ORDER OF DIVISION BENCH
1. Three persons--Tirath Ram, Mulk Raj and Barkat Ram--were doing business as the partners of a firm called Tirath Ram and Sons, and the business was carried on in what is now a part of Pakistan. At the time of the partition and because of it they came away to India. Before the partition, however, and while still in Pakistan they had taken a loan fr6m the Central Bank of India Limited and pledged with that bank certain goods, being cotton and cotton seeds. Those goods had been insured with the Free India General Insurance Company Limited for a sum of Rs. 27,000 against fire as well as not and the loan taken from the bank was also Rs. 27,000. The goods in question were during the disturbances in Pakistan looted by some rioters. After coming to India and, in fact, after the enactment of the Displaced Persons (Debts Adjustment) Act, 1951, an application was filed on behalf of the firm, Tirath Ram and Sons, under Section 18 of that Act and the application was for the recovery of Rs. 27,000 from the Free India General Insurance Company Limited which later came to be represented by the Life Insurance Corporation of India. Against that claim several objections were raised and among them one, which is now material, was that the petitioners had in fact suffered no loss and the insurance company was, therefore, not liable to pay anything to the petitioners. The submission in this connection was founded on the ground that in respect of the goods, which had been insured, the petitioners had already obtained from the Central Bank of India Limited the amount of Rs. 27,000 which was the limit of the insurance while the liability of the petitioners to pay back that loan to the Central Bank of India Limited had been wiped out by Section 17 of the Displaced Persons (Debts Adjustment) Act and in this manner there was nothing payable by the petitioners to that bank and having received Rs. 27,000, the petitioners were not entitled to receive anything more from the insurance company. Another objection was that the claim was not covered by Section 18 of the Displaced Persons (Debts Adjustment) Act, as the insurance had not been taken out before the 15th August, 1947. Section 18 of the Act, under which the claim was made, begins by saying:
' Where any property in West Pakistan belonging to a displaced person was insured with any insurance company before the 15th day of August, 1947, against any risk arising out of fire or theft or riot and civil commotion and there has been a loss ...'
2. The objection of the insurance company was that insurance in this case had been taken out only from the 15th August, 1947, and not prior to that date and the claim, therefore, could not fall under that section. This objection was considered by the Tribunal first and it came to the conclusion that the insurance had been taken out against riot only from the 15th August, 1947, till the 14th September, 1947, and Section 18, therefore, did not cover the case. The Tribunal, however, found that the petitioners' claim could properly fall and did fall under Section 13 of the same Act, under which ais placed creditor was entitled to claim any debt due to him from any other person not being a displaced person. On this finding the petition was amended and the case proceeded under Section 13 of the Act. The Tribunal later considered the other issues in the case which were mostly decided in favour of the petitioners, but on the objection first mentioned the Tribunal held that the petitioners had in law suffered no loss because they had received Rs. 27,000 from the Central Bank of India Limited in respect of the insured goods and the contract of insurance had not provided for any indemnity exceeding that sum. On this view of the matter, the Tribunal held that no relief could be allowed to the petitioners against the insurance company. The petition was, therefore, dismissed. Against the Tribunal's decision, Tirath Ram and Sons filed an appeal in this court which was heard by Mahajan J. At the time of arguments before the learned judge, the question, whether the claim properly fell under Section 18 of the Displaced Persons (Debts Adjustment) Act or under Section 13 of that Act, was not agitated at all and the learned judge proceeded on the assumption that the claim fell within the terms of Section 18 of the Act. The only matter actually argued was whether the Tribunal's view, that the petitioners having received Rs. 27,000 from the Central Bank of India Limited were not entitled to receive anything more from the insurance company, was in law sound or not, and the learned judge found that that view was not sound. He held that the goods having been lost, which fact of course was not in dispute, the insurance company was bound to pay the amount of the insurance, that is, Rs. 27,000, to the petitioners. On this view the learned judge allowed the appeal, set aside the judgment of the Tribunal and sent the case back to the Tribunal to decide it in accordance with, Sub-section (2) of Section 18 of the Displaced Persons (Debts Adjustment) Act, his view being that the Tribunal had to determine the amount of the actual loss and then the case had to be reported to the board mentioned in Section 18(2) and a decree had then to be made in accordance with the decision of that board. Against the judgment of the learned single judge, a Letters Patent Appeal has been filed on behalf of the Life Insurance Corporation of India and it is that appeal with which we are now dealing.
3. Mr. Sachar, in support of the appeal, first contends that the learned single judge could not have reversed the judgment of the Tribunal without first reversing its conclusion that the case was not covered by Section 18 of the Displaced Persons (Debts Adjustment) Act at all, which finding was never reversed by the learned single judge. As I have said, the question was never raised before the learned judge and I take it, therefore, that it was not seriously suggested in the course of arguments that Section 18 did not cover the petitioners' case. It is true that the conclusion of the Tribunal in that connection was based on a finding of fact, namely, that the insurance had been taken out only on and not before the 15th August, 1947, and the learned single judge has not referred to that finding nor expressly reversed it, but the judgment shows that such was his assumption presumably made with the t'acit consent of counsel, We have, however, permitted Mr. Sachar to take us into the evidence to see if the assumption made by the learned single judge that insurance had been taken out prior to the 15th August, 1947, is not supported by good evidence. The Tribunal based its finding entirely on the relevant risk note which undoubtedly covers the period, 15th August to 14th September, 1947, The case of the petitioners-respondents, however, was that that risk note was in continuation of a previous insurance policy which had been taken out earlier than the 15th August, 1947. Mulk Raj, petitioner, who gave evidence on oath, said clearly that the goods were first insured from the 15th June, 1947, to the 15th July, 1947, and then the insurance was extended from the 15th July to the 15th August, 1947, and later from the 15th August to the 15th September, 1947. He was not cross-examined in respect of this statement. Mulk Raj was supported by Madan Lal, P, W. The previous risk notes were not produced, but that does not take away from the effect of the direct testimony of Mulk Raj. The insurance company called no evidence to rebut Mulk Raj's testimony nor was any attempt made to contradict him otherwise, although the actual facts were as much in the knowledge of the insurance company as the petitioners-respondents. The Tribunal, when dealing with this matter, thought that because the risk note, which was a written document, showed that insurance was taken out from the 15th August to the 14th September, 1947, any oral evidence to show that any earlier period of time was covered by the insurance would be inadmissible as it would contradict the terms of the document. This was obviously a wrong view, for the oral evidence did not in any manner contradict and was not intended to contradict the risk note. On the other hand, the oral evidence was produced to show that apart from the period mentioned in the risk note, the previous period was also covered by a similar but not the same risk note. It seems to me, in the circumstances, that the Tribunal was wrong in discarding the oral evidence which is, in my opinion, entirely trustworthy and leaves no doubt that insurance had been taken out by the petitioners-respondents long before the 15th August, 1947. Mr. Sachar says in this connection that the evidence of Mulk Raj and his other witness does not clearly show that the insurance was against riots. The submission rests on the ground that Mulk Raj and the other witness did not in so many words mention the riot risk, but a reading of their evidence leaves no doubt that they were both deposing to the riot risk when they mentioned the previous insurance which, according to their evidence, was similar to the insurance mentioned in the risk note actually produced. There is, therefore, not much point in that objection and I feel satisfied that the goods in question had been insured against ' riot risk ' prior to the 15th August, 1947. On this conclusion, it is admitted that the case would fall under Section 18 of the Displaced Persons (Debts Adjustment) Act, as held! by the learned 'single judge.
4. The question then is whether the insurance company, that is, the present appellant, is not bound to pay to the respondents the amount for which the goods were insured. To appreciate the argument in this connection, it is necessary to refer to the provisions of Sections 17 and 18 of the Displaced Persons (Debts Adjustment) Act. Section 17 provides that if a debt had been incurred by a displaced person like the respondents and the debt was secured by the pledge of movable property and the creditor had been placed in possession of the property, the creditor shall not be entitled to recover from the debtor any part of the debt if the creditor is no longer in possession of the pledged goods. In view of this provision, it is admitted before us that the Central Bank of India Limited is in law not entitled to recover anything from the respondents in respect of the loan taken by the respondents from the bank on the security of the goods. It has been found that the loan taken was Rs. 27,000. We now come to Section 18 and that runs :
' 18. (1) Where any property in West Pakistan belonging to a displaced person was insured with any insurance company before the 15th day of August, 1947, against any risk arising out of fire or theft or riot and civil commotion and there has been a loss in respect of such property arising out of any such risk at a time when the contract of insurance was in force, such company shall not be entitled to refuse payment of the sum due under any claim in relation thereto on the ground that-
(a) no report was lodged with the police within the agreed time, or
(b) the claim was not made to the company within the agreed time, or
(c) in the case of a policy covering any risk arising out of riot and civil commotion, the disturbances in West Pakistan were not in the nature of a riot or civil commotion, or
(d) the displaced person has not fulfilled any other condition of the contract which in the opinion of the Central Government is of a technical nature and which the Central Government has, by notification in the Official Gazette, specified as a condition of the contract for the purposes of this section;
and any contract to the contrary, to the extent to which it is in contravention of the provisions of this sub-section, shall be deemed to have had no effect.
(2) Where a loss has been incurred in respect of any property in the circumstances specified in Sub-section (1), the Tribunal shall, in every proceeding where it is necessary to do so, determine respectively the amount of the loss, the amount for which the property was insured on the date of such loss, and the amount, if any, paid by the insurance company, and shall make a report thereof to such board or other authority as may be prescribed, and the prescribed board or other authority shall, after taking into account such matters as may be prescribed as being relevant thereto, and subject to any rules made in this behalf, in turn propose to the Tribunal the amount for which the claim against the insurance company shall be decreed, and the Tribunal shall pass a decree accordingly.
(3) The amount realised from the insurance company under any decree passed under Sub-section (2) shall first be applied towards the satisfaction of the debt due from the displaced person, and the balance, if any, shall be refunded to the displaced person.
(4) An application under this section may be made either by a displaced person having a claim against the insurance company in the circumstances specified in Sub-section (1) or by an assignee or any other person having an interest in the claim of any such displaced person, to the Tribunal within the local limits of whose jurisdiction the displaced person actually and voluntarily resides or carries on business or personally works for gain or in the case of a displaced bank making an application under this section, within whose limits the bank carries on business, for the determination of the amount due in respect of the claim in accordance with the provisions of Sub-section (2). '
5. There are two more sub-sections, but they are not material. It is clear that, when an application is made under Section 18, the Tribunal is required to determine the amount of the loss and ' the amount for which the property was insured on the date of such loss '. The Tribunal held that an insurance against fire or riot is a contract of indemnity and the undertaking by the insurer is that, if the insured suffers any loss ' in respect of ' the insured property, the insurer will indemnify the insured to the extent of the actual loss the maximum limit of indemnity being the sum mentioned in the insurance contract. The point is that an insurance of this kind is not a contract to pay any sum of money on the happening of a contingency, as is the case with life insurance. To take an extreme case, if goods insured against fire or riot are sold by the insured and a sum of money equal to the insurance amount is realised and the goods are destroyed as a result of fire or riot, nothing will be payable by the insurer to the insured, the reason being that the insured will have suffered no loss in respect of the insured goods, although of course the goods have actually been lost. What has to be made good under a contract of insurance of this kind is the loss to the insured. The question in the present case, therefore, is whether the respondents, who had insured the goods, has suffered any loss in respect of the insured goods within the limit mentioned in the contract, i.e., Rs. 27,000. The finding is that by pledging the goods with the Central Bank of India Limited, the insured had realised from that bank Rs. 27,000. Then occurred the loss of goods, but obviously within the limit of Rs. 27,000 and there was in that situation no actual loss to the insured, assuming, of course, that the insured were not in law liable to pay back the loan taken from the bank. That is what Section 17 of the Displaced Persons (Debts Adjustment) Act has done, for the legal liability of the owner of the goods to pay back the debt has been wiped out. In this situation it is difficult to see how it can be said that the respondents has suffered any loss in respect of the insured goods, and, if there is no loss, no question of indemnifying the respondents by the insurance company can arise.
6. Mr. Nehra does not accept this view and points out that there is no decided case supporting it. It is somewhat curious that neither counsel has been able to find any decision exactly bearing on the facts of the present case and although the leading English decision, which has been mentioned in several text books, Castellain v. Preston, (1882) 11 Q.B.D. 380, lends considerable support to Mr. Sachar's contention, it is of course not decisive and Mr. Nehra urges that that decision must be confined to the facts of that case, as the insured property there had been actually sold and had fetched full value in spite of some loss caused by fire. Further, Mr. Nehra submits--and that submission assumes considerable importance--that the ordinary rule that may be applicable in such cases is no longer applicable in view of the express provisions of Section 18 of the Displaced Persons (Debts Adjustment) Act which, according to learned counsel, deliberately places the burden of any loss on the insurer. The argument is that Section 18 applies not only where loss has been incurred by the insured person but in every case where actual loss of goods has occurred--no matter who has suffered the loss-- and that the decree to be made is for the benefit of the creditors of the insured. There is some point in this submission and the question is not free from difficulty. Both the questions of law are of considerable importance and are likely to arise in other cases and it is, in our opinion, proper that the questions should be authoritatively settled by a larger bench. We, therefore, refer the following two questions of law for the consideration of a Full Bench :
(1) If A, a displaced person, had pledged his goods and thereby obtained a loan from a bank and the goods had before the 15th August, 1947, been insured against riot and civil commotion for an identical sum of money and the goods had subsequently been lost as a result of riots in Pakistan, can A be said to have suffered any loss in respect of those goods in view of Section 17 of the Displaced Persons (Debts Adjustment) Act assuming that Section 17 was applicable ?
(2) Do the provisions of Section 18 of the Displaced Persons (Debts Adjustment) Act make any difference to the answer, if in the above-mentioned situation A files a petition under Section 18 to which petition the creditor-bank is also a party, and can any decree be granted by the Tribunal in the circumstances
7. Let the papers be laid before the Chief Justice for constituting a Full Bench.
ORDER OF FULL BENCH
S.S. Dulat, J.
8. Messrs. Tirath Ram and Sons were doing business in what is now a part of Pakistan and before the 15th August, 1947, they had insured certain goods, being cotton and cotton seeds, against fire as well as riot and civil commotion, the sum assured being Rs. 27,000. The same goods had been pledged by the firm to a bank and a loan of Rs. 27,000 taken from the bank. The goods were lost as a result of rioting. Messrs. Tirath Ram and Sons later moved to India and, after the enactment of the Displaced Persons (Debts Adjustment) Act, 1951, they made ah application to a Tribunal appointed under that Act for the recovery of Rs. 27,000 from the insurance company which company has now come to be represented by the Life Insurance Corporation of India. The main defence taken on behalf of the Insurance Corporation was that in law Messrs. Tirath Ram and Sons had suffered no loss in respect of the insured goods and were consequently not entitled to recover anything from the Insurance Corporation. This plea rested on a provision in the Displaced Persons (Debts Adjustment) Act contained in Section 17, according to which, the pledged goods being no longer available, the creditor, being the bank, could recover nothing from the debtor, that is, Messrs, Tirath Ram and Sons and the argument was that since Tirath Ram and Sons had already obtained Rs. 27,000 from the bank, which was no longer returnable, there was no loss suffered by them. This objection prevailed in the first instance but on appeal to this court Mahajan J. reversed that conclusion and held that Tirath Ram and Sons had suffered loss as the goods had been lost to them and the Insurance Corporation was therefore liable. The Life Insurance Corporation then filed an appeal under Clause 10 of the Letters Patent which came before two of us and, as the question raised on behalf of the appellant appeared to be sufficiently important, we decided to refer it to a larger Bench. Two questions were thus framed and are for our decision :
'(1) If A, a displaced person, had pledged his goods and thereby obtained a loan from a bank and the goods had before the 15th August, 1947, been insured against riot and civil commotion for an identical sum of money and the goods had subsequently been lost as a result of riots in Pakistan, can A be said to have suffered any loss in respect of those goods in view of Section 17 of the Displaced Persons (Debts Adjustment) Act assuming that Section 17 is applicable ?
(2) Do the provisions of Section 18 of the Displaced Persons (Debts Adjustment) Act make any difference to the answer if in the above mentioned situation A files a petition under Section 18, to which petition the creditor-bank is also a party, and can any decree be granted by the Tribunal in the circumstances '
9. These questions were framed in view of the facts involved and the provisions of the Displaced Persons (Debts Adjustment) Act, the interpretation of which was in dispute. On the arguments placed before us it appears that the questions can be readily answered once it is clear what exactly is the loss which any insurer undertakes to make good when he issues a policy covering risk to the insured goods against fire or riot and civil commotion.
10. It is common ground that an insurance against fire or riot is a contract under which the insurer undertakes to make good to the insured any loss that the insured may suffer in respect of the insured goods caused by fire or riot, and further that only the actual loss to the insured is to be made good. It follows, and again there is agreement on the point, that if the insured does or can recover a part or whole of the loss so incurred from another party, the insurer is entitled to have that adjusted against his obligation. On these premises Mr. Sachar has built the submission that if the insured receives any benefit in respect of the insured goods from any other source, then the advantage of that benefit must also go to the insurer. It is this inference which is in controversy. To put it in concrete terms it is agreed that if certain goods are insured against fire and fire breaks out causing loss to the goods, the insured may be able to recover a part or the whole of the loss from the person, if any, responsible for the fire, and in that event the insurer would be entitled to have it adjusted against his liability and that liability would be accordingly reduced. Mr. Sachar, however, goes further and seeks to maintain that it is not only what may be recovered from a wrongdoer that is so adjustable against the claim but every other amount that may have been obtained or may be obtained by the insured in respect of the insured goods. His submission, therefore, is that since in the present case the insured had obtained from the bank a sum of Rs. 27,000 in respect of the insured goods by pledging them with the bank and he has thus received that benefit, the same benefit must stand transferred to the insurer, and, since the goods were insured for Rs. 27,000, there has in law been no loss to the insured. It is, however, difficult to see on what principles this submission can be accepted, for what the insured took from the bank had nothing to do with the fire or riot against which the goods were insured. The transaction of loan and the pledge of the goods was entirely a separate matter and it seems to me impossible to permit the insurer to enter into it merely because the insurer is liable only for the actual loss. Mr. Sachar admits that if in the course of his ordinary business the insured makes any profit out of the insured goods, he is not in that respect accountable to the insurer, but he still maintains that in the present case the connection between the benefit received by the insured and the loss suffered by him is closer, for here, according to Mr. Sachar, the bank has paid for the goods lost in the form of the loan advance by it and that loan is no longer returnable under the provisions of the Displaced Persons (Debts Adjustment) Act. Reliance is placed on Section 17, which says :
' 17. (1) Where in respect of a debt incurred by a displaced debtor and secured by the pledge of movable property belonging to him, the creditor had been placed in possession of such property at any time before the debtor became a displaced person, the following rules shall regulate the rights and liabilities of the creditor and the debtor, namely:--
(a) the creditor may, if he is still in possession of the pledged property, realise the sum due to him by the sale of such property after giving to the debtor reasonable notice of the sale ;
(b) the creditor shall not be entitled in any case where the pledged property is no longer in his possession or is not available for redemption by the debtor, to recover from the debtor the debt or any part thereof for which the pledged property was security. '
11. The argument is that the law has by enacting these provisions conferred a benefit on the owner of the goods in case the goods have been lost and that benefit must go to the insurer, for, otherwise, the insured would be receiving double benefit and making a profit out of the contract of insurance. This argument ignores the fact that these provisions are intended to regulate the rights and liabilities between a creditor and a debtor in certain contingencies and insurance is not the contingency visualised by these provisions. Nor are the provisions intended to declare the rights and liabilities between an insured and an insurer. On the other hand, the contingency of insurance is provided for by another provision in the same section contained in Sub-section (2), which says:
' Notwithstanding anything contained in this section, the creditor shall be entitled to receive, and to give a valid discharge in respect of, any sum due under this Act or under any other law for the time being in force from an insurance company in respect of any claim arising out of the loss or destruction of the pledged property, but the creditor shall, in any case wherethe sum received from the insurance company is greater than the amount of the debt due to him, pay over the surplus to the debtor.'
12. It would, therefore, appear that, while in Sub-section (1) of Section 17 the legislature is providing for cases where the goods were lost while in the possession of the creditor in which case the debt is no longer recoverable by the creditor, in Sub-section (2) the legislature is providing for those cases where the goods lost were insured and in that contingency the creditor is given the right to recover from the insurance company the amount of the claim arising out of the insurance contract. The opening words of Sub-section (2) are important, as the provision there is intended to take effect in spite of what is provided in Sub-section (1). The scheme of Section 17, therefore, is that if the pledged goods are lost, the debtor is relieved from his liability to pay back the debt, but, if they were insured, then the creditor is entitled to recover from the insurer the claim due on the insurance contract. It is not, therefore, entirely right to say--what Mr. Sachar seems to imply--that in every case of pledged goods, which have been lost, the liability of the debtor to pay back the debt is completely wiped out. The liability, on the other hand, is kept alive in the case of insured goods, and it is discharged by payment by the insurer. The right to recover compensation from the insurer is by Sub-section (2) of Section 17 transferred from the insured to his creditor. There is, therefore, no question of the insured receiving any double benefit. This position is made clearer by section 18 which provides a machinery for claims against insurance companies and says that if property ' left in West Pakistan was insured ' against certain risk including riot and civil commotion and loss has actually occurred, then the Tribunal appointed under the Displaced Persons (Debts Adjustment) Act will determine the amount of the loss and pass a decree accordingly, and subsection (3) then says :
' The amount realised from the insurance company under any decree passed under Sub-section (2) shall first be applied towards the satisfaction of the debt due from the displaced person, and the balance, if any, shall be refunded to the displaced person.'
13. Sub-section (4) provides that an application may be made either by a displaced person having a claim against an insurance company or by an assignee or any other person having an interest in the claim of any such displaced person, and to all such proceedings, according to the next subsection, the insurance company and other interested person ' shall be made parties'. To repeat what I have said, the intention of the provisions in Sections 17 and 18 of the Act is that while a debtor is relieved in certain circumstances of his liability to pay personally or out of his own property to his creditors, the insurer, if any, in respect of the lost goods is not relieved of his obligation and, on the other hand, a direct relationship is established between the creditors of the insured and the insurer, and the creditors are entitled to recover from the insurer the amount, of the claim under the insurance contract. No double benefit accrues to the insured because out of the insurance claim the creditors have first to be satisfied and the insured receives only the balance. Mr. Sachar's suggestion, therefore, that if we permit the insured to recover from the insurer compensation for his loss, he would be deriving double benefit because the law has relieved the insured of his liability to pay his creditors, is not well-founded.
14. Mr. Sachar then says that in the present case no claim has been made by the creditors of the insured and the application, which is made by the insured himself, is merely an attempt to obtain a benefit for himself. This argument again ignores the provisions of Section 18 of the Displaced Persons (Debts Adjustment) Act, Sub-section (4) of which expressly authorises the insured, being a displaced person, to make an application. To such a proceeding the insurer and at the same time all other ' persons interested in the claim ' have to be joined and that of course includes the creditors of the displaced person. The benefit of any decree granted in such a proceeding is to go to the ' creditors first' and only the balance, if any, is receivable by the insured. The fact, therefore, that the proceedings have been started by the insured does not mean that they are not for the benefit of his creditors.
15. In support of his submission that the insured has suffered no loss, Mr, Sachar has relied strongly on a decision of the Court of Appeal in England reported as Castellain v. Preston. In that case a house belonging to Preston and others had been insured against fire. The owners of the house later contracted to sell that property to another party and after that contract had been made but before a legal conveyance deed was executed, the house was damaged by fire, the damage amounting to 330. The insurance company, not knowing about the sale, paid the insured 330. The insured then proceeded to convey the legal title to the purchasers and received full price. The insurance company on coming to know of the transaction of sale sued the insured to recover back the sum of 330 alleging that in the circumstances no loss was caused to the insured by fire. The Court of Appeal allowed the insurer's claim. That decision is readily understandable once it is remembered that the house was damaged after the equitable title had in fact passed to another party, so that the loss caused by fire had fallen actually not on the insured but upon the purchaser. That is why Cotton L.J. began his judgment by observing that the house belonging to the defendants had been sold to certain purchasers,' before there was any loss ', and, later on, that ' after the contract of sale the only interest the insured had in the property was an unpaid vendor's lien ' which interest was not as a matter of fact damaged by fire, for the insured received the full price from the purchasers. It is true, as observed by the court, that even at the time of the fire the insured had an insurable interest in the property but that Was obviously confined to his lien as ' unpaid vendor ' and since that lien was not at all affected by the damage, it was impossible to allow him to recover anything from the insurance company. The other ground mentioned by the learned judges was that to permit the insured to retain the money paid to him by the insurance company, would be to permit him to make a profit out of the insurance contract. As is clear from the facts, the real person who had suffered by the fire was the purchaser. Mr. Sachar has referred to the observations of Brett L.J. in the course of his judgment when he said that the 'underwriter is entitled to the advantage of every right of the assured, whether such right consists in contract, fulfilled or unfulfilled, or hi remedy for tort capable of being insisted on or already insisted on, or in any other right, whether by way of condition or otherwise, legal or equitable ...'. These observations, however, have to be read in the context of the facts of that case and read in that light they have no application to the present case. The goods that were damaged undoubtedly belonged to Tirath Ram and Sons. Those goods were lost as a result of rioting in Pakistan which was the risk covered by the insurance contract. The transaction of loan between Tirath Ram and Sons and the bank was a contract entirely distinct from the insurance contract and collateral to it and it is difficult to see what interest in that transaction the insurer can possibly claim. Suppose for a moment that a part of the goods had been lost but in spite of that the remaining goods had for other reasons appreciated in value, it could not possibly be suggested that the benefit of such enhancement could go to the insurer, and even Mr. Sachar did not make that suggestion, the reason of course being that what the insured may realise by sale of any part of the goods is no concern of the insurer. It is, I think, unnecessary to pursue this matter further because in the present case the rights of the parties stand regulated by the provisions of the Displaced Persons (Debts Adjustment) Act and those provisions do not indicate that in a situation like the present the insured suffers no loss. All that happens is that the loss is transferred to the creditors of the insured and the creditors are authorised to recover from the insurer. I am, therefore, unable to say that, in the circumstances mentioned in the first question referred to us, the insured suffers no loss in law, and would answer it by saying that in those circumstances the insured has suffered loss.
16. Regarding the second question the answer, in my opinion, is that the joining of the creditors in a petition filed by the insured under Section 18 of the Displaced Persons (Debts Adjustment) Act makes no difference and in fact the joining of the creditors is under the provisions of Section 18,necessary, and a decree can be granted by the Tribunal which is intended to be for the benefit of the creditors in the first instance.
A.N. Grover J.
17. I agree.
P.C. Pandit J.
18. I also agree.
FINAL ORDER OF DIVISION BENCH
19. This appeal under clause 10 of the Letters Patent has to be dismissed in the light of the answers given by the learned judges of the Full Bench to the questions referred to them, and, as ordered by D.K. Mahajan J., the case will go back to the Tribunal for the determination of the amount of damages under Section 18(2) of the Displaced Persons (Debts Adjustment) Act. The parties have been directed to appear before the Tribunal on the 27th of September, 1965, and they will bear their own costs in the appeal.
Mehar Singh, J.
20. I agree.