O R D E R
This appeal by special leave arise from the judgment of the Division Bench of the Andhra Pradesh High Court, made on April 21, 1976 in Appeal No. 157/73.
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 has 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.
The only question is : whether the appellant is entitled to damages from the Insurance Company for nonsupply of 12 bulldozers through their agent, Vijay Commercial Corporation, who had the insurance from the Insurance Company. The High Court extracted all the relevant clauses in the contract of insurance and held that it was a "Marine and Transit Insurance" policy under Ex.A-22 and nonsupply of bull-dozers was not a condition of this policy and further, since under the contract the insurer was entitled to terminate the contract in terms of the insurance, the cancellation thereof was valid in law and that the respondents were not liable for damages for non-supply of the goods.
Section 3 of the Marine Insurance Act, 1963, Act (11 of 1963) (for short, the ‘Act’) contemplates that a contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the losses incidental to marine adventure. The expression "Contract of Marine Insurance" has been defined in Section 2(a) to mean a contract of marine insurance as defined by Section 3. "Marine Adventure" has been defined under Section 2(d) to include any adventure where any insurable property is exposed to maritime perils. "Maritime perils" has been defined in Section 2(e) and means the perils consequent on, or incidental to, the navigation of the sea, that is to say, perils of the seas, fire, war perils, pirates, rovers, thieves, captures, seizures, restraints and detainments of princes and peoples, jettisons, battery and any other perils which are either of the like kind or may be designated by the policy. Section 3 of the Act envisages that :
"A contract of marine insurance is
an agreement whereby the insurer
undertakes to indemnify the
assured, in the manner and to the
extent thereby agreed, against
marine losses, that is to stay, the
losses incidental to marine
adventure."
Section 4 of the Act is a composite policy as regards mixed sea and land risks. It contemplates thus:
" "4(1) A contract of marine
insurance may, by its express
terms, or by usage or trade, be
extended so as to protect the
assured against losses on inland
waters or on any land risk which
may be incidental to any sea
voyage."
Sub-section (2) and the explanation thereto are not relevant for the purpose of this case, hence omitted.
The question, therefore, is: whether the insurance coverage under Ex.A-22 includes non-supply of 12 bulldozers contracted by Vijaya Commercial Corporation, which had undertaken to supply the same to the appellant. Though it is contended that the insurance liability starts only from destination Calcutta Port to any place in Orissa, we cannot accept the same of the reason that the contract of insurance under Ex.A-22 is a composite one. It read as under:
"Risk to attach only when the goods
hereby insured are inspected and
certified as sound by a
representative of the Insurer
before dispatch from Calcutta."
"The said Company promises and
agree that the insurance aforesaid
shall commence from the time when
the goods and Merchandise shall
laden on board the said ship or
Vessel Craft or Boat as above. And
continue until the said Goods and
Merchandise be discharged and
safely landed at as above."
It is also seen, as extracted by the High Court, that the insurance was from part to part, in other words, from the part in Yugoslavia to the part in Calcutta. 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 came to be effective, a notice was issued by the Insurance Company cancelling the same. One of the clause in the contract is that "this contract is subject to 7 days’ notice of cancellation by either side in writing." Thus, it is mutual right to be exercised by the parties to cancel the contract duly entered into.
The High Court has recorded the finding that the Branch Manager of insurance company exceeded his authority as an agent by underwriting in the policy the guarantee for the non-supply of bulldozers. The principal is not bound by such an undertaking, by operation of Section 237 of the Contract Act, which read thus:
"When an agent has, without
authority, done acts or incurred
obligations to third persons on
behalf of his principal, the
principal is bound by such acts or
obligations if he has by his words
or conduct induced subh third
persons to believe that such acts
and obligations were within the
scope of the agent’s authority."
It is found, as a fact, that he had no authority to undertake such liability by subsequent incorporation into the policy of such under writing and, therefore, by operation of Section 237 of the Contract Act, the Insurance Company was not bound by such act of the manger.
A contract of Indemnity is a contract by which one party promise to save the other from loss caused to him by the conduct of any other person as contemplated in Section 124 of the Indian Contract Act. But indemnity, as applicable to marine insurance, must not be an indemnity, as contemplated by the Indian Contract Act, as the loss in such a contract is covered by the contract itself and such loss is not caused to the assured by the conduct of the insurer nor by the conduct of any other persons. Brett. L.J., observed, with regard to this indemnity, thus:
"this contract means that the
assured, in case of loss against
which the policy has been made,
shall be fully indemnified, but
shall never be more than fully
indemnified. That is the
fundamental principle of insurance,
and if ever a proposition is
brought forward which is at
variance with it, that is to say,
which either will prevent the
assured from obtaining a full
indemnity, or which will give to
the assured more than a full
indemnity, that proposition must
certainly be wrong."
vide Marine Insurance by Banerji.
In view of the fact that the Branch Manger was not authorised to cover the risk of the loss on account of nonsupply, the agent, namely, the Insurance Company is not liable for any damages. But in view of the fact that the contract has 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 is General Assurance Co. vs. Chandumull Jain [(1966 (3) SCR 500 at 512]. Therein, this Court had held thus:
"This condition gives mutual rights
to the parties to cancel the policy
at any time. To the assurer it
gives a right to cancel the policy
at will."
Therefore, the High Court has not committed any error of law warranting interference.
The appeal is, therefore, dismissed. No costs.