Ganga Bishan Banshilal vs Union of India (UOI)

A.N. Banerjee, J.—This appeal at the instance of the Plaintiff arises out of a suit for recovery of damages for non-delivery of goods. One Bhatchandra Kanta Chotelal booked one bale of O.P. goods at Wandibamda under the Central Railways for delivery to self at Salimar on the South Eastern Railway. The Plaintiff became the owner of the goods and the R.R. was endorsed in his favour. The bale was said to have been lost in transit. Hence, the Plaintiff claimed a sum of Rs. 1,989-50 on account of the price of the missing bale of cotton piece-goods and also claimed a sum of Rs. 198-95 on account of higher market price obtaining in Calcutta. The trial Court disallowed the Plaintiff''s further claim of higher market price but allowed a part decree for Rs. 1,989-50. The defence was that the Plaintiff had no locus standi to commence the suit. The trial Court negatived such defence, but the appellate Court held that the Plaintiff had no locus standi to maintain the suit inasmuch as he had been fully compensated by the Insurance Company, viz. General Assurance Society Ltd., to whom the Plaintiff had given a letter of subrogation and thereby divested him of the right to sue. Needless to say that the appeal was at the instance of the Defendant Union of India owning two Railways. After the suit was dismissed by the appellate Court, the Plaintiff preferred this appeal.

It was contended on behalf of the Plaintiff Appellant that the lower appellate Court went wrong in construing the provisions of Section 135A of the Transfer of Property Act and in applying the principles of law as enunciated in the two cases of this Court in Union of India Vs. Alliance Assurance Co. Ltd. and Another, and Indian Trade and General Insurance Co. Ltd. Vs. Union of India (UOI), . It was urged that Section 135A(2) and (3) does not divest the owner of the goods to maintain a suit for damages even if a letter of subrogation had been given to the insurer by the insured.

It was contended on behalf of the Respondent Defendant that the suit was rightly dismissed by the appellate Court inasmuch as Sub-section (2) of Section 135A of the Transfer of Property Act applied in this case and after being fully compensated by the insurer and after giving a letter of subrogation to the insurer the insured had no locus standi to maintain a suit of the present nature. In this connection, reliance was sought to be placed on a Single Bench decision of this Court, Union of India (UOI) Vs. Gangabishan Banshilal, .

Therefore, the only point for consideration in this appeal is whether the owner of the goods, i.e. the insured can maintain a suit of the present nature after being compensated by the insurer and after giving a letter of subrogation to the insurer. Section 135A of the Transfer of Property Act as it stood at the relevant time and before it was deleted and incorporated in Marine Insurance Act stood as follows:

135A. Assignment of rights under policy of marine insurance repealed by Section 92, Marine Insurance Act, 1963, with effect from August 1, 1963.

The repealed Section 135A stood as follows:

(1) Where a policy of marine insurance has been assigned so as to pass the beneficial interest therein, the assignee of the policy is entitled to sue thereon in his own name; and the Defendant is entitled to make any defence arising out of the contract which he would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected.

(2) Where the insurer pays for a total loss, either of the whole, or, in the case of goods, of any apportion able part, of the subject-matter insured, he thereupon becomes entitled to take over the interest of the insured person in whatever may remain of the subject-matter so paid for and he is thereby subrogated to all the right and remedies of the insured person in and in respect of that subject-matter as from the time of the casualty causing the loss.

(3) Where the insurer pays for a partial loss, he acquires no title to the subject-matter insured, or such part of it as may remain, but he is thereupon subrogated to all rights and remedies of the insured person as from the time of the casualty causing the loss, in so far as the insured person has been indemnified by such payment for the loss.

(4) Nothing in Clause (e) of Section 6 shall effect the provisions of this section.

In the case of Union of India (UOI) Vs. The Great American Insurance Co. Ltd. and Another, , the Division Bench of this Court observed as follows:

Apart from that however, it seems to us that the subrogation, contemplated both under Sub-section (2) and under Sub-section (3), would entitle the insurer to institute the suit in its own name. Essence of subrogation is substitution. Indeed, on this statutory subrogation, the insurer, on the wordings of the statute itself, becomes entitled to all rights and remedies of the insured person in respect of the lost goods, for which he has made the payment or indemnified the insured. It is, therefore, seen that the said decision made no distinction between Sub-section (2) and Sub-section (3) of Section 135A of the Transfer of Property Act in so far as the right of the insurer to maintain a suit for damages in respect of the lost goods was considered. In that decision reference was also made to the two cases of this Court, viz. Indian Trade and General Insurance Company Ltd. v. Union of India Supra, a case dealt with under Sub-section (3) and Textiles and Yarn (P) Ltd. Vs. Indian National Steamship Co. Ltd., . It will appear that these cases and also the cases upon which reliance was placed by the appellate Court dealt with the question of locus standi of the insurer to maintain a suit for damages against the Union of India representing the Railways. But the question whether an insured after being compensated by the insurer and after giving a letter of subrogation to the insurer can still maintain a suit for damage came to be considered in the Madras case of Sri Sarada Mills Ltd. Vs. Union of India and Others, . It was held in that case that a letter of subrogation after being compensated by the insurer does not divest the insured of the right to maintain a suit in his own name. An appeal was taken to the Supreme Court as against such decision of the Madras High Court and the Supreme Court by its majority judgment reported in Union of India (UOI) Vs. Sri Sarada Mills Ltd., approved of the above view, viz. that in such circumstances the insured can maintain a suit for damages against the Railways. In view of such decision of the Supreme Court, I find no difficulty in holding that the appellate Court was incorrect in thinking that after the letter of subrogation and that also after being compensated by the insurer the Plaintiff had no locus standi to maintain the suit. Accordingly, the judgment and decree of the appellate Court is set aside and that of the trial Court is restored.

In the result, the appeal is allowed. The judgment and decree of the appellate Court is hereby set aside and that of the trial Court is restored.

No order is made as to the costs of this Court.