The General Assuranc... v. Sri Sitarama Rice Mi..., Madras High Court, Judgment, Law, casemine.com

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Case Number

A.N 776 of 1963 and 168 of 1964 10th April, 1970.

Attorney(S)

N.C Raghavachari and N.S Varadachari for Applt.
C. Vasudevan, M. Ramachandran and J. Jayaraman for Respts.

Judges

Sadasivam
Maharajan, JJ.

Acts

MOTOR VEHICLES ACT

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Smart Summary

Factual and Procedural Background

Sri Sitarama Rice Mills Co. owned a factory and machinery insured with Jupiter General Insurance Co. Ltd. (first defendant) against fire damage for the period 1st January 1960 to 1st January 1961. The factory was leased to Kodali Venkatasabba Rao, who subleased it to Venkineni Venkataratnam, who further subleased it to Koteswara Rao (third defendant). The plaintiffs had earlier obtained an injunction against their lessee Venkatasabba Rao to prevent subleasing. The third defendant also insured the factory and machinery with General Assurance Society Ltd. (second defendant) without the plaintiffs' knowledge or consent. A fire destroyed the factory on 31st January 1960, and the plaintiffs claimed Rs. 50,000 under their insurance policy. The first defendant's surveyor estimated the damage at Rs. 17,500, which was accepted by all parties. The first defendant relied on a policy clause limiting its liability to a rateable proportion due to the existence of another subsisting insurance by the third defendant with the second defendant. The plaintiffs denied authorizing the third defendant to insure on their behalf and sought full recovery from the first defendant or alternatively from both defendants.

The second defendant did not participate in the suit and contended that the third defendant had no insurable interest and that the insurance was void due to misrepresentation and lack of privity of contract with the plaintiffs. The trial court found that the plaintiffs had no contract with the second defendant and that the insurance by the third defendant was without the plaintiffs’ authority. The court granted partial decrees against both defendants. Both defendants and plaintiffs appealed the decision.

Legal Issues Presented

Whether the insurance policy effected by the third defendant without the plaintiffs’ knowledge created a double insurance situation triggering the contribution clause in the first defendant’s policy.
Whether the third defendant had an insurable interest in the factory and machinery.
Whether the first defendant can limit its liability to a rateable proportion of the loss under clause 16 of the insurance policy.
Whether the first defendant was required to pay the full claim amount and then seek contribution or subrogation against the second defendant.
Whether the second defendant is liable under the insurance policy issued to the third defendant given the absence of privity of contract with the plaintiffs.

Arguments of the Parties

Plaintiffs' Arguments

The third defendant’s insurance was effected without their knowledge or consent and without authority to bind them.
They denied any benefit from the third defendant’s insurance and challenged the validity of the sublease after an injunction.
They claimed full recovery from the first defendant or jointly from both defendants.

First Defendant's Arguments

Relied on clause 16 of their policy limiting liability to a rateable proportion when other subsisting insurance exists.
Asserted entitlement to contribution from the second defendant due to double insurance.
Argued they should have been allowed to pay the claim first and seek subrogation or contribution from the second defendant.

Second Defendant's Arguments

The third defendant had no insurable interest in the property, making the insurance policy void ab initio.
No privity of contract existed between the plaintiffs and the second defendant.
The insurance was obtained by misrepresentation and suppression of facts.
Denied liability to contribute or pay under the policy.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
North British and Mercantile Insurance Co. v. London Liverpool and Globe Insurance Co.	Construction of contribution clauses in insurance policies; contribution applies only in cases of double insurance where the assured has the same interest; contribution clause should be reasonably construed to avoid depriving insured of full remedy.	The court relied on this precedent to interpret clause 16 of the first defendant’s policy, holding that it applies only in cases of valid double insurance and not where the second insurance is without authority or privity.
Marks v. Hamilton (1) Pollock C.B	Possession, even if not legal ownership, can confer insurable interest; possession gives a right recognized against all except those with better title.	The court found that the third defendant had an insurable interest by virtue of possession and court permission to occupy, so the insurance policy was not void ab initio.
Portaven Cinema Co. v. Price	Contribution clause applies only to genuine double insurance; insurance taken without authority or ratification does not create double insurance or contribution rights.	The court applied this principle to reject the first defendant’s contention that clause 16 applies to the unauthorized insurance by the third defendant.
Austin v. Zurich General Accident and Liability Insurance Co. Ltd	Insurer paying claim may seek subrogation or contribution from other insurers; proper procedure involves paying insured and then suing other insurers.	The court noted that the first defendant should have paid the plaintiffs and then sought contribution or subrogation rather than relying on clause 16 to limit payment.

Court's Reasoning and Analysis

The court began by examining the nature of the insurance policies and the relationships between the parties. It accepted that the third defendant had no authority from the plaintiffs to insure the property, thus negating privity of contract between the plaintiffs and the second defendant. The court analyzed the legal principle of insurable interest, relying on established authorities that possession, even if not ownership, can suffice to create such interest. It found that the third defendant’s possession, sanctioned by court order, conferred an insurable interest, making the policy with the second defendant not void ab initio.

The pivotal issue was the applicability of clause 16 of the first defendant’s policy, which limits liability when other subsisting insurance exists. The court reasoned that this clause should be interpreted reasonably and sensibly, as per the precedent in North British and Mercantile Insurance Co. v. London Liverpool and Globe Insurance Co., to avoid depriving the insured of full indemnity. The clause applies only where there is valid double insurance by or on behalf of the insured or with their authority. Since the second insurance was unauthorized and without plaintiffs’ consent, it did not create a valid double insurance situation.

The court further held that the first defendant could not rely on clause 16 to limit its liability and should have discharged the claim fully before seeking contribution or subrogation against the second defendant. The second defendant’s arguments based on lack of insurable interest and privity were rejected insofar as the policy was valid with the third defendant’s interest.

Accordingly, the court modified the trial court’s decree, holding the first defendant liable to pay the full amount claimed by the plaintiffs and dismissing the suit against the second defendant.

Holding and Implications

The appeals were disposed of by modifying the trial court’s decree:

The suit was decreed as prayed for with costs against the first defendant (Jupiter General Insurance Co. Ltd.).
The suit was dismissed without costs against the second defendant (General Assurance Society Ltd.).
Appeal No. 776 of 1963 by the second defendant was allowed with costs.
Appeal No. 168 of 1964 by the plaintiffs was allowed with costs against the first defendant and dismissed without costs against the second defendant.

The direct effect of this decision is that the first defendant insurer cannot limit its liability under the contribution clause when the other insurance was effected without the insured’s authority. The ruling clarifies the scope of contribution clauses, emphasizing that they apply only in cases of valid double insurance with privity or authority. No new precedent was set beyond the application of established principles to the facts.

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The General Assurance Society Ltd. v. Sri Sitarama Rice Mill Co. By Mg. Partner Alipati, Chinnakutumba Rao And Others.

(Delivered by Sadasivam, J.)

Sri Sitarama Rice Mills, Co., are the owners of the factory building with godowns at Dosapadu, Krishna District. On 19th January 1960, they insured the factory and machinery with the Jupiter General insurance Co. Ltd., the first defendant is the suit, against less er damage that may result by fire er lighting for one year between 1st January 1960 and 1st January 1961. One Kodali Venkatasabba Rao took a lease of the factory with the machinery from the plaintiffs and subleased the same to one Venkinenl Venkataratnam. Venkineni Venkataratnam in his turn subleased the property to one Koteswara Rao, the 3rd defendant is the suit. The plaintiffs filed O.S 44 of 1958 on the file of the Subordinate Judge's Court, Gudiwada, against their lessee Venkatasubba Rao and others and obtained an junction against the lessee from sub-leasing the property. The plaintiffs' case is that their lessee Venkatasabba Rao had as right to sub-lease or assign his interest and more so after they had obtained as injunction order in O.S 44 of 1958 on the file of the Subordinate Judge's Court, Gudiwada. The 3rd defendant also incurred the factory and machinery against loss er damage as a resell of fire or lightning with the General Assurance Society Ltd., on 11th November 1959 for one year. On 31st January 1960, the plaintiffs' factory was destroyed by fire accident and the plaintiffs claimed the assigned amount of Rs. 50,000/. under the policy taken by thorn from the first defendant The Surveyor of the first defendant-company estimated the damage at Rs. 17500 and this is admitted as correct by all the parties. The first defendant, company relied on clause 16 of the Palley Ex. A.1 granted by it in support of its contention that it is not liable to contribute mere than the rateable proportion of each lose or damage as estimated by the Surveyor in view of the feet that there was a valid and subsisting insurance on the date of the fire accident, namely, the insurance effected by the 3rd defendant with the 2nd defendant. The plaintiffs have alleged in para-10 of the plaint that the insurance effected by the 3rd defendant Koteswara Rao with the 2nd defendant-company was with out their knowledge or content and that the 3rd defendant had neither power no authority to make any contrast for and on their behalf. They denied having had any benefit of the insurance effected by the 3rd defendant. They claimed to recover the entire amount from the 1st defendant or in the alternative from both, from defendants 1 and 2.

The 2nd defendant remained ex parte in the the suit. The 2nd defendant pleaded that the 3rd defendant had no insurable interest end that the insurance policy obtained by him had been brought about by misrepresentation and suppression of facts and that therefore they were not liable on the insurance policy, that there was no privily of contract between them and the plaintiffs and that there could be an claim for contribution against them.

The parties did not address any oral evidence in the trial court and the documents were marked by consent. The trial court accepted the plaintiffs' case that they never authorised the 3rd defendant to lame their property and that there was no privily of contract between them and the lad defendant. But it did not accept the contentious of the 2nd defendant that this was not a case of doable insurance in which the first defendant could claim any contribution from the 2nd defendant and that even if the first defendant had any such right of contribution, they should have red their remedy by following the third party prosed ere under Or. VIII-A C.P.C in the result, the trial court granted a decree to the plaintiffs for a sum of Rs. 9722-22 with proportionate cost against the first defendant and for Rs. 7777-78 with proportionate costs against the 2nd defendant.

The General Assurance Society Ltd., the 2nd defendant, have preferred App. No. 776 of 1963 against the decree and judgment passed against them. The plaintiffs have preferred App. No. 168 of 1964 against the decree and judgment of the trial court refusing to give a joint decree against both the defendants. They have restricted the claim to a sum of Rs. 7777-78 in as much as the first defendant has admitted liability for payment of the balance.

There is no privily of contract between the plaintiffs and the 2nd defendant company who issued the Ex. B.1 to the 3rd defendant. It is alleged in para 5 of the plaint that the plaintiffs' lessee K. Venkatasubba Rao had no right to sublease their factory, machinery and godowan and that the ultimate sublease in favour of the third defendant, after they had obtained an injunction order in O.S 44 of 1958 on the file of the Sub Court, Gadivada is void. In para 10 of the plaint the plaintiffs have clearly stated that the insurance effected by the 3rd defendant with the 2nd defendant is without their knowledge on can gent and that the 3rd defendant had neither power nor authority to make any contract for and on their behalf. If the suit claim is based on any contractual liability, the plaintiffs cannot sue the 2nd defendant in the absence of any privity of contract. If the suit claim is based on any delictual liability, there is no allegation that the third defendant committed any. Under the Motor Vehicles Act, there is a statutory liability on insurance companies under third party insurance policies granted by them, but there is an each statutory liability in the case of fire insurance policies. This the contention of the 2nd defendant that on the pleading it cannot be made liable for the suit claim, or for any part of the lame, is folly justified.

The 2nd defendant Society are entitled to raise all the defences that are open to them against the 3rd defendant. It is clear from Ivamy on “General Principles of insurance Law”, page 218 that a condition precedent to be read with the policy it that the assured has an insurable interest in the subject mater of insurance and that otherwise the policy never attacks, but is void ab initio. Para 623 in Halsbary's Laws of England, 3rd Edn. Vol. 22, page 310 deals with the necessity of insurable interest is a contract of fire insurance and it is as follows:

“A contract of fire insurance, like all other contracts of insurance, requires an insurable interest in the subject matter of the insurance to support it; in the absence of insurable interest, the assured can suffer no loss, and the contract becomes a mere wager”.

Para 624 deals with the interests which are insurable and it is as follows:

“The precise nature, extent or value of the interest is, however, irrelevant. An equitable or beneficial interest of any kind is as effective for this purpose as a legal interest. Interest in not restricted to ownership; it may arise under a contract relating to the subject-matter or it may be founded upon law possession. Thus a finder who takes the object which he finds into his possession has an insurable interest in it. Similarly a defensible or precarious interest is capable of tap-porting as insurance”.

Chapter 5 in Ivamy's General Principles of insurance Law, deals with insurable interest. At page 19 of the book it is stated that apart from any question of contract, the mere fact of possession, if lawful, is sufficient to give as insurable interest. In the foot note 15, it is stated that a finder has an insurable interest, but a trespasser has sot. But as pointed out in Porter's Law of insurance, 8th Edn. page 41 an insurable interest does not mean a perfect legal interest for if it did, there are some buildings on which it would be difficult for any one as owner to effect a valid insurance. It is pointed eat by the author that there must be a valid sub sating contract capable of being enforced between the parties themselves in order to constitute as insurable interest or right of action against the insurer.

Sri N.C Raghavachari appearing for the second defendant urged that having regard to the averments in the plaint it could act be said that the 3rd defendant had any insurable interest. But the matter is act free from difficulty. The 3rd defendant filed I.A 1085 of 1959 in O.S 44 of 1958 on the file of the Subordinate Judge's court, Gadiwada, for the appointment of a Commissioner to in speet the mill buildings and godowns and report about their condition. It is clear from the order Ex. A-5 that the court permitted the 3rd defendant to continue to remain in occupation of the Mill Buildings, machinery and godowns, subject to his depositing Rs. 7116 late court. It appears from the order that the present plaintiffs filed a coaster pleading that the 3rd defendant was allowed to remain in possession of the factory, machinery, etc., out of grace though be had obtained a sublease during the reader, by of the suit. Para 448 at page 221 of Macgillivary's insurance Law, 5th Edn. Vol. I, is relevant for the present discussion, and it is as follows:

“The more possession of property is probably sufficient to give the parson in possession insurable interest in it. Even if the possession is wrongful as against the tree owner, such as that of a mere trespasser, it is a right which is recognised by law as available against all the world except those who can show a better title……A person in possession of property may sue a third person who has negligently damaged or destroyed it, and may recover from him the full amount of damage upto the total value of the property, and it would seem to follow that person in possession of property has on that ground alone an insurable interest to the fall value. Mr. Banyos was of that opinion, but the minorities are not unanimous of the point, and it is arguable that the insurable Interest arising from the possession of any property is a limited interest corresponding to the market value of the right of possession or to the responsibility of the person in possession to the owner for accidental damage to or loss of the property.”

In Marks v. Hamilton(1) Pollock C.B held that an insolvent who had acquired property after he bad obtained his discharge and insured it, but subsequently the discharge was revoked, had an insurable interest in the property as he was in possession of the same as the apart meat owner responsible to those who were the real owners Thus it could not be said that the 3rd defendant had an insurable interest and that the pelley taken by him was ab Initio void.

The main question for consideration in these appeals is whether the Jupiter General insurance Co. the first defendant in the suit, can restrict their liability and claim that they are not liable to pay or contribute more than their rateable properties of the less or damage sustained by the plaintiffs by virtue of clause 16 is the policy Ex. A-1 issued by it; Clause 16 in Ex. A-1 is as follows:

“If at the time of any loss or damage happening to any property hereby insured, there be any other subsisting insurance, or insurance, whether effected by the insured or by any ether person or persons, covering the same property, this company shall not be liable to pay or contribute more than its rateable proportion of seen loss or damage”.

It is true that this clause in the policy Ex. A-1 is worded so generally that it is possible to contend that the first defendant-company shall out be liable to contribution more than its rateable proportion by reason of the 3rd defendant effecting the policy Ex. B-1 over the same property. But it is the duty of the court as pointed out by Jessel M.R in North British and Mercantile Insurance Co. v. London Liverpool and Globe Insurance Co. to adopt that which is reasonable construction as contrasted with that which if not absurd, would be a very unlikely construction. The learned Judge has rightly observed at page 577 of the decision that one must read the condition in a sensible way, and not assume that these great companies intended to entrap their policy holders and to destroy the value of the contract of indemnity by reason of the accidental contract of somebody else which bad no connection with the subject matter of the contract, or with the price paid for the insurance. The learned Judge had to consider the following clause contained in the insurance policies in that case (page) 571.

“In all cases where any other subsisting insurance or insurances, whether effected by the insured or by any other person, covering any other property hereby injured, either exclusively or together with any other property in and subject to the same risk only, shall be subject to average, the insurance on such property under this policy shall be subject to average in like manner”.

The suit in that case was instituted for the purpose of ascertaining the liability of certain fire insurance companies under the policies granted by them in respect of the loss of fire of a large amount of grain and seed belonging to Rodocanachi and Co. merchants, and stored in the granaries of Barnett and Co. what fingers. Burnett and Co. the what fingers, were absolutely responsible for the safety of the goods contrasted to them and they were liable to make good the less of the grain whether caused by their negligence or otherwise. They had in their us cul course of business effected insurance with the Liverpool, London and Globe and other insurance companies by means of what are called what fingers policies in order to indemnify them against the consequence of loss by fire etc. Messrs. Rodocanachi and Co. the merchants and owners of the goods, insured their grains themselves with North British and Merehantile Co.

The question that arose for decision in that case was whether a fire having occurred and a great loss having been sustained, the companies who were liable on the merchants' policies were liable to contribute anything to the amount of that loss, which the what fingers policies alone would be mote than sufficient to cover. The insurance companies who had granted the what fingers' policies alleged that by reason of the act of Rodocanachi and Co. in insuring gratuitously, so far as the what fingers were concerned, the grain in question their liabilities had been diminished by an amount proportionate to the amount insured by the merchants' policies. Bet this contention was negatived mainly on the ground that the what fingers were primarily liable to make good the loss or damage sustained by the owners of the goods. Reliance was pieced en the condition in the what finger’ policies that in all cases where any ether subsisting insurance or insurances, whether effected by the insured or by any other person covering the property, their liability to pay damages would be pro portionately reduced. We have already referred to the observations of Jestel M.R with regard to the construction of the said clause. Mellish, L. J. dealt with this congestion in the following terns (page 585):

“They have used words which are difficult to contrue and which prima facie at the commencement of them do appear to apply to the case, because their is an insurance covering the same properly. I agree with what Mr. Fry says, that there is some difficulty in construing the words covering the same property to mean only the interest in the same property.” Then it ends by saying the consequence is to be flat “this company shall set be liable to pay or contribute more than its rateable proportion of such less or damage. That seems to me plainly to imply that the other company is to be liable to pay the other proportion. Here the facts are sack that the other comparably, for the reasons I have given, are not liable to pay the ether proportion, because the otter company is not liable to pay anything. It is liable to pay Rodecanachi the moiety or the whole, but then, whether it is the whole or the moiety, it has the remedy over against Barnett, and therefore it is practically liable to pay nothing. In my opinion this 9th clause never could have been intended to apply to a case in which the consequentness would be that the insured would be deprived of his fall remedy. The object was not to deprive him of his fall remedy but that when there was a liability in several companies, then the loss might be divided equally between them, instead of the one being liable for the whole, and being pat to this right of contribution”

Baggallay J. has observed as to why the principle enunciated by Lord Mansfield with regard to marine policies should not be equally applied to fire policies. It is clear from the judgment that the question of contribution will arise only in a case of doable inter once where the same man is to receive two sums instead of one, er the same sum twice ever for the same less by reason of his having made two insurances open the same goods. He has observed that the condition in the what fingers' policy is binding upon the parties to the contract, but that, in his opinion, it really amount to this, that, where there are several policies, and where there, in point of fact, is a doable insurance, then in order to ale away with the old practice of the insured recovering the whole from one of the several insurance offices, and then the one from whom it was recovered being pat to obtain contribution from the others, this clause was pat is to say that the insured should, in the circumstances, proceed against the several insurance companies for the proportionate amount of the compensation amount for which they are liable. It was held in that decision that it was not a case of double insurance because the two companies had insured distinct interests, and that since there was as doubt insurance there was no right of conurbation either en general common law principles er by reason of the prorata clause, which had no application.

The contribution clause in Ex. A-1 has been introduced only in order to secure to the first defendant the right of contribution whenever it arises, the general principle is that the assured who insures his property cannot recover mere than a fall indemnity. But for each contribution clause, it would be open to the assured to select the policy from which to claim hit indemnity—If that alone is sufficient for the purpose—and the insurers open that policy cannot resist liability upon the ground that there are other policies in existence which the assured might have enforced. (See page 415 of Ivamy's General Prieiples of insurance law). At page 416 of the same book it is stated that in elder to give rise to a right to contribution the following conditions must be fulfilled. 1 All the policies concerned must comprise the same subject matter. 2 All the policies must be effected against the same peril. 3. All the policies must be effected by or on behalf of the same assured. 4. All the policies must be in force at the time of the less. 5. All the policies must be legal contracts of insurances. 6 No policy must contain any by which it is excluded from contribution. In dealing with the conditions giving rise to right of contribution, it is stated in para 528 at page 267 of Halsbury's Laws of England' 3rd Edn. Vol. 22 that each policy must cover the same interest in the property and the principle is explained in the following passage—

“Each policy must cover the same interest in the same property, that is to say, each policy must be intended to protect the same assured against the tame less. The policies must, therefore, cover a common interest; it is not sufficient that they cover the same property. Where separate insurances are effected upon the same property by different persons interested in it for the purpose of protecting their separate interests only, there is no contribution. Thus, there is no contribution when separate policies are effected by and bailee, by mortgagor and mortgagee, or by landlord and tenant for their individual protection. Where, however, one of the policies is intended to share for the benefit of both persons interested, as, for instance, where the bailee, mortgagee er tenant intends to cover the interest of hit batter, mortgagee or landlord so well as bis own, a case of contribution arises between such pulley and any policy effected by the bailer, mortgagee, or landlord for his separate protection, since both policies, in feet, cover a common interest, namely, the interest of the batter, mortgagee er landlord”.

Thus, where the assured under one policy is a distinct person from the assured under the other, each having a separate interest in himself, and neither policy being intended for the benefit of the assured under the other, no right of contribution arises, notwithstanding that the policies all relate to the same object, and to the same risk.

So far as Marine insurance is concerned, S. 34 of the Marine insurance Act, 1963. provides as follows:

“1. Where two or more policies are effected by or on behalf of the assured on the same adventure and interest or any part thereof, and the sums insured exceed the indemnity allowed by this Act, the assured is said to be over-insured by doable insurance.

2. Where the assured is over-insured by doable insurance—

(a) the assured, unless the policy others wise provides, may claim payment from the insurers “in sack order as be may” think fit, provided that be is not entitled to receive any sum in excess of the indemnity allowed by this Act;

(b) When the policy under which the assured claims “is a valued policy, the assured must give credit as against the valuation, for any sum received by him under any other policy, without regard to the actual value of the subject-matter insured;

(c) Where the policy under which the assured claims is an unvalued policy be must give credit, as against the full insurable value, for any sum received by him under any other policy.

(d) Where the assured receives any sum in excess of the indemnity allowed by this Act, he is deemed to held such sans in trust for the insurers, according to their right of contribution among themselves.”

The following passage from the judgment of Mellish L.J at page 583 of the decision in North British and Mercantile insurance Co. v. London, Liverpool and Globe insurance Co. is relevant for the present discussion:

“Now I do not know of any English cases on the subject of contribution as applied to fire in policies; but I can see no reason why the principle in respect of contribution should act be exactly the same in respect of fire policies as they are in respect of Marine policies and I think if the some person in respect of the same right insures in two offices, there is no reason why they should not contribute in equal pre-portions is respect of a fire poller they would in the case of a marine policy. The role is perfectly established in the case of a marine policy that contribution only applies where it is an insurance “by the same person having the same rights, and does not apply where different persons inshore in respect of different rights. The reason of that is obvious. Where different persons insure the Same property in respect of their differ out rights they any be divided into two daises. It may be that the interest of the two between them makes up the whole property, as in the case of a tenant for life and remainder man. Then if each insures although they may use words apparently insuring the whole property, yet they would recover from their respective insurance companies the value of their own interests, and of coarse those values as added together would make up the value of the whole property. Therefore it would not be a case either of subrogation or contribution, because the less would be divided between the two companies in proportion to the interests which the respective persons assured had in the property, but then there may be eases where, although two different persons insured in respect of different rights each of them can recover the where, as is the case of a mortgagor and mortgagee. But wherever that is the case it will accessibly follow that on a of these two has “a remedy over against the other, because the same property cannot in value belong at the same time to two different persons. One of them map have an interest which entitles him to insure for the fall value, because in certain events, for instance, if the other person becomes insolvent, it may be he would lose the fall value of the property, and therefore would have in law an insurable interest; but yet it must be that if each recover the full value of the property from the respective offices with when they insure, one office must have a remedy against the other. I think whenever that is the case the company which has insured the person who has the remedy over succeeds to his right of remedy over, and then it is a case of subrogation”.

It is clear from the averments in the plaint and the findings of the lower court that the third defendant effected the insurance with the second defendant: without the knowledge or consent of the plaintiffs and that he had neither power nor authority to make such a contract on behalf of the plaintiffs. Hence this is act a case of double insurance to which alone clause 16 of Ex. A-1 can have any relevance. In Portaven Cinema Co. v. Price(2) the plaintiffs who were the lessees of a cinema, insured the premises with the first defendant under a Lloyd's policy of insurance against less by fire. The lessen were desirous of raising a loan an the security of the cinema, and for this purpose, and as a condition of the granting of the loan, took eat a policy of insurance with the second defendant. The Liodyd's policy contained a contribution clause is the following terms:

“This insurance does not cover any loss or damage or liability which at the time of the happening of such loss or damage or liability is insured by or would, but for the existence of this policy, be insured by any other policy or policies except in respect of any excess beyond the amount which would have been payable under such policy er policies had this laser case act been effected”.

The cinema premises were later destroyed by fire at the time when both policies of insurance were in existence, and en the plaintiffs' making a claim under the Lloyd's policy it was contended that the second defendants' policy was an insurance insuring the loss or damage or liability insured by the Lloyd's policy and that it was therefore a case of doable insurance and came under the contribution clause of the Lloyd's policy. It was held in that decision that the contribution clause should be applied only to cases which are strictly cases of double insurance, that the taking out of the second policy created no equity in favour of the plaintiffs, there being no intention in the minds of the lessors to give the plaintiffs any interest in the policy moneys and that the second policy bad not been taken out by the authority of the plaintiffs, nor had there been any sub sequent ratification by the plaintiffs and that in the result no double insurance had been created.

For the foregoing reasons, we are unable to consignee clause 16 of Ex. A-1, in the manner contended for by the first defendant as in our opinion the said clause would never have been intended to deprive the plaintiff of their full remedy. On a reasonable construction of that clause, it could be invoked only in cases where the plaintiffs themselves or any other person validly claiming title through then, or with their authority effected more than one insurance policy in respect of the same subject matter. It is also clear from what we have stated that the insurance effected by the 3rd defendant with the second defendant was dote without the knowledge or consent of the plaintiffs and that the third defendant had neither the power nor the authority to make any contract of insurance with the second defendant. We fail to see how the act of a stranger take the third defendant in taking the policy Ex. B-1 could affect the rights of the plaintiffs under Ex. A-1. In the words of Jessel M.R, we must read dense 16 of Ex. A-1 in a way and not assume that the first defendant company intended to entrap its policy-holders and destroy the value of the contract of indemnity by reason of the accidental contract of somebody else like the third defendant and it is our duty construe the instrument in a rational and reasonable manner and refuse to invoke it when there is no real case of doable insurance.

Sri N. Raghavachari contended that the remedy of the first defendant late have paid the entire amount claimed by the plaintiffs and enforced their claim for subrogation in the came of the plaintiffs against the second defendant as pointed out in Austin v. Zurich General Accident end Liability insurance Co. Ltd. He urged that if it is a claim for contribution even then the first defendant should have paid the amount due to the plaintiffs and then filed a suit in their own name against the second defendant. He argued that in any event the remedy of the first defendant was have sought leave of the court to issue notice to the second defendant as a third party under O. 8-A C.P.C The case of the first defendant is based of Cl. 16 of the policy Ex. A-1. We have already pointed out that the said clause could be invoked only if this is a case of double insurance and is that event the first defendant could rely on Cl. 16 of Ex. A.1 and contend that they are not liable to pay more than the proportionate mount of the compensation. There is, however, no scope for the arguments advanced by the learned advocate for the second defendant that the first defendant should sue in the name of the plaintiffs for subrogation or in their own name for contribution after paying if the plaintiff.

In the result, the decree and judgment of the trial court are modified by decreeing the suit as prayed for with costs against the first defendant and dismissing the suit without costs against the second defendant. Appeal No. 776 of 1963 preferred by the second defendant is allowed with rests. Appeal No. 168 of 1964 preferred by the plaintiffs is alls wed with costs against the first defendant and dismissed without costs against the second defendant.

V.C.S

The General Assuranc... v. Sri Sitarama Rice Mi...