1. This revision petition has been filed in the following circumstances. On 29-5-1948, a car belonging to Mrs. Pahwa, wife of Mr. Des Eaj, Pahwa, a Subordiuate Judge at Delhi, was involved in a collision with another car numbered DLH 800, which was registered in the name of Mr. B.B Tawakley, an advocate of Delhi. Mrs. Pahwa, who was driving, her husband and some children received injuries. The car of Mrs. Pahwa was insured with the respondent Company, the Concord of India Insurance Company Limited of Calcutta. It be happened that Mr. Tawakley had also insured his car with the same Company. The Company promptly settled the claim arising out of the policy on the car of Mrs. Pahwa, a sum of about Rs. 9,000 being paid which included the costs of the damage to the car and also a sum of Rs. 350 as medical expenses. Mr. and Mrs. Pahwa, however, thought that they were also entitled to some compensation for injuries and shock and about 23-6-1948, they sent a notice to Mr. Tawakley demanding a sum of Rs. 35,000 on this account. As they had apparently discovered that Mr. Tawakley's car was also insured with the Company, a copy of this demand was sent to the Company. The result of the enquiries instituted by the Company however revealed that some time before the accident Mr. Tawakley had sold the car to a certain Taxi proprietor for R?. 1500 and at the time of the accident the car was hired on a daily basis to the section of the police at Delhi which was dealing with the recovery of abducted women. Since a motor insurance policy, being a contract between the owner of the car and the insurer, does not ordinarily continue in force if the owner of the car sells it to another person, in order that the policy shall continue to remain in force a mutual agreement is necessary between the insurer and the new owner. No such agreement having been arranged or even mentioned in the present case, the Company considered that it was no longer liable at the time of the accident under the third party risk portion of its contract with Mr. Tawakley, and it therefore repudiated any liability under the policy. Discussions continued for nearly a year with the Company maintaining this position and then on 26-5-1949, Mr. and Mrs. Pahwa sent a notice through counsel to Page: 115the Company alleging that the Company was liable for the damage caused by Mr. Tawakley's car and that the injured persons were entitled to take advantage of the third party risk section of the policy on Mr. Tawakley's car and therefore, since the settlement of the claim was disputed, Mr. and Mrs. Pahwa proposed to refer the matter to arbitration as provided in the terms of the policy. They also added that they hid decided to appoint Mr. Ranjit Singh Narula Advocate as their arbitrator and called on the Company to nominate its arbitrator. On the 29th of May Mr. Tawakley, apparently after consultation with Mr. and Mrs. Pahwa, said that he had no objection to the proposed arbitration. The Company, however, would not agree to this proposal as they claimed that there was no arbitration agreement in existence of which Mr. Pahwa could take advantage. Thereafter the arbitrator appointed by Mr. and Mrs. Pahwa sent formal notice to the Company of his intention to proceed with the arbitration, and on 15-7-1949 the Company filed a petition under Section 33 of the Arbitration Act, in the Court of the District Judge at Delhi seeking a declaration that there was no arbitration agreement in existence between it and Mr. and Mrs. Pahwa, and also seeking a direction to the arbitrator not to take proceedings in the matter. The learned District Judge gave an interim stay order and finally dealt with the case on 11-4-1950, in the order now under revision. The preliminary contention of the respondents that while the Company was denying the existence of any arbitration agreement between the parties it could not file an application under S. 33 of the Act was rejected, and the learned District Judge held further that there was no arbitration agreement in existence between the Company and the respondents arising out of the insurance contract between the Company and Mr. Tawakley and he therefore ordered that the arbitrator nominated by the respondents should be permanently restrained from proceeding with the arbitration. Mr. and Mrs. Pahwa have accordingly come to this Court in revision.

2. The preliminary point raised by the present petitioners in the lower Court regarding the locus standi of the company to move the Court under S. 33 of the Act was not now reagitated. On the merits of the case, two distinct questions arise, one of which has not been decided by the learned District Judge although prima facie it would appear that this was the first question to be decided, since if the decision on it went in favour of the Company the second question, on which the learned District Judge accepted the Company's petition, would not arise. This question, which, in my opinion, ought to have been decided first, was whether at the time of the accident Mr. Tawakley was in fact no longer the owner of the are, and therefore there was no longer any insurance contract in existence between the Company and Mr. Tawakley. It is generally agreed that a motor insurance policy does not remain in farce if there is a change of ownership of the car insured unless there is an agreement between the Company and the new owner that the policy shall remain in force, and there is no suggestion in the present case that any agreement of this kind was entered into or even that any attempt to negotiate one was initiated. This aspect of the matter was briefly dealt with by the learned District Judge in the following passage in his judgment:

“The Company's contention first is that in fact Mr. Tawakley had sold the car to another person before the date of this accident and the insurance contract was, therefore, at an end and the Company cannot be held liable for any damage caused by the car in question to Mr. and Mrs. Pahwa, but after hearing the learned counsel for the parties I find that this contention raises a question of fact, which it will really be for the aribitrator to decide if it is otherwise found that the aribtrator is entitled to proceed, and that of course largely rests on the question, whether there is any arbitration agreement in existence between the parties.”

3. To my mind this was clearly a wrong view of the matter and the question whether there was any arbitration agreement between the Company and Mr. Tawakley of which Mr. and Mrs. Pahwa could take advantage would only arise after a decision that Mr. Tawakley had not sold his car before the date of the accident and that there was a contract still subsisting between the Company and Mr. Tawakley. It seems to me that although Mr. Pahwa has denied the alleged sale of his car by Mr. Tawakley, and Mr. Tawakley himself has played rather curious and prevaricator part in the affair, there can in fact be no doubt that he had sold the car some time before the accident. (After discussing the evidence, the judgment proceeded:) I therefore consider that it has been satisfactorily established that at the time of the accident the car was no longer in the ownership of Mr. Tawakley and that therefore there was no contract between Mr. Tawakley and the Company of which Mr. and Mrs. Pahwa could take advantage even if it were found to be possible to extend the ordinary laws of contract in their favour in the manner which is the subject-matter of the second question.

4. In view of the above finding, it is not really necessary to go into the second question, but as it is of some importance I propose to do so. There is no doubt that in the insurance contract between Mr. Tawakley and the Company there was a clause for reference of any dispute arising between them out of the policy to be referred to arbitration (sic.) but the dispute is not between Mr. Tawakley and the company, the claimants being a third party. Under the ordinary law the only persons who can take legal steps to enforce the terms of contract are the parties to the contract, but there are undoubtedly some Indian cases relied on by the claimants in which it has been held that in certain circumstances a contract can be enforced by some Page: 116one other than a party to it. The first of these cases is a decision of the Privy Council reported at Mahomed Khan v. Husaini Begam, 32 All. 410, in which the facts were that when a Mohammadan minor girl was married her father-in law entered into a contract to pay her a sum of Rs. 500 per mensem in perpetuity as from the date when she was received in the house of her husband. She lived with her husband for some time, but later separated from him, whereupon her allowance was stopped by her father-in-law, and she sued to recover the amount which she claimed was due. She was met with the defence that she was not a party to the agreement and could not therefore maintain the action. Their Lordships of the Privy Council in rejecting this defence observed:

“It is contended on the authority of Tweddle v. Atkinson that as the plaintiff was no party to the agreement she cannot take advantage of its provisions. With reference to this it is enough to say that the case relied upon was an action of assumpsit and that the rule of common law, on the basis of which it was dismissed, is not in their Lordships opinion applicable to the facts and ‘circumstances of the present case. Here, the agreement executed by the defendant specifically charges immovable property for the allowance which he binds himself to pay to the plaintiff; she is the only person beneficially entitled under it. In their Lordships' judgment, although no party to the document, she is clearly entitled to proceed in equity to enforce her claim. Their Lordships desire to observe that in India and among communities circumstanced as the Mohammadans, among whom marriages are contracted for minors by parents and guardians, it might occasion serious injustice if the common-law doctrine was applied to agreements or arrangements entered into in connection with such contracts.”

5. Another case relied on was Khirod Behari Dutt v. Man Gobinda, 61 Cal. 841, in which it was held that a zemindar can sue upon a contract made between his mokarraridar and darmokarraridar, whereby the latter undertook to pay the mokarraridar's rent direct to the zemindar; and the zemindar can obtain a decree for his rent direct again the darmokarraridar, and that there is nothing in the Indian Contract Act, which prevents the recognition of a right to a third party to enforce a contract made by others, which contains a provision for his benefit; and the definition of consideration in S. 2(d) is wider than in English law.

6. There is also another decision of the Calcutta High Court reported at Deb Narain Dutt v. Ram Sadhan, 41 cal. 137, in which the facts were that one man was indebted to another and the debtor transferred his properties to a third person, who thereupon acknowledged the debtor's liability to the creditor in respect of the debt due to him, and the creditor accepted the acknowledgment of liability. When the creditor was unable to recover the amount he sued the transferee and the question arose whether the transferee could be held liable as he was not a party to the original contract creating the debt. A Division Bench held that in these circumstances the rigid rule of English common law was not applicable and that the decision in 32 All. 410 ought to be upheld.

7. All these decisions were however on the particular facts of those cases, and although the language used in the second of the decisions is prima facie capable of wide application, it would seem that no very wide application has been given to it in other decisions of the Calcutta High Court of which the leading one is Krishnalal v. Pramila Bala Dasi, 55 Cal. 1315 in which case law has been extensively reviewed. The facts of that case were that in a life insurance policy the insured nominated his widow as the person to whom the money due on the policy was to be paid. After his death the money due on the policy was attached by some creditors in execution of a decree against his sons. The widow then sued for the recovery of the amount on the basis of the insurance contract, and the question was whether the plaintiff was entitled to enforce her claim against the insurance Company. It was held, Rankin, C.J, delivering the judgment, that although the plaintiff was the nominee of the deceased, she was not a party to the contract between the deceased and the insurance company and was therefore not entitled to enforce the contract. The following passage has been cited by the learned District Judge:

“Clause (d) of Section 2 of the Contract Act, widens the definition of ‘consideration’ so as to enable a party to a contract to enforce the same in India in certain cases in which the English law would regard that party as the recipient of a purely voluntary promise and would reuse to him a right of action. Not only, however, is there nothing in S. 2 to encourage the idea that contracts can be enforced by a person who is not a party to the contrast, but this notion is rigidly excluded by the definition of ‘promisee’ and ‘promisee’. The decision of Tweddle v. Atkinson, (1861) 1 B & S. 393 was a decision at law and was unaffected by the rules of equity. For this reason the Judicial Committee in Muhammad Khan v. Hussaini Begum (32 All. 410) regarded it as inapplicable to the facts of the case before them where the agreement included a specific charge on immovable property. In my judgment, it is erroneous on the basis of that case, or on the observations of Jenkins, C.J in 41 Cal. 137 to suppose that in India persons who are not parties to a contract can be admitted to sue thereon, except where there is an obligation in equity amounting to a trust arising out of the contract.”

8. On behalf of the claimants, it was contended that in a contract of insurance for third party risks there was a kind of trust created for the benefit of any third party who might suffer injury or loss, but I cannot believe that this is the kind of trust contemplated in the decisions relied on by them, in which there was some kind of a specific & limited trust created in favour of some definite person, and not a vague and unspecified liability, limited only by the maximum amount payable under the policy, in favour of all and sundry.

9. Reliance was placed on the terms of Section 96 of the Motor Vehicles Act, 1939, which provides that where a certificate of insurance has been issued to any person and judgment is obtained against Page: 117the person covered by the policy, notwithstanding the fact that the policy might be liable to cancellation or has been canceled, the insurer must pay to the person entitled to the benefit of the decree a sum not exceeding the sum assured, it also being provided in the section that the insurance Company must be impleaded as a party and what defences are open to the Company. It seems to me, however, that the provisions of this section would only come into operation if the claimants had brought a suit against Mr. Tawakley or the owner of the car at the time of the accident, and I cannot interpret the section as extending the ordinary principle of law that legal proceedings based on a contract can only be instituted by a party to the contract.

10. A decision of the Privy Council in a Canadian case Alie Marie Vendepitte v. Preferred Accident Insurance Co.; New York, A.I.R(20) 1933 P.C 11, has been cited on behalf of the company in which it has been held regarding a motor insurance policy that the ordinary principles of law in this respect cannot be extended. The facts are quite parallel with those of the present case. A motor accident had happened in which the wife of the owner of one of the cars, who was himself driving, was seriously injured, the other car being driven by the daughter of the owner. The injured wife brought a suit against the driver of the other car, and her husband was also impleaded as a defendant and she obtained a decree for damages against both of them, the damages, however, being twice as heavy in the case of the driver of the other car as against her husband. She unsuccessfully sought to execute the decree against the other driver, and thereafter brought a suit against the company with which the car of the father of the defendant was insured, there being rather a similar clause in the appropriate statute regarding the liability of an insurance company to satisfy a judgment for damages for third party risks. Her claim was rejected by their Lordships of the Privy Council and although the case was the converse of the present case, some of their remarks appear to be applicable. They observed:

“On equitable principles only a person who is a party to a contract can sue on it. The law knows nothing of a jus guaesitum tertio arising by way of contract. Such a right may be conferred by way of property, as for example, under a trust, but it cannot be conferred on a stranger to a contract as a right to enforce the contract in personam. But a party to a contract can constitute himself a trustee for a third party of a right under the contract and thus before such rights enforceable in equity on the third party. The trustees then can take steps to enforce performance to the beneficiary by the other contracting party as in the case of other equitable rights. The action should be in the name of the trustee; if however, he refuses to sue, the beneficiary can sue, joining the trustee as a defendant. In such cases again the intention to constitute the trust must be affirmatively proved; the intention cannot necessarily be inferred from the mere general words contained in a contract such as an insurance policy.”

11. Again it was observed:

“The idea of a person being the cestui que trust under the insurance contract is objectionable since the doctrine of the equitable interest of a beneficiary under a contract of a third party relates to benefits under the contract, whereas in an insurance serious duties & obligations rest on any person claiming to be insured which necessarily involve contest and privity of contract.”

12. In the circumstances I am of the opinion that the learned District Judge rightly decided this point in favour of the company. I accordingly dismiss the petition with costs and assess the Pleader's fee at Rs. 100 (One hundred).

V.B.B

13. Petition dismissed.