UNION OF INDIA v. SRI SARADA MILLS LTD. September 28, 1972. [A. N. RAY, I. D. DUA AND K. K. MATHEW, JJ.] Transfer of Property Act ( 4 of 1882), s~. 6 (e) ~nd 135A and Marine Insurance Act ( 11 of 1963), ss. 52 and !9-Co11s1g11or of. goods 10 Railway suing Rai/1ray Administration for loss ?f .coods-~uit filecl after recol'ering fro1n insurance. co1npa~y and ass_ig!ung. to insi!ran.ce co111pany, assignor's rights agairlsr Railway
Adn11n1strauo11-Ma1ntauz- ability. The respondent consigned certain goods to the R:Ulway for dispatch. The goods were insured. They were damaged dunng tran.s1,t, and t~e Insurance company paid the total loss.
The respondent assigned all its rights, including the right to sue, to the Insurance Compc.ny. Thereafter the respondent sued the appellant for damages. The appellant contended irtter a/ia that the
respondent, having received the total los~ from the Insurance Company, was not entitled to institute the suit. The High Court in appeal, held the suit was maintainable because the assignment was of a mere right to sue which is not valid under s. 6( e) of the Transfer of Property Act, 1882, and that even i'f the assignment was valid, the right to action of the respondent had not ceased and dec- reed the suit.
Jn appeal to this Court, HELD: (per A. N. Ray and I. D. Dua, JJ.) The appeal should be dismissed. [471B] Section 6(e) of the Transfer of Property is not applicable to the facts of the case.
Under s. 52 of the Marine In~urance Act, 1963, an insurance company can sue in its own name where the policy has been transferred by assignment, but that is not the case here. Jn the present case, the insurance conpany is entitled to subrogation in
accordance with the provisions of s. 79 of the Marine Insurance Act. The insurance company and the respondent proceeded on the basis that the insurance company was only subrogated to the rights of the assured, and the Jetter of subrogation conIDins intrinsic evidence that ~he respondent wou1d give the insurance company facilities for enforcing rights.
But the Jetter of subrogation did not divest the respondent of its cause df action against the appellant for loss and damages. The insurance companv has chosen to allow the respondent to sue and the appellant did not take· the plea that there was an assignment.
If such a plea had been taken, the insurnnce company could have been impleaded and rights of all the parties could have been decided. [468H; 469A-B; 470C-D, E-H; 471A] The respondent will however give a valid discharge to the appellant and be answerab1e and accountable to the insurance company for the money recovered, and the decree would be a bar to the institution of any suit by the insurance cornpaoy. [470D-E]
c c UNION V. SARADA MILLS King v. Victc ·a Insurance Co1npany Liniited [1896] A.C. 250 Co111- pania Colombiano De Segur,s v. Pacific Steam Navigation Co. [1965] I Q.B. 101, Torkington "Magee [1902] 2 K.B. 427 and Ertet Bieber & Co. v. Rio Tinto Co. [ 918] A.C. 260, referred to.
Per K. K. Mal ""V, J. (dissenting). Th< real reason why a mere right to sue cannot be assigned is that such an assignment would offend the rule of cham.perty and maintenance. But where an insurance company has been subngated to all the rights and the remedies of the assured by virtue of s. 135-A of the Transfer of Property Act, 1882, (now incor- porated in the Marine Insurance Act, 1963 J, the reason
for the rnle against assignment of a mere right to sue does not obtain, because, the insurance company is clothed with all the rights and remedies of the assured and the only thing lacking is the capacity to sue in its O\\'O name. Subrogation is concerned solely with t'>e mutual rights and lib;lities of the parties to the contract of insurance; it confers no rights and imposes no liabilities upon third parties \!.·ho are strangers to that contract and_. the insurer, who has pt.id a loss gets no direct rights or remedies against anyone other than the assured, nor can sue such parties in his O\.Vn name. [472F-H; 475H; 476A; 4800-H]
Kin11 v. Victoria 111s11re11ce Co. Ltd, [1896] A.C. 250, 255-6 and Simpson v. Thomson, [1877] 3 App. Cas. 279 H.L. applied. Indian Trade and General Insurance Co. Ltd. v. Union of India,
A.LR. 1957 Cr.lcutta 190 and Vasudevan Mudaliar v. Caledonian lnSll- rance Co. and a11otl1er, A.LR. 1965 Madras 159, approved. Yorkshire /11s11ra11ce Co. Ltd. v. Nisbet Shipping Co. Ltd., [1962] 2 Q.B. 330,Castellain v. Preston, I 1 Q.B.D. 380, 395, Burnard v. Rodo- canachi, Sons & Co. 7 App Cas. 333, 939, Glen Line v. Attorney General. 11930] 46 T.L.R. 451, Textiles and Yarn (P) Ltd. v. Indian National Steamship Co. Lid. A.LR. 1964 Calcutta 362 i:.nd Asiatic Governments Security Fire and General Assurance Co. Ltd. v. The Scindia S:eani
Narif!ation Co. Ltd., A.LR. 1965 Kerala 214, referred to. Alliance Insurance Con1pany Ltd. v. Union of India. I.T.R. [1950] I Calcutta 544, disapproved. Clause ( 4) of s. 135-3 had not made any departure anJ conferred a right of suit upon the subrogee against third persons.
An assignment of insurance after loss would sound in the realm of an assignment of a mere right to sue r.nd the legislature wanted, by Cl: (4), to put it beyond doubt that s. 6(e) is no bar to such i:.r. assignment.
Moreover, cl. (4) may net have any operation upon els. (2) and (3) of the section, because, subrogation is effected by els. (2) and (3), that is, by operation of law, while s. 6(e) is concerned with a transfer cli a mere right to Slie by act nf parties. f476B-D]
But, in the present case, it is not mere subrogation. The assignment conveyed to the insurance company the entire rights in respect of the ;,,ubjcctMmatter of the insurance, including the right of the assured to sue in its own name, and therefore, after such c.assignment, the assured had no cause of action to institutt: the suit against the appellant for rccoverv 01 damages. f481F-GJ
Con1pania Co/0111hiana de S<•guros v. Pacific Stean1 Navigation Co. 11965j I Q.B. 101. 121 applied. .j 6 6 Anson's Law of Co111ract, T\\·~nty-third cdi1ion edited hy A.G. Guest referred to
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1045 of J 967. Appeal by certificate from the judgment and decree dated January 4, 1966 of the Madras High Court in Appeal No. 129 of 1961.
G. L. San!ihi and S. P. Nayar, for the appellant. R. K. Gar.g, S. C. Agarwa/a, V. J. Francis and Neuar, for the respondent. Narayana The Judgment of A. N. RAY and I. D. DUA, JJ. was delivered by RAY, J. K. K. MATHEW, J. gave a dissenting Opinion.
RAY, J.-We have had the advantage of reading the judg- ment written by our -learned brother Ma1hew. The question which falls for determination in this appeal is whether the respondent mill on recovering Rs. 32,254-6-9 from the Indian Globe Insurance Co. Ltd. and assigning ail rights against the Railway Administration in favour of the
insurance company as a subrogee was compe1ent to institute and maintain the suit against the Railway Administration. We agree with the reasoning and conclusion of our learned brother Ma1hew that subrogation does not confer any indepen- dent right on underwriters to maintain in their own name and withou1 reference to the persons assured an action for damage to the thing insured. The right of the assured is not one of those righ1s which are incident to the property insured.
Counsel for the appellant contended that by reason of the assignment to the insurance company of all rights against the Railway Administration the respondent mill did not have any cause of action against 1he Railway Administration.
In aid of that contention the decisions in King v. Victoria Insurance Company Limited [1896] A.C. 250 and Compania Colombiana De Seguros v. Pacific Steam Navigation Co., [1965) 1 Q.B. 101 were relied on.
In the Vicioria Insurance Company case (supra) the Bank of Australiasia effected an insurance with the insurance company of certain goods to be shipped to London. Be.fore the cargo left Australia it was damaged or destroyed through the negligence of the defendant King, an employee of the Queens- land Government.
The bank claimed a sum from the company c -H UNION V. SARADA MILLS (Ray, J.) which was duly paid. The company took an assignment by deed of all the rights of the b:ank against King subject to a stipu- lation that the bank's name should not be used in legal proceed- ings. The questions raised on appeal in tha1 case were. ( 1) . the plaintiffs have no right of action at all; (2) they have no nght of action in their own name. The Supreme Court oi. Queensland held that mere payment by the insµrance company did not sub- rogate them to the rights of the bank to the extent th.at they couid sue in their own naines.
The Supreme Court of Qµeens- land held that the assignment was covered by the Queensland Act which corresponded to the English Judicature Act of 1873. The Queensland Supreme Court construed the term 'legal chose in action' to include all rights the assignment of which a Court of Law or Equity would before the Act have considered lawful. On that ratio, the right covered by the assignment in Victon'a Insurance Company case (supra) was held to be a right of
that kind. The Judicial Committee upheld the decision and said "They rested their judgmeµt on the broader and simpler ground that a payment honestly made by the insurers in consequence of a policy granted by them and in satisfaction of a claim by the insured is a claim made under th; policy which entitles the insurers to the remedies available to the insured". The Judicial Committee on 1his view said that "the highly artificial defence of the Queens- land Government fails."
H should be noted here that the phrase 'legal chose in action' was said in the Victoria Insurance Co. case (supra) to mean 'lawfully assignab~e· chose in action. A legal chose in action is
something which is not possession. but which must be sued for in order. to recover possession of it. A legal chose in action does not include a right of action, such as, for instance, a right to rrcover damages for breach of contract, or for a to~t. for it that were so, such a right would be assignable. They would material- ly affect the Jaw of champerty and maintenance.
In the Pacific Steam Navigation Co. case (supra) the Pacific Steam Navigation Company .by a bill of lading acknowledged the shipment of 183 drums of electric cable at Liverpool for carriage to and delivery at a port in Colombia to the Colombiana Tele- phone Co. The electric cable was insured on behalf of the Tele- phone Company.
The insura~ce company paid the · telephone company in respect of the particular average loss. The telephone company on receipt. of the pay.neat handed to the insurance company 1wo documents.
By the first document, the telephone company ceded and endorsed to the insurance company "all righ1s which we have or which we may acquire in the future to claim reimbursement thereof from the third parties who may b~ responsible for loss or damage."
By the second document the telephone company waived in favour of the insurance company . I\ -168 "any rights he may have or has against others possibly respon· sible for the damages or losses indemnified by this payment, and we agree not to carry out any act that might in any way hinder the carrying out of such rights by the insurance company". The insurance company alleged that the documents went further than a form of letter of subrogation and constituted a valid assign- ment by the elephone company to the. insurance company oi. the .telephone company's claim against the defendants.
The Court found that the language of the documents was that of assignment. The question was whether the Court would permit the enforce- ment of the claim in the name of the assignee or whether the assignment would be of a bare cause of action to defeat assign- ment and its enforcement.
The decision in May v. Lane 64 L.J.Q.B. 236 was refer· red to in the Pacific Steam Navigation Co. case (suprn) for the \lroposition that a legal chose in action is something which is not Ill possession, but which must be sued fo,· in order to recover possession of it. A legal chose in action does not include a right of action, such as, for instance, a right to recover damages for breach of a contract, or a legal r~ht to recover damages arising· out of an assault.
Again, in Torkington v. Magee [1902] 2 K. B. 427 it was said that the words "other legal chose in action" mean right which the common law looks on as not assignable by reason of its being a chose in action, but which a court of equity deals with as being assignable.
In the Pacific Steam Navigation Co. case (supra) the insurance company was found entitled to sue upon the bill of lading, A bill of lading confers title to sue because it is a form of property. The reason for allowing the insurance company to sue in that case was that equity
before the Judicature Act allowed the enforcement of subrogation because equity never regarded subrogation as the enforcement of a bare cause of action, but as 1he enforceri\ent of a cause of action legitimately supported by the underwriter's interest in recouping himself in respect of the amount of the loss which he had paid under the policy as a result of the acts, neglects or defaults. of the .actual contract breaker or tortfeasor. The assignment in that case was held to amount to assignment of the benefit of the contract with the ship-owners.
It is indisputable that an insurance company can sue in its own name where the marine policy has been transferred by assign- ment under section 52 of the Marine Insurance Act 1963. That is not the present case.
c c UNION v. SARADA MILLS (Ray, /,) It is equally indisputable that an insurance company is en- titled to subrogation in accordance with the provisions of section 79 of the Marine Insurance Act, 1963.
Subrogation does not allow the subrogee or the underwriter to sue in its own name, In the present case, the insurance company has not enforced its. claim by virtue of subrogation.
Section 130 of the Transfer of Property Act however speaks. of transfer of actionable claim. Actionable claims under the Indian law include claims recognised by the Court either as to· unsecured debts or as to beneficial interests in moveable property not in possession. A debt is an obligation to pay a liquidated or certain sum of money.
A beneficial interest in moveilble pro-· perty will include a right to recQver insurance money or a. partner's right to sue for an account of a dissolved partnership or a decretal debt or a right to recover the insurance money or the right to claim the benefit of ·a contract not coupled with any liability.
Section 6 ( e) of the Transfer of Property Ac~ states that. i. mere right to sue cannot be transferred. A bare right of -action might be claims to damages for breach of contract or claims to damages for tort. An assignment of a mere right of litigation is bad.
An assignment of property is valid even although that property may be incapable of being recovered without litigation. The reason behind the rule is that a bare right of action for damages is not assignable because the law will not recognise any transaction which may savour of maintenance of champerty. It is only when there is some interest in the subject matter that a:. transaction can ble saved from the imputation of .Jll.aintenance. That interest must exist apart from the
assignment and to- . that exent must be independent of it. A chose in action for breach of contract was not assignable· at law but was assignable at equity. A chose in action in tort
was assignable neither in law nor in equity. A bare right of action is not assignable. When however the right of action is. one of the incidents attached to the property or contract assigned it will not be treated as a bare right of action.
In Ertel Bieber & Co. v. Rio Tino Co., [1918'] A .C. 260 Lord Summer treated a cause of action for damages for breach of contract as chose in action, a form of property. The reason for holding a cause of action for damages for breach of contract to r,e a form of property is that the assignee is seeking to enforce a right which is incidental to property or a right to p.
sum of money which theoretically is part of the property. The common law was; not inclined in fgyour of assignments of contractual righ\s an<!' liabilities. A person to whom rights
[1973] .2 S.C.R. -were assigned could not sue in his own name at common law. In equity both legal and equitable choses in action have been subject to assignment. Contractual rights being legal choses in
action could generally be assigned. It is on these reasonings .that the term 'thing in action' in the Law of Property Act has been interpreted in the Victoria Insurance Co. and the Pacific Steam Navigation Co. cases (supra) w include any right which the common law looked on. as not assignable by reason
of. its being chose in action but which a court of equity dealt with as .assignable. In the present case, the insurance company has not sued to enforce any assignment. The document which is d!!scribed as
'letter of subrogation also uses ilie words ol assigning rights against the Railway Administration. It is not necessary to express :any opinion whether the Jetter of subrogation amounted to an assignment in the present case, because the insurance company bas not soi;ght to enforce any assignment.
The respondent mill will give a valid discharge to the Rail- way Administration in respect of loss and damages. This decree will be a bar to the institution of any suit bv the insurance com- pany in respect of the subject matter of the suit.· The respondent mill is answerable and accountable to the insurance company for the_ moneys recovered in the suit to the extent the insurance company· paid the respondent mill.
c The High Court expressed the view that even if the ~ssignment is valid the right of action residing in the assignor has not ceased. . The respondent mill sued the Railway Administration for preach of contract of carriage and damages for negligence. The letter of subrogation did not divest the mill of its cause 1of
action against the Railway Administration for loss and damages. ·The defence of the Railway Administration was that the niill realised from the .insurance company the damages and "as such :the plaintiff (meaning thereby the respondent mill) has no right to claim any sum in this action". If the specific plea of assign- ment had been tabn in the written statement the· respondent mill would have impleaded the insurance company. The Court could have in those circumstances been in a position to afford full and •complete relief to the parties.
In the present case the insurance company and the mill pro- ·ceeded on the blasis that the insurance company was only subro- :g_ated to the rights of the assured. The letter of subrogation con- tains intrinsic evidence that the respondent
would give the insurance company facilities for enforcing rights. The insurance c UNION v. SARADA MILLS (Mathew, J.) company has chosen to allow the mill to sue. The cause of action of the mill against the Railway Administration '.iid not perish on giving the letter of subrogation.
For these reasons, we regret our inability to agree with our karned brother Mathew that the respondent mill has no cause· of action. We agree with the decision of the High Court that
the suit should be decreed. The appeal is therefore dismissed with costs. MATHEW, J. This is an appeal by certificate, against the· judgment of the Hi,gh Court of Madras allowing an appeal pre- ferred by the plainuff against the decree of the trial court dismis- sing the suit instituted by it for recovery of damages.
The plaintiff, Sri Sarada Mills Ltd., instituted the suit against the Union of India as representing the Central and Southern Rail- ways for damages to 100 bales of F. P. cotton consigned through. their agents from Nagpur to Podhanur under a railway receipt issued by the Central Railway. The goods had to pass thrOugh. several stations along the two railways, namely, the Central and the Southern, before it arrived at Podhanur.
When the goo·ds. arrived at Podhanur, it was found that 87 bales out of the 100 were burnt and charred and that 13 bales -were loose and ~hort in weight .. When the plaintiff applied for open delivery, the rail- way authorities at Podhanur got the damage surveyed, and issued a certificak of damage and
shortage. The plaintiff claimed damages ag.iinst the Railway Administration. But the Chief Com- mercial Superintendent, Southern Railway, informed the plaintiff" that the consignment was involved "in a fire accident at Sirpur Kagaznagar on 1he Central Railway, that the cause of the fire was unknowr. and that the Railways were not liable for the 'damage caused to the goods as there was no negligence or mis-conduct. The plaintiff, therefore, instituted the suit for damages alleging that the Railway Administration was negligent.
The defendants contended that the plaintiff was not entitled to institute the suit as. it had insured the goods with the Indian Globe Insurance Co. and had received the total less. from the Company, that the damage to the goods was caused by fire, which was beyond the control of the Railways and, therefore, the defen- dants were not liable for damages.
The trial court found that the· fire which caused the damage· · to the goods was n9t due to any cause beyond the control of the Railways that the damage was due to their negligence. It, how- ever. held that the suit was not maintainable .as the Indian Globe- lnsu.rance Co., with whom the goods were insured under a marine· (1973] 2 S.C.R.
insurance policy, had paid the plaintiff an amount of Rs. 32,254-6-9 for total loss of the goods and was subrogated to all the rights and remedies of the assured in respect of the subject matter and so the plaintiff was not competent to fostitute the suit and hence .dismissed the suit.
The plaintiff appealed to the High Court of Madras. The Court reversed the decree holding that the plaintiff was entitled to maintain the suit and that, damage to the goods was on account of the negligence of the Railways.
In this appeal, two submissions were made on behalf of the appellants : ( 1) that there was no evidence to show that the Railway Administration was negligent in dealing with the goods, and (2) that the suit was not maintainable.-
As regards the fir;t contention, the finding of the trial court as well as of the High Court is that the Railway Administration was negligent. The liability of a Railway is that of a bailee and it is not for the plaintiff, fo the first instance, to prove, when the goods consigned were destroyed or damaged, .as to how the loss or damage occurred. It has, no doubt, to satisfy the court that the Railway Administration was negligent but, the duty of showing how the consignment was !:lealt with during the transit lay on the Railway Administration as it was a matter within their conclusive knowledge.
The trial court found that the fire which caused damage to the goods was due to the negligence of the Railway Administration and the High Court was not persuaded to come to a contrary conclusion. The burden was on the Railway Adminis- tration to show how the goods consigned were dealt with during transit and, when that has not been done to the satisfaction of the Court, the Court was entitled to presume negligence on the part of the Railway Administration.
I see no grounds to interfere with the concurrent findings on this point. The second question which was argued at considerable length relates to the maintainability of the suit. It may be noted at this stage that the Gl0be Insurance Co. paid the total Joss to the plain- tiff on August 3, 1956; the assured assigned all its rights, including the right to sue to the Insurance company on July 31, 1956; and the present suit was filed on June 14, 1957. It was submitted on behalf of the appellant that the view of the High Court that the suit was maintainable overlooked the clear provisions of section 135-A of the Transfer of Property Act. as that section was a bar c
to the suit by the assured. Section 135-A was as follows (this section has since· been deleted from the T .P. Act and incorporated in the Marine Insurance Act, 1963) : "135-A(l) Where a policy of marine insurance has
been assigned so as to pass the beneficial interest therein, c UNION v. SARADA MILLS (Mathew, I.) 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 action had been – brought in the name of the person by or on behalf of wjlom the policy was effected.
" ( 2) Where the insurer pays for, a total loss, either of the whole, or, in the case of goods, of any apportion- able part, of the subject matter insured, he thereupon becomes entitled to take over the interest of the insured
person in whatever may remain of the subject-matter so paid for, and he is thereby subrogated to all the rights and remedies of the insured person in and in respect 'of that subject-matter as from the time of the casualty
causing the loss. " ( 3) 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 insured person as from the time indemnified by such payment for the loss. " ( 4) Nothing in clause ( 6) of section 6 shall affect the provisions of this section."
'473 This section was inserted in the Transfer of Property Act, 1882, by the Transfer of Property (Amendmer;t) Act, 1944. Before the amendment, the assignment of rights under both marine and fire insurance policies was governed by s. 135, What the amend- ment did was to take marine insurance policies out of s. 135 and provide for them in the new section 135-A. The Bill that become the Transfer of Property (Amendment) Act, 1944, stated the ~jects and reasons as follows :
''The rules and principles governing a marine insur- ance policy being materially different from those govern- ing a fire insurance policy,_ it is very unsatisfactory to accord the same treatment in the matter of assignment
oflmth categories of policies. To take but one instance a fire insurance policy is not assignablv after Joss, but the nature of a marine insurance contract is such as to require that marine insurance policies should be assign-
able even after Joss. In the United Kingdom, assi_gn- ability of marine insurance policies after Joss is placed beyond doubt by s. 50 of the Marine Insurance Act. But in the absence of a similar provision here, it is
doubtful if Courts in British India would hold that they are so assignable." It was the contention of the appellant that when the Globe Insur- ance Co. paid the assured the total loss, it became subrogated to all the rights and remedies of the assured in respect of the subject matter and that thereafter the Insurance Company alone could file a suit for recovery of damages against the Railway Administra- tion.
The application of the doctrine of subrogation to policies of marine insurance is based upon the fundamental principle that the contract of insurance contained in a marine policy is a con- tract of indemnity, and of indemnity only.
The expression "subrogation", in relation to a contract of marine insurance is no more than a convenient way of referrinJL to those terms which are to be implied in .the contract betWeen the assured and the insurer to give business efficacy to an agree- ment whereby the assured, in the case of loss against which the policy has been issued, shall be fully indemnified, and never more than fully indemnified.
The right of the insurer against the person' responsible for the toss, does not rest upon any relation of contract or of privity between them. It arises out of the nature of the contract of
marine insurance as a contract of indemnity, and is derived from the assured alone, and can be enforced in his right only. Sub-section (I) of s. 135-A correspond, to s. 50 ( 2 J of the «English) Marine Insurance Act, 1906 and sub-sections ( 2) and (3) of s. 135-A to sub-sections (1) and (2) respectively of s. 79 of that Act.
In Yorkshire Insurance Co. Ltd v. Misbet Shipping Co. Ltd. ( 1'), Diplock, J. as he then was had to deal with the question of subrogation. He said that the doctrine of subro- gation in insurance law requires one to imply in contracts of marine insurance only such terms as are necessary to ensure that. I)Ot- withsianding that the insurer has made a payment
under the policy, the assured shall not be entitled to retain, as against the illsurer, a greater sum than what is,ultimately shown to be his actual loss. ·As Cotton, L. J. said in Caste/lain v. Preston(') '' …… if there is a money or any other benefit received which ought to be taken into account in diminishing the loss or in ascer- taining what the real los.~ is against which the contract of indem- nity is given, the indemnifier ou~ht to b~ allowed to take advantage of it in order to circulate what the real loss is."
c So the only term to be implied to give bminess efficacy to the contract between the parties is that necessarv to secure that the assured shall not recover from the imurer an amount greater than the loss which h·~ has nctuallv sustained.
The insurer has contracted to pay to the assured the. amount of his actual loss and ————–·- (I) [196~] ~. Q.B. 380. (2) II Q.R.D . .'~O. 39.'. c UNION v. SARADA MILLS (Maihew, !.)
47.5. if, before the insurer has paid uneler the policy, th.e assured re- covers from some third party a sum in excess of the actual amount of the Joss, he can recover nothing from the insurer because he has sustained no loss, but it has never been suggested that the insurer can recover from the assured the amount of the e~cess. Lord Blackburn in his speech in Burnard v. BodocaMchi, Sons & Co. (1) said :
"The general rule of law (and it is obvious justice) is that where there is a contract of indemnity (it matters not whether it is a marine policy, or a policy against fire on land, or any other contract of indemnity) and
a loss happens, anything which reduces or diminishes that loss reduces or diminishes the amount which the indem- nifier is bound to pay; and if the indemnifier has already paid it, than, if anything which diminishes the loss comes into the hands of the person to whom he has paid it, it
becomes an 'equity that the person who has already paid the full indemnity is entitled to be recouped by having that amount back." That the insurer is entitled to recoupment only for the Joss for which he has paid and to the extent of his payment is clear from what Lord Atkin said in Gien Line v. Attorney-General('). "Subrogation will only give the insurer rights upto
20 s. in the £ on what he has paid''. In King v. Victoria Insurance Co. Ltd.("), Lord Hobhouse, made it quite clear that, under the doctrine of subrogation an insurer was entitled to recover from the assured only "to the extent of the payment" made to the assured by the insurer under the policy.
As between the insurer and the assured, the insurer is entitled to the advantage of every right of the assured whether such right consists in contract, fulfilled or unfulfilled, or in remedy for tort capable of being insisted on or already insisted.
But as stated by the Privy Council in King v. Victoria Insurance Co. Ltd.(8 ) "Subrogation by act of law would not give the insurer a right to sue in a Court of Law in his own nan1e."
Subrogation is concerned solely with the mutual rights and liabilities of the parties to the contract of insurance: it confers no rights and. imooses no liabilities uoon third parties who
are strangers to that contract and, the iJisurer who has paid a loss ——- (!) 7 App. Cas. 333, 339. (2) 11930] 46 T.L.R. 451. (3) (18961 A.C. 250, 255-6. 13-L498SupCl/73 SUP&BME COUllT llBPOllTS
[1973) 2 11.c.1.. gets no direct rights or remedies against anyone other than the assured nor can sue such parties in his own name [see SimPson v. Thomson(l.)J. It was argued on behalf of the appellant that clause ( 4) of section 135-A would indicate that the legislature intended to make a departure from the common law of Eng1and and to confer a right of suit upon the subrogee against third persons. I do not think that clause ( 4) has any such eltect. It only says that no- thing in s. 6 ( c) of the Transfer of Property Act will affect the provisions of that section.
An assignment of marine insurance after loss would sound in the realm of an assignment of a mere light to sue and the legislature wanted to put it beyond doubt that s. 6(c) is no bar to su~h an assignment. It is doubtful whether clause ( 4) has any operation upon clauses (2) and ( 3) of sec~ion 135-A. Though the payment by the insurer C'f the total or partial loss is an act of party, subrogation is effected by the operation of clauses (2) and (3) of the section viz., by operation of law. Section 6 ( c) i:; concerned with a transfer cf a mere right to sue by act of parties. If this is so, it would be incongruous to say that clause ( 4) will have any effect on the operation of clauses (2 l and ( 3) of the section.
In Indian Trade and General Insurance Co. Ltd. v. Union of India('). Mitter, J. had occasion to consider the question in detail amL after referring to the English law, he come to the conclusion that, although by sub-section (2) and (3) of s. 135-A, an insurer is subrogated to all the rights and remedies of the assured in respect of the subject matter, it has no independent right of action in its own name, but can only sue in the name of the insured. The learned judge referred to the decision in M. V. P. Marnkkya- yar & Sons v. Banians & Co.(') and said that the rule of English law which never permitted a subrogee to institute a suit in its own name has been followed in India and is a sound rule.
In Alliance Insurance Company Ltd; v. Union of India('), it wa:s held that an insurance company which has paid to the ·con- signee the total loss, was entitled to maintain a suit in its own name against the carrier for reimbursement of the amount paid to the insured ·for the loss.
The Court pointed out that although clause ( e) of s. 6 of the Transfer of Property Act provides that a mere right to sue cannot be transferred, subsection ( 4) of s. 135-A has removed the bar and made a deliberate departure from the English rule of procedure which lays down that an insurer who pays for a total Joss cannot sue independently in his own name. The <;:ourt did not, however, refer to the judgment of (1) [1877] 3 App. Cas. 279 H.L.
(3) T.L.R. 49 Madras 156. (2) A. l.'R. 1957 Calcutta 190. (4) T. L. R. [1950] 1 Calcptta, 544. c i , c UNION v. SAlW>A MILLS (Mathew, 1.) Mitter, J. In llldian Trade and General lnsura11ce Co. Ltd. v. Union of India("). For the rea5ons already given, I do not think I can agree with the reasoning of this case.
In Textiles and Yarn (P) Ltd. v. Indian National Steamship Co. Ltd.('), which was a suit filed by the insurer on payment of total loss for recovery of damages for loss of goods iu the course of transit from Madras· to Calcutta by a steamship, Mitra, J. held that the insurer cannot maintain an action in its own name unless there was an assignment of the claim by the ;issured in favour of the insurer, lrt the Asiatic Government Security Fire am/ General Assurance Co. Ltd. v. The Scindia Steam Naviga1io11 Co. Ltd.('), M. S. Mennon, C. J. in a well reasoned judgment sad that the insurer, on subrogation, is not entitled to sue in its own name. In Vas11deva M11daliar v. Ca/adonion /nsurancl' Co. and ,fo- Nher('), the Madras High Court said:
"But subrogation does not ivso jure enable him to sue third parties in his own name. It will 011ly entitle the insurer to sue in the name of the assured, it being an obligation of the assured to lend his name and assist-
ance to such an action." I think the High Court was right in its conclusion on this point. The second contention as regards the maintainability of the suit was that there was an assignment by the assured of all the rights, including the right to sue the Railway Administration, by virtue of which the Globe Insurance Co. could Jle a suit and that precluded the assured from suing.
The assignment, as already ~lated, was before the institution of the suit, and is in the following terms : "In consideration of your paying to us the sum of Rs. 32,254-6-9 only in full settlement of our claim for
damage by fire under Policy No. 49757 issued by you on the undermentioned goods, we hereby assign transfer and abandon to you all our rights against the Railway Company or other persons whatsoever caused or arising
by reason of the said damage or loss and grant you full power to take and use all lawful ways and means in your own name and otherwise H your risk and expense to recover the said damage or loss and we hereby subro-
gate to you the same rights as we have in consequence of or arising from the said loss or damage. (t) A. I. R.1957 Cal. 190. (3) A. I. R-1965 Kerala 214. (2) A. I. R. 1964 Calcutta 362.
(4).A. T. R. 1965Madra<1S9. [1973] 2 S.C.k. "And we hereby undertake and agree to make and execute at your expense all such further deeds, assign. ments and documents and to render you such assistance
as you may reasonably require for the purpose of carry- ing out this agreement." The High Court held that the assignment was of a mere right to sue and it was not, therefore, valid under s. 6 ( e) of the Trans· fer of Property Act. The question is, whether what was assigned was a mere right to sue or something which the law of insurance recognises as assignable.
In King v. Victoria Insurance Company Ltd.('), a consign- ment of wool was insured by the Bank of Australasia during its transportation by a ship from Townsvtllc to London. The wool was damaged in transit. The bank claimed against the insurance company under the policy for a loss of 920£. The insurance com- pany paid that amount and took a formal assignment from the bank of all its rights and causes of action against the Government, the bank stipulating that the assignment would not authorize the use of its name in legal proceedings. The insurance company sued the Government for the negligence of their officers and servants in not properly mooring and watching their punts which had caused the collision of the ship carrying wool resulting in damage to the consignment. The Government conter.ded that the assignmc:nt of a mere right to recover damages was illegal. Lord Hobhouse, after stating that subrogation would not give the insurer a right to sue in its own name, said :
"But that difficulty is got over by force of the express assignment of the bank's claim, and of the Judicature Act, as the parties must have intended that it should be when they stipulated that nothing in the assignment
should authorize the use of the bank's name. "Their Lordships do not express any dissent from the views taken in the Court below of the construction of the Judicature Act with reference to the term 'legal
chose in action'. They prefer to avoid discussing · a question not free from difficulty, and to express no opinion what limitation, if any, should be n'aced on the literal meaning cf that term. They rest their judg·
ment on the broaded and simpler ground that a payment honestly made by insurers in consequence of a nolicy granted by them and in satisfaction of a claim by the insured, is a claim made under the nolicy which entitles
the insurers to the remedies available to the insured. (1) [18961A.C.250. c UNION v. SARADA MILLS (Mathew, I.) On this view the highly artificial defence of the Queens- land Governnment fails, and the appeal must be dis-
missed with costs." (p. 256). The question whether there could be an assignment of such a right was considered in Comvania Colombiana de Seguros v. Pacific Steam Navigation Co.(").
Jn that case, the assignment by the assured in favour of the Insurance Company was in the following terms: '~For loss and/ or damage to the goods …. having received payment from the Compania Colombiana de
Seguros for the foregoing, we cede and endorse to the .c . said insurance company all rights which we have or .which We may acquire in the future to claim reimburse- ment thereof from the third parties who may be respon-
sible for such loss or damage." The insurance company alleged that the document went further than a form of Jetter of subrogation and constituted a valid assign- ment by the assured to the" insurance company of the assured's claim against the defendants. For the defendants it was argued : ". . . . An assignment by the insured to the insurance
company of the right of action is ineffective. The reason is that a bare right of litigation cannot be assigned … 'fhe only decision to the contrary is that of the Privy Council in King v. Victoria Imurance Co. Ltd. which
should not be followed. (see the argument at p. 108). The Court overruled the argument and held that the decision in King v. Victoria Insurance Co. Ltd.(') correctly Jays down the law.
After reviewing the case law on the subject, Roskill, J. speaking for the. Court observed : "So much, then· for the authorities. What is the principle to be adduced from them ? I think it can be
stated in this way. Where, before 1873, equity would have compelled the assignor to exercise his rights against the contract breaker or teirtfeasor for the benefit of the assignee, those rights· can, since 1873, be made the sub-
ject of a valid legal assignmen! and. subiect to due ~0111- pliance with the requirements of the statute-as to notice, can be enforced at law. Equity a1\Vays, before 1873, comoe1Jed an assured to lend his name to enforce his
underwriter's rights of subrogation ·against a contract breaker or tort-feasor. It follows, therefore, that the only possible objection to such rights being now enforce- able at law is that such enforcement would involve the
(I) [1965] l Q. B. IOI, 121. (2) [1896] A. C. 250. (1973] 2 S.C.lt. enforcement of a bare cause of action in contract or in tort. But as Mr. Littman urged upon me, if that is so, why did equity act as equity did act before 1873 in
relation ·to the enforcement of subrogation righl ? I think the answer is because the enforcement of such rights was never regarded as the enforcement of a bare cause of actio11, but as the enforcement of a cause of action
n legitimately supported by the underwriter"s interest in recouping himself in respect of the amount of the loss which he had paid under the policy as a result of the acts, neglects or defaults of the actual contract breaker
or tortfeasor." In Anson's Law of Colllrnct( 1), it is stated that although <Ill assignmen.t of a bare right to litigate has been· held invalid, the principle is necessarily subject to qualification. One such quaJi(i. cation is :
"Suppose an insurer, who has inden111ified his insured under a policy of insurance and in consequence been assigned the insured's right of actionin respect of a IJ 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 de seguros v. Pacific Steam Navigation Co., Reskill, J, held that the enforcement of
such a right is not the enforcement of a 'bare ;ight of action', but of a right of action legitimately supported by the insurer's interest in recouping the loss sustained by payinj! out on the policy."
In the Law of Contract by Che;hire and Fifoot( 2), the case of Compania Columbiana de Seguros v. Pacific Steam Navi~ation Co. ( suora) is quoted an authority for the proposition that if goods shipoed on a ves•el are delivered in a damaged condition, the consignee, after being: indemnified for his loss by the insurers can assign to the latter his right to recover damages from the owner of the vessel.
The real reason why a mere right to sue cannot be assigned is that such an assil!llment would offend the rule of champerty and maintenance. Now, as in this case where an insurance has been subrogated to all the rights and the remedies of the asmred by Yirtue of s. 135-A, the reason for the rule against assignment of a mere right to sue does not obtain, becau<e the insurance comnany is clo•hed with all the rights and remedie< of the as<ured and the onlv thin!? l•ckin11 i< the c•nadtv to sue in it< nwn n•me. If the right is capable of being assigned, and is assigned, it would (1) Tw~ntv.third edition, edited by A.B. Guest. p. 417.
(2) Seventh edition, p. 472. c UNION v. SARADA MILLS (Mathew, J.) no longer be fogical to say that the assignor can still sue, for, whatever right the assignor had in the subject matter had passed to the assignee.
It is impossible to understand, how, after the assignmem, the assignor can still maintain a suit. This question was considered by the Madras High Court in V asudeva Mudaliar v. Caledonian Insurance Co. and Another( 1) and the Court said :
"However; an assignment or a transfer implies something more than subrogation, and vests in the in- surer the assured's interest, rights and remedies in respect of the subject matter and substance of the insurance.
In such a case; therefore, the insurer, by virtue of the transfer of a mere· right to sue are permissible and are to maintain a suit in his own name against third parties. (22 Halsbury's Laws of England, Simond Edn. paras
512-513 and Shawcross on 'Motor Insurance'). "Normally, an assignment of a right of action for a tort is not valid under s. 6 ( e). But cases of subroga- tion as applied to insurance for indemnity are an excep-
tion to the rule and assignments by the assured to the insurer of his rights and remedies being more than a transfer of a mere right to sue are permissible and are valid. But ~xpress assignment by the assured of all his
rights is necessary and subrogation by itself will not enable the insurer to sue in his own name ( 1896 A. C. . 250; (1883)-11 Q.B.D. 380)". It is regrettable that the attention of the High· Court was not drawn to the above decision.
I ihink the reasoning in the decisions above referred to is correct, that the assignment conveyed to the insurance company, the entire right in respect of ·the subject matter of the imurance, including •he right of the assured to sue in its own name and that, after the assignment, the assured had no cause of action to institute the suit against the Railway Administra,tlon for recovery of damages.
I would allow the appeal and set aside the judgment and decree of the High Court and restore the decree passed by the Subordinate Judge, Coimbatore, dismissing the suit, without any order as to costs.
ORDER 'In accordance with the opinion of majority the appeal is dis- missed with costs .. V.P.S. (!) A .. J. R. 1965 Madras IS9.