Case: Union Of India Vs. Sri Sarada Mills Ltd

25. The plaintiff, Sri Sarada Mills Ltd., instituted the suit against the Union of India as representing the Central and Southern Railways for damages to 100 bales of F. P. cotton cosigned through their agents from Nagpur to Podhanur under a railway receipt issued by the Central Railway. The goods had to pass through several stations the two railways, namely the Central and the Southern, before it arrived at Podhanur. When the goods arrived at Podhanur, it was found that 87 bales out of the 100 were burnt and charred and that 13 bales were loose and short in weight. When the plaintiff applied for open delivery, the railway authorities at Podhanur got the damage surveyed, and issued a certificate of damage and shortage. The plaintiff claimed damages against the Railway Administration. But the Chief Commercial Superintendent, Southern Railway, informed the plaintiff that the consignment was involved in a fire accident at Sirpur Kagaznagar on the Central Railway, that the cause of the fire was unknown and that the Railways were not liable for the damage caused to the goods as there was no negligence or misconduct. The plaintiff, therefore, instituted the suit for damages alleging that the Railway Administration was negligent.26. The defendants contended that the plaintiff was not entitled to institute the suit as it had insured the goods with the Indian Globe Insurance Co. and had received the total loss from the Company, that the damage to the goods was caused by fire, which was beyond the control of the Railways and therefore, the defendants were not liable for damages.27. The Trial Court found that the fire which caused the damage to the goods was not due to any cause beyond the control of the Railways and that the damage was due to their negligence. It, however, held that the suit was not maintainable as the Indian Globe Insurance Co., with whom the goods were insured under a marine insurance policy, had paid the plaintiff an amount of Rupees 32,254-6-9 for total loss of the goods and was subrogated to all the rights and remedies of the assured in respect of the subject matter and so the plaintiff was not competent to institute the suit and hence dismissed the suit.28. The plaintiff appealed to the High Court of Madras. The Court reversed the decree holding that the plaintiff was entitled to maintain the suit and that, damage to the goods was on account of the negligence of the Railways.29. In this appeal, two submissions were made on behalf of the appellants : (1) that there was no evidence to show that the Railway Administration was negligent in dealing with the goods and (2) that the suit was not maintainable.

Reasoning:
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.