Case: The Central Bank of India Ltd Vs. The Hartford Fire Insurance Co. Ltd

1. By a policy dated May. 1, 1947 the respondent insured the appellant as the mortgagee and a firm of the name of Bombay Import and Export Agency as the owner; against loss suffered by the destruction of or damage to certain goods by fire between March 20, 1947 and, March 20, 1948. For the period covered by the policy prior to its date presumably there existed provisional policies but with these, if any, we shall not be concerned. The Insurance was subject to various conditions and stipulations printed in the policy of which cl. 10 was in the following termsThis Insurance may be terminated at any time at the request of the Insured, in which case the Company will retain the customary short period rate for the time the Policy has been in force. This Insurance may also at any time be terminated at the option of the Company, on notice to that effect being given to the insured, in which case the Company shall be liable to repay on demand a rateable proportion on the premium for the unexpired terms from the date of theword "Company" in this clause refers to the insurer the respondent. Originally the policy did not afford any insurance against loss caused by persons taking part in riot or civil commotion but by subsequent agreements made from time to time it was extended to cover these riot risks. One of such agreements covered the riot risks occurring between July 18, 1947 and August 17, 1947.2. It is not in dispute that from early 1947 the whole of Punjab including the town of Amritsar was disturbed by the serious riots and civil commotion which preceded the partition of India. On or about July 23, 1947, the godown at Bakarwana Bazar in Amritsar in which the insured goods were stored was looted and some of the goods were removed. Information of this loss was given by the appellant to the respondent and thereafter on August 7, 1947, the respondent wrote to the owners of the goods asremove the goods........... lying in godown at Bazar Bakarwana Amritsar to a safe locality. These stocks may be removed to any safe place in Amritsar before the 10th August, 1947 and on receipt of your information we will issue our necessary endorsement but under any circumstances we would not be on risk after the 10th instant by 4 p.m. which pleasecopy of this letter was on the same day sent to the appellant along with an endorsement reading, "please take necessary action and inform accordingly otherwise we would not be on risk after the 10th (tenth) August, 1947 by 4 p.m." The letter also stated that in case the goods were removed to a safe locality, the respondent would be prepared to sanction the removal without which sanction the benefit of the policy would on such removal have been forfeited under cl. 8 of the policy. In fact, however, the goods were not removed from the Bakarwana Bazar godown and were lost as the godown was burnt down by roiters on August 15, 1947.3. The appellant filed a suit against the respondent on the policy making a claim in respect of the loss suffered by the looting of the goods on July 23, 1947 and the destruction of the goods by fire through the action of rioters on August 15, 1947. The respondent denied liability altogether, contending that there had been no looting of the goods by rioters but there was an ordinary theft which was not covered by the policy and that as it had terminated the policy with effect from August 10, 1947, by its letter of August 7, 1947 it was not liable for any subsequent loss of the goods by fire caused by rioters. The claim in respect of the looted goods was decreed by the trial court and the decree was upheld by the High Court of Punjab on appeal and is no longer in dispute. The trial court also decreed the claim in respect of the loss by fire but that decree was set aside by the High Court. The appellant has now appealed from the judgment of the High Court.

Reasoning: Now it is commonplace that it is the courts duty to give effect to the bargain of the parties according to their intention and when that bargain is in writing the intention is to be looked for in the words used unless they are such that one may suspect that they do not convey the intention correctly. If those words are clear, there is very little that the court has to do. The court must give effect to the plain meaning of the words however it may dislike the result. We have earlier set out cl. 10 and we find no difficulty or doubt as to the meaning of the language there used. Indeed the language is the plainest. The clause says "This Insurance may be terminated at any time at the request of the Insured", and "The Insurance may also at any time be terminated at the instance of the Company". These are all the words of the clause that matter for the present purpose. The words "at any time" can only mean "at any time the party concerned likes". Shortly put cl. 10 says "Either party may at its will terminate the policy". No other meaning of the words used is conceivable.We are unable to agree. The prevailing riots do not indicate what the intention of the parties, that is, of both of them, was. There is no question of reading the policy in the riotous conditions for they throw no certain light. Further, the riot risk cover agreement expressly provided that "all the conditions of the policy shall apply" to it and this agreement had been made in the light of the prevailing riot conditions. Obviously the parties intended that cl.10 of the conditions of the policy would be applicable to the riot risk cover also. We also think that plain and categorical language cannot be radically changed by relying upon the surrounding circumstances; a right to terminate at will cannot by reason of the circumstances, be read as a right to terminate for a reasonable cause.7. The rule read from Halsbury does not assist the appellant either for it does not permit a court to speculate. The court must be able to say with certainty what the intention was in order that it may add something to the language used by the parties. We venture to think that it would be difficult to imagine what would be a reasonable cause for terminating the policy. Obviously the parties would be poles apart on that question and could not therefore have both intended, as suggested that the policy would be terminable for a reasonable cause only. There is nothing here to show that the parties did not intend what they said.8. Another passage from the same paragraph in Halsburys Laws of England was read which stated that if the intention of the parties could be ascertained from the written instrument, the court would give effect to that intention notwithstanding ambiguities in the words used or defects in the operation of the instrument. This statement of the law is based on the principle that a deed shall never be void where the words may be applied to any intent to make it good. This rule also affords no assistance to the appellant for here, as we have already stated, there is no ambiguity in the words used or defect in the operation of the instrument. It is also plain to us that the policy is by no meanslearned counsel said that we should, therefore, treat cl, 10 asunenforceable. This principle of law, whatever its merits, has no application, to the present case for it was stated in connection with the ascertainment of a fundamental condition of the policy, that is, a condition a breach of which entitled the insurer to repudiate his liability under it. We have nothing to do with the interpretation of such a clause and the principle would have no application to the present case. Clause 10 sanctions no repudiation of liability already incurred but only terminates a contract as to the future; it prevents liability arising in future which is not a fundamental term of the variety to which the rule was applied in the passage read from Halsbury.10. We are besides of opinion that there is nothing capricious or unreasonable in cl. 10. The insurer was free at the beginning to decide whether he would agree to indemnify the assured against the risk or not, and if he decided to indemnify, for how long he would indemnify. If the assured cannot compel an insurer to take up a risk, he cannot complain of unreasonableness, caprice or even abuse of power if the insurer is prepared to take it up only on a condition that he would be free at any time to change his mind as to the future; Furthermore cl.10 gives the assured the same liberty to terminate the policy. Besides a term in the form contained in cl. 10 is a common term in policies and must, therefore, have been accepted as reasonable;It is well known however that the rule has no application where there is no ambiguity in the words in the standard form contract: London and Lancashire Fire Insurance Co. Ltd. v. Bolands, 1924 AC 836   at p. 848. We have already stated that the words in cl.10 give rise to no doubt as to their meaning. There is, therefore, no scope for applying that ruleis no doubt about this rule but it applies only when the latter clause wholly destroys the earlier. Here that is not the position. The earlier clause on which learned counsel relies for this purpose, is a clause fixing the term of the policy for one year. There is nothing repugnant to that in cl, 10. Both can stand together. Read together they produce the result that if nothing was done, then the policy would continue for a year, but either party was at liberty to bring it to an earlier termination. As the policy was expressly made subject to cl.10, that clause was in effect a proviso to the term fixing the tenure of the policy at one year. It would be absurd to apply the rule of repugnancy to such a proviso. We might add that this argument, if correct, would lead to the conclusion that Harts case (1889) 14 AC 98   was wrongly decided, but counsel for the appellant did not so contend. This argument was not even raised in Hartscase, even if right, has no application to the facts now before us, Clause 10 does not purport to annul a liability already incurred; its only effect is to prevent liability in future accruing. It gives a right to put an end to the contract only as to the future and affects no liability incurred. From the judgment of the Madras High Court an appeal was preferred to this Court and it held that the clause giving power to cancel the contract applied only when after the acceptance the railway had not placed any formal order for the supply of the goods at which stage no legal contract can be said to have been made and so the cancellation in question was not covered by that clause. This Court, however, expressly reserved its opinion on the contention urged for the railway that the stipulation in the tender amounted to a term in the contract itself for the discharge of the contract and, therefore, was valid: See Union of India v. Maddala Thathiah, C.A. No. 53 of 1961, unreproted, D/( Mad). It would therefore appear that the Court expressly left open the question whether the judgment of the Madras High Court was right. We may at this stage also notice Chotelal Lallubhai v. Champsay Umersey and Sons, AIR 1923 Bom 75   where it was held that a contract for sale of goods which provided that "to cannel or not to cancel the sale for any reason depended on the seller", should be interpreted as if implying in that clause a term that the cancellation could only be for a good reason. That was because it was felt that unless it was so read the contract would be void. This case has to be read subject to what this Court said in Civil Appeal No. 53 of 1961, supra. It does not in any case help as the present contract as we have earlier stated, does not become void unless a term is implied.14. It remains now to refer to two cases the precise effect of which on the case in hand was not clear to us. The first was Nelson v. James Nelson. 770. There the directors of a company had appointed a managing director on the term that he would hold office as long as he should remain a director but subsequently dismissed him from his office while he was still continuing as director. It was held that the dismissal was wrongful and it made no difference that the articles gave the directors the power to appoint a managing director for such period as they thought fit and to revoke the appointment. The real decision was that the agreement appointing the managing director was not ultra vires the power of the directors under the aforesaid articles, and, as in the letter of appointment, dismissal at will had not been provided for, the dismissal in the case was wrongful. The question there decided has no relevance to the present case. The contract there considered did not provide for the termination of the employment except on the one condition mentioned, that is, ceasing to be director; here the contract provides for a termination at will. The other case is Shindler v. Northern Raincoat Co., (1960) 1 WLR 1038 which referred at p. 1043 to Stirling v. Maitland, (1864) 5 B and S. 840 for the proposition that if a party enters into an arrangement which can only take effect by the continuances of a certain existing state of circumstances, there is an implied agreement in his part that he shall do nothing on his own motion to put an end to that state of circumstances under which alone the arrangement can be operative. The principle is of course very well known. But there is no scope for it to operate on the facts of the case in hand. It cannot operate where a proper reading of the contract is, as it is in the present case, that the contract will exist only till such time as either party has not chosen to bring it to an end. It was said that the principle applied because the respondent in its letter of August 7, 1947 imposed a condition of the shifting of the goods by the defendant company which condition if carried out would under the terms of the policy have brought it to an end. This term provided that the goods could not be shifted from the place where they wire statedin the policy to be insured without the previous consent of the insurer. Assuming that the principle is applicable to the present case as to which grave doubts may legitimately be entertained, it is in any case wrong to say that the condition if carried out would have brought the policy to an end for along with the condition about the shifting of the goods from the godown where they were stated in the policy to be insured, the respondent has offered to make an endorsement agreeing to the shifting which would have prevented the policy from lapsing. The insurer was doing no violence to the principle read from (1864) 5 B and Sexpress no opinion as to whether the clause would be bad if it did so, for we are clear in our mind that it did not. The argument that it did was based on the use of the wordrequest in the case of a termination by the assured and option in the case of a termination by the insurer. It was said that the word request implied that the request had to be accepted by the insurer before there was a termination whereas the word option indicated that the termination would be by an act of the insurer alone.We are unable to agree that such is the meaning of the word request. In our view, the clause means that the intimation by the assured to terminate the policy would bring it to an end without more, for the clause does not say that the termination shall take effect only when the assureds request has been accepted by the insurer.We have nothing to show that condition, if it was such, was impossible of performance.that may be, there is no question of any condition. The letter clearly terminated the policy. It gave an option to the assured to keep the policy on its feet if it did something. Further we do not think that it can be said that if a party has a right at will to terminate a contract the imposition by him of a condition, however hard on failure to fulfil which the termination was to take effect, would make the termination illegal, for the party affected was not entitled even to the benefit of a difficult condition. The agreement was that the power to, terminate could be exercised without more and that is what we think was done in this case.17. It remains now to deal with the point about interest on judgment. This interest is claimed by the appellant on that part of the decree which awarded damages for the goods looted. The trial court had allowed this interest but the High Court set aside the order allowing interest. The High Court first observed that interest on judgment had not been claimed in the plaint but in this the High Court was clearly in error. The High Court however also pointed out that soon after the judgment of the trial court the respondent deposited the amount of the decree in court. After the date of the deposit of course, the appellant would not be entitled to any interest. There is also nothing to show that the deposit was made long after the decree of the trial court. It was however said that the deposit was of no use to the appellant because it could not withdraw the money without furnishing security. There is no material on record to show that that was so. In view of these circumstances we do not think this to be a fit case for interfering with the High Courts order as to interest on judgment.