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Judgment
S. Palanivelu, J.—The Civil Suit is filed for a judgment and decree, to direct the 1st Defendant to pay Rs. 37,34,700/- with further interest at
18% p.a. on Rs. 24,93,125/-from the date of plaint to date of realisation and to direct the 2nd to 4th Respondents to pay Rs. 18,67,350/- each
with further interest at 18% p.a. each on Rs. 12,46,563/- each from the date of plaint till the date of realisation with the costs.
The following are the contents in the plaint:
(a) The Plaintiff is a statutory body represented by its Superintending Engineer/Electrical, Mettur Thermal Power Project, Mettur Dam, Salem
District. In the course of their requirement of materials for the project, they had placed orders for Turbo General Materials including Condenser
Tubes from various parts of India on M/s. Bharat Heavy Electricals Ltd. (BHEL), that the Plaintiff insured covering all risks for the transport of the
said Turbo Generator materials including Condenser Tubes from various parts of India on behalf of Bharat Heavy Electricals Ltd., for a sum of Rs.
51 Crores with the first Defendant, that as per the ''Co-Insurance Clause'', 2nd, 3rd and 4th Defendants were included in the policy, that the
liability of the companies shall be several and in the proportion as set forth against their names as below:
United India Insurance Company Limited - 40;
The New India Assurance Company Limited - 20;
The Oriental Insurance Company Limited - 20;
National Insurance Company Limited - 20;
and that as per the terms, the Defendants are liable to pay the claims, if any, in the aforesaid proportion.
(b) M/s. Alcobex, Jodhpur a sub-vendor of Bharat Heavy Electricals Ltd., at Hardwar, despatched Condenser Tubes through M/s. Transport
Corporation of India, that the entire consignment was received by the Plaintiff in damaged condition, that the Plaintiff made a claim with the 1st
Defendant on 4.1.1989 for a sum of Rs. 62,32,814/- towards the cost of the materials received in a damaged condition, covered by the said
Insurance Policy, that after a prolonged correspondence, the 1st Defendant, by a letter dated 3.1.1991 stated that u/s 64-V.B of the Insurance
Act, the subject claim cannot be processed, that Section 64-V.B will not apply to the present case and even if it is made applicable, the Plaintiff
being a state owned Board, stands exempted, that the policy itself is open policy and having accepted advance premium and the premium for the
entire risk covered, the 1st Defendant is estopped from taking shelter under the provisions of the Insurance Act, that as the 1st Defendant did not
come forward to settle the lawful claim made by the Plaintiff, the Plaintiff issued lawyer''s notice dated 20.2.1991 to the 1st Defendant at its
Regional office at Madras as well as the Branch office at Mettur Dam, that the 1st Defendant sent a reply on 6.3.1991 through its lawyer informing
that a reply will be sent after two weeks, that by a further reply dated 15.6.1991, the advocate for the 1st Defendant called for certain details
which are already available with the first Defendant, that the 1st Defendant representing all the other Defendants has failed to settle the claim and
they are liable to pay interest which is claimed at 18% p.a. from 4.1.1989, the date of claim.
(c) The Plaintiff had paid the cost of the materials to the suppliers and could not use them to its benefit as the same were received in damaged
condition and thus the amounts paid have been blocked, that if the Defendants had settled the claim immediately on the submission of the claim by
the Plaintiff, the Plaintiff would have had the benefit of the same, that the Plaintiff has borrowed amounts from various financial agencies for interest
at the rate of more than 18% p.a. and that the suit may be decreed as prayed for.
In the written statement filed by the 1st Defendant, the following are averred:
3.(a) The allegations contained in the plaint are denied, that the suit is barred by limitation, that it is specifically denied that there was a valid policy
or a concluded contract in existence, covering the consignment for the transit risk, that on 29.3.88 the date on which the consignment was
despatched, there was no adequate premium paid to the Defendant, that the Plaintiff was given a facility of open policy and they are required to
deposit adequate premium with this Defendant and are expected to declare the value of the consignment prior to despatch, that the insurer used to
adjust the premium and it is the duty of the insured Plaintiff to provide adequate funds towards deposit account, that there was huge outstanding
premium due and the deposit account of the Plaintiff was due to the Defendant which was not paid inspite of several letters, that the amount was
paid only on 10.6.88 but the consignment was despatched on 29.3.88 which was not covered as no premium was paid to the same and hence the
contention that there was a valid policy in force is incorrect, especially in the light of Section 64.V-B of the Insurance Act. The Plaintiff has
suppressed the material particulars inasmuch as non-declaration of correct value of the consignment, which amounts to suppression of material
particulars, which renders the policy void.
3.(b) The suit is bad for non-joinder of parties, that the Plaintiff had neglected to implead the Carrier as a party under whose custody the damage
had occurred and from whom the insurer of the consignment would be entitled to recover the amount paid, by way of indemnity, that inspite of the
repeated requests of the Defendant to preserve the right of recovery by issuing a notice u/s 10 of Carriers Act, which was not complied with by the
Plaintiff, that the Plaintiff was reminded to take suitable steps by various letters by the Defendant but the Plaintiff has failed and neglected to do so
and hence the insured Plaintiff is not entitled to claim any amount from this Defendant, that under the law of Insurance the right of the Insurer on
payment of the loss to the assured is to be subrogated to the rights of the assured so as to enable the Insurer to proceed against the carriers and
any default committed by the assured either by allowing the remedy to get time barred or by abdicating or abandoning his rights against the carrier
or the third party will deprive the insurer of its remedies against the third party for indemnity and that in such cases it is not open to the insured, the
Plaintiff herein to claim any indemnity from this Defendant.
3.(c) There were some disputes regarding freight charges and ultimately the consignment was brought to Mettur on 8.10.1988, that the
consignment was kept with the Carrier for a period of three months by the consignee, that the Plaintiff had demanded a open delivery certificate
and survey was conducted, that the contention that the consignment was damaged beyond repair is factually unsustainable, that a survey was
arranged on 11.10.88 in the presence of Plaintiff and representatives of M/s. Bharat Heavy Electricals Limited and after assessing the damages a
meeting was held by the surveyor, that as per the request of the Plaintiff, it was agreed to send the surveyor alongwith representatives of M/s.
MTPP to discuss with M/s. Bharat Heavy Electricals Limited regarding re-processing, that the surveyor alongwith representatives of M/s. MTPP
went to Hardwar and as per the minutes of the meeting held on 22.2.1989 M/s. Bharat Heavy Electricals Limited had expressed their inability to
accept for reprocessing but would supply fresh tubes if M/s. MTPP places order and take back the tubes for salvage value subject to tubes being
cut to convenient size for transportation to M/s. Alcobex Metals Pvt. Ltd., or in the alternative customer can enter into contract with M/s. Alcobex
Metals Pvt. Ltd., directly for reprocessing when M/s. Bharat Heavy Electricals Limited would assist in sending their representative for inspection,
that on 24.2.1989 the Surveyor had contacted M/s. Alcobex Metals Pvt. Ltd., who had agreed to process the tubes if taken for re-processing
before 15.3.1989, that the re-processing would greatly reduce the loss to the consignment and the liability works out as per survey report in a sum
of Rs. 12,58,320/- only and thus the total loss is factually unsustainable.
3.(d) The insurer is entitled to replace or repair the machinery to the satisfaction of the Plaintiff, that the supplier themselves have stated that the
machinery can be repaired and therefore, the Plaintiff ought to have accepted the same, that under the terms of policy the insured the Plaintiff had a
duty to mitigate the loss and as such the Plaintiff has violated the same, that the salvage value in a sum of Rs. 17,00,000/- was not deducted out of
the value of the damaged machinery, that a proper assessment relating to the value of the loss if the machinery was returned for reprocessing would
have reduced the loss to the great extent as assessed by the surveyor which was brought to the knowledge of the Plaintiff and they were repeatedly
requested by this Defendant to take early action and reminded about their obligations under the policy repeatedly by various letters, that instead the
Plaintiff have chosen to file this suit without even adhering to the correct value of the loss adjusting the salvage value, that the claim for interest is
also not maintainable under law, that on account of non cooperation, various lapses and violation of policy conditions the Plaintiff have forfeited
their right of indemnity, that the Plaintiff is not entitled to capitalise on their lapses by way of interest also and that the suit is not maintainable under
law or on facts and the same be dismissed with costs.
In the written statement filed by the 2nd Defendant it is stated that the policy was issued by the 1st Defendant and this Defendant is a co-insurer,
that the correspondence between parties filed alongwith the plaint shows that it was between the Plaintiff and the 1st Defendant, that this Defendant
has not independent liability, that as the privity of contract being is between Plaintiff and the 1st Defendant, insofar as the Plaintiff is concerned, the
suit against this Defendant is not maintainable and that unless there is any liability established as against the 1st Defendant, this Defendant cannot be
held liable for any portion of the suit claim in all other respects and that this Defendant adopts the written statement filed by the 1st Defendant.
In the written statements filed by the 3rd and r4th Defendants it is expressed that they adopt the paragraphs 2 to 11 of the written statement filed
by the 1st Defendant and the same may be treated as part and parcel of their written statement.
On the strength of the above said pleadings, the following issues were framed by this Court:
Whether there was valid insurance cover for the suit consignment?
Whether the Plaintiff had paid premium prior to transit in respect of suit consignment?
Whether there was any short fall in the premium on the date of claim i.e., on 04.01.1989 in the open policy?
Whether the Insurer is relieved from liability on the ground that the Plaintiff has not proceeded against or preserved right of recovery against the
carrier?
Whether the entire consignment was damaged in transit and received in damaged condition? What is the extent of loss?
Whether the Defendants are right in rejecting the legitimate claim of the Plaintiff?
Whether the Defendants are jointly and severally liable to pay the suit claim?
To what relief the parties are entitled to?
Both the learned Counsel, at the time of argument, concentrated on the point of limitation also. Hence I deemed it necessary to frame the
following Additional Issue:
Whether the suit is in time?
Issue Nos. 1 to 3
The Plaintiff is a statutory body. The project was initiated for construction of 4 units of 210 MW Thermal Power Generation. The first
Defendant issued a Transit Insurance Policy for an assured sum of Rs. 50 lakhs on 23.1.1984 covering all the risk for transport of Turbo
Generator materials including Condenser Tubes from various parts of India on behalf of Bharat Heavy Electricals Ltd. M/s. Alcobex, Jodhpur, a
sub-vendor of Bharat Heavy Electricals Limited, on 29.3.1988 despatched the Condenser Tubes through M/s. Transport Corporation of India.
The consignment was received at the destination, namely at Mettur in a damaged condition on 11.10.1988. Ex.P.1 is the Policy issued by the 1st
Defendant to the Plaintiff dated 20.02.1984 which contains the warranties and conditions attached to and forming part of marine open policy. Even
though Ex.P.1 is dated earlier, the above said conditions assumed much importance in the case to show the rights of both the parties viz., the
Plaintiff and the 1st Defendant. Ex.P.2 is the xerox copy of the policy dated 10.10.1986 issued by the 1st Defendant to the Plaintiff for Rs. 51
lakhs. Ex.P.3 dated 23.01.1989, is a policy issued by the first Defendant, in which it is stated that all the Defendants have got liability as co-
insurers as follows:
1st Defendant United India Insurance Co. Ltd. - 40;
2nd Defendant The New India Assurance Co. Ltd. - 20;
3rd Defendant The Oriental Insurance Co. Ltd. - 20;
4th Defendant National Insurance Co. Ltd. - 20;
Ex.P.4. is the copy of Lorry Receipt issued by M/s. Transport Corporation of India Ltd., It is conceded that date of despatch is 29.3.1988, but
the premium amount was paid on l0.6.1988; date of delivery at Mettur Dam MTPP is 11.10.1988 and the Plaintiff made claim on 4.1.1989.
Ex.P.5 dated 4.4.1988 plays a vital role to show that excepting the suit claim all other claims were settled by the 1st Defendant. Declaration No.
376 emanated from the Plaintiff addressed to the first Defendant. The contents of the declaration are as follows:
S. No. Despatch details R.R.No. & Description Weight in Kgs.
Date Pkg. No.
1 991762/29.3.88 Condensor Tubes 352 Nos. 2,886 KGs
2 991764/29.3.88 Condensor Tubes 176 Nos. 1,452 Kgs
3 Tcl:18511/29.3.88 Condensor Tubes 2068 Kgs. 16,990 Kgs
4 993230l/16.3.88 Condensor Tubes 5,832 Kgs
5 991765/29.3.88 Condensor Tubes 711 Kgs
Total 27,871 Kgs
A defence has been raised by the first Defendant to the effect that inadequate premium was paid by the Plaintiff which could not cover all the
claims made by them, that the Plaintiff were required to deposit adequate premium and the Plaintiff were expected to require and declare the value
of the consignment prior to the despatch, that the Insurer used to adjust the premium ant it is the duty of the Insured to provide adequate funds
towards advance deposit and that there was huge outstanding premium due and the same was not paid inspite of several letters. The first
Defendant has produced very many communications addressed to the Plaintiff. But in none of them the first Defendant has intimated the Plaintiff as
regards the inadequacy of premium and required them to pay the same. Further it is also admitted by D.W.1, Defendant''s witness, that excepting
the suit claims all other claims contained in Declaration No. 376 (Ex.P.5) were settled by the first Defendant. In this respect it is to be treated that
the first Defendant has accepted the premium paid by the Plaintiff and honoured the claims projected by the Plaintiff excepting the suit claim.
The learned Counsel for the Plaintiff Mr. N. Muthusamy would contend that even though it is stated by the first Defendant that the premium
was paid belatedly it was accepted by the first Defendant, that the insufficiency of the premium was not intimated on any occasion and that the
other claims contained in the same Declaration No. 376 have been settled which would show that the first Defendant is wilfully denying to settle the
suit claim. In view of the above said circumstances, it is to be observed that the first Defendant is estopped by the settlement of other claims
barring the suit claim.
Even though the premium was paid posterior to the loading of the materials at Jodhpur, evidence is available to show that the same was
accepted by the first Defendant and the other claims were settled. By the conduct, they have allowed the Plaintiff to claim the insurance amount.
Worth saying it is that the first Defendant has not specified proper premium to the paid by the Plaintiff. Even in the reply notice issued by the first
Defendant (Ex.P.15.), in reply to the legal notice given by the Plaintiff under Ex.P.13, nothing was said about the inadequacy of premium and there
is no explanation nor reasons for dishonouring the claim. It is merely stated that there is serious breach on the part of the Plaintiff which would
vitiate the contract itself. Even then, the above said circumstances would candidly indicate that there were valid insurance cover for the suit
consignment and on the date of damage of the cargo was found out, i.e., the date of delivery, the insurance cover was existing and that there is no
material to show that there were short fall in the premium on the date of claim i.e. on 4.1.89.
In view of the above, Issue No. 2 is answered as indicated above. I answer Issue No. 1 in affirmative and Issue No. 3 in negative.
Issue No. 4
It is the grievance of the Defendants, particularly the first Defendant that the Plaintiff should have issued notice to the carrier namely M/s.
Transport Corporation of India Ltd., and initiated proceedings against the carrier before entering into litigation with the Defendants and by not
preserving the right of the Defendants, legal proceedings with a suit is not lawful and on this score the Plaintiff has to be non-suited for the relief
claimed. The learned Counsel for the first Defendant Mr. K. Narasimhan would strenuously contend that there is a specific clause in the terms and
conditions of the policy itself in this regard and by not observing the conditions therefor, the Plaintiff has violated not only the statutory requirement
but also the conditions as agreed.
It is his further argument that the terms of the agreement have to be strictly construed to determine the extent of the liability of the Insurer as per
law. It is well settled that the terms of the agreement have to be construed and observed as per the tenor of the agreement and neither the Court
nor the parties can alter or supplement with the conditions contained therein to suit their convenience. In this context, the contention of the learned
Counsel for the first Defendant is two pronged. One is with regard to strict construction of terms of contract by the parties concerned and another
is that the preservation of rights against the carrier by the Plaintiff so as to safeguard the interests of the first Defendant. As far as the first leaf of
contention is concerned, the learned Counsel for the first Defendant placed reliance upon various authorities which are as follows:
United India Insurance Co. Ltd. Vs. Harchand Rai Chandan Lal,
National Insurance Co. Ltd. Vs. Laxmi Narain Dhut,
Oriental Insurance Co. Ltd. Vs. Sony Cheriyan,
Suraj Mal Ram Niwas Oil Mills (P.) Ltd. Vs. United India Insurance Co. Ltd. and Another, .
15.(a) In Harchand Rai Chandan Lal''s Case cited supra, it is held by Their Lordships that it is not open to interpret the expression appearing in
policy in terms of common law; but it has to give meaning to the expression as defined in the policy and that the act that causes the loss must fall
within the definition in the policy and it cannot take the cover and contents of the definition as laid down in the criminal law.
15.(b) In Laxmi Narain Dhut''s case above, the Honourable Supreme Court as held as follows:
A statute is an edict of the legislature and in construing a statute, it is necessary to seek the intention of its maker. A statute has to be construed
according to the intent of those who make it and the duty of the court is to act upon the true intention of the legislature. If a statutory provision is
open to more than one interpretation the Court has to choose that interpretation which represents the true intention of the legislature. This task very
often raises difficulties because of various reasons, inasmuch as the words used may not be scientific symbols having any precise or definite
meaning and the language may be an imperfect medium to convey one''s thought or that the assembly of legislatures consisting of persons of various
shades of opinion purport to convey a meaning which may be obscure.
15.(c) In Sony Cheriyan''s case aforenoted, the Apex Court has formulated the principles as under:
The insurance policy between the insurer and the insured represents a contract between the parties. Since the insurer undertakes to
compensate the loss suffered by the insured on account of risks covered by the insurance policy, the terms of the agreement have to be strictly
construed to determine the extent of liability of the insurer. The insured cannot claim anything more than what is covered by the insurance policy.
That being so, the insured has also to act strictly in accordance with the statutory limitations or terms of the policy expressly set out therein.
15.(d) In Suraj Mal Ram Niwas Oil Mills (P.) Ltd. Case, referred above, the Supreme Court has referred to a decision of the Constitution Bench
of the Apex Court and ruled as follows:
Before embarking on an examination of the correctness of the grounds of repudiation of the policy, it would be apposite to examine the nature
of a contract of insurance. It is trite that in a contract of insurance, the rights and obligations are governed by the terms of the said contract.
Therefore, the terms of a contract of insurance have to be strictly construed, and no exception can be made on the ground of equity. In General
Assurance Society Ltd. (supra), a Constitution Bench of this Court had observed that:
In interpreting documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the
parties, because it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves."" (See also: Oriental
Insurance Co. Ltd. Vs. Sony Cheriyan, ; Vikram Greentech (supra); Sikka Papers Limited Vs. National Insurance Company Ltd. and Others, ;
New India Assurance Company Ltd. Vs. Zuari Industries Ltd. and Others, ; The Amravati District Central Co-operative Bank Ltd. Vs. United
India fire and General Insurance Co. Ltd.,
Similarly, in Harchand Rai Chandan Lal''s case (supra), this Court held that:
The terms of the policy have to be construed as it is and we cannot add or subtract something. Howsoever liberally we may construe the policy but
we cannot take liberalism to the extent of substituting the words which are not intended.
Thus, it needs little emphasis that in construing the terms of a contract of insurance, the words used therein must be given paramount
importance, and it is not open for the Court to add, delete or substitute any words. It is also well settled that since upon issuance of an insurance
policy, the insurer undertakes to indemnify the loss suffered by the insured on account of risks covered by the policy, its terms have to be strictly
construed to determine the extent of liability of the insurer. Therefore, the endeavour of the court should always be to interpret the words in which
the contract is expressed by the parties.
Having considered the instant case on the touchstone of the aforenoted broad principles to be borne in mind while examining the claim of an
insured, we are of the opinion that the claim of the Appellant must fail on the short ground that there was a breach of the afore-extracted special
condition incorporated in the cover note. The special condition viz. ""each and every consignment"" must be declared before dispatch of goods is
clear and admits of no ambiguity. The Appellant was obliged to declare ""each and every consignment"" before it left the Appellant''s factory
premises and there is nothing in the policy to suggest that the insured had the liberty to pick and choose the dispatches which they wanted to
declare to the insurer, not even at the instance of the consignee, who otherwise is a stranger to the contract between the insurer and the insured.
We have no hesitation in rejecting the plea of the Appellant that they were required to declare only those dispatches in which they had an insurable
interest. It bears repetition that notwithstanding any request by the consignee, the policy of insurance postulated declaration in respect of each and
every dispatch by the Appellant. Therefore, the fact that purchasers did not want an insurance cover on certain dispatches had no bearing on the
obligation of the Appellant to declare each and every dispatch under the policy. It is a settled proposition of law that a stranger cannot alter the
legal obligations of parties to the contract.
In view of the ratio laid down by the Supreme Court, it has to be observed that the terms in the policy which is an agreement between the parties
have to be strictly adhered to and no deviation, violation nor interpretation is to be entertained.
As far as the case on hand is concerned, the relevant stipulation is available in Ex.P.1 Policy which terms were consciously agreed upon by
both the parties. They are as follows:
MINIMISING LOSSES
It is the duty of the Assured and their servants and agents in respect of loss recoverable hereunder.
8.1. to take such measures as may be reasonable for the purpose of averting or minimising such loss and
8.2. to ensure that all rights against carriers, bailees or other third parties are properly preserved and exercised by lodging a monetary claim against
railway/road carriers/bailees within six months from the date of railway/lorry receipt or as prescribed by the relevant statute
and the underwriters will, in addition to any loss recoverable hereunder, reimburse and Assured for any charges properly and reasonably incurred
in pursuance of the duties.
Measures taken by the Assured or the underwriters with the object of saving, protecting or recovering the subject matter insured shall not be
considered as a waiver or acceptance of abandonment or otherwise prejudice the right of either party.
CLAIMS: In the event of any loss which may give rise to a claim under this policy, immediate notice thereof in writing should be given to the
Company''s Office at SALEM and to the Branch/Division nearest to the destination and also to the Carriers'' Agents or there Bailee at destination
for holding survey if necessary. The liability of the company is only to succeed and not in any way supersede any claim which the Assured may be
entitled to make upon any Carriers or other Bailee whose liability is primary.
In this juncture, it is to be borne in mind that Section 10 of the Carriers Act would come to play which mandates the party aggrieved by
damage of the cargo or the goods entrusted to the carrier to issue notice to the carrier concerned within six months. Section 10 of the Carriers Act
reads thus:
Notice of loss or injury to be given within six months. No suit shall be instituted against a common carrier for the loss of, or injury to, goods
entrusted to him for carriage, unless notice in writing of the loss or injury has been given to him before the institution of the suit and within six
months of the time when the loss or injury first came to the knowledge of the Plaintiff.
The learned Counsel for the Plaintiff while repelling the above said contention raised by the learned Counsel for the first Defendant, submitted
that the materials available in this case would vividly show that there is no privity of contract between the Plaintiff and the carrier, that the
manufacturer namely M/s. Bharat Heavy Electricals Limited have despatched the goods in their vehicles to the places of destination at their own
risk and there is an actual contract between the Bharat Heavy Electricals Limited on the one part and M/s. Transport Corporation of India on the
other and it is for M/s. Bharat Heavy Electricals Limited to observe Section 10 of the Carriers Act. But it is the intention of the legislature that the
Plaintiff has to issue notice on coming to know about the loss or injury of his goods to the carriers concerned within six months. To appreciate this
point, the terms employed in relevant clause in the policy aforestated have to be deeply scrutinised. It is the specific mention in the clause under the
caption ""Minimising Losses"" and ""Claims"" that it is the duty of the assured and their servants and agents in respect of loss recoverable by ensuring
that all rights against carriers, bailees or other third parties are properly preserved and exercised by lodging a monetary claim against railway/road
carriers/bailees within six months from the date of railway/lorry receipt or as prescribed by the relevant statute.
The terms of the policy aforementioned was agreed upon by both the parties. If the Plaintiff has come forward to project the contention that
there was no contract between the Plaintiff and the common carrier, then there should have been a provision in this respect in the clause. But, in
this regard, specific mention in the clause is absent in this case. Hence, the Plaintiff is statutorily expected to issue notice to the carrier on detecting
the loss or damages to the goods within six months. But it was not done in this case. The relevant portion in the clause is under the caption
Claims"". It is stated that in the event of any loss which may give rise to a claim under the policy, immediate notice thereof in wiring should be given
to the company''s office at Salem and to the Branch nearest to the destination and also to the Carriers agents or other Bailee at destination for
holding survey if necessary. It transpires from the pleading, oral evidence and Ex.P.18 minutes of the tripartite meeting dated 23.2.1989 that a joint
meeting was held among the customer-Plaintiff, Insurance Surveyor and M/s. Bharat Heavy Electricals Limited, Hardwar regarding damaged
condenser tubes. They have adopted certain resolutions. But they are not pertaining to the right of the Plaintiff against their liability of the carrier. In
other words, the carrier has been kept in dark by the Plaintiff as to the loss caused to the Plaintiff''s goods. It is also provided in the clause under
the heading ""Claims"" that the liability of the insurance company is only to succeed and not in any way supersede any claim which the assured may
be entitled to make upon any carriers or other Bailee whose liability is primary. The liability of the carrier or any other bailee under whose custody
the goods were entrusted for transport has been given priority for the Plaintiff to first proceed with and the liability of the insurance company, is
afterwards. In unequivocal terms, it is agreed in the policy by both parties that the Plaintiff and the 1st Defendant that the Plaintiff has to issue notice
to the carrier as expected by law so as to preserve the right of the insurance company against carriers. The obligation of preservation of right as
expected in the provision has not been observed by the Plaintiff.
The learned Counsel for the Defendant would cite authorities of this Court which are having relevance to the above said legal proposition. In
1993 (41) ECC 294 United India Insurance Company Ltd. v. G.M. Electrical Works. Thangamani, J. while dealing with the legal position has
observed an earlier decision in E.I.D. Parry (India) Ltd. v. Far Eastern Marine Transport Co. Ltd. and Ors. reported in 1988 (1) M.L.J. 145,
wherein it is held that it is the duty of the Assured and the agents in all cases to take measures as may be reasonable for the purpose of averting or
minimising loss and to ensure that all the rights against the carriers, bailees or other third parties are properly preserved and exercised in particular,
the assured or their agents are required to take these steps and failure to comply with this requirement may prejudice any claim under this policy
and that under the law of Insurance the right of the Insurer on payment of the loss to the assured is to be subrogated to the rights of the assured so
as to enable the insurer to proceed against the third party and indemnify itself.
Aforesaid E.I.D. Parry (India) Ltd., case, S.A. Kader, J. has observed as follows on this point:
.. Under the law of Insurance, the right of the Insurer on payment of the loss to the assured is to be subrogated to the rights of the assured so
as to enable the insurer to proceed against the third party and indemnify itself. It is therefore incumbent upon the assured to keep alive his remedies
against the carrier or other third party and any default committed by the assured either by allowing the remedy to get time barred or by abdicating
or abandoning, his rights against the carrier or the third party will deprive the insurer of its remedies against the third party for indemnity. In such
cases, it is open to the insurer to repudiate the liability under the policy, the loss is not paid to the assured or to lay a counterclaim against the
assured for damages if it had paid the loss to the assured. The law is thus stated in Mac Gillivray & Parkington Insurance Law, seventh edition,
paragraph 1172:
The assured is under an obligation not to deal with any claim he possesses, or will possess, against a third party in such a manner as to prejudice
the insurer''s rights of subrogation in relation to it. The insurer''s remedy will be to repudiate liability on the policy, or to counterclaim for damages
for the loss of, or diminution of their rights, depending on the circumstances. The position varies slightly depending on whether the insurer has paid
for the loss.
This Court has consistently held that the Assured is bound to preserve and keep alive the right to initiate against the carrier and if any default
committed in this regard by the assured, it would dis-entitle him from claiming remedy against the insurance company. I am in respectful agreement
with the aforesaid proposition. Hence, in not preserving the rights of the first Defendant by not issuing any notice to the carrier as to the damage,
the Plaintiff has not only violated the policy conditions but also statutory requirement which would disentitle him from seeking remedy. I answer this
issue in the affirmative.
Issue Nos. 5 and 6
The pleadings and evidence would go to show that the consignment was damaged in transit and received at the destination in a damaged
condition. The loss has been assessed by the Plaintiff in the plaint at Rs. 93,36,750/- as against all the Defendants. The break up figures have also
been furnished in the plaint. Since the issue No. 4 has been answered in favour of the Defendants, there is no necessity to assess the extent of loss
and it is also observed that the Defendants are right in rejecting the claim of the Plaintiff. I answer these issues accordingly.
Additional Issue:
The learned Counsel for the Plaintiff submitted that as per Article 44 of the Limitation Act, the suit has to be filed within three years from the
date of disclaimer and in this case the damage was found out on the date of delivery i.e. on 11.10.88 and the suit was filed on 8.10.1991 and
hence the suit claim is not barred by limitation.
The learned Counsel for the first Defendant has cited an authority of the Supreme Court in H.P. State Forest Company Ltd. Vs. United India
Insurance Co. Ltd., , in which it is held if the suit claim is laid beyond one year after the repudiation of liability, it is barred by time since Clause 6(ii)
of the policy specifically provided that 12 months period is fixed for laying claim. But the Defendants have not indicated any such identical clause in
the policy issued by the first Defendant and hence Article 44 of the Limitation Act would come to play. Neither in the pleading nor in the evidence
it is stated that the suit has been laid after the time fixed in the policy. In this context, this issue is answered that the suit is not barred by time.
Issue Nos. 7 and 8
In the light of the discussions undertaken under the Issue No. 4, following the authorities mentioned in the judgment, the Plaintiff is found not to
be entitled for the relief prayed for. The suit has to suffer dismissal. These issues are answered accordingly.
In the result, the suit is dismissed with costs.