1. I have had the advantage of reading the judgment just delivered by my learned brother. I entirely agree with him, not merely on the conclusion that the appeals ought to be allowed, but also on the grounds upon which that conclusion has to be based.
2. It may, hence, appear somewhat superfluous that I should write a separate judgment, however, condensed. But I am impelled to do so, for an important reason. It is possible to present the central argument that Mr. V. Thyagarajan has sought to put forward, in these appeals, as the horns of a dilemma. Presented in that form, the argument has the merit of great plausibility, at least on the first scrutiny. It is for this reason that I propose to tersely examine the links, in the logical chain of this argument, and to demonstrate that our conclusion follows as the correct one, even conceding the plausibility.
3. The process of reasoning is best expressed, I think, in the following form. Is there a suit known to law by an insurer, as in this case, who has, partially or wholly, reimbursed the assured on a contract of indemnity, or Marine Insurance, in respect of loss or injury to the goods, and who seeks to recover from the wrongdoer, to a proportionate extent, as one who is subgrogated to the rights of the party originally damnified? Certainly, such a suit is known to law, and is a well-known instance of the application of the equity doctrine of subrogation to Marine Insurance. It was originally expressed in Sections 130-A and 135-A of the Transfer of Property Act, and this concept is now embodied in Section 79 of the Marine Insurance Act, 1963, which repeals those sections of the Transfer of Property Act. We must here emphasise that, though the content of the claim or action by the sub-rogee is identical with, and cannot be different from, the rights of the assured, to whom the insurer is surrogated, nevertheless, the insurer can claim to be subrogated, only proportionately to the extent to which he has compensated the assured for loss or damage to the goods. These principles are not in controversy.
4. Next, to follow the argument of Mr. Thyagarajan a little further, what would comprise the bundle of rights known as the cause of suit, or "cause of action" for the subrogee to recover from the wrongdoer damages to the proportionate extent? It is here that the classical definition of Lord Esher becomes significant, that the cause of action is 'every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court'. Mr. Thyagarajan argues, is it not necessary for the insurer-plaintiff to prove, In an action of that kind, that he paid compensation to the assured to the extent to which he claims relief against the wrongdoer, standing in the shoes of the assured, as he does, upon the equity principle of subrogation? The answer is certainly in the affirmative.
Mr. V. V. Raghavan for the Board of the Port Trust of Madras does not dispute, for example, that if a suit were brought forward by the insurer against the Board, without this vital link being averred and proved, that would be a fatal bar to the suit. Here Mr. Thyagarajan rightly contends that the depth of the implications of this issue was not measured in Madras Port Trust v. A. M. Safiulla & Co., when Jagadisan, J., observed in that judgment:
"The fact that the subrogee gets a complete cause of action only after payment to his assignor cannot give an extended period of limitation to the subrogee by computing the period of six months from the date of subrogation. The recognition of a fresh starting point of limitation in favour of the subrogee from the date of subrogation may lead to the anomaly of reviving barred claims".
The learned Judge was careful to qualify these opinions, by observing that he was not finally deciding the matter; it was left open and the observations have to be construed as obiter.
5. The real point of Thyagarajan is this; and that inevitably confronts the opposer with the seeming horns of a dilemma. A suit of this character is known to law, and, indeed, it has been explicitly recognised. But such a suit does not lie, until the cause of action for the insurer to sue the third party wrongdoer is perfected or made complete, by payment to the assured by the insurer. That may take place on the last date of the period of six months, from the date when the loss or damage accrued. If that is the date of limitation reckoned from "the accrual of the cause of such suit or other proceeding," occurring in Section 110 of the Madras Port Trust Act (2 of 1905), then it would logically follow that such a suit could not be instituted at all by the insurer; he would be wholly deprived of his equitable remedy as a subrogee. Hence, this construction of Section 110 is itself anomalous, and ought not to be adopted.
The other horn of the dilemma is that if, on the contrary, we hold that the insurer also is bound to bring the suit within six months from the date of occasion of loss or damage, it would be far more reasonable to suppose that Section 110 applied only to suits by the person originally damnified, and did not at all include suits by the insurer-subrogee within its scope. Article 120 of the Indian Limitation Act, 1908, the residual article, would apply, and these suits would be perfectly within time.
6. But, on deeper scrutiny, I think that it could be shown that this dilemma does not really exist, and that the view that we have adopted, which is briefly stated, in the obiter observations of Jagadisan, J., in is the correct one. The real answer must be,
firstly, that such a suit is certainly known to law, but, secondly, that such a suit must nevertheless be filed within the special period of limitation prescribed for all such suits under Section 110 of the Madras Port Trust Act, One ground of justification for this view, has been referred to by my learned brother. The content of the rights of the subrogee cannot differ substantially from the rights of the assured, who was originally damnified by the negligence of the Port Trust authorities. The simple reason is that the insurer steps into the shoes of the assured, by virtue of the doctrine of subrogation as applied to Marine Insurance, He may be subrogated proportionately or wholly, but his right is derivative, and identical with the right of the assured, to recover against the Port Trust for loss or damage. If the Port Trust is not liable to the assured, upon an application of any principle or, on the facts, ipso facto it is not liable to the insurer-subrogee. It is for this reason that, if the Port Trust can rely upon Section 110 for a plea of limitation, with regard to any action by the assured, who originally sustained the loss, brought more than six months from the date of the damage or injury, it can equally plead that an action by the subrogee not brought within the same period of limitation, would be barred. It cannot be that the Port Trust is entitled to have the suit by the party that originally sustained the loss, if brought, dismissed upon a ground of law (here, limitation), but that the same argument is not available as against the insurer-subrogee.
7. But it might be conceivably argued, and Mr. Thyagarajan does press this, that on the ground of the very process of reasoning exhibited above, we should hold that Section 110 does not apply to the suit by the insurer-subrogee; it is the residual Article 120 of the Limitation Act that would apply. Here, I think, the answer is to be sought in the intendment behind Section 110, as a legislative provision designed to secure public authorities, like the Madras Port Trust, from being confronted with claims so belated that it would be unduly onerous for the public authority to defend itself against such claims. My learned brother has attempted to show how the other argument, based on Sections 39 (1) (a) to (d), 39 (2) and 41-A of the Madras Port Trust Act, cannot be considered as valid, when it is sought to be pressed to justify the conclusion that Section 100 will not apply to facts of this kind, because the duties were voluntarily assumed by the Board, or because the language of Section 110 would not include omissions in respect of acts, as contrasted with positive performance. I find myself in entire agreement with his conclusions on that aspect.
8. But, this apart, the true intendment of Section 110 is a protection afforded to the statutory authority, like the Port Trust, even at the risk of some inconvenience or difficulty to a party situated like the insurer-subrogee. This can be illustrated acutely by pointing out the consequence of an opposite view. An accident causing loss or damage may occur, and the settlement of claims as between the assured and the insurer may be protracted; if the insurer-subrogee is to have the period of limitation reckoned only from the date of payment, conceived as an essential part of his 'cause of action', it may be impossible for the Board to defend itself, owing to the obliteration of evidence or knowledge of the facts. The provision is a statutory safeguard, designed in the interests of public bodies like the Port Trust, performing these difficult duties, and undertaking heavy responsibilities as bailees and ware-house-providers. Since all the parties are presumed to know the law, the intention is that insurers, who are parties to a policy of Marine Insurance, which is a contract of indemnity, should be careful to see that, if they desire to sue the Board, as standing in the shoes of the assured, they are able to demonstrate a total right to do so, including payment, in whole or in part, to the assured, within a period of six months from the date of injury or loss, and to file a suit within that period. In this interpretation, the words "from the accrual of the cause of such suit or other proceeding" occurring in Section 110, must be related to the earlier words defining the suit referred to, as a claim against the Board or person "for anything done, or purporting to have been done, in pursuance of this Act". The cause of such suit is, necessarily, the occasion of loss or damage, whether it is the party originally damnified who is suing, or an insurer who has compensated him and who sues as subrogee. It equally follows that this provision is designed to secure for the Port Trust a protection from any such claim under any other provision concerning limitation, such as Article 120 of the Limitation Act.
9. For these reasons, I agree in the judgment and conclusions of my learned Brother.
Natesan, J.
10. These appeals from the decision of Ganapathia Pillai, J., in the Original Civil Jurisdiction of this Court which raise common questions of fact and law, are between the same parties and were heard along with another suit, C. S. No. 4 of 1957 (Mad), also between the very same parties. That suit was dismissed as barred by limitation and the suits now under appeal having been decreed, the defendants, the Trustees of the Port Trust of Madras (hereinafter referred to as the Board) have preferred these appeals. The Home Insurance Company Ltd., a company incorporated in the United States of America, was the plaintiff in the three suits and is the respondent in the appeals before us. We may first set out certain material facts.
11. Messrs. Fimberg and Trading Company, Dallas, Texas, in the United States of America consigned to Messrs, Baijnath Ganghadar and Company Ltd., Bombay, (hereinafter referred to as the assured) 750 bundles of high density American cotton in three consignments, by the steamer "s. s. Queen City", which arrived in Bombay on 31st January, 1952. In due course the goods were transhipped to "s. s. Jalapankshi" for carriage to Madras and the goods arrived at the Madras Port on 27th April, 1952. The three consignments of cotton had been insured with the respondent (hereinafter referred to as the insurer) under three policies of insurance, one a consignment of 500 bales, another a consignment of 200 bales, and the third consignment being 50 bales. The landing of the cotton at the Madras Port commenced on 29th April, 1952, and it was completed on 4th May, 1952. Applications for the clearance and survey of the goods on behalf of the assured were filed in the office of the Board on 12th May, 1952. On the 18th May, 1952, and on the following three days there was heavy rain in Madras as a result of which the goods got drenched and were considerably damaged. Thereupon the assured made claims on the insurer in a sum of Rs. 41,537-4-0 in respect of the consignment of 500 bales, the subject-matter of C. S. No. 4 of 1957, Rupees 13,215-14-0 in respect of the 250 bales in C. S. No. 5 of 1957 (Mad) (the subject of appeal in O. S. A. No. 23 of 1961) and Rs. 3,339-1-0 in respect of the 50 bales in C. S. No. 6 of 1957 (Mad) (the subject of appeal in O. S. A. No. 37 of 1961). The insurer, after satisfying himself that the claims were valid, paid the assured their claims and filed the aforesaid three suits against the Board on the basis that the insurer had become subrogated to the rights of the assured.
12. It was contended for the insurer, that the Board, after duly receiving the goods into its custody on landing, was in the position of bailee of the goods and had been grossly negligent in not properly storing the bales and protecting them from the weather as any prudent owner of the goods would have done in the circumstances. The insurer had paid the assured in respect of the claim relating to C. S. No. 4 of 1957 (Mad) on the 18th September, 1952, the claim in respect of C. S. No. 5 of 1957 (Mad), on 7th November, 1952, and the claim in respect of C. S. No. 6 of 1957 on 31st October, 1952. The suit C. S. No. 6 of 1957 (Mad) was filed on 29th April, 1953 and C. S. Nos. 4 and 5 of 1957 (Mad) were filed on 4th July 1953. the Court being closed between 4th May 1953 and 3rd July. 1953. The defence by the Board to the action was two-fold: (1) on the merits it was contended that there was no negligence on the part of the Board in taking care of the goods, that the general practice was to stack compressed American cotton in the open, that that practice was followed in the present case, that it was only during the rainy season that the bales used to be covered by tarpaulin, and that the rain on 18th May, 1952, was unusual and non-seasonal. Certain difficulties in the matter of storage of the goods were pleaded. Consignees were charged with delay in clearing their consignments when there was too much congestion in the port due to heavy arrivals of bales of American cotton. (2) It was contended that the claims were barred by limitation. This defence was rested on Section 110 of the Madras Port Trust Act, 1905 (hereinafter referred to as the Act) which provides a special period of six months for action against any person for anything done or purported to have been done in pursuance of the Act from the accrual of the cause of the suit.
13. On the question of negligence, the learned Judge, after a close analysis of the evidence and having regard to the law governing the matter, held that the Board did not take care of the goods in the manner expected of a bailee, and that it continued to be negligent even after the 18th of May when rain had fallen. He has taken the view that the Board cannot be held to have discharged the burden of proof that was laid on it to show that it had taken all the care incumbent upon a bailee. On the question of limitation it was contended for the insurer that if Section 110 of the Act were to apply, anything done or purported to have been done must be under a statutory duty, and that in the present case it was only a voluntary assumption of an obligation which no doubt the Act permitted. It was pointed out that it was only a case of breach of contract by a public authority which had authority to enter into a contract but not under a duty to do so. It was said that under the provisions of the Act no statutory duty was cast upon the Board in respect of the goods imported into the Port either for accepting the goods as a bailee or storing them as warehouse-man. The further plea was that Section 110 of the Act spoke only of an action against any 'person' and the Board was not a 'person' as contemplated in the Act. There was a further ground urged against accepting the applicability of Section 110 to the present case. It was submitted that Section 110 contemplated only action in respect of things done or purported to be done and not in respect of omissions. It was said that the negligence of duty by a bailee could not be construed to be anything done or purported to have been done in pursuance of the Act. On these contentions it was urged for the insurer that the Board could not avail itself of the protection of Section 110 of the Act.
It was further argued that as the insurer's claim was as subrogee the cause of action for the suits arose only on payment and the suits within six months of the payment would be within time even If they were beyond six months after the damage or negligent act of the Board. There was also a submission that only Article 120 of the Indian Limitation Act, 1908 applied and not the special period of limitation provided under Section 110 of the Act. The learned Judge, on an examination of the relevant provisions of the Act and the authorities placed before him, rejected the insurer's contention that Section 110 of the Act would not apply to the case. He held that the period of limitation provided in Section 110 would apply. But the learned Judge accepted without much discussion the argument that the cause of action for the suits under Section 110 of the Act arose only when the subrogee made the payments. In that view, the learned Judge, while dismissing C. S. No. 4 of 1957 (Mad) as barred by limitation (there is no appeal preferred against that decision) decreed C. S. Nos. 5 and 6 of 1957 (Mad) in favour of the insurer as in time. These two suits had been filed within six months of the payment by the insurer to the assured, the payment being within six months of the occurrence of damage.
14. Before us learned Counsel for the Board questions the tenability of the view of the learned Judge that the cause of action for a subrogee for purposes of limitation is different from the one available to the assured. The reasoning of the learned Judge is that for completing the cause of action for the insurer, besides the damage, there must be payment. The learned Judge observes that none can dispute that the cause of action for a subrogee is not the same as the cause of action for the person to whose rights he has become subrogated because in addition to the facts which constitute the cause of action for the latter the subrogee must allege and prove payment of money which the Board was bound to pay. The learned Judge states that while the content of the rights claimed by the subrogee, meaning thereby the relief obtainable, is determined by the content of the right to which he gets subrogated, on the question of limitation the subrogee is not affected by any rule of limitation which applied to the assured. It is the validity of this assumption that is substantially put in issue in these appeals by Mr. V. V. Raghavan, learned Counsel for the Board.
Of course Counsel for the Board would also question the finding of the learned Judge on the question of negligence and learned Counsel for the insurer would maintain the decree with the plea which no doubt has been overruled by the learned Judge, that Section 110 gave no protection to the Board and it could not be availed of by the Board at any rate with reference to the suit claims. We may immediately state that we are in entire agreement with the learned Judge on his finding on the question of negligence and his view as to the applicability in general of Section 110 of the Madras Port Trust Act. The further question arising in the actual application of Section 110, when limitation starts to run against the insurer on subrogation to the rights of the assured is a question of some considerable importance and requires careful consideration. Learned Counsel are agreed before us that except for obiter dicta by a Division Bench of this Court in ,
the matter is res Integra. It will be convenient in the circumstances to first deal with the contention raised by Counsel on either side on the question on which we are in agreement with the learned trial Judge.
15. First to take up the question of negligence of the Board in respect of the goods, there can be no dispute that the Board took charge of the goods under Section 39 of the Madras Port Trust Act and the responsibility of the Board for he loss, destruction or deterioration of he goods of which it has taken charge under Section 40 of the Act is that of a bailee under Sections 151, 152 and 161 of the Indian Contract Act. The Board as a bailee is bound to take as much care of the goods bailed to it, as a man of ordinary prudence under similar circumstances takes care of his own goods. It is a settled principle of law that in a case governed by the provisions of Sections 151 and 152 of the Indian Contract Act the loss or damage of the goods entrusted to the bailee is prima facie evidence of his negligence. The burden of proof is therefore, on the bailee to disprove negligence when damage or loss is established.
In the present case rain occurred first on the night of the 18th May, 1952. Immediately on the 19th May 1952, the agents of the consignor, Messrs Best and Co., wrote a letter, Exhibit P-26 to the Board giving notice of the claim for damages caused to the cotton bales by rain. They pointed out that the bales were stored in the open in the Harbour premises uncovered by tarpaulin. No doubt rain in summer about the middle of May is not common in Madras. But in the present case the log book maintained by the Board for May, 1952 shows that even on 17th May, the Port Trust received a telegram from the Madras Observatory which led the Port Trust to continue hoisting distant cautionary signal. The signal had been hoisted even on the previous day as a result of then prevailing weather conditions. Showers occurred both on the morning and afternoon of the 19th May also. On the 20th of May the Board received advice from the Madras Meteorological Office to replace the distant cautionary signal by local cautionary signal. It is needless to refer in detail to the weather conditions during the relevant period, on the 18th May, and on the three subsequent days found in the log book. There had been shower a and winds with squalls of high velocity. The evidence on record shows that on the 16th of May itself the weather conditions began to show indications of the coming summer storm. Even after the rain on the 18th May and the letter by the consignor's agents, Messrs Best & Co., the Board had not taken steps to prevent further damage to the goods. No attempt was made to requisition and cover the bales of cotton with tarpaulin to avoid further soaking by rain.
16. In this connection reference may be usefully made to the decision of the Privy Council in Brabant & Co., v. Thomas Mulhali King, 1895 AC 632 at p. 640. In that case an action was commenced for damages for the loss and destruction of certain cases of dynamite and other explosive goods which had been stored in the Government Storehouse at Brisbane. They had been stored in sheds near the water-edge and the Government was charged with neglect, in that they stored the goods at too low a level, and further they failed to take reasonable and proper measures to save the goods or part thereof on the advent of the floods. Setting the principles, the Privy Council observed:
"Their Lordships can see no reason to doubt that the relation in which the Government stood to the appellant-company was simply that of bailees for hire. They were, therefore, under a legal obligation to exercise the same degree of care towards the preservation of the goods entrusted to them from injury, which might reasonably be expected from a skilled storekeeper, acquainted with the risks to be apprehended either from the character of the storehouse itself or of its locality and that obligation included, not only the duty of taking all reasonable precautions to obviate these risks, but the duty of taking all proper measures for the protection of the goods when such risks were imminent or had actually occurred".
In the light of the above principles, on the facts we have no hesitation in agreeing with the learned Judge that the Board did not take care of the goods in the manner expected of a bailee and it continued to be negligent even after the 18th of May when rain had fallen.
17. Next we shall consider the applicability of Section 110 in general to a case of negligence of the Board with reerence to the goods landed which the Board has taken into its custody for delivery to the consignee. In our view, not much discussion of the law is called for on this aspect of the case, as the matter in so far as this Court is concerned is concluded by the Division Bench judgment of this Court in already referred to. The question directly arose in
that case even as it required consideration by the learned trial Judge in this case with reference to C. S. No. 4 of 1957 (Mad). In fact, the Division Bench refers with approval to this part of the judgment now under appeal. Section 110 which provides for notice and limitation of suits or other proceedings runs thus:
"No suit or other proceeding shall be commenced against any person for anything done, or purporting to have been done, in pursuance of this Act without giving to such person one month's previous notice in writing of the intended suit or other proceeding, and, of the cause thereof, nor after six months from the accrual of the cause of such suit or other proceeding".
The application of this section was opposed on two grounds: (1) that the Board was not a 'person' for claiming protection under this Section, (2) that the action being by the insurer as a subrogee on his rights acquired by subrogation against the Board and based upon the liability incurred by the Board by its neglect of duty as a bailee, the suit could not be considered to be for anything done or purported to have been done in pursuance of the Act,
Mr. V. Thyagarajan, learned Counsel for the insurer, referred to several sections in the Act where the Board has been referred to and dealt with distinctly as such and sections where the word 'person' has been used which could not refer to the Board at all. Particular emphasis was laid on Sections 41 and 41-A which according to learned Counsel brought out clearly the distinction which the Act has made between a person and the Board. But under Section 6, the Board is a body corporate with perpetual succession and a common seal and shall sue and be sued in the name of the Trustees of the Port of Madras. Section 3 (22) of the Madras General Clauses Act, 1891 defines the word 'person' so as to include any company or association of individuals whether incorporated or not. Section 104 of the Madras Port Trust Act clearly contemplates the possibility of the word 'person' including the word 'Board' where the context permits. There can be no doubt that the word 'person' in Section 110 is of sufficient amplitude to include the statutory body, the Board created under the Madras Port Trust Act.
18. On the second aspect urged in regard to the application of. Section 110, to appreciate precisely how the liability arose, we have to look at the charge made against the Board. That the insurer claims by subrogation, may give him only the locus standi to maintain the action. But the liability of the Board is not by virtue of the subrogation. The liability arose by virtue of its having handled the goods of the assured and stacked them negligently pending delivery to the consignee. Clearly its handling and stacking was in performance of functions under Section 39 of the Act. Section 40 specifically provides that the responsibility of the Board for the loss, destruction or deterioration of goods which it has taken charge would be that of a bailee under Sections 151, 152 and 161 of the Indian Contract Act. While the Act does not make it obligatory on the part of the Board to undertake the several services contemplated under Section 39, by Section 39 it certainly empowers the Board to provide all reasonable facilities according to its powers for the services mentioned in Clauses (a) to (d) of Section 39 (1) The Board is also empowered to undertake those services. The Board shall under Section 39 (2) if required by the owner, perform in respect of goods all fir any of the services mentioned in Clauses (a), (b) and (d) of Sub-section (1) of Section 39. Of course the Board could not be compelled to perform any service which it has relinquished under the provisions of Section 41-A. Sub-section (3) of Section 39 provides that the Board shall, if required, take charge of the goods for the purpose of performing the services and shall give a receipt in the prescribed form and to the effect prescribed by the Central Government. Among the services enumerated, Clause (b) refers to receiving, removing, shifting, transporting, storing, or delivering goods brought within the Board's premises. First, the contention that mere negligence or omission in the performance of a duty undertaken--may be under the powers conferred by the statute--will not be protected by Section 110, does not call for any serious discussion. Sections 110 and 111 go together. While Section 110 deals with notice and limitation of suits or other proceedings, Section 111 saves the liability of the Board for acts of default of its employees in certain circumstances. In our view breach of statutory duty as well as an omission to perform a statutory duty would both fall under the protection given by the provisions of Section 110. The Board under the Act is to take due care of the goods awaiting delivery to the consignee. Section 40 of the Act imposes the responsibility of a bailee on the Board for the loss, destruction or deterioration of the goods it has taken charge of. It is a responsibility which the Board undertakes pursuant to the Act. The Board's default in delivering the goods is closely connected with what the Board has to do in the matter of receiving, removing, shifting, transporting, storing or delivering goods brought within the Board's premises. The services which the Board has to perform and could perform statutorily under the statutory powers and duties cannot be dissociated from its omissions and failures in relation to the goods. Any action which is called for will properly be covered by the words 'anything done or purporting to be done in pursuance of this Act'. Under the Madras General Clauses Act, 1891 words which refer to the acts done extend also to illegal omissions.
On this question we have the weighty authority of the Judicial Committee which had to construe the corresponding provision in Section 142 of the Calcutta Port Act, 1890, which runs in these terms:
"No suit shall be brought against any person for anything done or purporting or professing to be done in pursuance of this Act, after the expiration of three months from the day on which the cause of action in such suit shall have arisen".
The Judicial Committee observed in Calcutta Port Commissioner v. Corporation of Calcutta. ILR(1938) 1 Cal 440 at p. 449 - (AIR 1937 PC 306 at p. 310) thus:
"The respondents argued that the Indian statute fell to be strictly construed, and that while it protects against a claim based on breach of statutory duty, it does not protect against an omission to perform a statutory duty. Their Lordships are unable to accept either argument. The argument is unsupported by authority, or from any other source".
19. & 20. Nor can protection under Section 110 be taken away on the ground that the Board is free to undertake or not the services and the performance of the services on the requirement of the owner cannot be construed to be anything done or purported to be done in pursuance of the Act. May be it is optional for the Board to undertake the services and may be the owner's request has to be there to make it obligatory; but it is undeniable that it is in pursuance of the powers given under the Act the services are undertaken. Section 110 speaks of anything done 'in pursuance' of the Act. The language is or sufficient amplitude to cover even the class of functions for which no duty is cast by Section 39 (1) but only power is given to undertake them.
In Griffiths v. Smith, (1941) 1 All ER 66 at pp. 70, 72 and 76, the question was whether the English Public Authorities Protection Act, 1893, would protect the managers of a non-provided school who were found to be a public authority under the Act, from an action for damages by an invitee to an exhibition in the school, who was injured through the collapse of a floor due to want of repair. Section 1 relied upon ran as follows:
"Where after the commencement of this Act any action, prosecution, or other proceeding is commenced in the United Kingdom against any person for any act done in pursuance or execution, or intended execution of any Act of Parliament or of any public duty or authority or in respect of any alleged neglect or default in the execution of any such act, duty, or authority, the following provision shall have effect: (a) the action, prosecution, or proceedings shall not lie or be instituted unless it is commenced within 6 months next after the act, neglect or default complained of, or, in case of a continuance of injury or damage, within six months next after the ceasing thereof........"
Posing for consideration the question whether the neglect or default proved against the managers could be considered to be in the execution of their statutory duty or authority, Viscount Simon, L. C. said that the question must be answered in the affirmative. The Lord Chancellor said:
"The real question is whether the managers, in authorising the issue of invitations to the display on the school premises after school hours, should be regarded as exercising their function of managing the school............... It would be within the discretion of the managers to decide whether they would approve such a display or whether they would not. The point is, however, that they did approve it, and that they did so in the course of carrying on this public elementary school and of exercising the powers of management conferred upon them by the Education Act."
Viscount Maugham in his speech said:
"It is sufficient to establish that the act was in substance done in the course of exercising for the benefit of the public an authority or a power conferred on the public authority not being a mere incidental power, such as power to carry on a trade. The words in the section are 'public duty or authority', and the latter word must be taken to have its ordinary meaning of legal power or right and does not imply a positive obligation".
With great appositeness we may refer also to the decision of the Judicial Committee in Firestone Tyre and Rubber Co. v. Singapore Harbour Board, 1952 AC 452, where in an action for damages for short delivery of goods landed in Singapore Harbour by the Singapore Harbour Board which under the Singapore Ports Ordinance was authorised to carry on the business of wharfingers and warehousemen and was carrying on for the benefit of the public within the statutory powers, the applicability of the Public Authorities Protection Ordinance which is similar to the language to the English Public Authorities Protection Act was considered. True the relevant sections in the English Public Authorities Protection Act, 1895 and the Singapore Ports Ordinance specifically contemplate protection even in respect of neglect or default in the execution of any act or public duty or authority. But the relevance of these citations is with reference to their interpretation of the words 'any act done in pursuance or execution, or intended execution', to show that the duty undertaken by the Board or its act which has given rise to the cause of action need not necessarily be an obligatory one. In 1952 AC 452 at p. 468, the Judicial Committee observed:
"The board, having constructed or become possessed of warehouses, which must be regarded as a normal and necessary adjunct to a port such as Singapore, could elect whether to let them out to others for periods less than three years (or with consent of the Governor for longer periods) or themselves to operate them as wharfingers and warehousemen and levy rates for the wharfage or storage of goods therein. Having chosen the latter alternative they did not thereby cease to function as a harbour board and undertake some purely subsidiary activity of a non-public nature. They were supplying facilities essential to the shipping community in one of the ways authorised by the Ordinance by which they were created a harbour board charged with the management and control of the port, and were thus fulfilling one of the main purposes for which they had been given statutory powers."
The Judicial Committee further said:
"Further more, as previously stated, the existence or non-existence of a contract is not a decisive test, and on the facts of the present case their Lordships are clearly of opinion that the question of contract is immaterial to their decision since, on any view, the board were exercising their permissive powers to perform a normal function of a harbour board and in so doing were providing a service essential to the shipping and commercial community of Singapore and accordingly, entitled to the protection of the Public Authorities Protection Ordinance."
The language of Section 110 of the Madras Port Trust Act which we have to interpret is wider in its scope and quite plain and emphatic. The protection of the section would be available in respect of anything done or 'purported to have been done' in pursuance of the Act. The Singapore Ordinance even as the English Act did not contain the words 'purported to have been done in pursuance of the Act.' It protected only acts done in pursuance of or execution or intended execution of any Act. Still the Privy Council said that the harbour board has the protection of the Ordinance as they were supplying facilities to the shipping community in one of the ways authorised by the Ordinance, which created the Board, and were fulfilling one of the main purposes to which they had been given statutory powers.
In ILR (1938) 1 Cal 440 at p. 448 -(AIR 1937 PC 306 at p. 309), referring to the words 'purporting or professing to act in pursuance of the statute' in Section 142 of the Calcutta Port Act, the Judicial Committee observed:
"Their Lordships regard these words as of pivotal importance. Their presence in the statute appears to postulate that work which is not done in pursuance of the statute may nevertheless be accorded its protection, if the work professes or purports to be done in pursuance of the statute."
No doubt Section 110 does not contain the word 'professing'. But that, in our view, cannot make any difference to the applicability of the observations of the Judicial Committee. Once the Board assumes functions under the Act whether optional or obligatory, it can call in aid the protection afforded by Section 110. Apart from the decision of the Division Bench of our own Court in we have on
this question the decision of a Division Bench of Calcutta High Court in Commissioner for the Port of Calcutta v. Kaitan Sons & Co., .
In also the charge against the Board was improperly stacking goods, without taking sufficient precautions to keep them safe from being drenched in rain, and this Court observed:
"The fulfillment of a statutory duty by the Board is not merely the literal obedience to the letter of the Act but is also the carrying on of things and matters which are incidental to and necessary for the proper and effective discharge of that duty............... We have no difficulty in holding that the defendants received and stacked the goods in the special platform in the Harbour premises purporting to discharge their statutory function in pursuance of the Act".
The fact that the suits now under consideration have been instituted by the insurer cannot make any difference to the applicability of Section
110. The action being in respect of a matter covered by Section 110, the protection of that section is not taken away by reason of the fact that the suit is not by the owner or consignee of the goods but by the insurer. The liability of the Board for damages is its neglect of duties as a bailee and the insurer's claim in substance is to enforce that liability. The substantial cause for the suit is the same whoever figures as the plaintiff whether it be the consignee or the insurer. The indisputability of this position becomes manifest presently when we discuss the juridical basis of the insurer's rights on his paying the assured.
21. We shall now take up the really substantial point for consideration by us, the question when time begins to run for an action like the present one by the insurer as subrogee. In though
obiter, it is stated:
"The subrogee's right is just the same as that of the person whose rights are subrogated. The subrogee steps into the shoes of his assignor and can have no higher rights than his assignor. The cause of action in a case governed by Section 110 gets barred after the lapse of six months subsequent to its accrual. The fact that the subrogee gets a complete cause of action only after payment to his assignor cannot give an extended period of limitation to the subrogee by computing the period of six months from the date of subrogation. The recognition of a fresh starting point of limitation in favour of the subrogee from the date of subrogation may lead to the anomaly of reviving barred claims".
Proceeding it is said:
"It is however, unnecessary to express any opinion on the question whether the subrogee may sustain a claim under Section 110 of the Act though such a claim is unenforceable by his assignor".
It has therefore become necessary to examine the matter carefully somewhat at length.
Mr. V. Thyagarajan, learned Counsel appearing for the insurer, stressed that time would not run against a person who cannot act and the subrogee had no right of action till payment. Learned Counsel emphasised that the cause of action for the suit of the subrogee was his settlement with the assured, and that but for satisfaction of the claims of the assured by payments he could not file the suits. Reference was made to Lord Esher's definition of a cause of action as 'every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court'. But the question for consideration is not when the insurer acquired his right to sue. That would be relevant when limitation begins to run from when the right to sue accrued as in Article 120 of the Limitation Act, 1908. We have to consider the language of Section 110 which provides a special period of limitation, and find out there from, when time begins to run in favour of the person sought to be sued. Section 110 provides for two things as a precondition to suits contemplated thereunder: (1) one month's previous notice in writing of the intended suit and of the cause thereof; and (2) the suit shall not be commenced after six months from the accrual of the cause of such suit. The starting point for limitation is the accrual of the cause of the suit. The expression "such suit" immediately takes us to the suit described earlier, that is, the suit for anything done or purported to have been done in pursuance of the Act. It is the case of that suit that has to be set out in the notice and it is from the accrual of that cause, the period of six months starts running. When we are on a special period of limitation and it give its own starting point, we are bound to apply that notwithstanding any inconvenience that may arise from its literal application.
Learned Counsel contends that an Insurer may pay an assured his claim on the last day of the six months period since the neglect or damage complained of. It is said that in such a case the insurer would be left without the equitable remedy of reimbursement from the wrong-doer and this cannot be the intendment of the enactment. But there is no ambiguity in the section. The language is clear and the inconvenience suggested is not unsurmountable. Section 110 is modeled on the lines of similar provisions protecting public authorities from delayed actions. A shorter period of limitation in respect of actions against them is provided. In England prior to June, 1954 actions against public authorities were in general subject to a limitation period of one year. Now there is no difference. One may see some reason behind the rule providing a shorter period of limitation; there may be difficulties in public authorities whose officers will be changing or retiring, in preserving and securing evidence if actions are unduly delayed. We do not think that the protection afforded to the Trustees of the Port Trust having regard to the volume and variety of work they have to handle is anything unusual to liberally construe Section 110. It has been judicially noticed that insurance companies often protected themselves in their contracts providing a period of time for the subsistence of the rights of the assured against them, generally three months, from the rejection of the claim by the insurer. We cannot say that the Trustees have less need of the protection afforded by the statutory compulsion for acceleration of the proceedings that may be brought against them. It may also be in public interest that such claims are speedily settled. Whether any discrimination in this regard is justified or not, we have to interpret the section as it stands and apply the law.
22. It is a well-established principle of the law of limitation that time which has once begun to run will as a rule continue to do so. No subsequent disability or inability to sue stops it--see Section 9 of the Limitation Act, 1908. The learned Judge at the trial, when he observed that the subrogee is not affected by any rule of limitation which applies to the other person, overlooks the position of the subrogee in law and the rights he acquired by subrogation. The doctrine of subrogation comes in where one person has a claim against another and a third person is in certain circumstances allowed to have the benefit of the claim and the remedy of enforcing it, although it has not been assigned to him. Section 130-A of the Transfer of Property Act provides when and how a policy of marine insurance may be transferred, and Section 135-A with the subrogation which we are concerned runs thus:--
"(1) Where a policy of marine insurance has been assigned so as to pass the beneficial interest therein, the assignee of the policy is entitled to sue thereon on his own name; and the defendant is entitled to make any defence arising out of the contract which he would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected.
(2) Where the insurer pays for a total loss, either of the whole, or, in the case of goods, of any apportionable part, of the subject-matter insured he thereupon becomes entitled to take over the interest of the insured person in whatever may remain of the subject-matter so paid for, and he is thereby subrogated to all the rights and remedies of the insured person in and in respect of that subject-matter as from the time of the casualty causing the loss.
(3) Where the insurer pays for a partial loss, he acquires no title to the subject-matter insured, or such part of it as may remain, but he is thereupon subrogated to all rights and remedies of the insured person as from the time of the casualty causing the loss in so far as the insured person has been indemnified by such payment for the loss.
(4) Nothing in Clause (e) of Section 6 shall affect the provisions of this section". By virtue of Section 135-A the insurer on payment to the assured steps into the shoes of the assured, and acquires all his rights and remedies, "as from the time of the casualty causing the loss". The bar of transfer of a mere right to sue is removed, and the remedies available to the assured get vested in the insurer on his paying the assured. Clearly the insurer gets himself substituted for the assured vis-a-vis the wrong-doer and the substitution takes effect from the time of the casualty causing the loss. In regard to the liability of the wrong-doer, that is, the person liable for the loss, on the language of these provisions it is plain that no different cause of action arises in favour of the insurer. Neither the character nor extent nor content of the original liability of the wrong-doer is changed or affected by the subrogation and the insurer's rights and remedies date from the time of the casualty causing the loss.
These provisions found in the Transfer of Property Act. which apply to the cases on hand are now found in Section 79 of the Marine Insurance Act, 1963, which repeals Sections 130-A and 135-A of the Transfer of Property Act. We may here point out that Section 135-A of the Transfer of Property Act and Section 79 of the Marine Insurance Act, 1963 which replaced the former are just verbatim reproductions of Section 79 of the British Marine Insurance Act, 1906. Subrogation with reference to insurance as such, is not defined in the Transfer of Property Act; but we have the definition of subrogation in Section 92 of the Transfer of Property Act in relation to mortgages and its principles are well known. The effect of subrogation is to place the insurer in the shoes of the assured and enable the insurer to recover the amount from the person who ought to have paid. It confers on the insurer no greater rights. Nor does it provide him with further remedies than the assured himself had at the time he was paid off and the insurer got subrogated. Of course it is the payment to the assured that subrogates the insurer to the assured's rights against the wrong-doer. Without such payment there can be no subrogation. But the payment does not extinguish the liability of the wrong-doer or the other person responsible for the loss to the assured. Only the benefit of, this liability, when subsisting ensures to| the benefit of the insurer. The insurer has to rest upon the cause for action which had accrued to the assured when he got himself subrogated. It may not be that in every case of loss a third party is liable to the assured, the assured might have acquired by contract absolute indemnity against loss and the insurer might not be able to recover anything from the third party for subrogation. The assured may have really no cause of action against the alleged wrong-doer, though the insurer has to pay him. Before the insurer can recover under the doctrine of subrogation, I he will have to establish the cause of action and liability of the wrong-doer for damages. He must establish that it is the negligent act of the party proceeded against that was the proximate cause of the damage to the property of the assured.
23. Contracts of insurance are considered really as contracts of indemnity and the principle of subrogation is applied to it being an equitable arrangement incidental to all contracts of indemnity and to payments on account of the indemnity. Subrogation is an equity rule and the equity of subrogation arises as the assured has concurrent remedies for relief from the loss against the person responsible for the loss, say on contract or tort, and also against the insurer on the contract of insurance, each independent of the other. And equity will not permit the injured to be doubly compensated by the insurer and the person liable for the loss. On payment to the assured by the insurer in terms of his policy the doctrine of subrogation steps in and vests in the insurer the rights the assured has against the person who has caused the loss. He succeeds to all the ways and means by which the assured may have reimbursed himself for the loss from the person responsible for the loss.
Arnould in his classic on Marine Insurance (British Shipping Laws Vol. 10, page 1193) states the position thus:
"...,........ it is entirely foreign to the spirit of contracts of indemnity that a person damnified should recover his loss more than once; it is, therefore, clear that if he has already recovered from a third party, there can be no liability under the contract of indemnity. On the other hand, if he has not previously recovered from such third party, but has the right to do so, there is no reason why such third party should be allowed to allege that his liability has been satisfied or reduced by a payment made by a stranger to him, under a contract with which he has nothing to do. The third party remains liable to the person indemnified just as if there had been no contract of indemnity. But the person indemnified can only take the sum recovered from the third party as trustee for the indemnifier, and similarly, if he has not himself received any sum to which he is entitled, he is bound to afford the latter all facilities for doing so. In practice, the commonest way in which the principle of subrogation is applied to insurance, is for the insurer to pay the claim of the assured, and then to institute proceedings in the name of the latter, but for his own benefit, against the party ultimately liable"--Para 1215.
In the Law of Insurance by Preston and Colinvaux, 2nd Edition, at page 128 we find the position stated thus:
"The right of 'subrogation' rests upon the ground that the insurer's contract is in the nature of a contract of indemnity and that he is therefore, entitled, upon paying a sum for which others are primarily liable to the assured, to be proportionately subrogated to the right of action of the assured against them".
In Macgillivray on Insurance Law, 5th Edition, para 1882, the Learned Author points out that the right of subrogation is a corollary of the general principle that insurance is only a contract to indemnify the assured, that the insurer's right of subrogation arises whenever he pays a loss for which he is liable under his policy, and that it arises upon payment of a partial as well as upon payment of a total loss. The learned author states in para 1886:
"The legal right to compensation remains in the assured, and, therefore, unless there has been an express assignment of the legal right, actions at law brought for the benefit of the insurer are brought in the name of the assured. In Courts of Equity or of Admiralty the insurer has always been allowed to sue in his own name".
In Porter's Laws of Insurance, 8th Edition, at page 232 the position is stated thus:
"The insurer, having contracted to indemnify, could not insist on others being sued first who were primarily liable, or on consolidation of his action with others by the same assured against other insurers in respect of the same loss. The mere payment of a loss by the insurer does not afford any defence to a person whose fault has been the cause of the loss in an action brought against the latter by the assured. But the insurer acquired by such payment a corresponding right in any damages recoverable by the assured against the wrong-doer or other party responsible for the loss".
At page 237, the learned author points out:--
"An insurer suing the party through whose fault the loss occurred can only assert the right of the assured, and will be subject to any defence or equities which would be good against him. The insurer stands in no relation of contract or privity with such a party. His title arises out of the contract of insurance, and is derived from the assured alone, and can only be enforced in right of the latter. Thus, where damage occurred through contributory negligence, that defence would be an answer to the action of the subrogated insurer. Again, if two ships of the same owner collided by the fault of one to the destruction of the other, the insurer could not sue the owner, since they claim under him".
24. Having regard to the universality of the subject under consideration we may point out that similar views are expressed on the insurer's right of subrogation in the opinion of the Supreme Court of the United States of America in St. Louis, I. M. and S. R. Co. v. Commercial Union Ins. Co., (1891) 139 US 154 = 35 Law Ed 155. It is thus seen that an insurer's rights are not higher than that of the assured and that he has no independent cause of action against the wrong-doer. In fact the claims under the assured standing in his shoes and asserting his rights. Only, on payment, pro tanto, without more, he gets substituted for the assured in relation to the person who is responsible for the loss and is answerable for the loss. And this substitution occurs without reference or leave of either that person or the assured.
In Stroud's Judicial Dictionary, 3rd Edition, volume 4, at page 2896, quoting Dixon on Subrogation, subrogation is defined thus;
'Subrogation' is the substitution of another person in the place of a creditor to whose rights he succeeds in relation to the debt ........................ subrogation differs from a transfer or assignment of a debt, and from delegation, in the circumstances that it does not, necessarily, depend upon the creditor, but may be made independently of him. It is, properly speaking, but a fictitious cession made to one who has a right to offer payment; it is not a true cession nor sale of a debt, but such as is conceded by law and may have effect by operation of law and the act of the debtor, even without the consent of the creditor from whom the debt proceeds".
25. Under the Limitation Act plaintiff includes any person from or through whom he derives his title to sue. The particular definition may not apply here, but the insurer who derives his rights standing in the shoes of the assured, unless statute provides to the contrary, cannot claim a different period of limitation. The special law with which we are concerned. Section 110 of the Madras Port Trust Act, makes no distinction as to who happens to be the plaintiff. As under the English law the insurer has to sue in the name of the assured, no question of different period of limitation could arise there. In fact an additional ground is sought to be raised in these cases in appeal that the suits by the plaintiff alone are not maintainable. Being taken for the first time and having regard to the nature of the objection we have not permitted the raising of the new point at this stage. For the insurer, the decision of the Calcutta High Court in Alliance Assurance v. Union of India, (1958) 62 Cal WN 539, is cited for the position that in view of Section 135-A of the Transfer of Property Act, there is no bar in this country to the insitution of suits by the insurer in his own name. As we have not heard any arguments on this question and as in the view we take of the other question, it is unnecessary to decide it, we are not expressing any considered views on it. In Simpson and Co. v. Thompson Burrell, (1877) 3 AC 279 at p. 293, it is observed by the House of Lords:
"In England, the action must be in the names of the ship owner, not of the underwriters. I think this material as showing that it is the personal right of action of the ship owner, the benefit of which is transferred to the underwriters. In other systems of jurisprudence, or it may be in our own as altered hereafter the assignee of such a right may be able to sue in his own name".
Sheldon in his Law of Subrogation. 2nd Edn. while defining Subrogation, says at page 3:--
"It is a legal fiction, by force of which an obligation extinguished by a payment made by the third person is treated as still subsisting for the benefit of this third person, who is thus substituted to the rights, remedies, and securities of another. The party who is subrogated is regarded as entitled to the same rights, and indeed as constituting one and the same person with the creditor whom he succeeds".
26, This being the true position of an insurer and the persona of the assured is continued in him for the purposes of recovery from the wrong-doer or person responsible for the loss, we fail to see how it can be claimed that a fresh period of limitation starts for the insurer on his paying the assured. He has no independent claim of his own against the person responsible for the loss and even though he has instituted the suit in his own name, he must be regarded as the assured himself--see Sheldon quoted above. The Board in this case, on expiry of the period of six months, can claim a complete defence to any action against it by the consignee or owner for any negligence or default in the due delivery of goods landed and taken charge of by it.
On what principle is this protection taken away on the insurer taking the place of the consignee or owner, when the substitution is without reference to the Board and when there is no new contract or fresh liability incurred by the Board on the substitution? The Board is not directly liable to the insurer and can be called upon to pay only what it may have to pay to the consignee or owner. General considerations and the principle of subrogation above discussed do not call for an interpretation of Section 110 to permit extending the period prescribed. This is not a case of contribution between joint tort-feasors or co-sureties or several insurers who have insured against loss from the same perils the same property where the liability is against the joint tort-feasors or co-sureties or co-insurers inter se arises, for the first time on payment by one of the entire or more than their proportionate share of liability. Here what the insurer has to enforce is the very liability which the assured could have enforced, that is the primary liability. Only the insurer has taken his place. The cause for action against the defendant is of the assured. Time under Section 110 of the Act started running against the assured in favour of the defendant on the occurrence of the 'casualty causing the loss' in the language of Section 135-A of the Transfer of Property Act. In the light of the above discussion we have no hesitation in the circumstances in holding that the claims against the Board in actions falling under Section 110 of the Madras Port Trust Act like those now under consideration whoever figures as the plaintiff --whether it be the assured or the insurer --must be within six months from the accrual of the cause for the claim by the assured against the Board. There can be no fresh start under Section 110, on the insurer getting subrogated to the rights of the assured.
We may by way of analogy usefully refer here to the view of the majority of the Judges in the Full Bench case. Valliamma Champaka v. Sivathanu Pillai, (FB), where the question of
limitation on subrogation arising with reference to a redeeming co-mortgagor arose for consideration. At page 169 (of Mad LJ) - (at p. 274 of AIR) Ramachandra Iyer, C. J. observes:
"It is argued for the appellant that as the redeeming mortgagor becomes a mortgagee with respect to his co-mortgagors on redeeming the main mortgage, he should be deemed to become a mortgagee from that time, the period of fifty years prescribed by Article 136 of the Travancore Limitation Regulations should be reckoned from the date of payment and redemption. I cannot accept this contention. In a subrogation what the redeeming co-mortgagor obtains is a right to stand in the shoes of the mortgagee whom he had satisfied and, as pointed out in Mamundi v. Somasundaram, if the
person claiming subrogation wants to enforce his rights over the mortgage redeemed, he would be governed by the rules of limitation which would be applicable to the mortgage redeemed".
27. It is not contended that the suits under appeal would be in time if limitation commenced from the, act of negligence of the Board complained of which resulted in damages. These suits, if they had been instituted by the assured himself, would have been barred by limitation and met successfully by the Board with the plea of limitation. It follows that the decrees in the two suits in question have to be set aside and the suits dismissed. The appeals are therefore, allowed. On the question of costs the Board has been found responsible for the damages. It is succeeding only on the point of limitation and on that, the learned trial Judge has taken a different view. In the circumstances the parties will bear their respective costs in the trial Court. The appellants will be entitled to their costs in the appeals.