Case: Pannalal Jankidas Vs. Mohanlal And Another

3. In Jan. 1944 restrictions were imposed against the consignment of piecegoods and/or yarn outside Bombay by rail without obtaining the necessary previous permit from the Textile Commr. at Bombay. On or about 6/2/1944 Mohanlal of the defts joint family firm came to Bombay and the plfts. purchased on their behalf 278 bales of piecegoods. Ninety-four out of those were desptached according to the defts.  instructions. The plfts. according to the defts.  instructions, applied for and obtained permit to consign several more bales. On the permits being issued, they were despatched on 14/2/1944 to destinations given by the defts. On 10/4/1944, the plfts. after obtaining the necessary permits, despatched more bales as directed by the defts. The dispute between the parties relates to the remaining 92 bales which were stored in godown NO. 424 Baroda Street, Argyle Road, Bombay, pending the receipt of permit for consigning the same.(3) On 14/4/1944, there occurred a big explosion in the Bombay harbour which destroyed several immovable properties and godowns with movable property covering a large area, near the port. Fires were caused by the explosion and they also caused considerable destruction of movable and immovable properties. These 92 bales purchased by the pltfs. on account of the defts, were also destroyed either by the fire or the explosion. The pltfs. filed a suit to recover the price of these 92 bales from the defts. on the ground of the agents right to indemnity. The defts. contended that the plfts. were their pucca adatiyas, that the property in the goods did not pass to them and that they were not liable for the price till delivery of the goods was given to them. In the alternative, in para. 4 of their written statement, they pleaded that when Mohanlal of the defts. firm was in Bombay and the pltfs. stated that the goods could not be railed until permits were obtained, it was agreed between the pltfs. and the defts. that the defts. were to pay annas four per bale per month to the pltfs. for insurance charges and the goods were thus to remain insured till despatached according to their instructions. In para. 21 of their written statement, they contended that if their plea that the plaintiffs were pucca adatiyas was not accepted and the plfts. were held to be their commission agents, the plfts. were guilty of negligence and misconduct in the business of agency as in spite of specific instructions and agreement they had failed to insure the goods. They contended that owing to this negligence and misconduct the plffs. were not entitled to the indemnity claimed. In the alternative they contended that the pltfs. were liable to make good the loss caused to the defts by their failure to insure the said bales. They contended that they were entitled to set off this loss against the claim for the price. They also counter -claimed the same amount if their set-off was not allowed. On these pleadings the parties went to a hearing. Issue to covered the defts. plea about the pltfs. negligence and misconduct in not insuring the 92 bales and the counter-claim arising therefrom.(4) Numerous witnesses were called before the trial Ct. and the learned Judge after considering their demeanour and hearing their evidence came to the conclusion that the plfts. witnesses were unreliable, except when they were corroborated by documentary evidence. He also disbelieved the defts. evidence. He held that the agreement to insure the goods was not proved and passed a decree in favour of the plfts. On appeal, differing from the view of the trial Court, the appeal Ct. held that instructions were given by Mohanlal to insure the goods and that the agreement was proved. In thus differing from the trial Cts. decision, they accepted the well-recognised principle to give full weight to the trial Judges observations about the witnesses. They however found that on the documents the view of the learned trial Judge was not correct. In doing so, they principally relied on statements of account sent by the plfts. to the defts. in respect of bales purchased in Feb. 1944 and despatched by them out of the lot of 271 bales previously and where the pltfs. had charged the defts. insurance premia at the rates mentioned in the defts. written statement. They rejected the pltfs. explanation, which was accepted by the trial judge, that these entries were foolishly made out of cupidity by the plfts.(5) After a brief discussion in which this point was haltingly urged before us, the learned counsel for the pltfs. did not very properly dispute this conclusion of the appeal Ct. In our opinion, the finding of the appeal Ct. having regard to the documents, was correct.

Reasoning:
(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.