Case: State Of Orissa Vs. United India Insurance Co. Ltd.Represented By Divisional Of

2. The admitted facts are that Vijay Commercial Corporation submitted a proposal for insurance to cover certain risks, viz., supply of 12 Bulldozers of Yugoslavian make, under Ex. A-22 dated July 23, 1966, which was subsequently extended by fresh policy, Ex. A-3, dated July 27, 1966, wherein the Chief Engineer of State of Orissa was also included as one of the insured. The insurance coverage was for Rs. 27 lakhs. Before commencement of the contract for said supply, a notice was issued on December 6, 1966 cancelling the insurance. Since the appellant had claimed under the insurance policy, the Insurance Company, namely, Hindustan Ideal Insurance Company Ltd. laid a suit in the trial Court for declaration that the insurance coverage was duly cancelled and for consequential injunction. The trial Court granted the decree. On appeal, the High Court confirmed the same by the above judgment. Thus, this appeal by special leave.

Court's reasoning:
Thus, it could be seen that for the insurance to be operative, it is a transit policy and when non-supply during the transit occurs, the liability is undertaken by the Insurance Company. But before that undertaking came to be effective, a notice was issued by the Insurance Company cancelling the same. One of the clauses in the contract is that "this contract is subject to 7 days notice of cancellation by either side in writing." Thus, it is a mutual right to be exercised by the parties to cancel the contract duly entered into.In view of the fact that the Branch Manager was not authorised to cover the risk of the loss on account of non-supply, the agent, namely, the Insurance company is not liable for any damages. But in view of the fact that the contract had been duly terminated under the insurance itself, the declaration sought, viz., for that the contract was duly cancelled, is clearly within the power and legal competence. This controversy is covered by the judgment of a Constitution Bench of this Court in General Assurance Co. v. Chandumull Jain, 1966(3) SCR 500. Therein, this Court had held thuscondition gives mutual rights to the parties to cancel the policy at any time. To the assurer it gives a right to cancel the policy atthe High Court has not committed any error of law warranting interference.