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PETITIONER: STATE OF ORISSA

       Vs.

RESPONDENT: UNITED INDIA INSURANCE CO. LTD.REPRESENTED BY DIVISIONAL OFF

DATE OF JUDGMENT:       01/04/1997

BENCH: K. RAMASWAMY, D.P. WADHWA

ACT:

HEADNOTE:

JUDGMENT:                          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  non- supply  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 non- supply 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

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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

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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 non- supply, 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

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    at will."      Therefore, the  High Court  has not committed any error of law warranting interference.      The appeal is, therefore, dismissed. No costs.