deliver the same according to their instructions. They counterclaim that if the applts. are unable to give them the goods they must pay them the value thereof. The applts. plead by way of defence to the counterclaim that the goods were destroyed without any neglect on their part by fire caused by the explosion and therefore they were not liable. The resps. rejoinder is that they had asked the applts. to insure the goods and if the applts. had not failed in their duty they would have reimbursed the resps. The applts. then plead that even if they had insured the goods, the resps. could not have recovered anything from the insurance companies. It is in reply to this contention that the resps. say that the applts. liability to recover money from the insurance co. on the terms of the usual fire insurance policy is irrelevant because they could have recovered the money if they had insured in fact, irrespective of the terms of the policy, under the Ordinance. The resps. are not thus claiming to recover money from the applts. otherwise than under S. 18 (1) of the Ordinance. Their cause of action is the misconduct of the agent in the business of agency and is quite different. It is not for compensation arising from explosion.(21) It was argued that damages formed part of the cause of action of the resps. in framing the counterclaim and therefore S. 18 (2) stood in the way of the resps. The contention is unsound because the cause of action is completed by the averment that there was a duty or agreement to insure, that there was a failure to perform that duty, that loss had occasioned to the resps. because of the failure to perform the duty and the applts. were, therefore, liable for the breach of the duty. The quantum of damages is not a part of the cause of action. It is a matter to be ascertained by the Ct. according to well laid down principles of law.

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

Explanation:
0[ds](17) Bearing in mind this state of the law it appears clear that in the present case it was the duty of the applts. to insure the goods, as they had agreed to do. Once misconduct is admitted or proved, the fact that the Ordinance did not exist and could not have been in the contemplation of the parties is irrelevant for deciding the question of liability. The liability was incurred by reason of the breach of their duty and the applts made themselves liable to pay damages. The measure of damages was the loss suffered by the resps. on account of the goods not being insured. The next point to be decided is what difference the promulgation of the Ordinance makes in the liability of the applts. The relevant provisions are noted above. The scheme of the Ordinance clearly is, as stated in the preamble to provide for and regulate the payment of compensation and to prevent litigation, amongst other things. It is thus a comprehensive legislation which replaces the rights of parties either under the policy of insurance against insurance companies, or on the ground of negligence against Govt. by the owners of the goods, is also claim by insurance companies against Govt. The validity of this legislation is not challenged. S. 18 gives it a retrospective effect. Therefore the Ordinance only substitutes a new basis for assessing compensation for the ordinary basis for assessing unliquidated damages. The compensation under the Ordinance is payable on proof of the existence of a fire insurance policy irrespective of the terms of the Policy. The non-recovery of half the amount of the resps.  claim from the Govt. under the Ordinance because of the absence of a fire insurance policy, thus directly arises from the neglect of the applts. to insure the goods as they had been instructed to do or agreed to do and which in fact they represented that they had done. In our opinion, these are not indirect or remote damages.(18) The contention that under the policy of insurance the assured could not have recovered anything for loss caused by the fire due to explosion cannot be accepted. Firstly, this contention of the assureds inability to receive any compensation because of cl. 7 of the form of common policy was not raised in the trial Ct. No issue was raised in respect thereof and no arguments in support or against it were heard. It was suggested for the first time, as appears from the judgment of Chagla J. in the Ct. of appeal. The assumption that because of cl. 7 Of the policy no insurance co. would have paid the loss cannot be assumed to be necessarily and unquestionably sound and in view of the terms of the Ordinance not capable of being determined. There appears no reason under the circumstances to proceed as if an adverse decision on the interpretation of the policy had been given against the resps. and to hold the applts. free from liability for not recovering half the value of the goods which could have been recovered if the goods had been insured (irrespective of the terms on which the policy stood) as agreed to be done by them. I do not think when the relations between the parties are of a principal and an agent and the agent is found to have committed breach of his duty, it is correct to take a narrow view of the situation. The agent chose to gamble in not insuring the goods and desired to charge the agreed premia, on the footing that the goods were covered by insurance. If so, he must take the consequences of his default. The argument that their liability as an agent who had agreed to insure should be ascertained as on the date of the explosion is no answer to the claim of the resps. The position would be this. Assuming that the applts. had insured the goods on the terms of the usual fire insurance policy, the resps. could ask them either to assign the policy to the resps. or ask them to file a suit against the insurance co. contending that the fire, and not the explosion, was the cause of the loss and was covered by the policy of insurance. Before the Ct. could decide the rights of the parties, the Ordinance promulgated by the Governor General prevented the decision of the dispute, but the Govt. undertook to pay the loss on the footing that the policy covered the risk. The misconduct gave rise to the liability to make good the damage and to put the resps. in the same position in which they would have been if their goods had been insured.(19) On behalf of the applts. it was urged that because of the Govt. intervention in issuing the Ordinance they were sought to be made liable under a new liability. Their liability has been and exists on the basis that a fire insurance policy existed, as they were instructed to insure the goods and which they represented they had done. The liability arises not because of the Ordinance but because of the breach of their duty in failing to insure, which has taken place apart from the Ordinance and which is not affected by the Ordinance. The utmost that they could urge is that the extent of their liability arising from their misconduct was not anticipated by them when they agreed to perform their duty. That, however, is no defence in law if the damages directly flow from the breach of duty. The Ordinance only quantifies the damages instead of leaving the unliquidated damages to be assessed in the usual way. The Ordinance lays down the yardstick for fixing the damages under different circumstances, which cover all alternative situations, and the liability for failure to insure must now be measured by the new basis. It does not create any new liability. The applts. contention on this point therefore must be rejected0.(20) The only other point urged before us was based on the construction of S. 18 of the Ordinance. It was argued on behalf of the applts. that apart from what could be recovered under cl. (1) of S. 18 the Ordinance extinguished all right, whether in contract or tort or otherwise to any compensation or damage for loss of any property due to or in anyway arising out of the explosion and provided that no suit or other legal proceedings for any such compensation or damages shall, save as aforesaid, be maintainable in any Ct. against the Crown or against any other person whatsoever. It was urged that in establishing their claim the resps. must plead the right to recover the amount due to explosion and that was barred under S. 18 (2 ). In our opinion, this contention is unsound. The applts. have filed this suit to recover the price of the goods on the ground of indemnity. The resps. answer is that the applts. are not entitled to the indemnity because they are guilty of a breach of duty in the business of the agency. They contend that they could be liable to pay for the goods only if the applts. give them the goods or deliver the same according to their instructions. They counterclaim that if the applts. are unable to give them the goods they must pay them the value thereof. The applts. plead by way of defence to the counterclaim that the goods were destroyed without any neglect on their part by fire caused by the explosion and therefore they were not liable. The resps.  rejoinder is that they had asked the applts. to insure the goods and if the applts. had not failed in their duty they would have reimbursed the resps. The applts. then plead that even if they had insured the goods, the resps. could not have recovered anything from the insurance companies. It is in reply to this contention that the resps. say that the applts.  liability to recover money from the insurance co. on the terms of the usual fire insurance policy is irrelevant because they could have recovered the money if they had insured in fact, irrespective of the terms of the policy, under the Ordinance. The resps. are not thus claiming to recover money from the applts. otherwise than under S. 18 (1) of the Ordinance. Their cause of action is the misconduct of the agent in the business of agency and is quite different. It is not for compensation arising from explosion.(21) It was argued that damages formed part of the cause of action of the resps. in framing the counterclaim and therefore S. 18 (2) stood in the way of the resps. The contention is unsound because the cause of action is completed by the averment that there was a duty or agreement to insure, that there was a failure to perform that duty, that loss had occasioned to the resps. because of the failure to perform the duty and the applts. were, therefore, liable for the breach of the duty. The quantum of damages is not a part of the cause of action. It is a matter to be ascertained by the Ct. according to well laid down principles of law.