PETITIONER:
PANNALAL JANKIDAS
Vs.
RESPONDENT:
MOHANLAL AND ANOTHER.
DATE OF JUDGMENT:
21/12/1950
BENCH:
KANIA, HIRALAL J. (CJ)
BENCH:
KANIA, HIRALAL J. (CJ)
SASTRI, M. PATANJALI
DAS, SUDHI RANJAN
CITATION:
1951 AIR 144 1950 SCR 979
ACT:
Contract–Damages–Remoteness of damage–Agent neglect-
ing to insure goods against fire–Goods destroyed by exploi-
sion–Liability of agent–Bombay Explosion (Compensation)
Ordinance, 1944, ss. 14,18–Ordinance grantinq compensa-
tion for damage by explosion-Loss by explosion not covered
by policy–Loss of compensation under Ordinance by failure
to insure—Whether direct or remote damaqe–Claim by prin-
cipal against agent, whether barred by Ordinance–Indian
Contract Act, 1872, s. 212.
HEADNOTE:
The plaintiffs who were commission agents purchased
piecegoods according to defendant’s instructions and stored
a portion of the goods in a godown in Bombay pending receipt
of a permit from the Government authorities for consigning
the same to the defendants. Before the goods could be
despatched, a big explosion occurred in the Bombay Harbour
and the goods stored were destroyed either by the fire or
the explosion. A few months later the Governor-General
promulgated the Bombay Explosion (Compensat,ion) Ordinance,
1944, which provided, inter alia, (i) that the Government
shall pay a compensation of 50 per cent. of the damage
caused in respect of uninsured goods, and the entire damage
in respect of insured goods; and (ii) that no person shall
have or be deemed ever to have had, otherwise than under the
Ordinannce any rights whether in contract or in tort or
otherwise to any compensation for damage to or loss of
property arising out of the explosion and no suit or other
legal proceeding for any such compensation or damage shall
be maintainable in any civil courts. The plaintiffs re-
ceived 50 per cent of the value of the destroyed goods as
they
980
were not insured, and, alleging that as agents they had the
right to be indemnified by the defendants, sued the latter
for recovery of the remaining 50 per cent of the value of
the goods. The defendants pleaded, and it was found as a
fact, that they had instructed the plaintiffs, and the
latter had agreed, to insure the goods but had omitted to do
so, and they claimed that inasmuch as they would have been
entitled to receive the full value of the goods as compensa-
tion under the Ordinance if the plaintiffs had insured, they
were entitled to set off or counter claim the value of the
goods as damages caused to them by the neglect or breach of
duty of the plaintiffs.
Held per KANIA C.J. and DAS J. (PATANJALI SASRI J.
dissenting).–(i) As full compensation under the Ordinance
was payable on proof of the existence of a fire insurance
policy irrespective of the terms of the policy, and the
non-recovery of half the value of the goods from the Govern-
ment under the Ordinance was due to the obsence of a fire
insurance policy, the loss to the defendants arose directly
from the neglect or breach of duty of the plaintiffs to
insure the goods as they had been instructed and agreed to
do; intervention of the Ordinance did not break the chain of
causation or make the loss remote or indirect; the Ordinance
did not create any new liability but only quantified the
damages; and the fact that it did not exist at the time of
the explosion and could not have been in the contemplation
of the parties was irrelevant for deciding the question of
liability;
(ii) the plea of the defendants was not barred by the
Ordinnance inasmuch as their cause of action against the
plaintiffs was misconduct of the latter in the business of
their agency, and this cause of action was completed by the
averment that there was a dnty or agreement to insure, that
there was failure to per. form that duty and that the fail-
ure had caused damage to the defendants, and the quantum of
the damages was not a part of the cause of action.
Per PATANJALI SASRI J.–(i) The defendants’ inability to
recover the full value of the goods from the Government
under the Ordinance did not arise directly and naturally in
the usual course of things from the plaintiffs’ failure to
insure, but from independent and disconnected events, name-
ly, the Government’s scheme for compensation, embodied in
the Ordinance, the agreement with the insurance companies
regarding contribution and the consequent discrimination
made by the Government between insured and uninsured goods.
The Ordinance did not, displace the ordinary rules of law as
to remoteness of damage or amend or abrogate any terms in
the fire insurance policies and it was further difficult to
see how by virtue of an Ordinance passed some months after
the explosion, the right to damages could become enlarged.
The broad principle of restitutio in integrum upon which the
assessment of the quantum of damages is based cannot be
carried to its utmost logical results but must be qalified
by the rule of remoteness-
981
(ii) The bar under the Ordinance was not based upon the
nature of the cause of action but upon the damage or loss
being “due to or in any way arising out of” the explosion
and the claim of the defendands was clearly barred. In any
event the defendants cannot be allowed to claim that the
loss of the goods was explosion damage so as to bring the
case under s. 14 and at the same time contend that the loss
was not due to or did not in any way arise out of the explo-
sion in order to avoid the bar under s.
18.In re an Arbitration between Polemis and Another and
Furness Withy & Co. Ltd. [1921] 3 K.B. 560, Weld-Blundell
v. Stephens [1920] A.C. 983, Monarch Steamship Co. Ltd.
v. Karlshamns Oljefabriker [1949] A.C. 196, Hadley v.
Baxendale (9 Ex. Livingstone v. Rawyards Coal Co. (1880) 5
App. Cas. 25, British Westinghouse Electric and Manufactur-
ing Co. Ltd. v. Underwood Electric Railways Co., London
[1919] A.C. 673, Liesbosch (owners) v. Edison (owners)
[1933] A.C. 449, Smith Hogg & Co. Ltd. v. Black Sea and
Baltic General Insftrance Co. Ltd. [1940] A.C. 997, Standard
Oil Co. of New York v. Clan Line Steamers Ltd. [1924] A.G.
100 referred to.
JUDGMENT:
APPELLATE JURISDICTION: Civil Appeal No. 71 of
1949.
Appeal from a judgment and decree of the High Court of
Judicature at Bombay dated 11th April, 1947, (Sir Leonard
Stone C.J. and Chagla J.) in Appeal No. 39 of 1946 reversing
the judgment and decree of Bhagwati J., dated 27th March,
1946, in Civil Suit No. 1373 of 1944 of the said High Court
in its Original Jurisdiction.
Rang Behari Lal (Rajeswar Nath Nigam, with him) for the
appellants.
M.C. Setalvad (Ram Ditta Mal and B. Sen, with hirn) for
the respondents.
1950. December 21. The Court delivered judgment as
follows :—
KANIA C.J.–This is an appeal from a judgment of the
High Court at Bombay. Although the record is heavy and many
points were argued in the trial court and in the court of
appeal at Bombay, the important point argued before us is
only one.
The appellants (plaintiffs) are a firm of commission
agents in Bombay. The respondents (defendants)
982
were their constituents. Accounts between the parties in
respect of their dealings were made up and settled up to the
30th of October, 1943. Piecegoods and yarn continued to be
purchased and consigned by the plaintiffs to the defendants
joint family firm thereafter. One bale of piecegoods was
purchased and despatched in November, 1943. In January,
1944, restrictions were imposed against the consignment of
piecegoods and/or yarn outside Bombay by rail without.
obtaining the necessary previous permit from the Textile
Commissioner at Bombay. On or about the 8th February, 1944,
Mohanlal of the defendants’ joint family firm came to Bombay
and the plaintiffs purchased on their behalf 278 bales of
piecegoods. Ninetyfour out of those were despatched accord-
ing to the defendants’ instructions. The plaintiffs, accord-
ing to the defendants’ instructions, applied for and ob-
tained permit to consign several more bales. On the permits
being issued they were despatched on 14th February, 1944, to
destinations given by the defendants. On the 10th April,
1944, the plaintiffs, after obtaining the necessary permits,
despatched more bales as directed by the defendants. The
dispute between the parties relates to the remaining 92
bales which were stored in godown No. 424, Baroda Street,
Argyle Road, Bombay, pending the receipt of permit for
consigning the same
On the 14th April, 1944, there occurred a big explosion in
the Bombay harbour which destroyed several immovable proper-
ties and godowns with moveable property covering a large
area near the port. Fires were caused by the explosion and
they also caused considerable destruction of moveable and
immoveable properties. These 92 bales purchased by the
plaintiffs on account of the defendants were also destroyed
either by the fire or the explosion. The plaintiffs filed a
suit to recover the price of these 9’2 bales from the de-
fendants on the ground of the agent’s right to indemnity.
The defendants contended that the plaintiffs were their
pucca adatiyas, that the property in the goods did not pass
to them and that they were not liable for the price
983
till delivery of the goods was given to them. In the alter-
native, in para. 4 of their written statement, they pleaded
that when Mohanlal of the defendants’ firm was in Bombay and
the plaintiffs stated that the goods could not be railed
until permits were obtained, it was agreed between the
plaintiffs and the defendants that the defendants were to
pay annas four per bale per month to the plaintiffs for
insurance charges and the goods were thus to remain insured
till despatched according to their instructions. In para-
graph 21 of their written statement, they contended that if
their plea that the plaintiffs were pucca adatiyas was not
accepted. and the plaintiffs were held to be their commis-
sion agents, the plaintiffs were guilty of negligence
and misconduct in the business of agency, as in spite of
specific instructions and agreement they bad failed to
insure the goods. They contended that owing to this negli-
gence and misconduct the plaintiffs were not entitled to the
indemnity claimed. In the alternative they contended that
the plaintiffs were liable to make good the loss caused to
the defendants by their failure to insure the said bales.
They contended that they were entitled to set off this loss
against the claim for the price. They also counterclaimed
the same amount if their set-off was not allowed. On these
pleadings the parties went to a hearing. Issue to covered
the defendants’ plea about the plaintiffs’ negligence and
misconduct in not insuring the 92 bales and the counter-
claim arising therefrom.
Numerous witnesses were called before the trial court
and the learned judge after considering their demeanour and
hearing their evidence came to the conclusion that the
plaintiffs’ witnesses were unreliable, except when they were
corroborated by documentary evidence. He also disbelieved
the defendants’ evidence. He held that the agreement to
insure the goods was not proved and passed a decree in
favour of the plaintiffs. On appeal, differing from the
view of the trial court, the appeal court held that instruc-
tions were given by Mohanlal to insure the goods and that
984
the agreement was proved. In thus differing from the trial
court’s decision, they accepted the well-recognised princi-
ple to give full weight to the trial judge’s observations
about the witness. They however found that on the documents
the view of the learned trial judge was not correct. In
doing so, they principally relied on statements of account
sent by the plaintiffs to the defendants in respect of bales
purchased in February, 1944, and despatched by them out of
the lot of 278 bales previously and where the plaintiffs had
charged the defendants insurance premia at the rates men-
tioned in the defendants’ written statement. They rejected
the plaintiffs’ explanation, which was accepted by the
trial judge, that these entries were foolishly made out of
cupidity by the plaintiffs.
After a brief discussion in which this point was halt-
ingly urged before us, the learned counsel for the plain-
tiffs did not very properIy dispute this conclusion of the
appeal court. In our opinion, the finding of the appeal
court, having regard to the documents, was correct.
That left for decision the important question of damages
to which the respondents were entitled. Before the appel-
late court in Bombay, it was conceded by the respondents’
counsel that the insurance which was to be effected by the
appellants under the agreement was on the usual terms of
fire insurance policies prevalent in Bombay. Clause 7 of
that form of policy, inter alia, provided as follows :–
“Unless otherwise expressly stated in the policy, this
insurance does not cover……
(h) any loss or damage occasioned by or through or in
consequence of explosion but loss or damage by explosion of
gas used for illuminating or domestic purposes in a building
in which gas is not generated and which does not form part
of any gaswork will be deemed to be lost by fire within the
meaning of this policy-”
The appellants urged that granting that they were in
default and had committed a breach of duty in not
985
insuring the goods according to the instructions or the
agreement, the respondents could not recover anything from
them due to damage arising from the explosion, because the
policy of fire insurance, if taken out, would not have given
to the respondents the money claimed by them. For this
purpose they relied on a statement n Mayne on Damages, (11th
Ed.) at page 592, as follows :–
“Therefore if an agent is ordered to procure a policy of
insurance for his principal and neglects to do it, and yet
the policy, if procured, would not have entitled the princi-
pal, in the events which have happened, to recover the loss
or damage, the agent may avail himself of that as a complete
defence.”
In the present case, after the explosion considerable
discussion about the liability of the insurance companies
under their policies of fire insurance and the liability of
Government for alleged negligence in unloading high
explosives from a ship on the docks appears to have taken
place. On the 1st of July, 1944, the Governor-General pro-
mulgated the Bombay Explosion (Compensation) (Ordinance,
1944. The preamble to that Ordinance runs as follows:-
” Whereas an emergency has arisen which makes it neces-
sary to provide for and regulate the payment of compensation
for…… damage to property due to, or arising out of, the
explosions and fires which occurred in the Bombay Docks on
the 14th April, 1944, to restrict litigation in connec-
tion with the said explosions and fires and to make
certain other provisions in connection therewith.”
The other relevant provisions may be also noticed at
this stage. Uninsured property was defined to mean property
which was not covered whether wholly or partially by any
policy of fire, marine or miscellaneous insurance at the
time of the explosion. After providing for the procedure
according to which compensation may be claimed and dealt
with by the Claims Committee to be set up under the Ordi-
nance and an appeal and review from their decision, section
14 provided as follows :–
986
14. “Subject to the provisions of this Ordinance, there
shall be paid by the Central Government compensation for
explosion damage to property being
(a) damage caused by fire to property insured whether
wholly or partially at the time of the explosion against
fire under a policy (other than a policy of marine insur-
ance) covering fire risk, or damage caused by blast without
fire intervening to property insured whether wholly or
partially at the time of the explosion under a pollcy (other
than a policy of marine insurance) covering fire and explo-
sion risks, of an amount equal to the proved loss, or
(b) damage caused by blast without fire intervening to
property insured whether wholly or partially at the time of
the explosion against fire under a policy (other than a
policy of marine insurance) covering fire risk but not
explosion risk, of an amount equal to 871/2 per centum of
the proved loss, to the holder of the policy of insurance
covering the damaged property, or if he is deceased, to his
legal representatives.
Section 15 provided for contribution by the insurers
towards the payment of amounts to be paid under the Ordi-
nance. Section 18 of the Ordinance runs as follows :–
18. (1) Nothing in this Ordinance shall prevent the
recovery of compensation for death or personal injury under
the Workmen’s Compensation Act, 1923 (V/11 of 1923), or
under any policy of life insurance or against personal
accident or under any other contract or scheme providing for
the payment of compensation for death or personal injury, or
for damage toproperry under any policy’ of marine or miscel-
laneous insurance.
(2) Save as provided in sub-section (1), no person shall
have, or be deemed ever to have had, otherwise than under
this Ordinance any right whether in contract or in tort or
otherwise to any compensation or damages for any death,
personal injury or damage to or loss of any property, rights
or interests, due to or in any way arising out of the explo-
sion; and no suit or other
987.
legal proceedings for any such compensation or damages
shall, save as aforesaid, be maintainable in any Court
against the Crown or the Trustees of the Port of Bombay or
the Municipal Corporation of the City of Bombay or against
any servants or agents of the Crown or of the said Trustees
or Municipal Corporation or againt any other person whomso-
ever; and no act or omission which caused or contributed to
the explosion shall be deemed to have been done or omitted
to be done otherwise than lawfully.
(3) No suit, prosecution or other legal proceeding
whatsoever shall lie against any person for anything in good
faith done or ordered to be done in combating or mitigating
the effects of the explosion, or for anything in good faith
done or intended to be done in pursuance of this Ordinance
or any rules or orders made thereunder.”
It is common ground that in respect of uninsured merch-
andise fifty per cent. compensation was to be paid under
the Ordinance. The appellants have recovered that amount
and have now agreed to give credit of the same to the re-
spondents. The dispute is in respect of the remaining fifty
per cent. It is not disputed that if the goods had been
insured, under section 14 of the Ordinance, full compensa-
tion would have been recovered by the appellants and become
payable to the respondents.
The appellants’ contention is two-fold. Firstly, that
if they had insured the goods the ordinary fire insurance
policy would not have covered the risk and therefore al-
though they had committed a breach of the agreement or been
negligent in their duty as agents, they were not liable to
pay anything more to the respondents. In the alternative it
was argued on their behalf that the intervention of Govern-
ment in passing this Ordinance could not increase or add to
the liability of the appellants for the breach of contract
or breach of duty and therefore they were not liable to pay
the compensation which would have been receivable by the
respondents if the goods had been
988
insured. The second contention is that the counterclaim of
the respondents is barred under section 18 (2) o[ the Ordi-
nance. In the Indian Contract Act, sections 211 and 212
provide for the consequences of an agent acting otherwise
than according to his duty towards the principal. Under
section 211 when an agent conducts the business of the
principal otherwise than according to the directions given
by the principal, ii any loss be sustained he must make it
good to his principal and if any profit accrues he must
account for it. In Smith v. Lascelles(1), it was held that
if an agent was instructed to insure goods and neglected to
do so he was liable to the principal for their value in the
event of their being lost. Section 212 of the Indian Con-
tract Act provides as follows :---
"An agent is always bound to act with reasonable dili-
gence and use such skill as he possesses; to make compensa-
tion to his principal in respect of the direct consequences
of is own neglect, want of skill or misconduct, but not in
respect of loss or damage which are indirectly or remotely
caused by such neglect, want of skill or misconduct."
These sections make it clear that in case of the agent's
negligence he is liable to make good the damage directly
arising from his neglect but not indirectly or remotely
caused by such neglect or misconduct. The question there-
fore is whether in the present case the claim of the re-
spondents based on the neglect or misconduct can be stated
to be a direct consequence of such neglect or misconduct or
is only indirectly or remotely caused by such neglect.
Two positions can be visualized as arising from the
appellants' neglect in this case. The appellants could be
treated either as insurers themselves or can be considered
as having agreed to cause the goods insured by a recognised
insurance company on the usual fire insurance policy terms.
In Tickel v. Short(2), the Lord Chancellor shortly stated
the proposition of law in these terms :--" The rule of
equity is, that if an order
(1) (1788) 2 T.R. 187. (2) 2 Ves. Sen, 239.
989
is sent by a principal to a factor to make an insurance; and
he charges his principal, as i[ it was made; if he never in
fact has made that insurance, he is considered as the insur-
er himself" If therefore, as in the present case, the appel-
lants were given instructions to insure the goods and they
charged the respondents as if they had insured the goods,
the law would throw upon them the liability of an insurer as
if they stood in the position of insurers, i.e., the Court
will then be -entitled in equity to proceed on the footing
as if an insurance had been effected by the appellants and
the goods stood covered under a fire insurance policy.
Whatever consequences follow from that position must be
accepted and enforced in a court of equity against the
appellants. Proceeding on that line of reasoning under
section 14 of the Ordinance the only thing which is required
to be considered is whether the goods were covered by a fire
insurance policy. The terms of the policy are immaterial.
If, therefore, the appellants are considered as having
insured the goods and are precluded from saying that the
goods were not covered by a fire insurance policy, the loss
arising from the fact that the goods were not so covered is
a direct consequence of their neglect and they must make it
good. That will make them liable to pay what was claimed by
the respondents.
If, however, it is considered that they were not them-
selves insurers but that they had agreed only to keep the
goods insured under a policy of insurance of a recognised
insurance company on the usual fire insurance policy terms,
the question is whether the damages claimed by the respond-
ents directly flow from their neglect of duty in not being
able to produce such a fire insurance policy. Our attention
has been drawn to an instructive judgment which makes the
distinction between direct and remote damages clear. In In
Re An Arbitration between Polemis & another and Furness
Withy & Co. Ltd.(1) there is a discussion on this point in
the judgment of Banks L.J. He drew attention to the obser-
vations of Lord Sumner in Weld-Blundell v.
[1921] 3 K.B. 560.
990
Stephens (1), who observed as follows:–”What are natural,
probable and necessary consequences ? Everything that hap-
pens, happens in the order of nature and is therefore natu-
ral. Nothing that happens by the free choice of a thinking
man is necessary except in the sense of pre-destination. To
speak of probable consequences is to throw everything upon
the jury. It is tautologous to speak of effective cause or
to say that damages too remote from the cause are irrecover-
able, for an effective cause is simply that which causes,
and in law, what is ineffective or too remote is not a cause
at all. I still venture to think that direct cause is the
best expression……………… What a defendant ought to
have anticipated as a reasonable man is material when the
question is whether or not he was guilty of negligencee that
is, of want of due care according to the circumstances;
This however goes to capability, not to compensation.”
Banks L.J., after noticing the above observations, stated
as follows :–” Under these circumstances I consider that it
is immaterial that the causing of the spark by the falling
of the plank could not have been reasonably anticipated. The
appellants’ junior counsel sought to draw a distinction
between the anticipation of the extent of damage resulting
from a negligent act, and the anticipation of the type of
damage resulting from such an act………… I do not
think that the distinction can be admitted. Given the
breach of duty which constitutes the negligence, and given
the duty damage as a direct result of that negligence, the
anticipations of the person whose negligent act has produced
the damage appear to me to be irrelevant,”
The question of what is remoteness of damages in a case
of negligence has been reviewed in detail in a recent deci-
sion of the House of Lords in Monarch Steamship Co. Ltd. v.
Karlshamns Oljefabriker(2). In that case the question
arose in respect of damages due to the late delivery of
goods shipped for a port in Sweden, but which ship, owing to
its unseaworthiness, was delayed in its voyage and owing to
the outbreak of war
(1) [1920] A.C, 983-981 (2) [1949] A.c. 196,
991
under orders of the British Admiralty, was directed not to
proceed to the Swedish port but ordered to discharge the
cargo at Glasgow. The assignees of the bills of lading from
the shippers had to forward the goods in neutral ships
chartered for the purpose to the Swedish port. A war risks
clause in the charterparty exonerated the owners of the
vessel in the event of compliance with any orders given by
the government of the nation under whose flag the ship
sailed, as to destination delivery or otherwise. The hold-
ers of the bills of lading claimed the re-transport
charges from Glasgow to the Swedish port. It was
contended that these damages were too remote. The House of
Lords rejected the contention. In the speech of Lord
Wright most of the relevant authorities have been reviewed
and the ratio decidendi has been set out. In Hadley v.
Baxendale (1) Alderson B., giving the judgment of the
CoUrt, thought that the proper rule in such a case consisted
of two alternatives. He said: “Where two parties have made
a contract which one of them has broken the damages which
the other party ought to receive in respect of such breach
of contract should be such as may fairly and reasonably be
considered either arising naturally, i.e., according to
the usual course of things, from such breach of contract
itself, or such as may reasonably be supposed to have been
in the contemplation of both parties at the time they made
the contract, as the probable result of the breach of it.”
In the opinion of Lord Wright this in truth gives effect to
the broad general rule of the law of damages that a party
injured by the other party’s breach of contract “is entitled
to such money compensation as will put him in the position
in which he would have been but for the breach.” This rule
was stated by Lord Blackburn in Livingstone v. Rawyards Coal
Co. (2) as follows :–”Where any injury is to be compensated
by damages, in settling the sum of money to be given for
reparation of damages you should as nearly as possible get
at that sum of money which will put the party who has been
injured,
(1) 9 Ex. 341. (2) (1880) 5 App. Cas. 25, 39.
992
or who has suffered, in the same position as he would have
been in if he had not sustained the wrong for which he is
now getting his compensation or reparation.” The ‘rule
stated by Alderson B. has consistently been accepted as
correct;the only difficulty has been in applying it.. The
distinction drawn is between damages arising naturally
(which means in the normal course of things) and cases
where there were special and ex-traordinary circumstances
beyond the reasonable prevision of the parties. The dis-
tinction between these types is usually described in English
Law as that between generaland special damages; the latter
are such that if they are not communicated it would not be
fair or reasonable to hold the defendant responsible for
losses which he could not be taken to contemplate as likely
to result from his breach of contract. Viscount Haldane L.C.
in The British Westinghouse Electric & Manufacturing Co.
Ltd. v, The Underground Electric Railways Co. of London (1),
on the question of damages said :In some of the cases there
are expressions as to the principles governing the measure
of general damages which at first sight seem difficult to
harmonize. The apparent discrepancies are, however,
mainly due to the varying nature of the particular questions
submitted for decision. The quantum of damage is a question
of fact, and the only guidance the law can give is to lay
down general principles which afford at times but scanty
assistance.in dealing with particular cases. The Judges who
give guidance to juries in these cases have necessarily to
look at their special character, and to mould, for the
purposes of different kinds of claim, the expression of the
general principles which apply to them and this is apt to
give rise to an appearance of ambiguity.-.It was necessary
to balance loss and gain and no simple solution was possi-
ble.” The House of Lords in Liesbosch (Owners) v. Edison
(Owners) (2) has stated at page 463 that it is impossible to
lay down any universal formula. The dominant rule of law is
the principle of restitutio in integrum and subsidiary rules
can only be justified if
(1) [1912] A.C. 678. 689. (2) [1933] A.C. 449,
993
they give, effect to that rule. (The italics are mine).
In Smith, Hogg & Co. Lid. v. Black Sea & Baltic General
Insurance Co. Ltd. (1), the loss of a vessel occurred
through the negligence of the master operating on
conditions of unseaworthiness existing since the com-
mencement of the voyage. The loss was held to be
caused by the breach of the warranty of seaworthiness
and recoverable accordingly. There was an exception of
negligence. At page 1005 in the judgment of that case it is
stated ”no distinction could be drawn between cases where
the negligent conduct of the master is a cause and cases
where any other cause, such as perils of the sea, is a co-
operating cause. A negligent act is as much a co-operating
cause if it is a cause at all., as an act which is not
negligent.” What was then being emphasized was that a
voluntary act (negligent or not) of a human agent is not
generally an independent or new cause for this purpose which
breaks the chain of causation, as it is called, so as to
exclude from consideration the causal effect of the unsea-
worthiness. In that case it was held that the unseaworthi-
ness created in the vessel instability which, combined with
negligence of the master, caused the loss. No new law was
laid down in that case. Similarly in The Standard Oil Co.
o[ New York v. Clan Line Steamers Ltd. C"), the vessel
capsized because the master not being instructed by his
owners as to the peculiarities of a turret ship, so
handled her that she capsized. That loss was immediately
due to perils of the sea which overwhelmed her when she
capsized, liability for which was excepted, but the dominant
cause was her unseaworthiness in that her master, though'
otherwise efficient, was inefficient in not being aware of
the special danger. In general, all the authorities are in
agreement in this respect and embody the same rule. TIm
shipowner, of course, under the familiar general rule, is
debarred by his breach of duty from relying on the specific
exception. Though he would not be liable for the conse-
quences caused by the specific excepted peril or the acci-
dent alone if he
(1)[1940] A.G. 997. (2) [1924] A.C. 100.
994
were not in default, though the unseaworthiness existing at
the commencement Of the voyage might not be operative or
known until the time when the accident occurs, yet then the
breach of the warranty operates directly as a cause and,
indeed, a dominant cause. Causation in law does not depend
on remoteness or immediacy in time,” These observations meet
the appellants’ contention about the Government Ordinance
intervening to fix the damages. They show that such inter-
vention does not break the chain of causation, nor does it
make the loss, i.e., damages, remote. The statement of law
in Mayne on Damages quoted above, only reproduces the prin-
ciple of law stated by Lord Blackburn in Livingstone v.
Rawyards Coat Company(1).
Bearing in mind this state of the law itappears clear
that in the present case it was the duty of the appellants
to insure the goods, as they had agreed to do. Once miscon-
duct is admitted or proved, the fact that the Ordinance did
not exist and could not have been in the contemplation of
the parties is irrelevant for deciding the question of
liability. The liability was incurred by reason of the
breach of their duty and the appellants made themselves
liable to pay damages. The measure of damages was the loss
suffered by the respondents on account of the goods not
being insured. The next point to be decided is what differ-
ence the promulgation of the Ordinance makes in the liabili-
ty of the appellants. The relevant provisions are noted
above. The scheme of the Ordinance clearly is, as stated in
the preamble, to provide for and regulate the payment of
compensation and to prevent litigation, amongst other
things. It is thus a comprehensive legislation which re-
places the rights of parties either under the policy of
insurance against insurance companies, or on the ground of
negligence against Government by the owners of the goods, as
also claims by insurance companies against Government. The
validity of this legislation is not challenged. Section 18
gives it a retrospective effect. Therefore the Ordinance
only
(1) (1880) 5 App. Cas. 25
995
substitutes a new basis for assessing compensation for the
ordinary basis for assessing unliquidated damages. The
compensation under the Ordinance is payable on proof of the
existence of a fire insurance policy irrespective of the
terms of the policy. The non-recovery of half the amount of
the respondents’ claim from the Government under the Ordi-
nance because of the absence of a fire insurance policy,
thus directly arises from the neglect of the appellants to
insure the goods, as they had been instructed to do or
agreed to do and which in fact they represented that they
had done. In our opinion, these are not indirect or remote
damages.
The contention that under the policy of insurance the
assured could not have recovered anything for loss caused by
the fire due to explosion cannot be accepted. Firstly, this
contention of the assured’s inability to receive any compen-
sation because of clause 7 of the form of common policy was
not raised in the trial court. No issue was raised in re-
spect thereof and no arguments in support or against it were
heard. It was suggested for the first time, as appears from
the judgment of Chagla J., in the court of appeal. The
assumption that because of clause 7 of the policy no insur-
ance company would have paid the loss cannot be assumed to
be necessarily and unquestionably sound and in view of the
terms of the Ordinance not capable of being determined.
There appears no reason under the circumstances to proceed
as if an adverse decision on the interpretation of the
policy had been given against the respondents and to hold
the appellants free from liability for not recovering half
the value of the goods which could have been recovered if
the goods had been insured (irrespective of the terms on
which the policy stood) as agreed to be done by them. I do
not think when the relations between the parties are of a
principal and an agent and the agent is found to have com-
mitted a breach of his duty, it is correct to take a narrow
view of the situation. The agent chose to gamble in not
insuring the goods and desired to charge the agreed premia,
on the footing that the goods were covered by insurance.
If so, he must take the
996
consequences of his default. The argument that their li-
ability as an agent who had agreed to insure should be
ascertained as on the date of the explosion is no answer to
the claim of the respondents. The position would be this.
Assuming that the appellants had insured the goods on the
terms of the usual fire insurance policy.. the respondents
could ask them either to assign the policy to the respond-
ents or to file a suit against the insurance company con-
tending that the fire, and not the explosion, was the; cause
of the loss and was covered by the policy of insurance.
Before the Court could decide the rights of the parties, the
Ordinance promulgated by the Governor-General prevented the
decision of the dispute, but the Government undertook to pay
the loss on the footing that the policy covered the risk.
Tile misconduct gave rise to the liability to make good the
damage and to put the respondents in the same position in
which they would have been if their goods had beeen insured.
On behalf of the appellants it was urged that because of
the Government intervention in issuing the Ordinance they
were sought to be made liable under a new liability. Their
liability has been and exists on the basis that a fire
insurance policy existed, as they were instructed to insure
the goods and which they represented they had done. The
liability arises not because of the Ordinance but because of
the breach of their duty in failing to insure, which has
taken place apart from the Ordinance and which is not af-
fected by the Ordinance. The utmost that they could urge is
that the extent of their liability arising from their mis-
conduct was not anticipated by them when they agreed to
perform their duty. That however is no defence in law if the
damages directly flow from the breach of duty. The Ordinance
only quantifies the damages instead of leaving the unliqui-
dated damages to be assessed in the usual way. The Ordi-
nance lays down the yardstick for fixing the damages under
different circumstances, which cover all alternative situa-
tions, and the liability for failure to insure must now be
measured by the new basis. It does not create any new li-
ability.
997
The appellants’ contention on this point therefore must be
rejected.
The only other point urged before us was based on the
construction of section 18 of the Ordinance. It was argued
on behalf of the appellants that apart from what could be
recovered under clause (1) of section 18, the Ordinance
extinguished all right, whether in contract or tort or
otherwise, to any compensation or damage for loss of an),
property due to, or in any way arising out of, the explosion
and provided that no suit or other legal proceedings for any
such compensation or damages shall, save as aforesaid, be
maintainable in any court against the Crown or against any
other person whatsoever. It was urged that in establishing
their claim, the respondents must plead the right to recover
the amount due to explosion and that was barred under sec-
tion 18 (2). In our opinion, this contention is unsound.
The appellants have filcd this suit to recover the price of
the goods on the ground of indemnity. The respondents’
answer is that the appellants are not entitled to the indem-
nity because they are guilty of a breach of duty in the
business of the agency. They contend that they would be
liable to pay for the goods only if the appellants give them
the goods or deliver the same according to their instruc-
tions. They counterclaim that if the appellants are unable
to give them the goods, they must pay them the value there-
of. The appellants plead by way of defence to the counter-
claim that the goods were destroyed without any neglect on
their part by fire caused by the explosion and therefore
they were not liable. The respondents’ rejoinder is that
they had asked the appellants to insure the goods and if the
appellants had not failed in their duty they would have
reimbursed the respondents. The appellants then plead that
even if they had insured the goods the respondents could not
have recovered anything from the insurance companies. It is
in reply to this contention that the respondents say that
the appellants’ liability to recover money from the insur-
ance company on the terms of the usual fire insurance policy
is irrelevant
998
because they could have recovered the money if they had
insured in fact, irrespective of the terms of the policy,
under the Ordinance. The respondents are not thus claiming
to recover money from the appellants otherwise than under
section 18 (1) of the Ordinance. Their cause of action is
the misconduct of the agent in the business of agency and is
quite different. It is not for compensation arising from
explosion.
It was argued that damages formed part of the cause of
action of the respondents in framing the counterclaim and
therefore section 18 (2) stood in the way of the respond-
ents. The contention is unsound because the cause of action
is completed by the averment that there was a duty or agree-
ment to insure, that there was a failure to perform that
duty, that loss had occasioned to the respondents because of
the failure to perform the duty and the appellants were
therefore liable for the breach of the duty. The quantum of
damages is not a part of the cause of action. It is a matter
to be ascertained by the court according to well laid down
principles of law.
The result is that the appeal fails and is dismissed
with costs.
PATANJALI SASTRI J.–I regret I am unable to agree with the
judgment just delivered by my Lord which I have had an
opportunity of reading. As the facts of the case have been
fully stated in that judgment it is unnecessary to re-state
them here.
The main question arising for determination is what
damages are the appellants liable to pay to the respondents
for their failure to insure the respondents’ goods which
were destroyed by fire caused by the big explosions which
occurred in the Bombay Docks on 14th April, 1944 ? The
goods had been purchased by the appellants in Bombay as the
commission agents of the respondents and were left in their
godowns pending their despatch to the respondents’ place of
business. It was found by the appellate bench of the Court
below that the appellants had agreed to keep ‘the goods
insured against fire while in their custody
999
and had debited the respondents in their books with the
insurance charges. A suggestion was made in the course of
the arguments before us that the appellants agreed to be the
insurers themselves, but the findings of the appellate bench
leave no room for doubt that all that the appellants agreed
to do was to procure a policy of fire insurance in the
ordinary or common form and subject to the conditions usual-
ly stipulated in that form of policy. This is also made
clear by the concession of the respondents’ counsel in the
court below that “he was only relying on the agreement to
the extent that the insurance was to be effected against
fire on an ordinary fire insurance policy”. It is common
ground that one of the general conditions in that form of
policy is that “it does not cover” among others any loss or
damage occasioned by or through or in consequence of explo-
sion”. Relying on that condition, it was contended for the
appellants that even if they had effected an insurance on
the goods according to the agreement, the loss of the goods
by fire caused by the explosion would have been an excluded
loss for which no damages could have been claimed from the
insurer and that, therefore, the respondents would not be
entitled to recover from the appellants anything more than
nominal damages for failure to insure. This contention
must, in my opinion, prevail. As pointed out by Mr. Mayne in
his Treatise on Damages (p. 591, 11th Edition) “When the
agent can show that under no circumstances could any benefit
to the principal have followed from obedience to his orders,
and therefore that disobedience to them has produced no real
injury, the action will fail. There fore, if an agent is
ordered to procure a policy of insurance for his principal,
and neglects to do it, and yet the policy, if procured,
would not have entitled the principal, in the events which
have happened, to recover the loss or damage, the agent may
avail himself of that as a complete defence.”
A complication, however, is introduced by an Ordinance
promulgated by the Governor-General known as the Bombay
Explosion (Compensation)
1000
Ordinance (No. 32 of 1944) which came into force on 1st
July, 1944. The preamble states ‘,Whereas an emergency has
arisen which makes it necessary to provide for and regulate
the payment of compensation for……… damage to property
due to, or arising out of, the explosions and fires which
occurred in the Bombay Docks on 14th April, 1944, to re-
strict litigation in connection with the said
explosions……”. By section 2 “the explosion” is defined
as meaning “the explosions which occurred in the Bombay
Docks on 14th April, 1944, and the fire. which ensued there-
from.” An “explosion damage” is defined as “damage which
occurred, whether accidentally or not, as the direct result
of the explosion…” “Uninsured proPerty means “pro-perty
which was not covered whether wholly or partially by an
policy of fire, marine or miscellaneous
explosion” Section 14 insurance at the time of tile
1 ….. so far as it is material here, provides that “there
shall be paid by the Central Government compensation for
explosion damage to property, being damage caused by fire to
property insured whether wholly or partially at the time of
the explosion against fire under a policy covering fire
risk…of an amount equal to the proved loss.”Section 15
provides for coutribution to Government by insurance compa-
nies. Section 16 provides for compensation for such damage
to uninsured property on a certain scale mentioned in that
section. Section 18(2) enacts, subject to certain exccep-
tions not material here, “no person shall leave, or be
deemed ever to have had, otherwise than under this Ordinance
any right, whether in contract or in tort or otherwise to
any compensation or damages for any…or damages to or loss
of any property, rights or interests. due to or in any way
arising out of the explosion; and no suit or other legal
proceedings for any such compensation or damages shall, save
as aforesaid. be maintainable in any court against the
Crown…or against any servants or agents of the Crown ….
or against any other person whomsoever; and no act or omis-
sion which caused or contributed to the explosion shall be
deemed to have been done or omitted to be done otherwise
than lawfully.”
1001
It is admitted that the appellants recovered from the
Central Government under section 16 nearly one-half of the
value of the goods destroyed by fire while in their custody
as compensation fox’ the loss of the respondents’ goods
and have given credit to the respondents in their ac-
counts for the amount thus received. The dispute now re-
lates to the respondents’ claim to the balance of the value
of the goods as damages for the appellants’ failure to keep
them insured according to the agreement between the parties
as the full value of the goods and have been obtained from
the Government under section 14 without regard to any ex-
cepted risk if only they had been insured against fire.The
scheme of the Ordinance appears to be that the Government,
instead of having probably to fight out numerous law suits
for compensation for loss or damage to property based upon
alleged negligence of their officers in having allowed the
explosion to take pleace, undertook to pay an amount equal
to the “proved loss” in cases of loss or damage to goods
which had been insured against fire, etc. and smaller
amounts for loss or damage to uninsured goods, putting an
end, at the same time, to all rights to compensation or
damages arising out of the explosion, and barring all suits
or legal proceedings for the same.
On the basis of these provisions it was contended on
behalf of the respondents that the appellants, by reason of
their failure to keep the goods insured, were liable under
the law to place the respondents, who had suffered the loss,
in the same position as if the appellants had performed
their agreement or carried out the instructions of the
respondents. Learned counsel for the respondents based the
claim on the neglect of duty on the part of the appellants
as commission agents in carrying out the instructions of
their principals, and relied on the provisions of section
212 of the Indian Contract Act, which provides, inter alia,
that an agent is bound “to make compensation to his princi-
pal in respect of the direct consequence of his own neglect,
want of skill or misconduct, but not in respect of loss or
damage which are indirectly or remotely
1002
caused by such neglect, want of skill or misconduct.” On
the other hand, it was urged on behalf of the appellants
that the question had to be determined on the basis of a
breach of contract for the consequences of which provision
is made in section 73 of the Indian Contract Act. That
section says that “when a contract has been broken, the
party who suffers by such breach is entitled to receive,
from the party who has broken the contract, compensation
for any loss or damage caused to him thereby, which natural-
ly arose in the usual course of things from such breach, or
which the parties knew, when they made the contract, to be
likely to result from the breach of it. Such compensation is
not to be given for any remote or indirect loss or damage
sustained by reason of the breach.” I do not think that it
makes much difference, so far as the assessment of general
damages is concerned, whether the default of the appellants
is treated as a breath of contract between two contracting
parties or a neglect of duty by agents in failing to carry
out the instructions of their principal. Although the Indian
Contract Act makes separate provisions for the consequences
in each case, the rule laid down as to measure of damages
is s the same, namely, the party in breach must make compen-
sation in respect of the direct consequences flowing from
the breach and not in respect of loss or damage indirectly
or remotely caused, which is also the rule in English common
law. The rule is based on the broad principle of restitutio
in integrum, that is to say, that the party who has suffered
the loss should be placed in the same position, as far as
compensation in money can do it, as if the party in breach
had performed his contract or fulfilled his duty. That
principle was once carried to its utmost logical, if gro-
tesque, result as in an old English case to which Willes J.
referred in British Columbia Saw-Mill Co. v.
Nettleship(1):” Where a man going, g to be married to an
heiress, his horse having cast a shoe on the journey, em-
ployed a blacksmith who did the work so unskilfully that the
horse was lamed, and the rider not having
(1) L. L. 3. C.P. 409, 508
1003
arrived in time the lady married another; and the blacksmith
was held liable for the loss of the marriage.” And the
learned Judge warned ”We should inevitably fall into a
similar absurdity unless we applied the rules of commonsense
to restrict the extent of liability for the breach of a
contract of this sort.” The commonsense point of view was
thus put by Lord Wright in Liesbosch, Dredger v. Edison S.S.
(Owners)(1): ,, The law cannot take account of everything
that follows a wrongful act; it regards some subsequent
matters as outside the scope of its selection because ‘it
were infinite for the law to judge the cause of causes,’ or
consequence of consequences. Thus the loss of a ship by
collision due to the other vessel’s sole fault may force the
shipowner into bankruptcy and that again may involve his
family in suffering, loss of education or opportunities in
life, but no such loss could be recovered from the wrongdo-
er. In the varied web of affairs the law must abstract some
consequences as relevant, not perhaps on grounds of pure
logic but simply for practical reasons.” These considera-
tions have led the courts to evolve the qualifying rules of
remoteness subject to which alone the broad principle of
restitutio in integrum now finds its application.
Applying these principles to the facts of the present
case, what is the position ? The respondents lost their go-
ods by fires arising out of the explosion presumably due to
the negligent conduct of the Government’s officers or serv-
ants at the docks. Even if the appellants had taken out a
fire insurance policy in ordinary form it would not have
covered the loss, for fire due to explosion would be an
excepted peril. So, the appellants’ failure keep the goods
insured produced no direct consequence for which damages
could in law be claimed. It is true enough to say that if
the appellants had taken out a fire policy covering the
goods, the respondents could have obtained the full value
of the goods from the Government. But did the respondents’
inability to recover such full value from the Government
arise directly or naturally in the usual course
[1933] A.C. 449.
1004
of things out of the appellants’ failure to insure? I think
not, since independent and disconnected events had to occur
to produce the result, viz., the Government’s scheme of
compensation embodied in the Ordinance, the agreement with
the Insurance Companies regarding their contribution, and
the consequent distinction made between insured and unin-
sured property in providing compensation for their loss.
Suppose the fire was caused by an explosion due to the
negligence of a private individual. The respondents would
have their remedy by suing him for damages. But if he was
insolvent, could the respondents’ inability to recover
damages from him be a direct and natural consequence of the
appellants’ failure to insure ? Surely not, for even if the
appellants had insured the goods according to their agree-
ment with the respondents, the latter would be in no better
position. Here, the Government, presumably being satisfied,
or at any rate apprehending, that the explosion was due to
the negligence of their servants, got the Ordinance passed
providing for payment of compensation by the Government on
the terms stated therein and at the same time putting an end
to all rights to recover compensation save as provided in
the Ordinance and barring all suits and other proceedings
for that purpose. As any claim to compensation against the
Government must be based upon the negligence of their serv-
ants, the Government took no note of excepted risks in
insurance policies and undertook liability to pay full
compensation in case of all insured property, doubtless
because, under an arrangement with certain Insurance Compa-
nies the Government obtained a proportionate contribution as
provided for in section 15, though on the hypothesis of
their servants’ negligence their liability in law would be
the same in respect of insured and uninsured property. if
the Ordinance had provided for partial compensation in both
cases, as it would probably have done if the Insurance
Companies had not agreed to come into the scheme with their
contributions, the respondents could have no claim to recov-
er the balance from the appellants,
1005
notwithstanding that the supposed direct causal connection
between the appellants’ default and the respondents’ loss
would still be there. The truth is there was no such con-
nection and it was because of the provisions of the Ordi-
nance which made a distinction between insured and uninsured
property in the matter of compensation for explosion damage,
and barred rights and remedies under the general law in
relation theretto, that the respondents were unable to
recover the balance of the value of their goods destroyed by
fire. But such inability cannot be regarded as flowing
naturally or directly from the appellants’ default.
It was suggested that the provisions of the Ordinance
must be taken to have displaced the ordinary rules of law as
to remoteness of damage, as section 18 (2) extinguished,
retrospectively from the date of the explosion, all rights
and remedies under the general law for obtaining compensa-
tion for explosion damage and substituted the rights therein
provided. The substituted right to compensation, so far as
the Government and insured property were concerned, was not
subject to any restrictive conditions in the policies, and
therefore, it was claimed, the measure of damages in this
case must be determined irrespectively of the existence of
the clause excluding ”explosion” from the scope of the
common form of policy. The argument is, m my opinion, more
ingenious than sound. The short answer to it is that the
Ordinance did not purport to displace or supersede any rule
of law as to measure of damages or to amend or abrogate any
terms in insurance. policies. There is nothing in the
Ordinance to indicate that the clause excepting explosion
contained in the fire insurance policies issued in Bombay
should be deemed to be null and void. As already stated,
the Government, having accepted liability for explosion
damage, were not really concerned with the restrictive
conditions in the policies. Their liability did not arise
out of such policies. In view of certain Insurance Compa-
nies having agreed to contribute a certain proportion, the
Government undertook liability
1006
to pay full compensation for loss of insured property
regardless of the terms o[ insurance, which had no relevance
to the liability which they assumed. To suggest, in such
circumstances, that the clause excepting explosion risk in
all fire policies issued in common form in Bombay was legis-
latively abrogated is, in my opinion, extravagant and far-
fetched. The respondents’ goods were destroyed when the
explosion occurred on the 14th April, 1944, and on that
date they could have recovered nothing except perhap-
snominal damages for the appellants’ failure to insure the
goods as they agreed to do. It is difficult to see how
by virtue of the Ordinance passed more than two months
later, their claim against the appellants, which the re-
spondents themselves are contending is not in any way af-
fected by the provisons of the Ordinance, could become
enlarged.
The next contention raised on behalf of the apellants before
us relates to the maintainability of the respondents’ coun-
ter-claim- The contention is based upon section 18 (2) of
the Ordinance which provides that “no suit or other legal
proceedings for any such compensation or damages” (i.e.,
compensation or damages for any damage to or loss of any
property, rights or interests due to or in any way arising
out of the explosion)”shall, save as aforesaid” (exception-
snot material here) “be maintainable in any court
against the Crown ……… or against any other person
whoms oever……”. The learned Chief Justice in the Court
below makes no reference in his judgment to this contention,
but Chagla J. repelled it thus. “Now, in my opinion, the
defendants’ claim does not arise out of the explosion nor is
it in any way due to the explosion. The plaintiffs have
filed the suit as agents on an indemnity and the defendants’
answer is that they were entitled to set off against the
amounts due to the plaintiffs, the loss incurred by them by
reason of the fact that the plaintiffs as the defendants’
agents did not carry out the defendants’ instructions. If
the plaintiffs’ claim on the indemnity does not arise out of
the explosion equally so does the defendants’ set-
1007
off not so arise. The defendants’ cause of action is fail-
ure by the plaintiffs to carry out their instructions and
that cause of action has nothing whatever to do with the
explosion’”. With all respect I find it difficult to follow
this reasoning. The appellants’ claim on the indemnity does
not certainly arise out of the explosion, for their case is
that they purchased the goods in question paying the price
on the respondents’ instructions, and they claim to recover
the price so paid notwithstanding the destroction of the
goods by fire for which they say they were in no way respon-
sible. But the basis of the respondents’ counter-claim is
quite different. They say that if the appellants had kept
the goods insured according to the agreement, they (the
respondents) could have recovered the full value of the
goods from the Government under section 14 of the Ordinance,
and the appellants, having failed to do so, are liable to
pay by way of damages the balance of the value of the goods.
It is a little difficult to see how it could be said that
the respondents’ claim “does not arise out of the explosion
nor is it in any way due to the explosion”. The bar under
section 18 is not based upon the nature of the cause of
action for the suit or proceeding barred, but upon the
damage or loss of property having been “due to or in any way
arising out of” the explosion. Indeed, the respondents
appear to my mind to be in a dilemma in regard to this
point. They must necessarily say, in order to have been able
to claim the full value of the goods from the Government if
they had been insured, that the damage to the goods was
“explosion damage to property, being damage caused by
fire to property insured whether wholly or partially at the
time of the explosion against fire under a policy covering
fire risk”. For, unless they said that, no claim could be
made against the Government under section 14, and so the
very basis of their claim against the appellants that, but
for the appellants’ neglect of duty, the respondents could
have recovered the full value of the goods from the Govern-
ment, would fail. But if they had to say that the goods were
lost by explosion damage within the meaning
1008
of section 14, it seems to me, they would be bringing them-
selves under the bar of section 18 (2). The respondents
cannot therefore claim that the loss of the goods was explo-
sion damage within the meaning of the Ordinance so as to
bring the case within section 14 and at the same time con-
tend that the loss was not “due tO or did not in any way
arise out of the explosion” in order to avoid the bar under
section 18. Both section 14 and section 18 have in view the
physical cause for the loss or damage to property for which
compensation is claimed and not the cause of action in
relation to the person against whom relief is sought. The
respondents cannot, in my opinion, be allowed to take up
inconsistent positions in order to bring themselves within
the one and to get out of the other.
I would therefore allow the appeal and dismiss the
counter-claim.
DAS J. agreed with the Chief Justice.
Appeal dismissed.
Agent for the appellants: Mohan Behari Lal.
Agent for the respondents:/. N. Shroff.