1. This second appeal by original defendant No. 1, the New Great Insurance Company of India Ltd., raises an interesting question of law in the field of marine insurance.
2. A few facts relevant to the point canvassed in this appeal may be stated. Respondent No. 1, original plaintiff, M/s. Vithaldas Dhanjibhai, a partnership firm, is carrying on business at Jamnagar. M/s. Vasantrai Shantilal consigned 3,000 bags of centrifugal raw sugar from Calcutta to Bedi Bandar (Jamnagar) by S. S. 'K. R. Ashok' under invoice dated 31st January, 1966. Of the 3,000 bags 1,500 bags were insured with the appellant-defendant No. 1 and 500 bags were insured with respondent No. 2-defendant No. 2. Remaining 1,000 bags were also insured with appellant-defendant No. 1. At the time of delivery the cargo appears to have been damaged in part. Of the whole consignment 11bags were entirely missing. According to the plaintiff, there was damage to the tune of Rs. 2,872.31 by way of short delivery. This was worked out by surveyors, G. P. Dave and Sons, at the time of taking delivery. Plaintiff called upon appellant-defendant No. 1, the insurer, to pay the amount of damage, and after some correspondence the plaintiff served a notice dated 17th May, 1967, to both the insurance companies to pay up the amount of damage and ultimately filed a suit being Civil Suit No. 42 of 1968 in the court of the Joint Civil Judge (Junior Division) at Jamnagar to recover the same.
3. Both the defendants contested the suit as per their common written statement, ex. 9, raising various contentions and reference would only be made to those which were pressed into service at the hearing of this appeal. The trial court held that the plaintiff had committed breach of the terms and conditions of the policy subject to which insurance was effected, in that the plaintiff failed to preserve the right of the insurer intact against the carrier and thereby it has disentitles itself to the reliefs at the hands of the court and accordingly, dismissed the plaintiff's suit with costs.
4. Plaintiff preferred Civil Appeal No. 144 of 1969 in the court of the District Judge at Jamnagar. The learned district judge reversed the decree of the trial court and decreed the plaintiff's suit in full. Original defendant No. 1 having been aggrieved by this judgment and decree has preferred this second appeal.
5. Mr. B. R. Shah, Learned advocate who appeared for the appellant, urged that under clause 9 of the policy of insurance, it is the duty of the assured and their agents in all cases, to take such measures as may be reasonable for the purpose of averting or minimising a loss and to ensure that all rights against carriers, bailees or other third parties are properly preserved and exercised. Said Mr. Shah, that as the plaintiff failed to preserve the said rights of the insurer against the bailee, the plaintiff as assured is disentitles to claim any damage from the insurer. To be specific, Mr. Shah urged that the insurer desired that the plaintiff should lend its name and file the suit for recovering damage from the insurer. To be specific, Mr. Shah urged that the insurer desired that the plaintiff should lend its name and file the suit for recovering damage form the carriers even though the insurer was willing to defray the costs of litigation and as action has become time-barred, clause 9 of the policy of insurance has come into pay and the plaintiff-assured is disentitles to recover any damages from the insurer.
6. Clause 9 of the policy of insurance clearly provides that it is the duty of the assured and their agents in all cases to take such measures as may be reasonable for the purpose of averting or minimising a loss and to ensure that all rights against carriers, bailees or other third parties are properly preserved and exercised. Short question is : whether the insurer can insist upon the assured filing suit against the insist upon prior pay-payment and would then be bound to lend its name for filing suit against the carrier
7. Section 79 of the Marine Insurance Act, 1963, by which the present litigation would be governed, provides right of subrogation. It reads as under :
'79. (1) Where the insurer pays for a total loss, either of the whole, or in the case of goods of any apportionable part of the subject-matter insured, he thereupon becomes entitled to take over the interest of the assured in whatever may remain of subject-matter so paid for, and he is thereby subrogated to all the rights and remedies of the assured in and in respect of that subject-matter as from the time of the casualty causing the loss.
(2) Subject to the foregoing provisions, where the insurer pays for a partial loss, he acquires no title to the subject-matter insured, or such part of it as may remain, but he is thereupon subrogated to all rights and remedies of the assured in and in respect of the subject-matter insured as from the time of the casualty causing the loss, in so far as the assured has been indemnified, according to this Act, by such payment for the loss.'
8. It must at once be conceded that the present action would be governed by sub-s. (2) because this is not the case of total loss but partial loss. Section 52 provides that a marine policy may be transferred by assignment unless it contains terms expressly prohibiting assignment. It may be assigned either before or after loss. Sub-section (2) of s. 52 provides that where a marine policy has been assigned so as to pass the beneficial interest in such policy, the assignee of the policy is entitled to sue thereon in his own name; and the defendant is entitled to make any defence arising out of the contract which he would have been entitled to make if the suit had been brought in the name of the person by or on behalf of whom the policy was effected. Sub-section (3) is not material for our discussion. It may be mentioned in passing that S. 130-A and 135-A were initially introduced in the Transfer of Property Act in 1944 which were in perimeter with S. 52 and 79 of the Marine Insurance Act and on the introduction of the Marine Insurance Act were repealed.
9. Section 52 makes it abundantly clear the marine insurance policy can always be assigned. There is no controversy that such an assignee can institute an action in its own name. In this case, the insurer never asked for any assignment by paying up loss and the correspondence shows that, on payment, the assured was either willing to assign actionable claim in favour of the insurer or if loss was paid and the insurer was subrogated, the insured was either willing to file action on the costs, charges and expenses being provided by the insurer or to lend his name for such an action. Even if the point of law seriously canvassed kept apart on facts and especially referring to correspondence, it becomes distinctly clear that the insurer was neither prepared to ask assignment claiming that it is not bound to take assignment nor was it prepared to pay the assured the loss which is not in dispute e and then call upon the assured to institute suit. Of course, the insurer, without making payment, called upon the assured to institute action by filing a suit and was of course willing to defray costs and expenses. Question that would securely arise is : whether the assured is bound to institute suit without payment of loss. And if in these circumstances, the assured did not commence action as desired by the insurer, could the assured be said to have contravened or violated clause 9 of the bailee-clause of the insured cargo clause which requires the assured to take such measures as maybe reasonable for the purpose of averting or minimising a loss and to ensure that all rights against carriers, bailees or other third parties are properly preserved and exercised. It must be conceded that under the relevant clause the assured is bound to art or minims a loss which includes right to be kept intact under which it can be recovered from the carrier and that the assured is also bound to ensure that all rights against carriers, bailees or other third parties are properly preserved and exercised.
10. First limb of the argument is that where there is partial loss, on payment the insurer is subrogated to all rights and remedies of the assured in and in respect of the subject-matter insured as from the time of the casually causing the loss, in so the assured has been indemnified, according to this Act, by such payment for the loss. The insurer becomes subrogated on payment of loss where loss is partial.
11. Mr. Shah contended that the contract of carriage was between consignor and the carrier and if the consignment is assigned to the consignee, the contract would be between the consignee and the carrier. If there is damage to the cargo, the carrier would be liable to make good the loss. The right to claim loss would arise from the contract of carriage. It was then said that it is well recognized that a stranger to the contract cannot sue upon the contract save and except when the case falls under certain well recognized exceptions and the present one is not a case covered by one of these exceptions. That of course is true. It was then said that s. 79, even if it is fully complied with, would not enable the insurer to file a suit against the carrier or person responsible for the loss. Some attempt was made to distinguish the position of subrogee (sic) under s. 79(1) and (2) and under s.92 the Transfer of Property Act. It is not necessary to ascertain the difference in position between two classes of subrogees, because that is hardly relevant. Emphasis was that subrogee under s. 79(1) and (2) cannot bring an action in its own name even after indemnifying the assured and, therefore, in order not to commit breach of sue and labour clause the assured is bound to commence an action if required by the insurer without insisting on first being indemnified. I am prepared to proceed on the assumption that a subrogee is not entitled to bring an action in its own name. But that discussion is all academic because in the present case there was no attempt by the insurer to get subrogated by paying loss. Now, if the insurer does not pay loss, it certainly does not get subrogated and, therefore, the question whether the subrogee can commence action in its own name would hardly be relevant, though without deciding that point, one can broadly say that a subrogee cannot commence action in its own name for recovering damage which it has paid under the policy of insurance for indemnifying the assured so as to be reimbursed from a tortfeasor, namely, the carrier. Insurer's right of subrogation arises whenever he pays loss for which he is liable under the policy and it arises upon payment of partial as well upon payment of total loss and although insurers are not entitled to the benefit of recovering until assured has received full indemnity. Right of subrogation as an equitable right or charge or assured chose-in-action arises upon payment of insurance money and although such payment by itself does not completely indemnify the assured, the legal right to compensation remains in the assured and, therefore, unless there has been express assignment of the legal right of action at law brought for the benefit of the insurer in the name of the assured (vide MacGillivray & Parkington on Insurance Law, 5th Edn., paras. 1883 and 1886). This will clearly bring out the difference between the rights acquired under s. 52 and under s. 79. Right of subrogation operates on payment by the insurer and there is no need for the assured to assign his right to recover from the insurer. In subrogation assured is domains litis, and he is entitled to control any proceedings brought in his name. In such a situation, insurer can only bring action in the name of the insured. There is a noteworthy difference in the position of the insurer when he takes assignment because in that event the insurer can bring action in its own name. Where loss claimed by the insured is paid by the insurer as being covered by the policy of insurance, there would not be conflict of interest between the insurer and the insured. But where there is under-insurance or risk is not fully covered and contract of marine insurance being one of indemnity, the insured may be indemnified to the extent of the risk covered under the policy and yet it does not compensate the whole loss and in that event insured would like to keep its right alive against the carrier and would like to remain as dominus litis. Of course, where the insured is fully insurer. Mr. Shah in this connection almost bodily adopted the reasoning in Oriental Fire and General Insurance Co. Ltd. v. American President Lines Ltd.  38 Comp Cas 294 (Bom), wherein it has been in terms held that the insurer could not maintain an action in his own name although there was subrogation of the claims of the insured unless there was an assignment of the claim by the insured in favour of the insurer. Decision in Union of India v. Vulcan Insurance Company, AIR 1972 Guj 255, does not assist us because it was case of total loss, where the suit filed by the insurance company was held to be maintainable after referring to certain documents placed on record. Similarly in Union of India v. Great American Insurance Company, AIR 1971 Cal 491, the contention that a suit by insurer is not maintainable was negatived observing that reading some documents placed on record, there can be no doubt that the right to sue for recovery of the damages in question was assigned by the insured to the insurer. It is a decision on facts which does not render assistance in this case. But in Union of India v. Gangabishan, AIR 1973 Cal 141, a suit by the plaintiff who was already compensated by the insurer for his total loss before institution of the suit was held incompetent observing that he had no locus standi. The court went on to observe that there is no difficulty in holding that the suit would be maintainable by the insurance company. It was held that, in view of the provisions contained in s. 79(2), the insurance company became entitled to the rights of the insured in respect of the subject-matter and even on subrogation, the above authority, the insurance company, would thereby be entitled to institute the suit. With respect, it is difficult to subscribe to this view, because this overlooks the distinction between assignment and subrogation. Even apart form that MacGillivray notes that where payment is made, insured refuses to lend his name for commencing action, the insurer may institute an action against the wrongdoer, in his own name, join insurer as second defendant and ask the court to order him to lend his name in the action as plaintiff or perhaps ask for an order that first defendant pay damages to the second defendant and for a declaration that second defendant holds such damages in trust for the insurer. Insurer who enters into a contract of indemnity, on payment is entitled to advantage of every right of action of the assured, whether in contract or in tort; this entitlement does not depend on the contract itself but on the plainest equity. In order to sue the wrongdoer, the insurer or the indemnifier must use the name of the insured or party indemnified. But the important point to notice is this : the insurer had no right at law to make use of the name of the assured. If the assured did not consent to it, the insurer had to go to a court of equity to compel him to allow his name to be used and the court of equity could impose such terms as it thought fit [vide Morries v. Ford Motor Co.  QB 792 at 800 (CA)]. However, this point need not be pursued further because the insurer was not subrogated in this case as admittedly it had not paid loss before calling upon the insured to commence action. This position of law can be said to be concluded by a decision in Union of India v. Sri Sarda Mills Ltd.  43 Comp Cas 431 (SC), wherein it has been in terms held that subrogation does not confer any independent right on under-writers to maintain in their own name and without reference to the persons assured an action for damage to the thing insured, and subrogation takes place on indemnifying the insured in respect of the loss suffered by him.
12. The question that must squarely be canvassed is whether the provision contained in clause 9 makes it obligatory upon the insured to lend his name to commence action against the carrier notwithstanding the fact that the insurer has not indemnified the insured even though the insurer is willing to defray costs and expenses of litigation. If in the circumstances herein set out, the insured refuses to lend his name for the action, could the insurer disown its liability on the assertion that insured has committed breach of clause 9 Clause 9, which has been quoted hereinabove, is known as 'sue and labour' clause. Generally, a marine insurance policy contains 'sue and labour' clause. In fact Lloyd's standard form of policy always contains such a clause. Undoubtedly 'sue and labour' clause is an independent contract. Under this clause on the insurer agreeing to defray costs of litigation, the assured is required to assist the insurer in enforcing the claim which he may have against third persons in respect of the loss and the insured should do no act by which the insurer may be prejudiced. This is, however, subject to the important exception that if the right is claimed by subrogation it can only come into existence on payment when assured lends his for the purpose of an action against the carrier. It appears, however, well settled that his duty to permit the insurer to use the name of the insured arises on the insured being indemnified and even after payment if the insured refuses to lend his name, court may compel him to do so thereafter only receiving indemnity in respect of the costs to be incurred.
13. Under the 'sue and labour' clause the insurer must not act by which the insured may be prejudiced. It is open to him to proceed against tortfeasors and he need not have consent of the insurer. However, if action is taken by him and in the meantime the insured is indemnified by the insurer, in a given situation he may have to account to his insurer for the amount originally paid under the policy.
14. The contention, however, before me is that payment is not a condition precedent and that clause 9 makes it obligatory upon the insured to take action as desired by the insurer and the only indemnity he can insist upon is defraying the costs of litigation. I am afraid the insurer under a policy of insurance can on payment subrogate itself or, if the terms of the policy permit, insist upon assignment but that too on payment. It is difficult to accept the broad proposition that clause 9 being an independent term of contract, or being a contract by itself, must be so construed as to mean that the insured with an offer to defray expenses of litigation, and on its failure to do so, there would be such a breach of clause 9 as to disentitle the insured to be indemnified by the insurer. Clause 9 cannot stand out or apart from the terms of the contract of insurance. It is a contract of indemnity. Where loss is admitted, the insured under the terms of insurance is entitled to be indemnified by the insurer. That is the first and direct outcome of a contract of insurance. Any other view would lead to complication if the contract of insurance can only result in the insured being asked to commence litigation against the carrier which right he has, and he is no better off by the contract of insurance. It is, therefore, not possible to agree with such a broad preposition canvassed for by Mr. B. R. Shah that under clause 9 the insured on being desired or suggested by the insured must commence action against carrier without insisting upon payment, or that payment is not a condition precedent to the enforcement of the right under clause 9. In fact, such an approach may run counter to the contract of insurance itself. MacGillivray notes in paragraph 1885 (6th edition), at pp. 787-788, that 'It has never been decided whether (in the absence of a specific clause) there is any obligation on the part of the insured to take any active steps to prosecute his claim. Once the insurer knows of a claim and there is any danger of its being lost by lapse of time, loss evidence, bankruptcy of the wrongdoer or any other cause, the insurer have the remedy in their own hands of paying the loss and commencing proceedings in the name of the insured.' It would, therefore, clearly follow that on payment of the loss, the insurer would be in a position to compel the insured to lend its name. If it is alleged that there was collusion between the insured and the wrongdoer, such conduct would amount to a release and the insurer and the wrongdoer, such conduct would amount to a release and the insurer could no doubt refuse to pay; but if the situation arose wholly innocently, it must be doubtful whether the insurer could decline liability. It is true that, as a general proposition, the doctrine of subrogation imposes on the insured the general duty not to prejudice the position of the insurer in any way; if this is right, failure to preserve a time bar could be treated analogously to the release or settlement of a claim, so that the insurer would not be obliged to pay under the policy. This approach, however, can be read in the well recognized dictum that subrogation can only take place on payment and obligation to lend name and prosecute claim would arise on subrogation. It is, therefore, not possible to accept the submission that, reading clause 9, payment of loss is not a condition precedent and that even if the insured is not indemnified, yet, at the instance of the insurer, the insured must commence action and if on his default, action becomes time barred, the insurer would be discharged from the liability to indemnify the insured.
15. I may now refer to some of the decisions to which may attention was drawn in this case. In British and Foreign Marine Insurance Co. v. Gaunt  All ER 447;  2 AC 41 (HL), it was observed that under s. 78(4), it is the duty of the assured and his agents, in all cases to take such measures as may be reasonable for the purpose of averting or minimising a loss. But having quoted the section, 'duty' was examined in the context of duty of the agent of the assured throughout the transit of the cargo. That question hardly arises here. Darrell v. Tibbitts  5 QBD 560 (CA) was a case of fire insurance and, in the context of fire insurance policy, it was held that being a contract of indemnity, upon payment of the amount of loss, the insurer is entitled to be put into the place of the assured; and if at a subsequent time the assured receives compensation from other sources for the loss sustained by him, the insurer is entitled to recover from the assured any sum which he may have received in excess of the loss actually sustained by him. This would not lend support to the contention that payment is not a condition precedent. The matter can be looked at from this specific angle that, under the contract of marine insurance, the insurer may on payment either get subrogated or take an assignment which could again be on payment; but it is not possible to hold that the insurer can call upon the assured to preserve the right against the carrier by initiating action without payment and only on the indemnity of costs. Such an approach may almost make the contract of indemnity superfluous because the insured can always proceed against the carrier and recover the damage. He insures against loss and on the loss being either proved or admitted, insurer is under an obligation to pay under contract of indemnity and then may insist upon preservation of the rights. That conclusion appears to be inescapable.
16. Turning to the facts in this case, there is no dispute that loss is admitted. In the initial stage of correspondence there was some dispute between the insurer and the assured about the loss and cause of loss. Thereafter surveyors were appointed and the surveyors assessed the loss. Correspondence thereafter is made. By letter, Ex. 68 dated 2nd July, 1966, the plaintiff wrote to the first defendant that a period of two months has passed when the claim was preferred and yet the claim is not settled and requested the insurer to immediately settle the claim. First defendant replied by a letter, Ex. 50 dated 9th July, 1966, calling upon the insured to send certain documents mentioned therein. Plaintiff by letter, Ex. 49 dated 26th September, 1966, submitted his reply enclosing therewith list of documents which was not sent earlier and stated that the claim is over delayed and it must at once be settled. About two months thereafter by letter, Ex. 48 dated 4th November, 1966, first defendant called for some further documents from the insured. The insured promptly replied by letter, Ex. 47 dated 19th November 1966, informing the insured that the documents have already been sent and that delaying tactics is not businesslike and to settle the claim at once. Then comes letter, Ex. 61 dated 11th February, 1967, written by V. N. G. Narichania & Co. presumably on behalf of the insurer, in which it is stated that the insured can claim to indemnified for the loss from the underwriters, that in terms of the contract of insurance the insured is under an obligation to institute legal proceedings in its own name and sign all the documents that may be required in connection with the legal proceedings to be instituted and prosecuted thereafter. Some provision of law is set out in the letter. It is however, stated that settlement of the claim will follow in due course but in the meantime the insured must approach one Mr. R. P. Shah, advocate, appointed by the underwriters and sign the plaint and vakalatnama and assist the advocate to institute legal proceedings in the name of the insured against the carrier. This was followed by another letter dated 13/15th February, 1967, by M/s. V. N. G. Narichania & Co. informing the insured that telegram had been received by the advocate appointed by the underwriters in which they were received by the advocate appointed by the underwriters in which they were informed that the plaintiff declined to sign the plaint unless loss is paid. There was another letter of the same date, 13th February, 1967, Ex 39, addressed to the insurer, in which it is admitted that insured was willing to sign the plaint and proceed with the suit provided he is indemnified. It is also stated that the insurer must by the claim and obtain a letter of authority to proceed with the suit. Then comes letter, Ex. 59 dated 24th February, 1967, by M/s V. N. G. Narichania & Co. to the plaintiff, in which the history of the correspondence is set out and it is asserted that, since the plaintiff failed to sign the plaint and initiate action in time, under writers were advised to directly deal with the plaintiff. Thereafter, the plaintiff filed the present suit.
17. Two things emerge from the correspondence and evidence in the case, that the plaintiff was always willing to institute a suit provided his loss is paid and his claim is settled. It cannot be said that this was an unreasonable conduct or the conduct was violative of clause 9. At no time, the insurer was willing to pay and get subrogated and then call upon the plaintiff to commence action. Till the plaintiff filed a suit, the claim was not paid and the suit was resisted. This shows the conduct of the insurance company that it was never willing to pay and get subrogated as required by law nor did it ever offer to take an assignment which would require payment of loss. Instead of taking either of the two legal courses open under the law, the insurer went on insisting upon the insured initiating action without fulfilling its own obligation. In such a situation, the conduct of the plaintiff in not signing the plaint till the loss is paid, would not amount to breach of terms of the clause 9. Therefore the plaintiff's suit has been rightly decreed and no case is made out for interfering with the decree made by the first appellate court in this second appeal.
18. Accordingly, the appeal fails and is dismissed with costs.