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Oriental Fire and General Insurance Co. Ltd. and anr. Vs. Union of India and ors. - Court Judgment

LegalCrystal Citation
CourtDelhi High Court
Decided On
Case NumberSuit No. 96 of 1971
Reported inILR1979Delhi346
ActsRailway Act, 1890 - Sections 77C
AppellantOriental Fire and General Insurance Co. Ltd. and anr.
RespondentUnion of India and ors.
Advocates: S.K. Khanna,; P.K. Jaitely and; H.S. Mac, Advs
Cases Referred(See Union of India v. S. S. H. Syndicate
railways act - section 77-c--meaning of--marine insurance act, 1963--difference between assignment and subrogation--hire-purchase agreement--right of hirer to sue.;as follows :; (1) in a case of subrogation the insurance company cannot sue in its own name. the suit has to be brought in the name of the insured.; (2) the benefit of a contract can be transferred to third party by a process called assignment. this is a transaction between the person entitled to the benefit of the contract (called the assignor) and the third party (called the assignee)( as a result of which the assignee becomes entitled to sue the person liable under the contract. the insurers in this case had paid the claim made by the insured and in consideration of the settlement of that claim on the insurance policy the.....avadh behari rohatgi, j. (1) this is a claim against the railways. the plaintiffs, life insurance corporation of india and lakshmi udyog (udyog) have brought this suit for the recovery of rs. 53,722.50 against the union of india and the railways on account of the loss of goods. (2) three cases of printing machinery were booked at wadi bunder, bombay on 19th december, 1967 for varanasi. the railways issued a railway receipt to the consignor of the goods. on their arrival at varanasi on 24th january 1968 the goods were offered for delivery to the consignee. the consignee asked for open delivery. open delivery was given to him. out of three cases one case was found broken and contents missing. the remaining two cases were in sound condition. within six months a claim for loss was lodged with.....

Avadh Behari Rohatgi, J.

(1) This is a claim against the Railways. The plaintiffs, Life Insurance Corporation of India and Lakshmi Udyog (Udyog) have brought this suit for the recovery of Rs. 53,722.50 against the Union of India and the Railways on account of the loss of goods.

(2) Three cases of printing machinery were booked at Wadi Bunder, Bombay on 19th December, 1967 for Varanasi. The Railways issued a railway receipt to the consignor of the goods. On their arrival at Varanasi on 24th January 1968 the goods were offered for delivery to the consignee. The consignee asked for open delivery. Open delivery was given to him. Out of three cases one case was found broken and contents missing. The remaining two cases were in sound condition. Within six months a claim for loss was lodged with the Chief Commercial Superintendent. The Railways repudiated the claim. On 26th February 1971, after serving a notice under s. 80 Civil Procedure Code ., the present suit was brought against the Railways for the recovery of the aforesaid amount on account of loss and damages.

(3) One L. N Aggarwal carrying on business under the name and style of Lakshmi Udyog at Varanasi was interested in getting some printing machinery from Germany. He approached the National Small Industries Corporation Ltd., New Delhi (the Corporation). The Corporation was prepared to get the machinery for him provided he agreed to purchase it from them on hire-purchase basis. Aggarwal agreed. The Corporation placed an order on 28th October, 1966 (P-l) with a German firm of manufacturers and suppliers called M/s. Schmachtenberg and Turck of West Germany. The German firm sent the goods by ship. On 21st January, 1967 the steamer carrying the goods arrived. The goods were unloaded at Bombay port.

(4) On behalf of the Corporation, Overseas Trading Company, clearing and forwarding agents, took the delivery of the goods. After the customs had cleared, the goods were brought at Wadi Bunder for booking. The Overseas Co. obtained the railway receipt in their name as the consignor. The consignee in the Rr was the Corporation.

(5) On 12th July, 1967 L. N. Aggarwal as the proprietor of Lakshmi Udyog entered into a hire-purchase agreement with the Corporation. He made an initial payment of Rs. 16,599 to the Corporation. The full price was settled at Rs. 1,04,513.98 which was [email protected] be paid in Installments. The hire-purchase agreement contained an option of repurchase, the usual default clause and the terms that the hirer was to remain in defector possession as the bailee of the goods and the de jure possession of the goods was to remain with the Corporation till the option to purchase was exercised.

(6) As the Udyog had entered into the hire-purchase agreement the Corporation endorsed the Rr in favor of the Udyog. The Udyog in its turn endorsed the Rr in favor of one Paras Ram Tiwari who went to the railway station and asked for the delivery of the goods. Two boxes, as I have said, were in sound condition. The third case was found 'with its planks off and missing contents lying loose' as was stated in the short delivery certificate (Public Witness 2/2). The contents of this third case were compared with the packing list of the German manufacturers and such goods as were missing were detailed in the short delivery certificate. This certificate was issued without prejudice.

(7) One important fact may be mentioned here. When the goods started from Germany on their onward journey to India the Corporation obtained a marine policy from the Life Insurance Corporation (P-3) dated 5th of September, 1967. Under this policy the goods were insured from the place of dispatch to the place of destination. When the Udyog found that the Railway had lost the goods, Aggarwal approached the Corporation and the Life Insurance. The Corporation asked the Life Insurance to pay the claim to the Udyog. The Life Insurance Corporation after obtaining a survey report from its surveyor and on being satisfied of the loss of the goods made the payment of Rs. 54,060 to the Udyog. This was in complete discharge of their liability under the policy. On making payment the Life Insurance Corporation required the Udyog to execute a document which is styled as a 'letter of subrogation' dated December 12, 1968 (Public Witness 3/3). By this letter the Udyog assigned and transferred all their title, title and interest etc. in the goods and all rights of claims and remedies against the Railway Administration to the Life Insurance Corporation.

(8) On the basis of the letter dated 12th December, 1968, the Lite Insurance Corporation and Lakshmi Udyog brought the present suit. The Life Insurance Corporation pleaded in the plaint an assignment in their favor. Lakshmi Udyog sued as the endorsee of the RR. During the pendency of the suit the general business of insurance was nationalised by an Act of Parliament. After nationalisation the Oriental Fire and General Insurance Company Limited was brought on the record of the suit in place of the Life Insurance Corporation of India.

(9) The Union of India representing the Northern and Central Railways opposed the claim of the plaintiffs on several grounds. These grounds are reflected in the issues. On 2nd September, 1971 the following preliminary issues were framed :

1. Whether this court has territorial jurisdiction to entertain and try this suit 2. Whether the suit by plaintiff No. 2 as preferred is maintainable ?

(10) The first issue was decided on 8th February, 1972. It was held that this court had territorial jurisdiction to entertain and try the suit. The second issue was not decided. Everybody seems to have forgotten about it. On 9th August, 1972 the remaining issues were framed:

1. Whether Shri S. P. Duggal was competent to file the suit on behalf of the plaintiff 2. Whether the suit is maintainable at the instance of the plaintiff? 3. Whether there was privity of contract between plaintiff No. 2 and the defendants 4. Whether the suit is within time 5. Whether there was any short delivery of goods at Varanasi and what was the value of the goods short delivered 6. In case it is found that the goods were short delivered, were the goods booked at Wadi Bunder 7. Whether the goods tendered to the defendants for carriage were defectively packed 8. Whether the good's were booked at railway risk 9. To what relief, if any, is the plaintiff entitled First I take up the issues framed on 9th August, 1972.

Issue No. I

(11) This issue is not pressed. I, thereforee, hold that S. P. Duggal was competent to institute the suit. Issues 2 and 3

(12) The two plaintiffs are (i) the Oriental General and Fire Insurance Company Limited (insurance company) and (ii) the Lakshmi Udyog. The insurance company claims the right to institute the suit on the basis of the deed of assignment dated 12th December, 1968 (PW 3/3). It will be recalled that the marine insurance policy was issued in favor of the Corporation. The Corporation assigned the policy to the Udyog. The Udyog claimed the amount of the loss of goods from the Life Insurance Corporation. The Life Insurance Corporation paid Rs. 54,060 to the Udyog on 11th December, 1968 (PW 3/1). This was in full settlement of their claim. After the claim of the Udyog had been settled the Life Insurance Corporation required the Udyog to execute a deed in their favor. Udyog did it. This is styled as a letter of subrogation'. But the insurance company now claims that in truth and substance this is a deed of assignment.

(13) Counsel for the Union of India submits that this letter has to be construed as a Letter of subrogation which it purports to be. He further submits that the insurance company itself has throughout been calling it as a letter of subrogation. He referred me to the letter of the insurance company dated December 17, 1968 to the Railways informing them about subrogation in their favor (PX) and the notice under s. 80 Civil Procedure Code dated 12th November, 1970 wherein the insurance company described it as a letter of subrogation. He also contends that the contents of the letter show that nothing more than right of subrogation was being conferred on the insurance company by the executant of the letter. In this connection he drew my attention sections 17, 52 and 79 of the Marine Insurance Act, 1963 (the Act) and Union of India v. Sri Sarada Mills, : [1973]2SCR464 .

(14) Counsel for the plaintiffs, on the other hand, contends that the letter dated 12th December, 1968 is a deed of assignment. It is thereforee necessary to construe this document at this stage. If it is a letter of subrogation, it is admitted on both hands, the insurance company cannot sue in its own name. The suit has to be brought in the name of the insured. The Corporation is the insured. But the suit has not been brought in the name of the insured. The insurance company can sue only if it is held to be a deed of assignment. Now the letter dated 12th December, 1968 says :

'In consideration of your paying to us a sum of Rs. 54,060 only (Rupees fifty four thousand sixty only) in respect of the loss to the goods mentioned in Schedule hereunder under Policy No. PSB/110/MC/2975 dated 5-9-1967 we hereby assign and transfer to you all our right, title, interest, claim and demand in respect of the said goods and all rights of claim and remedies against any Railway Administration in India/The Union of India/Shipping Company Limited/Any Port Authorities and/or any persons, firm or corporation whosoever is liable in respect of such loss/damage.'

(15) The letter uses the words 'transfers' and 'assigns'. It assigns all interest in the goods including the right to sue. This is an assignment by the insured of all rights including the right to sue the Railway Administration. No particular form of assignment is prescribed. What has to be seen is the substance and not the label. This assignment was made before the institution of the suit. Notice of assignment was given to the Railway Administration. With the notice of assignment Px dated 17th December, 1968 a copy of the letter of subrogation' dated 17th December, 1968 was also sent. The Railways cannot thereforee say that they were misled because they were given the copy of the document which in fact was the deed of assignment and not a letter of subrogation as was erroneously described.

(16) The benefit of a contract can be transferred to a third party by a process called assignment. This is a transaction between the person entitled to the benefit of the contract (called the assignor) and the third party (called the assignee) as a, result of which the assignee becomes entitled to sue the person liable under the contract. The insurers had paid the claim made by the Udyog and' in consideration of the settlement of that claim on the insurance policy the insurers took an assignment of the right to sue. The insurers thereforee can maintain the suit in their own name. This legal position was established as long ago as 1896 by the Privy Council in King v. Victoria Insurance Company 1896 A.C. 250 . That was a case of assignment. It was an express term of the assignment that the insured's name was not to be used. Lord Hobhouse delivering the judgment of the Board said:

'THEY(their Lordships) rest their judgment on the broader and the 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.'

(17) The leading case on the subject is Compania Colombiana de Seguros v. Pacific Steam Navigation Co. (1964) 1 All. E.R. 216. In that case the consignees of a cargo of electric cables which were damaged during a voyage from England to Columbia, recovered the sum insured from the insurers, and assigned them their right of action against the ship-owners. The insurers gave notice of the assignment to the ship-owners, and then brought an action in their own names. Roskill J. held that they were entitled to do so. An objection was raised before the learned judge that a 'bare right of action' 'is unassignable. This contention was repelled. He held that a right of action may be validly assigned if it is a subsidiary but an essential part of the main subject-matter of the assignment. If the goods shipped on the defendant's vessels are delivered in a damaged condition, the consignee, after being indemnified for his loss by the insurers, may assign to the latter his right to recover damages from the defendants. He assigns the benefit of his contract with the ship owners to the insurers together with the attached right to recover damages for breach. To put it differently : Suppose the 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 (supra) Roskill J. held that the enforcement of such a right is not the enforcement of a 'bare right of action' but of aright of action legitimately supported by the insurer's interest in recouping the loss sustained by paying out on the policy : See Cheshire and Fifoot, 9th ed. p. 506 and Anson's Law of Contract 24th ed. p. 438.

(18) But then it is said that the letter is a deed of subrogation. Lord Hobhouse has said in King. Victorial Insurance Co. (supra) :

'Subrogation by act of law would not give the insurer a right to sue in a court of law in his own name.'

(19) The right of subrogation is embodied in s. 79 of the Act. ft does not require a deed. But assignment is by act of parties. It, thereforee, requires a deed. The assignee can sue in his own name. The subrogee cannot. Then the subrogee can sue only for the sum paid. He cannot recover more than what he has paid. The doctrine of indemnification on which the rule of subrogation is founded says that the subrogee is entitled to no more than what he has paid to the insured. An indemnity insurer has an equitable right, whether specified in the insurance contract or not, to pursue the insured's right in the latter's name against any defendant, be he a tort feasor or a contract breaker, who has caused' the insured loss, to the extent that the insurer has indemnified the insured for it. This is a wise concession to commercial convenience.

(20) The principle thereforee is that the insurer as subrogee must sue in the insured's name, unless he has taken an assignment. Subrogation being a right independent of agreement, may be exercised not only without the consent of the insured but against his very wishes. Such is likely to be the case when the loss has been caused by the tort of the insured's own employee or a close member of his family whom the insured would not have thought of suing himself. (Fleming Law of torts 5th ed. p. 383).

(21) On a construction of the letter dated 12th December, 1968, I reach the conclusion that it is a deed of assignment which transfers to the insurance company all the rights including the right to sue the Railway Administration. The insurance company, in consideration of the settlement of the insured's claim on the insurance policy, took an assignment of the right to sue and thereforee the insurance com- pany can maintain the suit.

(22) Next I come to the second plaintiff, the Udyog. The Udyog claims to sue as an endorsee of the railway receipt for consideration. The udyog entered into a hire-purchase agreement with the Corporation on 12th July, 1967 (Public Witness 4/IA). This was before the goods were entrusted to the Railways. The contract of hire-purchase, or more accurately, the contract of hire with an option of purchase, is one under which the owner of a chattel lets it out on hire and undertakes to sell it to, or that it shall become the property of, the hirer, conditionally on his making a certain number of payments. It is a modern development in the commercial life. (Halsbury Laws of England 4th ed. vol. 2 p. 722). Hire-purchase contains not only the element of bailment but also the element of sale. It is a bailment plus an option to purchase. A hire-purchase contract creates also a proprietary interest. The bailee acquires an interest in the chattel, although it is limited. Swinfen Eady M.R. in Whiteley Ltd. v. Hilt (1918) 2 K.B. 808 said:

'The whole terms of the agreement shows that the contract not merely a bailment for reward but that it conferred on the bailee an interest in the chattel.'

(See G. W. Paton's Bailment in the Common Law p. 311 and The Winfield 1902 p. 42 and Morrison Steamship Company v. Greystoke Castle 1947 A.C. 265.

(23) The textbooks and judicial decisions show that the hirer has a proprietary interest in the goods. From the time he first makes a payment under the agreement the hirer acquires an interest in the goods. He has an insurable interest. He has an assignable interest. And has also a' right of action.

(24) For a true appreciation of the nature of the hirer's interest an understanding of the nature of the contract of hire-purchase becomes of prime importance. The cardinal fact to be borne in mind is that after a hire-purchase agreement has been entered into the owner and the hirer each possess distinct and independent sets of rights. On the hirer the agreement confers two distinct sets of rights, namely, the benefit of the hiring which constitutes the bailment part of the contract and the option to purchase, which it is now established, constitutes a separate and proprietory right capable of independent assignment. The option to purchase constitutes a proprietary interest. The hirer's interest has been defined as a 'legal right sui generis'. The hirer may himself sue third parties who damage or destroy the goods; for in these cases damage is caused to what Goode calls '(he hirer's reversion', namely, the proprietary interest vested in him by virtue of his option to purchase. (See Goode Hire-Purchase Law and Practice 2nd ed. p. 512, 541 and Diamond's Introduction to Hire-Purchase Law 2nd ed. ch. 2).

(25) It was argued that there was no delivery of the goods to the Udyog and, thereforee, no interest passed in the goods. This is a fallacious argument. Delivery is normally by physical transmission of possession of the goods from the owner to the hirer. This is not essential, however, and it is sufficient if constructive possession is given. Constructive possession may also' be given to the hirer by endorsing the railway receipt in his favor. It is the symbol of possession. This places the hirer in constructive possession for the purpose of commencing the hiring. This is what happened in this case.

(26) I have no doubt that Lakshmi Udyog also had a proprietary interest in th(e goods on the basis of which they were entitled to sue.

(27) But there is one insuperable difficulty in the way of plaintiff No. 2. Plaintiff No. 2 is Lakshmi Udyog. A number of documents on the record show that one L. N. Aggarwal is the proprietor of Lakshmi Udyog. (See the Hire-Purchase Agreement, Ex. Public Witness 4/1 A), Power of Attorney (Public Witness 3/2) and letter of subrogation (PW 3/3). All these documents arc is signed by L. N. Aggarwal. He is described as the proprietor of the firm. thereforee, the suit should have been brought in the name of L. N. Aggarwal who was carrying on business in a: name other than his own, that is, Lakshmi Udyog. But Lakshmi Udyog as such is nothing in the eye of law. It is not a legal entity. It cannot sue in its own name. L. N. Aggarwal could have sued. But he has not. This is a fatal flaw in so far as plaintiff No. 2 is concerned. I must, thereforee, hold that suit by plaintiff No. 2 is incompetent. This is my answer to issue No. 2 framed on 2nd September, 1971.

(28) On issues 2 and 3 framed on 9th August, 1972 my finding is that the suit is maintainable at the instance of the insurance company. But plaintiff No, 2 cannot maintain the suit. Issue No. 4

(29) It is not disputed that the suit is within time. The suit was brought on 26th February, 1971. The goods were delivered to the Udyog on 24th January, 1968. Limitation will begin from the date of delivery of goods. Three years from that date expired on 24th January, 1971. Notice under s. 80, Civil Procedure Code was served on 12th November, 1972. The plaintiff No. 1 is entitled to the notice period of two months. This will bring the period to 24th March, 1971. The suit was filed before that date and is thereforee within time : See Article 10 and section 15(2) of the Limitation Act. Issues 5, 6 and 7

(30) These three issues were vehemently contested by the Union of India. These issues raise three questions for decision : (1) Were the goods short delivered; (2) Was the packing defective If so. to what effect (3) What is the value of the lost goods

(31) In so far as issue No. 6 is concerned it is not denied that the goods were booked at Wadi Bunder. But what is denied is that. there was a short delivery of the goods.

(32) The evidence shows that from Germany the steamer arrived at the Bombay Port on 21st June, 1967. We have the bill of lading (CW 4) and the bill of entry (C.W. 3) on record. The steamer brought three cases of printing machinery which were ordered by the Corporation from the German manufacturers. Two cases were delivered to the party on 29th July, 1967. The third case was delivered on 3rd August, 1967. On behalf of the Corporation Overseas Trading Company took delivery. Thereafter the goods were inspected by the customs. They conducted a brief examination. They picked up two or three articles from one of the cases and compared them with the manufacturer's packing list (P-2) dated 25th March, 1967. They cleared the goods. After clearance from customs the goods were brought at the railway station. They were booked at Wadi Bunder for Varanasi. At Varanasi the goods were delivered to the Udyog on 24th January, 1968. When the goods were offered for delivery two cases were in sound condition but in the third case goods were found loose and scattered. Paras Ram Tiwari (Public Witness 3) who had gone to take delivery of the goods on beha'lf of the Udyog asked for open delivery. All the three cases were opened. Their contents were checked with the detailed packing list (Ex. P-2). The manufacturers had sent an invoice dated 12th April, 1967 (CW 5), a packing list dated 25th March, 1967 (P-2) and an item wise invoice dated 10th April, 1968 showing the price of each article (C.W. 6). At the request of the Corporation the manufacturers had written a letter dated 15th February. 1971 (P-5) to them in which the manufacturer's man had assured the Corporation and said :

'Before closing the crates I checked myself the contents. All the parts which were mentioned in the invoice were actually shipped.'

At the request of Tiwari the goods in the third case were checked with the packing list dated 25th March, 1967. A number of articles were found missing. The Railway Administration issued a short delivery certificate (Public Witness 2/2). On this basis the insurance company claims that the goods were short delivered to them.

(33) On these issues the evidence of Cw I K.M. Chengappa, Manager, Overseas Trading Company Bombay is material. He said that customs made a superficial examination. They picked up two or three articles from one case and compared them with the packing list. Oil 19th December, 1967 'all three cases were offered to the Railways' according to the witness 'in their original imported pack iiig'. He further said that 'the Railway accepted goods in the same condition'. On this point we have also the testimony of the Railways' own witnesses. Dcw 2 Vishnu Moti Ram testified that 'the packages ere in good packing condition' when they were brought for booking. At the time of the booking the goods were weighed. B. D. Verma DCW-1 said that 'the weight of packages was 426 Kg'. This weight is noted on the railway receipt. The manufacturer's packing list and their invoice show the weight of all the three cases separately as follows :

Case No. 1 = 80 Kg. Case No. 2 = 175 Kg. Case No. 3 = 173 Kg. Total: 428 Kg.

(34) The total weight is. thereforee. 428 Kg. It is in evidence that the two cases were in proper condition. One case was found broken and its contents missing. Pashupati Ram Jaiswal, Goods Clerk, Northern Railway, Varanasi (DW2) had this to say :

'Two cases were in proper condition. They had battens on two sides and three iron bands enclosing them. The planks of the third case were broken. The broken planks had been pulled apart from the case and it appeared that the contents of the case had been scattered. I counted nine pieces of machinery parts in this case. There were no wooden battens to be seen on this case. There were only two iron bands on it.'

The short delivery certificate also' says that the Railways 'delivered three cases out of which one case with its plunks off and missing contents lying loose.' As regards the remaining two cases the certificate ays : 'The other two sound cases con'.ents correct as per packing list'. thereforee, it stands established that one of three cases had been broken and its contents were missing. The Railways do not dispute this. But what they dispute is that it was obligatory on the plaintiffs to prove that at Wadi Bunder they had booked the lost goods.

(35) Counsel for the Railways contended that there is no evidence on record that the insurance company had booked and delivered to the Railway at Wadi Bunder goods alleged to have been lost in transit. Counsel also criticised the evidence of Changappa on the ground that he had no personal knowledge of the conditions of cases nor was packing one in his presence a's is admitted by him. Without the evidence of packing and entrustment, of goods, counsel contended that negligence could not be imputed to the Railway and it could not be said that they had lost the goods. Three circumstances are being relied upon by the Railways to raise suspicion in the mind of the court. In the first place it is said that the two cases were cleared from the customs and the port authorities on 29th July, 1967 while the third case was found after sometime, that is, on 3rd August, 1967. It is suggested that this is indicative of loss of goods by the Port authorities. Secondly, it is said that the goods were found missing from the case which was opened by the customs. Thirdly, it is said that L. N. Aggarwal had gone to Germany and he might have brought these goods with him. From these three circumstances it is said that it is highly probable that the missing goods were never booked and delivered to the Railway.

(36) I have examined the evidence. In my opinion issue No. 5 must be found in favor of the insurance company. The burden of proof that the law places on the Railways as carriers that loss or damage to the goods was not due to their negligence is supported by their superior knowledge of what happened, by the probability that they were responsible and by the strong judicial policy of encouraging the utmost care under threat of strict liability. In this as in some other sitluations, indeed, the practical effect is to impose strict liability in all but name. Common carriers for the same reasons, are virtual insurers. (See Fleming Law of torts 5th (1977) ed, p. 298). In Union of India v. S. S. H. Syndicate, Poona : [1976]3SCR504 the Supreme Court has said :

'We are of the opinion that Section 73 of the new Act (Amended Railways Act) while converting the liability of the Railway Administration from that of a carrier to that of an insurer, has imposed heavier responsibility on the Railway Administration.'

(37) The crucial factor in this case is that it stands established that the three cases when weighed at Wadi Bunder were found to be 426 Kg. Tills is clearly the same weight a's shown in the packing list, that is, 428 Kg. The case was found broken. Planks were off. The contents were lying loose and scattered. On checking with the packing list contents were found missing.. It is a factor of prime importance that the contents of the two cases were found to be in accordance with the packing list. thereforee, the packing list was correct. We have the manufacturer's word who had said that he himself had checked the contents and all the parts mentioned in the invoice were actually shipped. When the goods were booked they were in good packing condition. This is the evidence of the Railways' employees. Changappa's evidence shows that after the goods were cleared from the customs they were booked at Wadi Bunder for Varanasi. The criticism leveled against his evidence is not entirely justified. It is true that he himself did not see the cases. But in his reexamination he said that he gave evidence on the basis of the record which he had brought with him before the Commissioner. From the record he could say that the three cases were entrusted' to the Railways in their original packing condition. He has given evidence regarding these three cases right from their arrival at the Port to the time they were booked at Wadi Bunder. The weight to be attached to his evidence is not lessened by the fact that he himself was not present at the time the goods were packed or examined by the customs,

(38) There is not a word of decadence to show that Aggarwal had brought any goods from Germany. Nor is it shown that clearance of goods by customs authorities on two different dates has made anv difference. The goods were booked according to the packing list by the manufacturers. They were checked by the customs and were found in conformity with the packing list. After clearance they were booked at Wadi Bunder. At the time of booking the goods were packed. When the goods arrived at the destination the contents of two cases were exactly according to the list. But in the third case the goods did not tally with the packing list of the manufacturers. That all the three cases were opened, that two were found in sound condition, and that their contents tallied with the manufacturer's list, are factors which must be held decisive in this case. The Railways have given no evidence that they took care of the goods, that they were not negligent, that they had acted not merely as bailees for reward but also as insurers of goods.

(39) For these reasons T would hold that there was short delivery of the goods at Vanarasi.

(40) Two questions remain : defective packing and the value of

(41) As regards defective packing the plea of the Railways is that the packing was defective inasmuch as 'P-17 (was) not complied with'. P-17 is a clause of Goods Tariff which requires the goods to be packed according to the instructions contained therein. On the forwarding note it is written 'P-17 not complied with'. Basing himself on this, counsel for the Railways, argued that if the packing is defective the Railways are not liable. There are two answers to this plea. One is that though the note says that P-17 has not been complied with, the Railways give no particulars of defective packing. We do not know what was the actual defect. The Railway's witness B. D. Verma, Shed Clerk (Weigher) Railway, Wadi Bunder Bombay in his evidence on commission said:

'I examined the packages which were tendered for booking and when I found that the packing was defective, I told the party to put the remarks 'P-17 not complied with' and 'one case with two iron bands.' '.

In cross-examination the witness had to admit that he did not know what particular defect was. He said this :

'I cannot say as to what particular defect was found in the package for which the remark was given. The remarks shown as A on the Ex. C.W. I relate to all the three packages. he other remark shown as B on the Ex. C.W. I relate to only one package and also does not comply with rule P. 17. According to rule P. 17 two iron strip are required to be put on a package weighing between 200 to 400 Kg. I did not weigh the three packages separately, I cannot say whether the weight of each package was less than 200 Kg. I cannot even contradict that the weight of each package was less than 200 Kgs.'

(42) There is thereforee no evidence to show in what manner the packing was defective. On the other hand we have the evidence of the German manufacturer who in his letter said that three cases were packed 'with oil paper and sheet iron' before they were put on the vessel in Germany. (See Cw 5 and Cw 6).

(43) The second answer is that s. 77C of the Railways Act on which reliance is placed does not absolve the Railway Administration of its responsibility for short delivery. A catena of decisions hold that s. 77C does not apply to loss or failure to deliver goods. Short delivery is not covered by the terms of the section. S. 77C says that the Railway Administration shall not be responsible for any damage, deterioration. leakage or wastage if that is the result of defective or improper packing. (See Shiv Saran Dass v. Union of India, : AIR1970Delhi261 , K. R. Sarda and Co. v. Union of India, : AIR1968MP199 , T. M. Veerappa v. Union of India Air 1972 Mys 164, Union of India v. Khandelwal Bros. : AIR1975Mad389 and Union of India v. Chabildas Mamkdas : AIR1978AP262 .

(44) Then there remains in the end the question of the value of the goods. The value of the goods is proved on the record. The surveyor made a report of the loss. His survey report Public Witness 2/1 assesses the value of the lost goods. The surveyor himself appeared in the witness box. He said that he had arrived at the value on the basis of the invoice dated 12th April 1967 Ccw 5) and the invoice dated 10th April 1968 (CW 6) which gives an item wise price of the goods. This survey report was accepted by the insurance company. The insurance company paid a sum of Rs. 54.060 to the Udyog. This is evidenced by a receipt of the Udyog (Public Witness 3/1). The insurance company has claimed in the suit even less than this amount. The claim is for Rs. 41,325 on account of the value of the goods and Rs. 12,397.50 on account of freight, customs duty, insurance and other incidental charges which had to be paid. The total amount of Rs. 53,722.50 represents the price of the lost goods. Damages are merely a substitute for the lost goods and the damages must thereforee be complete equivalent of the whole loss. The insurance company is entitled either to the property or to its pecuniary equivalent. The law assumes that the full value of the goods must always represent the plaintiff's actual loss. The object is to place the insured as far as possible in as good a condition as if the contract of carriage had been performed' by the Railways. thereforee, the price at which the goods were purchased from the German manufacturers plus freight etc. is the correct basis for compensation. (See Union of India v. Saqauli Sugar Works (P) Ltd.. : [1976]3SCR614 . In Bihar Agents Ltd. v. Union of India, : AIR1960Pat111 , Union of India v. Bikaner Textiles. the plaintiff was held entitled to the cost price of the goods which was awarded on the basis of the bijak produced by the plaintiff. In Nathu Lal v Dominion of India, : AIR1963All137 the court adopted the cost of goods to the consignor plus freight as the measure of damages. Issue No. 8

(45) It is not disputed that the goods were booked at railway's risk. In fact title railway receipt CW-2 clearly shows that the goods were accepted at railway It the goods are booked at railway, risk the onus is on the Railway. As was said in the case of Union of India v. Saqauli Sugar Works (P) Ltd., (supra)

'The liability of the railway was that of a bailee. The consignments ere booked at railway risk. The onus of proving that the railway employees took the necessary amount of care and that they were not guilty of negligence rested on the railway authorities.'

(46) As I have said earlier the Supreme Court in a later pronouncement has equated the liability of the Railways with that of an insurer. (See Union of India v. S. S. H. Syndicate, Poona, : [1976]3SCR504 ). In this connection it may again be emphasised, even at the risk of repitition, that the weight of the three packages was 'found to be 426 Kgs. B. D. Verma says this. The railway receipt shows it. The packing list and the invoice of the manufacturer show the weight of 428 Kg. The disparity in the two figures is negligible. Now it was open to the Railways at the time of giving open delivery to weigh the good's and show to the customer that the goods had in fact not been lost because they weighed the same at the time of delivery as at the time of booking.

(47) Counsel for the Railways argued that it is none of the responsibility f the Railways to weigh the goods at the destination. He referred me to rule 118 of the Goods Tariff which says that in exceptional cases the Railway may weigh the goods if the facility of weighing is available. This one was an exceptional case. Why did the Railway not weigh The good's were booked at railway risk. Issue No. 9

(48) For these reasons I decree the suit. The plaintiff is granted a decree for Rs. 53,722.50 with costs of the suit and future interest at the rate of 6 per cent annum from the date of the suit till realisation.

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