1950 (12) TMI 37 - SC - Indian Laws

Summary

Issues Involved:
1. Liability of the appellants for not insuring the goods.
2. The relevance and impact of the Bombay Explosion (Compensation) Ordinance, 1944.
3. The measure of damages and remoteness of damages.
4. Maintainability of the respondents' counterclaim under Section 18(2) of the Ordinance.

Issue-wise Detailed Analysis:

1. Liability of the Appellants for Not Insuring the Goods:
The appellants, a firm of commission agents, failed to insure 92 bales of piece goods stored in Bombay, which were destroyed by an explosion in the Bombay harbour. The respondents contended that the appellants were liable for the loss due to their failure to insure the goods as agreed. The trial court found no agreement to insure the goods, but the appellate court held that there was such an agreement based on documentary evidence. The Supreme Court upheld the appellate court's finding, stating that the appellants were negligent in their duty as agents and must make good the loss directly arising from their neglect.

2. The Relevance and Impact of the Bombay Explosion (Compensation) Ordinance, 1944:
The Ordinance provided compensation for explosion damage to property, distinguishing between insured and uninsured property. The appellants argued that even if they had insured the goods, the ordinary fire insurance policy would not have covered the explosion risk. The Supreme Court rejected this contention, noting that under the Ordinance, full compensation would have been recovered if the goods had been insured. The Court held that the Ordinance did not break the chain of causation and the appellants were liable for the damages directly arising from their failure to insure the goods.

3. The Measure of Damages and Remoteness of Damages:
The Court discussed the principles of remoteness of damages, emphasizing that damages must be a direct consequence of the breach. The appellants contended that the intervention of the Ordinance could not increase their liability. The Supreme Court held that the Ordinance only quantified the damages and did not create new liability. The appellants' failure to insure the goods directly resulted in the respondents not receiving full compensation under the Ordinance, making the appellants liable for the remaining 50% of the loss.

4. Maintainability of the Respondents' Counterclaim under Section 18(2) of the Ordinance:
The appellants argued that the counterclaim was barred under Section 18(2) of the Ordinance, which extinguished all rights to compensation for explosion damage. The Supreme Court rejected this argument, stating that the respondents' claim was based on the appellants' breach of duty as agents and not directly on the explosion. The Court clarified that the cause of action was the appellants' failure to insure the goods, and the quantum of damages was to be determined by the Court.

Conclusion:
The Supreme Court dismissed the appeal, holding the appellants liable for the loss due to their failure to insure the goods as agreed. The Court upheld the respondents' counterclaim for the remaining 50% of the loss, emphasizing that the appellants' breach of duty directly caused the respondents' inability to recover full compensation under the Ordinance. The measure of damages was to place the respondents in the same position as if the appellants had performed their duty.