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PETITIONER: UNION OF INDIA

       Vs.

RESPONDENT: SRI SARADA MILLS LTD.

DATE OF JUDGMENT28/09/1972

BENCH: RAY, A.N. BENCH: RAY, A.N. DUA, I.D. MATHEW, KUTTYIL KURIEN

CITATION:  1973 AIR  281            1973 SCR  (2) 484  1972 SCC  (2) 877

ACT: Transfer of Property Act (4 of 1882), ss. 6 (e) and 135A and Marine Insurance Act (11 of 1963), ss. 52 and  79--Consignor of goods to Railway suing Railway Administration for loss of goods--Suit  filed after recovering from  insurance  company and  assigning  to  insurance  company,  assignor’s   rights against Railway Administration--Maintainability.

HEADNOTE: The  respondent consigned certain goods to the  Railway  for dispatch.  The goods were insured.  They were damaged during transit, and the Insurance company paid the total loss.  The respondent  assigned all its rights, including the right  to sue,  to the Insurance Company.  Thereafter  the  respondent sued  the  appellant for damages.  The  appellant  contended inter  alia that the respondent, having received  the  total loss  from  the  Insurance  Company,  was  not  entitled  to institute the suit. The  High  Court in appeal, held the suit  was  maintainable because  the assignment was of a mere right to sue which  is not  valid  under s. 6(e) of the Transfer of  Property  Act, 1882,  and that even if the assignment was valid, the  right to  action of the respondent had not ceased and decreed  the suit. In appeal to this Court, HELD : (per A. N. Ray and 1. D. Dua, JJ.) The appeal  should be dismissed. [471B] Section  6(e) of the Transfer of Property is not  applicable to  the  facts  of  the case.  Under s.  52  of  the  Marine Insurance Act, 1963, an insurance company can sue in its own name  where the policy has been transferred  by  assignment, but  that  is not the case here.  In the present  case,  the insurance  company is entitled to subrogation in  accordance with  the provisions of s. 79 of the Marine  Insurance  Act. The  insurance company and the respondent proceeded  on  the basis that the insurance company was only subrogated to  the rights  of  the  assured,  and  the  letter  of  subrogation contains  intrinsic evidence that the respondent would  give the insurance company facilities for enforcing rights.   But the  letter of subrogation did not divest the respondent  of its  cause  of  action against the appellant  for  loss  and

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damages.   The  insurance company has chosen  to  allow  the respondent  to sue and the appellant did not take  the  plea that  there  was  an assignment.  If such a  plea  had  been taken,  the insurance company could have been impleaded  and rights  of all the parties could have been  decided.  [468H; 469A-B; 47OC-D, E-H; 471A] The  respondent will however give a valid discharge  to  the appellant and be answerable and accountable to the insurance company  for the money recovered, and the decree would be  a bar to the institution of any suit by the insurance company. [470D] 465 King  v. Victoria Insurance Company Limited [1896] A.C.  250 Compania  Colombiana De Seguros v. Pacific Steam  Navigation Co. [1965] 1 Q.B. 101, Torkington v. Magee [1902] 2 K.B. 427 and  Ertet  Bieber & Co. v. Rio Tinto Co. [1918]  A.C.  260, referred to. Per  K. K. Mathew, J. (dissenting).  The real reason  why  a mere  right  to  sue  cannot be assigned  is  that  such  an assignment   would   offend  the  rule  of   champerty   and maintenance.   But  where  an  insurance  company  has  been subrogated  to  all  the rights, and  the  remedies  of  the assured  by virtue of s. 135-A of the Transfer  of  Property Act,  1882, (now incorporated in the Marine  Insurance  Act, 1963), the reason for the rule against assignment of a  mere right to sue does not obtain, because, the insurance company is  clothed with all the rights and remedies of the  assured and the only thing lacking is the capacity to sue in its own name.   Subrogation  is  concerned solely  with  the  mutual rights  and  liabilities of the parties to the  contract  of insurance;  it confers no rights and imposes no  liabilities upon  third parties who are strangers to that contract  and, the  insurer, who has paid a loss gets no direct  rights  or remedies against anyone other than the assured, nor can  sue such parties in his own name. [472F-H; 475H; 476A; 480G-H] King  v. Victoria insurance Co. Ltd, [1896] A.C. 250,  255-6 and  Simpson  v.,  Thomson, [1877] 3  App.   Cas.  279  H.L. applied. Indian  Trade  and General Insurance Co. Ltd.  v.  Union  of India,  A.I.R. 1957 Calcutta 190 and Vasudevan  Mudaliar  v. Caledonian  Insurance  Co. and another, A.I.R.  1965  Madras 159, approved. Yorkshire  insurance Co. Ltd. v. Nisbet Shipping  Co.  Ltd., [1962] 2 Q.B. 330,Castellain v. Preston, 11 Q.B.D. 380, 395, Burnard v. Rodocanachi, Sons & Co. 7 App Cas. 333, 939, Glen Line v. Attorney General, [1930] 46 T.L.R. 451, Textiles and Yarn (P) Ltd. v. Indian National Steamship Co. Ltd.   A.I.R. 1964 Calcutta 362 and Asiatic Governments Security Fire  and General  Assurance Co. Ltd. v. The Scindia Steam  Navigation Co. Ltd., A.I.R. 1965 Kerala 214, referred to. Alliance  Insurance Company Ltd. v. Union of India.   I.T.R. [1950] 1 Calcutta 544, disapproved. Clause  (4)  of  s. 135-3 had not  made  any  departure  and conferred  a right of suit upon the subrogee  against  third persons.  An assignment of insurance after loss would  sound in the realm of an assignment of a mere right to sue and the legislature wanted, by Cl. (4), to put it beyond doubt  that s. 6(e) is no bar to such an assignment.  Moreover, cl.  (4) may  not  have any operation upon cls. (2) and  (3)  of  the section,  because, subrogation is effected by cls.  (2)  and (3),  that  is,  by  operation of  law,  while  s.  6(e)  is concerned  with a transfer of a mere right to sue by act  of parties. [476B-D] But,  in the present case, it is not mere subrogation.   The

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assignment  conveyed  to the insurance  company  the  entire rights  in respect of the subject-matter of  the  insurance, including  the right of the assured to sue in its own  name, and  therefore,  after such assignment, the assured  had  no cause of action to institute the suit against the  appellant for recovery of damages. [481F-G] Compania  Colombiana de Seguros v. Pacific Steam  Navigation Co. [1965] 1 Q.B. 101, 121 applied. 466 Anson’s Law of Contract, Twenty-third edition edited by A.G. Guest referred to

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1045  of 1967. Appeal  by certificate from the _judgment and  decree  dated January  4, 1966 of the Madras High Court in Appeal No.  129 of 1961. G.  L. Sanghi and S. P. Nayar, for the appellant. R.   K.  Garg,  S. C. Agarwala, V. J. Francis  and  Narayana Nettar, for the respondent. The  Judgment of A. N. RAY and I. D. DUA, JJ. was  delivered by RAY, J. K. K. MATHEW, J. gave a dissenting Opinion. RAY,  J.-We have had the ad-vantage of reading the  judgment written by our learned brother Mathew. The question which falls for determination in this appeal is whether  the  respondent mill on recovering  Rs.  32,254-6-9 from the Indian Globe Insurance Co. Ltd. and assigning all rights  against the Railway Administration in favour of  the insurance  company as a subrogee was competent to  institute -and maintain the suit against the Railway Administration. We  agree with the reasoning and conclusion of  our  learned brother Mathew that subrogation does not confer any indepen- dent right on underwriters to maintain in their own name and without  reference  to  the persons assured  an  action  for damage  to the thing insured.  The right of the  assured  is not  one of those rights which are incident to the  property insured. Counsel  for the appellant contended that by reason  of  the assignment  to the insurance company of all  rights  against the Railway Administration the respondent mill did not  have any cause of action against the Railway Administration.   In aid  of  that contention the decisions in King  v.  Victoria insurance  Company  Limited  [1896] A.C.  250  and  Compania Colombiana  De  Seguros  v. Pacific  Steam  Navigation  Co., [1965] 1 Q.B. 101 were relied on. In  the Victoria Insurance Company case (supra) the Bank  of Australian effected an insurance with the insurance  company of certain goods to be shipped to London.  Before the  cargo left  Australia  it  was damaged or  destroyed  through  the negligence of the defendant King, an employee of the Queens- land Government.  The bank claimed a sum from the company 467 which was duly paid.  The company took an assignment by deed of  all  the rights of the bank against King  subject  to  a stipulation that the bank’s name should not be used in legal proceedings.   The questions raised on appeal in  that  case were (1) the plaintiffs have no right of action at all;  (2) they have no right of action in their own name.  The Supreme Court of Queens-land held that mere payment by the insurance company did not subrogate them to the rights of the bank  to the,  extent  that they could sue in their own  names.   The Supreme  Court of Queens-land held that the  assignment  was

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covered  by  the Queens-land Act which corresponded  to  the English  Judicature  Act of 1873.  The  Queens-land  Supreme Court construed the term ’legal chose in action’ to  include all rights the assignment of which a Court of Law or  Equity would before the Act have considered lawful.  On that ratio, the  right covered by the assignment in  Victoria  Insurance Company  case (supra) was held to be a right of  that  kind. The  Judicial Committee upheld the decision and  said  "They rested their judgment on the broader and simpler ground that a payment honestly made by the insurers in consequence of  a policy granted by them and in satisfaction of a claim by the insured is a claim made under the policy which entitles  the insurers  to  the remedies available to the  insured".   The Judicial  Committee  on  this view  said  that  "the  highly artificial defence of the Queens-land Government fails." It  should  be noted here that the phrase  ’legal  chose  in action’ was said in the Victoria Insurance Co. case  (supra) to  mean  ’lawfully assignable’ chose in  action.   A  legal chose,  in action is something which is not possession,  but which must be sued for in order to recover possession of it. A legal chose in action does not include a right of  action, such as, for instance, a right to recover damages for breach of  contract,  or for a tort, for it that were  so,  such  a right would be assignable.  They would materially affect the law of champerty and maintenance. In the Pacific Steam Navigation Co. case (supra) the Pacific Steam  Navigation Company by a bill of  lading  acknowledged the shipment of 183 drums of electric cable at Liverpool for carriage  to  and  delivery at a port  in  Colombia  to  the Colombiana  Telephone Company.  The insurance  company  paid the  telephone company in respect of the particular  average loss.   The  telephone  company on receipt  of  the  payment handed to           the insurance company two documents.  By the first document, the telephone company ceded and endorsed to the, insurance company "all rights which we have or which we may acquire in the future to claim reimbursement  thereof from  the third parties who may be responsible for  loss  or damage." By the second document the telephone company waived in favour of the insurance company 468 "any  rights  he  may have or has  against  others  possibly responsible  for the damages or losses indemnified  by  this payment, and we agree not to carry out any act that might in any  way  hinder  the carrying out of  such  rights  by  the insurance company".  The insurance company alleged that  the documents went further than a form of letter of  subrogation and constituted a valid assignment by the telephone  company to  the insurance company of the telephone  company’s  claim against  the defendants.  The Court found that the  language of the documents was that of assignment.  The question  was whether the Court would permit the enforcement of the  claim in the name of the assignee or whether the assignment  would be  of a bare cause of action to defeat assignment  and  its enforcement. The decision in May v. Lane 64 L.J.Q.B. 236 was referred  to in  the  Pacific Steam Navigation Co. case (supra)  for  the proposition that a legal chose in action is something which is not in possession, but which must be sued for in order to recover possession of it.  A legal chose in action does  not include a right of action,such as, for instance, a right  to recover damages for breach of a  contract, or a legal  right to recover damages arising out of an    assault. Again,    in Torkington v. Magee [1902] 2 K. B. 427 it was said that the words "other legal chose in action" mean right which the common law looks on as not assignable by reason of

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its  being  a chose in action, but which a court  of  equity deals with as being assignable. In  the  Pacific  Steam  Navigation  Co.  case  (supra)  the insurance company was found entitled to sue upon the bill of lading.  A bill of lading confers title to sue because it is a  form of property.  The reason for allowing the  insurance company  to  sue  in that case was that  equity  before  the Judicature  Act  allowed  the  enforcement  of   subrogation because equity never regarded subrogation as the enforcement of a bare cause of action, but as the enforcement of a cause of  action  legitimately  supported  by  the   underwriter’s interest  in recouping himself in respect of the  amount  of the loss which he had paid under the policy as a result  of the  acts,  neglects  or defaults  of  the  actual  contract breaker or tortfeasor.  The assignment in that case was held to amount to assignment of the benefit of the contract  with the ship-owners. It is indisputable that an insurance company can sue in  its own  name  where the marine policy has been  transferred  by assignment  under  section 52 of the  Marine  Insurance  Act 1963.  That is not the present case. 469 It  is  equally indisputable that an insurance   company  is entitled to subrogation in accordance with the provisions of section  79 of the Marine Insurance Act, 1963.   Subrogation does not allow the subrogee or the underwriter to sue in its own name, In the present case, the insurance company has not enforced its claim by virtue of subrogation. Section  130 of the Transfer of Property Act however  speaks of  transfer of actionable claim.  Actionable  claims  under the Indian law include claims recognised by the Court either as  to,  unsecured debts or as to  beneficial  interests  in moveable   property  not  in  possession.   A  debt  is   an obligation  to pay a liquidated or certain sum of money.   A beneficial  interest  in moveable property  will  include  a right to recover insurance money or a partner’s right to sue for an account of a dissolved partnership or a decretal debt or  a right to recover the insurance money or the  right  to claim  the  benefit  of a contract  not  coupled  with  any liability. Section  6(e) of the Transfer of Property Act states that  a mere  right to sue cannot be transferred.  A bare  right  of action might be claims to damages for breach of contract  or claims  to damages for tort.  An assignment of a mere  right of  litigation is bad.  An assignment of property is  valid even  although  that  property may  be  incapable  of  being recovered without litigation.  The reason behind the rule is that  a bare right of action for damages is  not  assignable because the law will not recognise any transaction which may savour  of maintenance of champerty.  It is only when  there is some interest in the subject matter that a,.  transaction can  be  saved from the imputation  of maintenance..  That interest  must exist apart from the assignment and to)  that extent must be independent of it. A chose in action for breach of contract was not  assignable at  law but was assignable at equity.  A chose in action  in tort  was assignable neither in law nor in equity.   A  bare right of’ action is not assignable.  When however the  right of  action is one of the incidents attached to the  property or contract assigned it will not be treated as a bare  fight of action. In Ertel Bieber & Co. v. Rio Tino Co., [1918] A.C. 260  Lord Summer  treated a cause of action for damages for breach  of contract as chose in action, a form of property.  The reason for  holding  a cause of action for damages  for  breach  of

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contract  to be a form of property is that the  assignee  is seeking  to enforce a right which is incidental to  property or a right to a sum of money which theoretically is part  of the property. The common law was not inclined in favour of assignments  of contractual rights and liabilities, A person to whom rights 470 In  equity  both legal and equitable choses in  action  have been subject to assignment.  Contractual rights being legal choses  in action could generally be assigned.  It  is  on these seasonings that the term ’thing in action’ in the Law of  Property  Act  has  been  interpreted  in  the  Victoria Insurance  Co.  and the pacific Steam Navigation  Co.  cases (supra) to include any right which the common law looked  on as not assignable by reason of its being chose in action but which a court of equity dealt with as assignable. In  the present case, the insurance company has not sued  to enforce any assignment.  The document which is described  as -letter  of  subrogation also uses: the words  of  assigning rights  against  the  Railway  Administration.   It  is  not necessary  to  express ,-any opinion whether the  letter  of subrogation  amounted to an assignment in the present  case, because  the  insurance company not sought  to  enforce  any assignment. The respondent mill will give a valid discharge to the Rail- way  Administration  in respect of loss and  damages.   This decree  will be a bar to the institution of any suit by  the insurance  company in respect of the subject matter  of  the suit.  The respondent mill is answerable and accountable  to the  insurance company for the moneys recovered in the  suit to  the  extent the insurance company paid  the  respondent mill. The  High  Court  expressed  the  view  that  even  if   the assignment  ’is  valid the right of action residing  in  the assignor  has  not ceased.  The respondent  mill  sued  the Railway  Administration for breach of contract of  carriage and  damages for negligence.  The letter of subrogation  did not  divest  the mill of its cause of  ;action  against  the Railway Administration for loss and damages. The defence of the Railway Administration was that the  mill realised from the insurance company the damages and "as such the  plaintiff (meaning thereby the respondent mill) has  no right  to  claim any sum in this action".  If  the  specific plea  of assignment had been taken in the written  statement the  respondent  mill  would have  impleaded  the  insurance company.  The Court could ’have in those circumstances  been in  a  position to afford full and complete  relief  to  the parties. In the present case the insurance company and the mill  pro- ceeded  on  the basis that the, insurance company  was  only subrogated  to  the rights of the assured.   The  letter  of subrogation contains intrinsic evidence that the  respondent would  give the insurance company facilities  for  enforcing rights.  The insurance 471 company  has chosen to allow the mill to sue.  The cause  of action  of the mill against the Railway  Administration  did not perish on giving the letter of subrogation. For these reasons, we regret our inability to agree with our learned brother Mathew that the respondent mill has no cause of  action.   We agree with the decision of the  High  Court that  the suit should be decreed.  The appeal  is  therefore dismissed,. with costs. MATHEW,  J.  This is an appeal by certificate,  against  the judgment  of  the High Court of Madras  allowing  an  appeal

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preferred  by the plaintiff against the decree of the  trial court  dismissing the suit instituted by it for recovery  of damages. The  plaintiff, Sri Sarada Mills Ltd., instituted  the  suit against  the Union of India as representing the Central  and Southern  Railways for damages to 100 bales of F. P.  cotton consigned through their agents from Nagpur to Podhanur under a railway receipt issued by the Central Railway.  The  goods had  to  pass  through,  several  stations  along  the   two railways,  namely, the Central and the Southern,  before  it arrived at Podhanur.  When the goods arrived at Podhanur, it was  found  that  87 bales out of the  100  were  burnt  and charred  and that 13 bales were loose and short  in  weight. When  the plaintiff applied for open delivery,  the  railway authorities at Podhanur got the damage surveyed, and  issued a certificate of damage and shortage.  The plaintiff claimed damages  against the Railway Administration.  But the  Chief Commercial  Superintendent, Southern Railway,  informed  the plaintiff  that  the  consignment was  involved  in  a  fire accident  at Sirpur Kagaznagar on the Central Railway,  that the cause of the fire was unknown and that the Railways were not  liable for the damage caused to the goods as there  was no  negligence  or misconduct.   The  plaintiff,  therefore, instituted  the suit for damages alleging that  the  Railway Administration was negligent. The defendants contended that the plaintiff was not entitled to  institute the suit as it had insured the goods with  the Indian  Globe Insurance Co. and had received the total  loss from the Company, that the damage to the goods was caused by fire,  which  was beyond the control of  the  Railways  and, therefore, the defendants were not liable. for damages. The trial court found that the fire which caused the damage, to the goods was not due to any cause beyond the control  of the  Railways that the damage was due to  their  negligence. It, however, held that the suit was not maintainable as  the Indian Globe Insurance Co., with whom the goods were insured under a marine.                             472 insurance  policy, had paid the plaintiff an amount  of  Rs. 32,254-6  for total loss of the goods and was subrogated  to all  the rights ,and remedies of the assured in  respect  of the subject matter and so the plaintiff was not competent to institute the suit and hence dismissed the suit. The  plaintiff  appealed to the High Court of  Madras.   The Court  reversed  the decree holding that the  plaintiff  was entitled to maintain the suit and that, damage to the  goods was on account of the negligence of the Railways. In  this appeal, two submissions were made on behalf of  the -appellants  : (1) that there was no evidence to  show  that the Railway Administration was negligent in dealing with the goods and (2) that the suit was not maintainable. As  regards the first contention, the finding of  the  trial court as  well as of the High Court is  that  the  Railway Administration was negligent.  The liability of a Railway is that  of  a bailee and it is not for the plaintiff,  in  the first  instance,  to prove, when the  goods  consigned  were destroyed  or  damaged,  as  to  how  the  loss  ,or  damage occurred.   It has, no doubt, to satisfy the court that  the Railway  Administration  was  negligent  but,  the  duty  of showing  how  the  consignment was  dealt  with  during  the transit lay on the Railway Administration as it was a matter within  their conclusive knowledge.  The trial  court  found that  the fire which caused damage to the goods was due  to the  negligence of the Railway Administration and  the  High Court  was not persuaded to come to a  contrary  conclusion.

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The burden was on the Railway Administration to show how the goods  consigned  were dealt with during transit  and,  when that  has not been done to the satisfaction of  the Court, the Court was entitled to presume negligence on the part of the  Railway Administration.  I see no grounds to  interfere -with the concurrent findings on this point. The second question which was argued at considerable  length relates to the maintainability of the suit.  It may be noted at  this stage that the Globe Insurance Co. paid  the  total loss  to  the  plain,tiff on August  3,  1956;  the  assured assigned  all its rights, including the right to sue to  the Insurance company on July 31, 1956; and the present suit was filed  on June 14, 1957.  It was submitted on behalf of  the appellant that the view of the High Court that the suit  was maintainable overlooked the clear provisions of section 135- A of the Transfer of Property Act, as that section was a bar to  the suit by the assured.  Section 135-A was  as  follows (this  section has since been deleted from the T.P. Act  and incorporated in the Marine Insurance Act, 1963)               "135-A(1)  Where a policy of marine  insurance               has been assigned so as to pass the beneficial               interest therein,                473               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 rights 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 indemnified by such payment  for               the loss.               "(4) Nothing in clause (6) of section 6  shall               affect the provisions of this section." The  section was inserted in the Transfer of  property  Act, 1882  by  the Transfer of Property  (Amendment)  Act,  1944. Before  the amendment, the assignment of rights  under  both marine  and fire insurance policies was governed by s.  135. What the amendment did was to take marine insurance policies out of s. 135 and provide for them in the new section 135-A. The  Bill that become the Transfer of  Property  (Amendment) Act, 1944, stated the objects and reasons as follows :               "The  rules and principles governing a  marine               insurance  policy being  materially  different               from those governing a fire insurance policy,_               it  is very unsatisfactory to accord the  same               treatment in the matter of assignment of  both               categories  of  policies.   To  take  but  one               instance  a  fire  insurance  policy  is   not

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             assignable  after  loss, but the nature  of  a               marine  insurance  contract  is  such  as   to               require that marine insurance policies  should               be assignable even after loss.  In the  United               Kingdom,  assignability  of  marine  insurance               policies after loss is placed beyond doubt  by               s. 50 of the Marine Insurance Act.  But in the               absence  of  a similar provision here,  it  is               doubtful if Courts in British India would hold               that they are so assignable." It  was the contention of the appellant that when the  Globe Insurance  Co.  paid the assured the total loss,  it  became subrogated to 474           . all the rights and remedies of the assured in respect of the subject  matter  and that thereafter the  Insurance  Company alone could file a suit for recovery of damages against  the Railway Administration. The  application of the doctrine of subrogation to  policies of marine insurance is based upon the fundamental  principle that the contract of insurance contained in a marine  policy is a contract of indemnity, and of indemnity only. The  expression "subrogation", in relation to a contract  of marine  insurance  is  no  more than  a  convenient  way  of referring  to  those terms which are to be  implied  in  the contract  between  the  assured  and  the  insurer  to  give business  efficacy to an agreement whereby the  assured,  in the  case of loss against which the policy has been  issued, shall  be  fully  indemnified, and  never  more  than  fully indemnified. The right of the insurer against the person responsible  for the Doss, does not rest upon any relation of contract or  of privity  between them.  It arises out of the nature  of  the contract of marine insurance as a contract of indemnity, and is  derived from’ the assured alone, and can be enforced  in his right only. Sub-section  (1) of s. 135-A corresponds to s. 50(2) of  the (English)  Marine, Insurance Act, 1906 and sub-sections  (2) and s.    79 of that Act.  In Yorkshire Insurance Co. Ltd v. Misbet Shipping Co. Ltd.("), Diplock, J. as he then was  had to deal with the question of subrogation.  He said that  the doctrine  of  subrogation in insurance law requires  one  to imply  in contracts of marine insurance only such  terms  as are  necessary  to  ensure that,  notwithstanding  that  the insurer  has  made a payment under the policy,  the  assured shall  not be entitled to retain, as against the insurer,  a greater  sum than what is ultimately shown to be his  actual loss.   As Cotton, L. J. said in Castellain v.  Preston  (2) "  ...  if there is a money or any  other  benefit  received which Ought to be taken into account in diminishing the loss or  in ascertaining what the real loss is against which  the contract of indemnity is given, the indemnifier ought to  be allowed  to take advantage of it in order to circulate  what the real loss is. So the only term to be, implied to give business efficacy to the contract between the parties is that necessary to secure that  the  assured  shall not recover from  the  insurer  an amount   greater  than  the  loss  which  he  has   actually sustained.  The insurer has contracted to pay to the assured the amount of his actual loss and (1) [1962] 2. Q.B. 380.  (2) It Q.B.D. 380, 395. 475 if,  before  the  insurer has paid  under  the  policy,  the assured  recovers from some third party a sum in  excess  of the  actual amount of the loss, he can recover nothing  from

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the  insurer  because he has sustained no loss, but  it  has never  been suggested that the insurer can recover from  the assured  the  amount of the excess.  Lord Blackburn  in  his speech in Burnard v. Bodocanachi, Sons & Co. (1) said:               "The  general rule of law (and it  is  obvious               justice) is that where there is a contract  of               indemnity  (it  matters not whether  it  is  a               marine  policy,  or a policy against  fire  on               land, or any other contract of indemnity)  and               a  loss  happens, anything  which  reduces  or               diminishes that loss reduces or diminishes the               amount which the indemnifier is bound to  pay;               and  if the indemnifier has already  paid  it,               than,  if anything which diminishes  the  loss               comes into the hands of the person to whom  he               has  paid  it, it becomes an equity  that  the               person who has already paid the full indemnity               is  entitled  to be recouped  by  having  that               amount back."               That  the  insurer is entitled  to  recoupment               only for the loss for which he has paid and to               the  extent of his payment is clear from  what               Lord  Atkin  said  in Gien  Line  v.  Attorney               General (2)               "Subrogation will only give the insurer rights               upto 20 s. in the pound on what he has paid".               In  King  v. Victoria Insurance  Co.  Ltd.(3),               Lord Hobhouse, made it quite clear that, under               the  doctrine  of subrogation an  insurer  was               entitled to recover from the assured only  "to               the extent of the payment’ made to the assured               by the insurer under the policy.               As  between the insurer and the  assured,  the               insurer is entitled to the advantage of  every               right  of  the  assured  whether  such   right               consists    in    contract,    fulfilled    or               unfulfilled, or in remedy for tort capable  of               being insisted on or already insisted.  But as               stated  ’by  the  Privy  Council  in  King  v.               Victoria Insurance Co. Ltd.(3)               "Subrogation by act of law would not give  the               insurer  a right to sue in a Court of Law  in,               his own name.  " Subrogation  is concerned solely with the mutual rights  and liabilities of the parties to the contract of insurance;  it confers  no  rights and imposes no  liabilities  upon  third parties who are strangers to that contract and, the  insurer who has paid a loss (1)  7 App.  Cas. 333, 339.  (2) [1930] 46 I.L.R. 451. (3)  [1896] A.C. 250, 255-6. LA98SuPCI/73 476 gets no direct rights or remedies against anyone other  than the  assured nor can sue such parties in his own  name  (see Simpson v. Thomson(1)]. It was argued on behalf of the appellant that clause (4)  of section  135-A would indicate that the legislature  intended to  make a departure from the common law of England  and  to confer  a  right  of suit upon the  subrogee  against  third persons.   I  do  not think that clause  (4)  has  any  such effect.   It  only  says that nothing in s.  6  (c)  of  the Transfer of Property Act will affect the provisions of  that section.  An assignment of marine insurance after loss would sound  in the realm of an assignment of a mere right to  sue and the legislature wanted to put it beyond doubt that s.  6

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(c) is no bar to such an assignment.  It is doubtful whether clause  (4)  has any operation upon clauses (2) and  (3)  of section  135-A.   Though the payment by the insurer  of  the total  or  partial loss is an act of party,  subrogation  is effected  by  the operation of clauses (2) and  (3)  of  the section  viz.,  by  operation  of law.   Section  6  (c)  is concerned  with a transfer of a mere right to sue by act  of parties.  If this is so, it would be incongruous to say that clause (4) will have any effect on the operation of clauses (2)  and (3) of the section. In  Indian Trade and General Insurance Co. Ltd. v. Union  of India   (  2  ).  Mitter, J. had occasion  to  consider  the question in detail and, after referring to the English  law, he come to the conclusion that, although by sub-section  (2) and  (3)  of s. 135-A, an insurer is subrogated to  all  the rights and remedies of the assured in respect of the subject matter,  it  has no independent right of action in  its  own name,  but  can only sue in the name of  the  insured.   The learned judge referred to the decision in M. V. F. Marakkya- yar  &  Sons v. Banians & Co.(1) and said that the  rule  of English law which never permitted a subrogee to institute  a suit  in  its own name has been followed in India and  is  a sound rule. In Alliance Insurance Company Ltd. v. Union of India (4)  it was  held  that an insurance company which has paid  to  the consignee the total loss, was entitled to maintain a suit in its  own name against the carrier for reimbursement  of  the amount paid to the insured for the loss.  The Court  pointed out  that  although clause (e) of S. 6 of  the  Transfer  of Property  Act  provides that a mere right to sue  cannot  be transferred, subsection (4) of s. 135-A has removed the  bar and  made  a deliberate departure from the English  rule  of procedure  which  lays down that an insurer who pays  for  a total  loss cannot sue independently in his own  name.   The Court did not, however, refer to the judgment of (1)  [1877] 3 App.  Cas. 279 H.L. (3)  I.L.R. 49 Madras 156. (2)  A. I. R. 1957 Calcutta 190. (4) I. L. R. [1950] 1 Calcutta, 544. 477 Mitter,  J. In Indian Trade and General Insurance Co.   Ltd. v.  Union of India(1).  For the reasons already given, I  do not think I can agree with the reasoning of this case. In  Textiles and Yarn (P) Ltd. v. Indian National  Steamship Co.   Ltd.  (2)  which was a suit filed by  the  insurer  on payment  of total loss for recovery of damages for  loss  of goods in the course of transit from Madras to Calcutta by  a steamship,  Mitra, J. held that the insurer cannot  maintain an action in its own name unless there was an assignment  of the  claim by the assured in favour of the insurer.  In  the Asiatic  Government Security Fire and General Assurance  Co. Ltd.  v.  The Scindia Steam Navigation Co. Ltd. (2),  M.  S. Mennon,  C.  J.  in a well reasoned judgment  sad  that  the insurer,  on subrogation, is not entitled to sue in its  own name.  In Vasudeva Mudaliar v. Caladonion Insurance Co.  and Another(4), the Madras High Court said:               "But subrogation does not ipso jure enable him               to sue third parties in his own name.  It will               only entitle the insurer to sue in the name of               the  assured,  it being an obligation  of  the               assured  to  lend his name and  assistance  to               such an action."               I  think  the  High Court  was  right  in  its               conclusion on this point.               The   second   contention   as   regards   the

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             maintainability of the suit was that there was               an  assignment  by  the  assured  of  all  the               rights, including the right to sue the Railway               Administration,  by virtue of which the  Globe               Insurance  Co.  could  file a  suit  and  that               precluded   the  assured  from   suing.    The               assignment, as already stated, was before  the               institution  of  the  suit,  and  is  in   the               following terms :               "In consideration of your paying to us the sum               of  Rs. 32,254-6-9 only in full settlement  of               our claim for damage by fire under Policy  No.               49757  issued  by you  on  the  undermentioned               goods,  we hereby assign transfer and  abandon               to  you  all our rights  against  the  Railway               Company or other persons whatsoever caused  or               arising  by reason of the said damage or  loss               and  grant you full power to take and use  all               lawful  ways  and means in your own  name  and               otherwise at your risk and expense to  recover               the  said damage or loss and we hereby  subro-               gate  to  you the same rights-as  we  have  in               consequence  of or arising from the said  loss               or damage.               (1) A. 1. R. 1957 Cal. 190.                 (2) A. 1. R. 1964 Calcutta 362.               (3) A. 1. R  1965 Kerala 214.               (4) A. T. R. 1965 Madras 159.               478               "And we hereby undertake and agree to make and               execute  at  your  expense  all  such  further               deeds, assignments and documents and to render               you  such  assistance as  you  may  reasonably               require  for the purpose of carrying out  this               agreement."               The High Court held that the assignment was of               a mere right to sue and it was not, therefore,               valid  under  S.  6(e)  of  the  Transfer   of               Property  Act.  The question is, whether  what               was  assigned  was  a mere  right  to  sue  or               something   which   the   law   of   insurance               recognises as assignable.               In King v. Victoria Insurance Company Ltd.(1),               a consignment of wool was insured by the  Bank               of Australasia during its transportation by  a               ship from Townsville to London.  The wool  was               damaged in transit.  The bank claimed  against               the insurance company tinder the policy for  a               loss  of 920pound. The insurance company  paid               that amount and took a formal assignment  from               the  bank  of  all its rights  and  causes  of               action   against  the  Government,  the   bank               stipulating  that  the  assignment  would  not               authorize  the  use  of  its  name  in   legal               proceedings.   The insurance company sued  the               Government   for  the  negligence   of   their               officers and servants in not properly  mooring               and watching their punts which had caused  the               collision of the ship carrying wool  resulting               in damage to the consignment.  The  Government               contended that the assignment of a mere  right               to   recover   damages  was   illegal.    Lord               Hobhouse, after stating that subrogation would               not give the insurer a right to sue in its own               name, said:

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             "But  that difficulty is got over by force  of               the "press assignment of the bank’s claim, and               of  the  Judicature Act, as the  parties  must               have  intended  that it should  be  when  they               stipulated  that  nothing  in  the  assignment               should authorize the use of the bank’s name.               "Their  Lordships do not express  any  dissent               from the views taken in the Court below of the               construction   of  the  Judicature  Act   with               reference to the term ’legal chose in action’.               They prefer to avoid discussing a question not               free  from  difficulty,  and  to  express   no               opinion  what  limitation, if any,  should  be               placed  on the literal meaning of  that  term.               They  rest their judgment on the  breaded  and               simpler ground that a payment honestly made by               insurers in consequence of a policy granted by               them  and  in satisfaction of a claim  by  the               insured,  is  a claim made  under  the  policy               which  entitles the insurers to  the  remedies               available to the insured.               (1) [1896] A.C. 250.               479               On this view the highly artificial defence  of               the  Queens-land  Government  fails,  and  the               appeal  must  be dismissed  with  costs."  (p.               256).               The   question  whether  there  could  be   an               assignment  of such a right was considered  in               Campania  Colombiana  de  Seguros  v.  Pacific               Steam  Navigation Co. (1). in that  case,  the               assignment  by  the assured in favour  of  the               Insurance Company was in the following terms :               "For  loss and/or damage to the  goods  having               received payment from the Compania  Colombiana               de  Seguros  for the foregoing,  we  cede  and               endorse  to  the said  insurance  company  all               rights  which we have or which we may  acquire               in  the future to claim reimbursement  thereof               from the third parties who may be  responsible               for such loss or damage."               The   insurance  company  alleged   that   the               document went further than a form of letter of               subrogation and constituted a valid assignment               by the assured to the insurance company of the               assured’s  claim against the defendants.   For               the defendants it was argued               ".  . . . An assignment by the insured to  the               insurance  company of the right of  action  is               ineffective.  The reason is that a bare  right               of  litigation cannot be assigned... The  only               decision to the contrary is that of the  Privy               Council in King v. Victoria Insurance Co. Ltd.               which   should  not  be  followed.  (see   the               argument at p. 108).               The Court overruled the argument and held that               the decision in King v. Victoria Insurance Co.               Ltd. (2 ) correctly lays down the law.   After               reviewing   the  case  law  on  the   subject,               Roskill, J. speaking for the Court observed :               "So  much, then for the authorities.  What  is               the  principle  to be adduced from  them  ?  I               think  it can be stated in this  way.   Where,               before  1873, equity would have compelled  the               assignor  to exercise his rights  against  the

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             contract breaker or tortfeasor for the benefit               of the assignee, those rights can, since 1873,               be   made  the  subject  of  a   valid   legal               assignment and, subject to due compliance with               the requirements of the statute as to  notice,               can be enforced at law.  Equity always, before               1873, compelled an assured to lend his name to               enforce    his   underwriter’s    rights    of               subrogation  against  a  contract  breaker  or               tortfeasor.   It follows, therefore, that  the               only  possible objection to such rights  being               now   enforceable   at  law   is   that   such               enforcement would involve the               (1) [1965] 1 Q. B. 101, 121.               (2) [1896] A. C. 250.               480               enforcement  of  a  bare cause  of  action  in               contract or in tort.  But as Mr. Littman urged               upon me, if that is so, why did equity act  as               equity did act before 1873 in relation lo  the               enforcement of subrogation right ? I think the               answer  is  because the  enforcement  of  such               rights  was never regarded as the  enforcement               of  a  bare  cause  of  action,  but  as   the               enforcement of a cause of action  legitimately               supported  by  the underwriter’s  interest  in               recouping himself in respect of the amount  of               the loss which he had paid under the policy as               a result of the acts, neglects or defaults  of               the actual contract breaker or tortfeasor."               In  Anson’s Law of Contract(1), it  is  stated               that although an assignment of a bare right to               litigate has been held invalid, the  principle               is necessarily subject to qualification.   One               such qualification is :               "Suppose  an insurer, who has indemnified  his               insured  under  a policy of insurance  and  in               consequence been assigned the insured’s  right               of action in respect of a breach of  contract,               sues  to enforce this right of action  against               the contract-breaker.  Could he be met by  the               plea  that he is the assignee of a bare  right               of action ? In Compania Columbiana de  seguros               v.  Pacific Steam Navigation Co., Reskill,  J.               held  that the enforcement of such a right  is               not  the,  enforcement  of a  ’bare  right  of               action’, but of a right of action legitimately               supported   by  the  insurer’s   interest   in               recouping the loss sustained by paying out  on               the policy." In  the Law of Contract by Cheshire and Fifoot(2) the  case of   Compania  Columbiana  de  Seguros  v.   Pacific   Steam Navigation  Co.  (supra)  is quoted  an  authority  for  the proposition that if goods shipped on a vessel are  delivered in   a  damaged  condition,  the  consignee,   after   being indemnified  for his loss by the insurers can assien to  the latter  his right to recover damages from the owner  of  the vessel. The  real reason why a mere right to sue cannot be  assigned is  that  such  an  assignment  would  offend  the  rule  of champerty  and maintenance.  Now, as in this case  where  an insurance  has  been subrogated to all the  rights  and  the remedies  of the assured by virtue of s. 135-A,  the  reason for the rule against assignment of a mere right to sue  does not  obtain, because the insurance company is  clothed  with

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all  the  rights and remedies of the assured  and  the  only thing  lacking is the capacity to sue in its, own name.   If the right is capable of being assigned, and is assigned,  it would (1)  Twenty-third edition, edited by A.B. Guest, p. 417. (2)  Seventh edition, p. 472. 481 no longer be logical to say that the assignor can still  sue for,  whatever right the assignor had in the subject  matter had passed to the assignee.  It is impossible to understand, how, after the assignment, the assignor can still maintain a suit. This  question  was considered by the Madras High  Court  in Vasudeva   Mudaliar v.   Caledonian  Insurance   Co.   and Another(1) and the Court said               "However, an assignment or a transfer  implies               something more than subrogation, and vests  in               the insurer the assured’s interest, rights and               remedies in respect of the subject matter  and               substance  of the insurance.  In such a  case,               therefore,  the  insurer,  by  virtue  of  the               transfer   of   a  mere  right  to   sue   are               permissible and are to maintain a suit in his               own name against third parties. (22 Halsbury’s               Laws of England, Simond Edn. paras 512-513 and               Shawcross on ’Motor Insurance’).               "Normally, an assignment of a right of  action               for  a tort is not valid under s.  6(e).   But               cases  of subrogation as applied to  insurance               for indemnity are an exception to the rule and               assignments  by the assured to the insurer  of               his  rights  and remedies being  more  than  a               transfer   of   a  mere  right  to   sue   are               permissible   and  are  valid.   But   express               assignment by the assured of all his rights is               necessary  and subrogation by itself will  not               enable  the  insurer to sue in  his  own  name               (1896 A. C. 250; (1883)-11 Q.B.D. 380)". It  is regrettable that the attention of the High Court  was not drawn to the above decision. correct,  that  the  assignment conveyed  to  the  insurance company,  the entire right in respect of the subject  matter of the insurance, including the right of the assured to  sue in its own name and that, after the assignment, the  assured had  no  cause of action to institute the suit  against  the Railway Administration for recovery of damages. I  would  allow the appeal and set aside  the  judgment  and decree  of the High Court and restore the decree  passed  by the  Subordinate  Judge, Coimbatore,  dismissing  the  suit, without any order as to costs.                            ORDER In  accordance  with the opinion of majority the  appeal  is dismissed with costs. V.P.S. (1)  A. I. R. 1965 Madras 159. 482