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United India Fire and General Insurance Co. Ltd. Vs. Pelaniappa Transport Carriers and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal Against Order No. 710 of 1980
Judge
Reported inAIR1986AP32
ActsTransfer of Property Act, 1882 - Sections 6 and 130; Carriers Act, 1965 - Sections 8; Partnership Act, 1932 - Sections 69 (2)
AppellantUnited India Fire and General Insurance Co. Ltd.
RespondentPelaniappa Transport Carriers and anr.
Appellant AdvocateS. Venkat Reddy, Adv.
Respondent AdvocateS. Ananda Reddy, Adv.
Excerpt:
.....themselves and filed suit for same - respondents contended that as firm was unregistered suit not maintainable as letter only conveyed a mere right to sue which cannot be transferred - as per section 130 assignment of indemnification is actionable claim which can be transferred - section 69 does not prohibit transfer or acquiring of property from an unregistered firm - held, assignment not illegal and suit can be maintained by appellants. - - therefore, if it is concluded that the suit is not maintainable under those circumstances, the order of remand is perfectly legal and it does not warrant interference. , like marine or accident insurance is, in essence, one of indemnity. the right of insurer to subrogation or to get into the shoes of the assured as it were, is..........the majority of their lordships speaking through a. n. ray, j., (as he then was) held that the suit is maintainable. mathew, j. held that the suit is not maintainable. while considering the effect of the assignment vis a vis the provisions of s. 6(e) of the transfer of property act, it was held that 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. as 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.....
Judgment:

1. The appellant-United India Fire and General Insurance Company Limited obtained two letters, one, dated Feb. 5, 1973 letter of subrogation and the other, letter of assignment of even date Ex. A-3 from M/s. V. K. Brothers, a partnership firm, second respondent herein with a right to recover the suit claim against Sri Palaniappa Transport Carriers, first respondent herein. The facts leading thereto are that M/s. V. K. Brothers (second respondent) consigned six bales of cloth to be delivered at Madras and entrusted to the first respondent Transport Carriers, for delivery thereof to the consignee. Before consigning the second respondent also insured the six bales of cloth with the appellant under a policy. When the goods were delivered at Madras, they were found to be damaged and the authorised values made valuation thereof at Rs. 7,199-25 ps. It was found that the first respondent was responsible for causing damage and that the damage was causes due to their negligence. But pursuant to the policy of Insurance covered with the appellant, the appellant made payment thereof to the second respondent and the appellant obtained the letters of subrogation and the assignment of right to indemnification from the second respondent impleading M/s. V. K. Brothers, as the second plaintiff in the suit. The appellant laid the suit in the lower Court against the defendant - Transport Carriers. In the written statement the defendant took the plea that M/s. V. K. Brothers is not a registered partnership Firm and that, therefore, the suit is not maintainable. No issue, in that regard, was framed by the trial Court. The trial Court found, as to fact, that the defendant carriers, was negligent and the damage had been caused as a result thereof, that the Insurance Company obtained not only the letter of subrogation but also the assignment of the right of indemnification from the defendant and that, therefore, the defendant is liable for the payment of the suit claim. Therefore, the trial Court decreed the suit. The Transport Carriers filed an appeal. The appellate Court felt that the plea that M/s. V. K. Brothers being an unregistered partnership firm, the suit at their instance is not maintainable is a material issue and that it is to be tried after affording an opportunity to all the parties to adduce evidence in that regard. In that view, the appellate Court set aside the decree and remanded the matter to the Trial Court for framing the above issue and for retrial on that issue. Assailing the remnant order, the present appeal has been filed.

2. Sri C. V. Mohan Reddy, the learned counsel for the appellant raised an important question of law contending that even assuming that M/s. V. K. Brothers, is not a registered partnership firm, the suit is not merely based on the right of subrogation but also in assignment of indemnification. The appellant having obtained those rights, it is needless to implead M/s. V. K. Brothers, eo nomine as the second plaintiff and the suit at the instance of the appellant itself is maintainable and in such an event the issue framed by the appellate Court is unnecessary and the remand also is not needed. He also further contended that the decision of the Supreme Court in Union of India v. Sri Sarada Mills, : [1973]2SCR464 , was not correctly appreciated by the lower appellate Court and the ratio therein helps the appellant. It is further contended by the learned counsel for the appellant that the right to recover is a common law right or a statutory III of 1865). Therefore, the prohibition engrafted under S. 69(2) of the Indian Partnership Act does not apply to the facts of this case. In support thereof, he relied on the decisions of the Kerala and Calcutta High Courts in Kerala Arecanut Stores v. Ramkishore and Sons, : AIR1975Ker144 , and Sukul Brothers v. H. K. Kavarana (AIR 1958 Cal 730).

3. Though the first respondent has been served, no one is appearing either in person or through their counsel. Since the question involved is of much importance, I requested Sri S. Ananda Reddy, the learned Member of the Bar, to assist this Court as Amicus Curiae. Sri Ananda Reddy, the learned counsel contends that, as of fact, it is now found that M/s. V. K. Brothers is a non-registered partnership Firm and that the suit at their instance is not maintainable in view of S. 69 of the Indian Partnership act. The letter of subrogation and the letter of assignment of right to indemnification are not helpful to the appellant for the reason that the suit itself is not maintainable at the instance of an unregistered partnership firm and that the assignments were made with a view to avoid the rigour of the provisions of S. 69 of the Indian Partnership Act. He also contended that the statutory right under S. 8 of the Carriers Act is available only to owner of the goods but not to the third parties. Therefore, if it is concluded that the suit is not maintainable under those circumstances, the order of remand is perfectly legal and it does not warrant interference.

4. Upon the restrictive contentions of both the learned counsel, two questions arise for consideration : (1) What are the rights acquired by the appellant under Exs. A-3 and A-5 and (2) even assuming that M/s. V. K. Brothers, the consignor, is not a registered partnership firm, whether the suit can be filed by the appellant alone on the basis of Exs-A-3 and A-5 and whether the decree granted by the trial Court is legal on that premise.

5. The facts, which are not in dispute for the disposal of this appeal, can be stated in a nut shell : the appellant is the United India Fire and General Insurance Company Limited. M/s. V. K. Brothers, second respondent herein, is the consignoer. It consigned the goods of six bales of clothe for delivery at Madras and entrusted the same to Sri Palaniappa Transport Carriers, first respondent herein. The goods were found to have been damaged and the suit claim is the amount that is assessed towards the damages. The appellant obtained letters of surrogation and also indemnification to recover from the first respondent-carriers-damages paid pursuant to the policy booked with the appellant.

6. In Halsbury's Laws of England, Third Edition, Volume 22, in para 512 it is stated :

'The doctrine of subroagtaion applies to all contracts of non-marine insurance which are contracts of indemnity, such as, for example, contracts of fire insurance, motor vehicle insurance and contingency insurance covering non-payment of money. It applies whether the loss is total or partial, and is a corollary of the principle of indemnity. By requiring any means of diminishing or extinguishing a loss to be taken into account, it prevents the assured from recovering more than a full indemnity.'

In para 513 it is stated that subrogation, in the strict sense of the term, expresses the right of the insurers to be placed in the position of the assured so as to be entitled to the advantage of all the rights and remedies which the assured posseses against third parties in respect of the subject matter. The precise nature of the third party's liability to the assured is immaterial; subrogation applies even to a statutory liability.

In Vasudeva v. Caledonian Insurance Company, : AIR1965Mad159 , Veeraswamy, J, speaking for the Court observed :

'A contract of motor insurance., like marine or accident insurance is, in essence, one of indemnity. The right of insurer to subrogation or to get into the shoes of the assured as it were, is inherent in and springs from the principles of indemnity and the basis of the right is justice, equity and good conscience, namely, the indemnifier should be in a position to reduce the extent of his liability within limits. 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.

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 or assignment in his favour will be in a position to maintain a suit in his own name against third parties.'

In Union of India v. Sri Sarada Mills : [1973]2SCR464 (supra), their Lordships of the Supreme Court were called upon to consider the assignment and subrogation of the rights to recover pursuant to marine insurance covered under the Marine Insurance Act. In that case, the respondent Sri Sarada Mills Limited, consigned the goods with the Railways for transshipment, but they were fond to be lost. They also insured the goods with the Insurance Company. They subrogaged their rights to the Insurance Company. Thereafter, they filed the suit for recovery of the value of the goods in the transit. Defence was taken that the suit at their instance was not maintainable. The trial Court dismissed the suit. On appeal, the High Court allowed the appeal and decreed the suit. When it was assailed, the majority of their Lordships speaking through A. N. Ray, J., (as he then was) held that the suit is maintainable. Mathew, J. held that the suit is not maintainable. While considering the effect of the assignment vis a vis the provisions of S. 6(e) of the Transfer of Property Act, it was held that 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. As 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 tore 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 right of action. On the facts in that case it was held that the insurance company and the mill proceeded 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 given the insurance company facilities for enforcing rights. The insurance 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. On that finding, it was held that the suit is maintainable.

7. Section 6(e) of the Transfer of Property Act prohibits assignment or transfer of a mere right to sue. But S. 130 of the Transfer of Property Act postulates that the transfer of an actionable claim whether with or without consideration shall be effected only by the execution of an instrument in writing signed by the transferor or his duly authorised agent, shall be complete and effectual upon the execution of such instrument, and thereupon all the rights and remedies of the transferor, whether by way of damages or otherwise, shall vest in the transferee, whether such notice of the transfer as hereinafter provided be given or not.

8. The recitals in Ex. A- 3 read thus :

In consideration of your paying to us a loss of Rs. 2,083.65 ps. In respect of the undermentioned goods insured with you under Policy No. HY/O/482/72 Certificate No. 1, we hereby assign and transfer to you all our rights, title and interest and respect of the said goods, and all rights and claims against any person or persons in respect thereof.'

It is also given under Ex. A-5 an authorisation to sue in the name of M/s. V. K. Brothers, as well. In view of these specific recitals and in view of the legal position set out above, the necessary conclusion is that the appellant has got under Exs. A3 and A 5 not merely a subrogation but also assignment of the right to recover the loss to get indemnification thereof which they suffered pursuant to the policy under which they made payment to the consignor, M/s. V. K. Brothers so as to reducing or diminishing or extinguishing the said loss. It applies to ordinary policy relating to commercial goods. This right is based on justice, equity and good conscience. Therefore, the embargo created under S. 6(e) of the Transfer of Property Act is not attracted to the facts in this case. It is an actionable claim under S. 130 of the Transfer of Property Act and, therefore, it is validly transferred; the appellant acquired valid right, title and interest from the consignor and the suit for the recovery thereof is maintainable.

9. The next question is whether the suit is maintainable at the instance of the appellant alone. We assume, for the purpose of this case, that M/s. V. K. Brothers is an un-registered partnership firm. The effect of non-registration of a partnership firm has been stated in S. 69 (1) and (2) of the Indian Partnership Act, 1932 (Act IX of 1932). Sub-sec (2) is relevant for the purpose of the case which reads thus :

'69 (2) NO suit to enforce a right arising from a contract shall be institued in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Registrar of Firms as partners in the firm.'

10. The contention of Sri Mohan Reddy, the learned counsel for the appellant, is that it is not merely a right arising from a contract, but it is also a statutory right arising under S. 8 of the Carriers Act 1865 (Act III of 1865). No doubt S. 8 thereof provides a right to recover the loss or damage of any property delivered to a carrier notwithstanding anything contained herein before where such loss or damage has arised from the negligence of the carrier or any of his agents or servants. But the question is whether the suit is maintainable at the instance of the Insurance Company. The Carriers Act provides a right to claim damages for the loss of goods entrusted for delivery to the carrier to the owner of the goods. The language used therein that 'every common carrier shall be liable to the owner for loss of or damage to any property delivered to such carrier to be carried where such loss or damage shall have arisen from ...........'Therefore, it is a personal right granted to the owner and unless this statutory right is permitted to be assigned under the statute, the assignee acquiries no right under the statute. This court in Naras Reddy v. Venkata Subbayya, : AIR1964AP71 , Satyanarayana Raju, J., (as he then was) took the same view. I respectfully agree with the same. In that case, the question was whether the agent can maintain the suit on behalf of the owner. It was held by Satnayanarayana Raju, J., that he suit at the instance of the agent was not maintainable. The ratio in the above case is equally applicable to the facts of this case is equally applicable to the facts of this case and it must be held that the suit is not maintainable for the loss or damage against the career at the instance of the assignee. But it does not conclude the matter. It is already held that it is an assignment of indemnification which is an actionable claim transferred and acquired under the provisions of S. 130 of the Transfer of Property Act. But the question still remains to be considered is whether an unregistered firm can assign its rights to third parties and whether the third parties can sue on the basis thereof. In Loonkaran Sethia v. Ivan E. John : [1977]1SCR853 the Supreme Court has held that an unregistered firm cannot lay a suit, that the suit is not maintainable at their instance and that the suit is liable to be dismissed. Same is the view of this Court in Narasa Reddy v. Venkata Subbayya (supra). But the question is whether the suit can be laid by third parties. In I. T. Commr. Andhra Pradesh v. J. R. & O. Mills, : [1971]79ITR549(SC) ., the Supreme Court held :

'the registration of the firm takes place only when the necessary entry is made in the register of firms under S. 59 of the Partnership Act by the Registrar.'

In shanmugha v. Rathina, AIR 1948 Mad 187, it was held :

'Partnership Act places no prohibition upon an unregistered partnership making contracts either between the partners inter se or with some third party, nor upon an unregistered partnership acquiring property or assets. All that it does to make a suit instituted by an unregistered partnership, to recovery property unforceable. But relief from the disability can be obtained at any time as long as the partnership is in existence, and if the partnership is registered before the suit is instituted the partnership can recover its property and sue on contracts made with third parties even when those contracts were entered into at a time when the partnership was not registered.'

The same view was taken by the Bombay High Court in Appaya Nijlingappa v. Subba Babaji, AIR 1938 Bom 108. In Mohan Singh v. Janki Dass, AIR 1937 Lah 241, the facts were that there was an unregistered partnership firm that it filed a suit to recover the amount due and that the suit to recover the amount due and that the suit was dismissed. Thereafter, it transferred the debt to a registered firm. The registered firm filed a suit. The contention raised was that the earlier decree operates as res judicata.

In that context it was held :

'Even the firm Behari Lal Parashotam Das was competent to maintain another suit for the recovery of the amount after registration. No provision from the Partnership Act has been cited to show that an unregistered firm is not entitled to do business or to legally assign its assets to another person who himself is competent to maintain a suit. Therefore, the dismissal of the previous suit cannot operate as res judicata against the assignee of the firm Behari Lal Parshotam Das. It is obvious that under S. 69 Partnership Act, two conditions must exist before a suit can be dismissed. The contract must be with an unregistered firm and the person to suing to recover the amount must be that firm or another unregistered firm. It is only then, that there can be an objection to the maintainability of the suit. The mere fact that the contract was with an unregistered firm is not sufficient to dismiss a suit if the plaintiff is otherwise competent to maintain it.'

11. From the ratio of the above decisions, the necessary conclusion is that sub-sec (2) of S. 69 prohibits filing of a suit on the basis of a contract by an unregistered partnership firm or a partner thereof on its behalf. But there is no prohibition for acquiring property by an unregistered firm or its transferring property in the third parties and the right acquired by the third parties pursuant to the assignment made by the unregistered partnership firm is not defeated. The embargo would not apply to cases of suits filed by a person or a registered firm to whom the unregistered firm may have assigned the rights under an assignable contract entered into by it with third parties. Under those circumstances, the necessary conclusion is that the assignment is not illegal and the suit can be maintained individually by the assignee alone. In this view, it is not necessary for me to consider the decisions cited by Sri Mohan Reddy, the learned counsel for the appellant, since they do not directly cover the point.

12. Before concluding, I express my thanks to Mr. Ananda Reddy, the learned member of the Bar, for giving me assistance in this case.

13. For the foregoing reasons, the appeal is allowed and the decree of the appellate Court is set aside and that of the trial Court is restored and affirmed, but in the circumstances without costs.

14. Appeal allowed.


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