I.

Shanti Devi v/s Shri Ram Lal

Information Of The Case
Allahabad High Court
Sm. Shanti Devi v/s Shri Ram Lal on 28 January, 1958
Equivalent citations: AIR 1958 All 569
JUDGMENT
R.N. Gurtu, J.
1. One Sri Ramlal held a decree against Sri Brij Bhushan Saran. Mittal, The decree-
holder put his decree into execution after the death of the said Brij Bhushan Saran
Mittal and sought to attach the money due under a life insurance policy which Brij
Bhushan Saran Mittal had taken out on 28-2-1944 from the Indian Mercantile
Insurance Company Ltd.
2. Brij Bhushan Saran Mittal's wife, Smt. Shanti Devi, made an application for the
release of the insurance policy money which had been attached, upon the ground
that she had been nominated by Brij Bhushan Saran Mittal to receive the policy
money in the event of the death of Brij Bhushan Saran Mittal, the insured.
The objection of Smt. Shanti Devi was dismissed by the learned executing court
which held that Section 6(1) of the Married Women's Property Act (Act III of
1874) did not apply to Hindus.
It also held that Section 39 of the Insurance Act was clear that where the insured
had nominated his wife to receive payment of the money after his death, Section 6
of the Married Women's Property Act did not come into play. It also held that
mere nomination did not create any interest in favour of the nominee and held that
the money still continued to be the property of the assured and the executing court
further held that the insurance money was liable to be attached as a part of the
estate of the deceased. The objection of Smt. Shanti Devi was, therefore,
dismissed.
3. Upon an appeal by Smt. Shanti Devi, the court below held that, in the absence of
an assignment in favour of Smt. Shanti Devi, the policy amount remained the
assets of the deceased. It held that merely because the appellant was nominated to
receive the sum from the Insurance Company that did not make her owner of the
money and that the nomination only dispensed with the necessity of obtaining a
succession certificate.
4. This is an execution second appeal by Smt. Shanti Devi. It is contended that
Section 6(1) of the Married Women's Property Act applies to Hindus and that
though the policy in question was effected by Brij Bhushan Saran Mittal on his
own life but was expressed on the face of it to be for the benefit of his wife and
that therefore the policy enured for the benefit of the wife and must be deemed to
be a trust for the benefit of the wife under Section 6(1) of the Married Women's
Property Act.
5. Before dealing with the contention it is necessary to state that the policy in
question was taken out on 28-2-1944, that the sum assured was Rs. 2,000/-. The
conditions of the policy, inter alia, were set out in the Schedule to the Policy
which is reproduced below:
SCHEDULE.
The Proposer
Name: Brij Bhusan Saran Mittal, Esq. Occupation Cashier.
Address.: C/o. Messrs. Mansa Ram & Sons, Bankers, Dehradun, U. P.
The Life Assured: Same as above.
Date of Proposal: 21st February, 1944.
Date of Commencement of the Assurance: 28th February 1944.
Sum Assured Amount Rupees.:Two Thousand only with Profits Table No. VII.
Plan. Endowment Assurance, 20 years.
To whom Payable: The Life Assured, his nominees, executors, administrators or
Assigns.
Nominee under Section 39 of Insurance Act 1938.: Nil.
Event on the happening of which the sum as-Sured is to become payable.
On the 28th day of February 1964 or at death or the Life Assured, if earlier.
Instalment of Premium.
Annual Tabular Premium Rs. 109/10
Amount Rs. 27/-
(Rupees Twenty sevan. and annas seven only).
Date when due.
28th day of February, May, August and November every year.
Period during which payable.
During life time of the Life Assured for 20 years, that is until the 28th November
1963 (Inclusive).
Age of the Life Assured admitted or not. Not admitted.

Special provisions (if any).
This policy is issued with Double Accident Benefit as per Endorsement stated at
the back hereof.


6. On 9-5-1944 the Assured endorsed a nomination on the back of the policy in
the following words:

"I, Brij Bhushan Saran Mittal hereby nominate my wife Shreemati Shanti Devi aged 25
years to be the person to whom the moneys secured by the within Policy shall be paid in
the event of my death. Dated at Dehradun this 9-5-1944.
Witness : Sd. D. Joshi Sd. B. B. S. Mittal.
Full name; Damodar Joshi.
Designation : Chief Agent. Signature of the Life Assured.
Address : Dehra Dun Anand-Chowk.
The Indian Mercantile Insurance Co. Ltd. Registered No. 1682 Date 22-5-44.
Note that the Registration of this document must not be taken to imply any admission on
the part of the Company as to the validity of the document or otherwise.
Sd. R.M. Desai.
(General Manager)

7. It is now necessary to quote Section 6 of the Married Women's Property Act,
1874 (Act III of 1874) as amended by Section 2 of the Act 13 of 1923.
"6(1) A policy of insurance effected by any married man on his own life, and
expressed on the face of it to be for the benefit of his wife, or of his wife,
children, or any of them, shall enure and be deemed to be a trust for the benefit of
his wife, or of his wife and children, or any of them, according to the interest so
expressed, and shall not, so long as any object of the trust remains, be subject to
the control of the husband, or to his creditors or form part of his estate.
When the sum secured by the policy becomes payable, it shall, unless special
trustees are duly appointed to receive and hold the same, be paid to the Official
Trustee of the (Part A State or Part C State) in which the office at which the
insurance was effected is situate, and shall be received and held by him upon the
trusts expressed in the policy, or such of them as are then existing.
And in reference to such sum he shall stand in the same position in all respects as
if he had been duly appointed trustee thereof by a High Court, under Act No.
XVII of 1864 (to constitute an office of Official Trustee), Section 10.
Nothing herein contained shall operate to destroy or impede the right of any
creditor to be paid out of the proceeds of any policy of assurance which may have
been effected with intent to defraud creditors.
6(2) Notwithstanding anything contained, in Section 2, the provisions of Sub-
section (1) shall apply, in the case of any policy of insurance such as is referred to
therein which is effected by any Hindu, Muhammadan, Sikh or Jain, in Madras
after the thirty first day of December, 1913, or. in any other (Part A state or Part C
State) after the first day of April 1923:
Provided that nothing herein contained shall affect any right or liability which has
accrued or been incurred under any decree of a competent court passed before the
first day of April 1923."
8. It is also necessary to quote Section 39 of the Insurance Act, 1938 (Act IV of
1938) as amended by Section 20 of the Insurance Amendment Act, 1946 (VI of
1946).
The holder of a policy of life insurance on his own life may, when
effecting the policy or at any time before the policy matures for payment
nominate the person or persons to whom the money secured by the policy
be paid in the event of his death:
Provided that, where any nominee is a minor it shall be lawful for the
policy-holder to appoint in the prescribed manner any person to receive
the money secured by the policy in the event of his death during the
minority of the nominee.

Any such nomination in order to be effectual shall unless it is
incorporated in the text of the policy itself, be made by an endorsement
on the policy communicated to the insurer and registered by him in the
records relating to the policy and any such nomination may at any time
before the policy matures for payment be cancelled or changed by an
endorsement or a further endorsement or a will, as the case may be, but
unless notice in writing of any such cancellation or change has been
delivered to the insurer, the insurer shall not be liable for any payment
under the policy made bona fide by him to a nominee mentioned in the
text of the policy or registered in records of the insurer.


The insurer shall furnish to the policy, holder a written acknowledgment
of having registered a nomination or a cancellation or change thereof, and
may charge a fee not exceeding one rupee for registering such
cancellation or change.

A transfer or assignment of a policy made in accordance with Section 38
shall automatically cancel a nomination;

Provided that the assignment of a policy to the insurer who bears the risk
on the policy at the time of the assignment, in consideration of of a lien
granted by that insurer on the security of the policy within its surrender
value or its reassignment on repayment of the loan shall not cancel a
nomination, but shall affect the rights of the nominee only to the extent of
the insurers interest in the policy.

Where the policy matures for payment during the lifetime of the person
whose life is insured or where the nominee or, if there are more nominees
than one, all the nominees die before the policy matures for payment, the
amount secured by the policy shall be payable to the policy holder or his
heirs or legal representatives or the holder of a succession certificate, as
the case may be.

Where the nominee or, if there are more nominees than one, a nominee or
nominees survive the person whose life is insured, the amount secured by
the policy shall be payable to such survivor or survivors.


The provisions of this Section shall not apply to any policy of life
insurance to which Section 6 of the Married Women's Property Act, 1874
(III of 1874) applies or has at any time applied;

Provided that where a nomination made whether before or after the
commencement of the Insurance (Amendment) Act, 1946, in favour of
the wife of the person who has insured his life or of his wife and children
or any of them is expressed, whether or not on the "face of the policy, as
being made under this section, the said Section 6 shall be deemed not to
apply or not to have applied to the policy".


It will appear from Section 6(2) of the Married Women's Property Act,
(as quoted above) that in respect of policies of insurance taken out after
the 1st day of April 1923, Section 6(1) of the said Act is applicable.
Before Sub-section (2); was added in 1923 the Act was not applicable to
those who professed the Hindu religion but after Act XIII of 1923,
Section 6, Sub-section (1) became applicable to them also. Act XIII of
1923 has renumbered the old Section 6 as Section 6(1) and has added the
Sub-section (2) also. The Execution Court was therefore wrong in
considering that Section 6(1), as it now stands, was not applicable to
Hindus.

9. The question which has therefore to be determined is whether this policy executed
by Brij Bhushan Saran Mittal on his own life was expressed on the face of it for
the benefit of his wife or not. From the schedule quoted above it is clear that when
the policy was executed on 28-2-1944 the wife was not indicated as the person to
whom the sum assured was payable. On that date the sum was agreed to be paid
only to the life assured, his nominees, executors, administrators or Assigns. On
that date it also appears from the schedule, quoted above, that no nomination
under Section 39 of the Insurance Act was made.
The nomination was made, as already indicated, on 9-5-1944. This nomination, it
will be observed, is by an endorsement on the back of the policy and it was
clearly communicated to the insurer under Section 39(2) of the Insurance Act for
it was registered by the treasurer in the records relating to the policy as will
appear from the fact that there is a note to the effect below the endorsement that it
has been registered at No. 1682 on 22-5-1944. Therefore, it is apparent that this
nomination was intended to be and was treated as nomination under Section 39 of
the Insurance Act, 1938.
That being so, the proviso to Section 39 would have the effect of excluding the
application of Section 6(1) of the Married Women's Property Act, 1874, in this
case.
10. It may be here restated that this proviso was introduced by Section 20 of the
Insurance Amendment Act, 1949 already referred to.

11. Section 6(1) of the Married Women's Property Act makes no such provision for
nomination subsequent to the effecting of the policy, nor does make any provision
for the registration of such nomination, as is provided for in Section 39 of the
Insurance Act.


12. The contention of Mr. Kunzru for the wife nonetheless is that a policy, which has
been effected in the first instance only in favour of the husband, may yet become
a policy to which the incidents of Section 6(1) of the Married Women's Property
Act would apply if the husband subsequently makes a nomination expressed on
the face of the policy to be for the benefit of his wife or his wife and children or
any of them. In other words, Mr. Kunzru contends that even though ab initio no
equitable or beneficial interest is created by the policy itself in favour of the wife,
it may so be created by a mere nomination such as in this case.

13. For the purpose of testing this contention we invited counsel to place before us
any reported case in which a subsequent nomination had been made after the
policy had been effected and it was held that, by virtue of the said nomination, the
policy became a policy to which Section 6(1) of the Married Women's property
Act was attracted. No such case was cited; on the other hand, several cases were
shown to us where money due under a policy of Insurance and shown as payable
ab initio to the assured husband or the wife in case of the husband's prior death,
were held to attract Section 6(1) of the Married Women's Property Act.
The view in these cases was that where the amount is payable to the assured or his
wife, if the assured predeceases her, a contingent trust comes into existence in
favour of the wife, but none of these cases is a case in which there was a
subsequent nomination.
14. In Abhiramavalli Ammal v. The Official Trustee of Madras, (ILR 55 Mad 171) :
(AIR 1932 Mad 220) (A) the amount was payable to ........the assured or his wife
Abhiramavalli Ammal if he "predeceased her". In V. Lalithambal Ammal v.
Guardian of India Insurance Co., Ltd. AIR 1937 Mad. 645 (B) under the heading
"per whose benefit and to whom payable" were the words "the assured or his wife
Mrs. V. Lalithambal if he predeceases her". In V. E. R. M. K. Krishnan Chettiar
v. Velayee Ammal, reported in AIR 1938 Mad 604 (FB) (C) the wife was
indicated the beneficiary in clause 12 of the proposal which is intended to contain
the name of the person nominated to receive the sum assured and his or her
relation with the proposer.
In this case the words entered therein were, "self or wife Velayammal". It was
held in this case that the proposal could be read along with the policy and so here
also the wife was indicated as the beneficiary from the very inception of the
policy. In Parmeshwaribai v. Nihalchand Lalchand AIR 1938 Sind 20 (D) the
person or persons to whom the sum assured is payable showed ....... Smt.
Parmeshwari, the wife of the Life assured. In re Asha "Lata Dassi, ILR 1940 Cal
64: (AIR 1940 Cal 217) (E) the sum of Rs. 5000/- was shown as payable to his
wife if the assured was dead before that date.
It will thus appear that in every case where it was held that Section 6(1) of the
Married Women's Property Act was attracted, the wife was ab initio, and at the
very inception when the policy was effected, made a beneficiary thereunder.
Inasmuch as in this case the wife was not made a beneficiary ab initio, it is not
really necessary to consider how a policy, which is intended to be effected for the
benefit of a wife under the Married Women's property Act should be expressed
i.e. what words should be used.
In each of the above cases a statement in the Policy that, in the event of the death
of the husband the policy would be payable to the wife, was considered a
sufficient expression of the desire of the husband to effect the policy in question
for the benefit of his wife. In each of these cases it was considered that continent
trust had come into existence in favour of the wife in the event of the husband
dying before the policy matured.
15. In our view inasmuch as the wife was not made beneficiary ab initio this policy
was not "effected" by the husband for the benefit of his wife and the mere fact
that he made a subsequent nomination such as he was empowered to make and
did make under Section 39 of the Insurance Act does not make this policy a
policy to which Section 6(1) of the Married Women's Property Act applies
because of such nomination. In our view the equitable and beneficial interest
whether immediate or contingent must be created at the very inception of the
policy. It must be created ab initio in the wife or the children or any of them if it is
to attract Section 6(1) of the Married Women's Property Act otherwise if a trust is
to be created later in favour of any person after the policy has been effected, then
it cannot be created under Section 6(1) of the Married Women's Property Act but
must be created as any other trust is created.
Section 6(1) clearly shows that the policy has to be "effected" for the benefit of
his wife. The language is not that a policy effected for the benefit of another
person may be considered to have been effected for the benefit of the wife by a
subsequent nomination. The making of a subsequent nomination in favour of the
wife is merely authorising her to receive the money and is not the "effecting" of a
policy for her benefit. A policy cannot be effected twice.
In other words, a policy is brought into effect when the assured and the insurer
enter into the contract, and a nomination, if it is intended to operate as a
divestment of the interest of the assured in the subject-matter of the policy,
would have to be made by way of such an assignment as is contemplated and
permitted by Section 38 of the Insurance Act which provides for the assignment
and transfer of insurance Policies.
If the nomination is made only under Section 39 it is not an assignment but
merely gives the right to the nominee to receive the assured amount without
creating any interest in the nominee. It seems to us clear that Section 39 of the
Insurance Act and Section 6(1) of the Married Women's Property Act are not
complementary and that the right of nomination which is bestowed on a Policy-
holder under Section 39 of the Insurance Act cannot be read into Section 6(1) of
the Married Women's Property Act so as to vary the clear intention of the latter
Act.
There is the right to cancel nominations and to vary them under Section 39 of the
Insurance Act, Where a trust comes into existence though the right of the
beneficiary to receive the benefit under the trust may be of a contingent
character, once those contingent rights come into existence it is no longer
possible for the creator of the trust to destory the contingent trust. Section 39 of
the Insurance Act, therefore, cannot be brought in aid as a complementary
Section to Section 6(1) of the Married Women's Property Act.
16. We have already indicated that the courts have considered that a contingent trust
comes into existence in a case where a policy is made payable ab initio to the
assured or to his wife in case of his prior death. Those cases have been mentioned
above. A note of dissent has, however, been struck in some cases that a contingent
trust does not come into existence even in a case where the policy is made merely
payable to the assured or to his wife in case of demise. It is not necessary for us to
go into this question as it is not essential for the disposal of this appeal because
we can proceed on the basis that a contingent interest can be created by the use of
such words provided that policy at its very inception and ab intio is expressed in
these words.

17. We accordingly agree that the objection of the wife was liable to be dismissed.
We, therefore, dismiss this appeal with costs.









II. Vasudev Mudaliar V/S Caledonian
Information Of The Case
Madras High Court
Vasudev Mudaliar vs Caledonian Insurance Co. And Anr. on 3 January, 1964
Equivalent citations: AIR 1965 Mad 159
Bench: Veeraswami
JUDGMENT
(1) This second appeal raises an important question as to the rights of an insurer to
sue in his own name to recover damages from a third party, by whose negligence
the assured's car met with an accident and was totally damaged, but who was fully
indemnified by the insurer under a comprehensive policy. On that question, the
courts below have differed, the lower appellate court, in a reversing judgment,
holding such a suit to be maintainable and decreeing the suit. One G. H. Morley
had insured his car MSP 2228 with the Caledonian Insurance Co. the plaintiff,
against comprehensive risks for Rs. 4000. On 6-2-1955, on the Madras Bangalore
road, a lorry MDJ 1099, coming from opposite direction and after overtaking a
bus, collided with the car causing serious damage to it. The insurer settled the
claim of the assured at Rs. 3030, treating the case as a total loss and itself taking
over the damaged car. The insurer later sold it on 16-4-1955, for Rs. 1500 and
brought the suit to recover the balance of Rs. 1530 from the second defendant, the
owner of the lorry, as loss and damages it had sustained by the wilful, gross, rash
and negligent driving of the lorry. The assured did not figure as a party to the suit
either as a plaintiff along with the insurer or as a defendant. The basis of the
insurer's claim in the suit was that it was subrogated to the rights of the assured
against the defendants, including the right to sue and recover damages from them,
and that, in any case, it held an assignment from the assured of all his rights. The
factum of negligence by the second defendant's driver, which was in issue, is now
concluded by the concurrent findings of the courts below, against the defendants,
and this question is no longer reiterated in this court.
The second assistant Judge of the city Civil Court, who tried the suit was of the
opinion that, though plaintiff had armed itself with a letter of subrogation from the
assured to the latter's rights and remedies in respect of damages caused to his
vehicle, such a right was not assignable and the latter did not validly clothe the
insurer with the right to recover damages. On that view, he held that the suit was
not maintainable. If it was, he added, that second defendant would be liable for
the suit claim. The plaintiff, however, successfully appealed against that
judgment. the Principal Judge, City Civil Court, who disposed of the appeal,
thought that a formal assignment of the kind by the assured of his rights and
remedies to the insurer was prohibited by S. 6(e) of the Transfer of Property Act,
but held that the general principle of S. 69 of the Indian Contract Act together
with the principles applicable to contracts of insurance under which in England,
the insurer was able to get an assignment from the assured and institute a suit
should help the plaintiff. His further view was that though S. 96 of the Motor
Vehicles Act only enabled a third party, who had been injured by the insured car,
to have his remedy against the insurer, the rights of the insurer should be treated
as complementary to such rights of third parties against the insurer. He, therefore,
decreed the suit against the second defendant.
(2) On behalf of the second defendant, who is the appellant in this court, it is not
contended that he is not liable, as held by the Principal Judge of the City Civil
Court, if it be found that the plaintiff was entitled to maintain the suit in its own
name. But, it is argued that, under the Indian Law, as evident from S. 6(e) of the
Transfer of Property Act, there can be no valid assignment or transfer of a mere
right to sue which was all the assured in this case had. The argument is sought to
be reinforced by reference to S. 130-A of the Transfer of Property Act, which
expressly provides for transfer or assignment of a policy of marine insurance
either before or after loss and by pointing out that this implied that in the absence
of an express statutory provision as in the case of a policy of a marine insurance,
other policies of non-marine insurance cannot validly be assigned after the loss.
On the other hand, for the insurer, it is urged that in cases of total loss, where the
insurer had indemnified the assured, the insurer is subrogated to the rights and
remedies of the assured against third parties by whose negligence the damage is
caused, by reason of which the insurer is entitled to sue in his own name to
recover damages from such third party, that on this view, as a matter of fact, no
assignment from the assured of his rights and damages to the insurer will be
necessary and that under the English law if an insurer could not sue in his own
name on the basis of subrogation but he could do so only on the basis of an
assignment, it was because of the special rules of pleading there.

(3) It is rather surprising that on a question so important as that, there appears to be
not much of Indian authority directly bearing on it. But I think, on principles of
English authority and having regard to the peculiar nature and effect of a contract
of insurance providing cover for motor vehicles against risks, the view of the
Principal Judge of the City Civil Court as to maintainability of a suit such as this
brought by an insurer, is correct. But his judgment can be sustained, not on
ground of subrogation, which is its basis, but on ground of assignment by the
assured of his rights to the insurer.
(4) A contract of motor insurance, like marine or accident insurance, is, in essence,
one of indemnity. The underwriter, for consideration, guarantees the assured
compensation against loss or risks, the limits of the guarantee against accident or
loss or risks, the limits of the guarantee against accident or loss or damage
suffered, totally or partially, being subject to the maximum stipulated in the
contract of insurance. Conversely, the rights of the assured are not to profit out of
the bargain. It is implied in the very nature of the contract of indemnity that the
indemnifier is entitled to recoup or minimise the damages he is obliged to pay the
assured, by ways and means the assured himself could resort to, in order to
reimburse himself against loss caused to him by third party negligence. Such a
right of the insurer is, of course, conditional upon his having already indemnified
the assured. In other words, arising out of the nature of a contract of indemnity,
the insurer, when he has indemnified the assured, is subrogated to his rights and
remedies against third parties who have occasioned the loss. This right of the
insurer to subrogation or to get into the shoes of the assured as it we, need not
necessarily flow from the terms of the motor insurance policy, but is inherent in
and springs from the principles of indemnity. This is as a matter of law relating to
indemnity, and the basis of the right is justice, equity and good conscience,
namely, the indemnifier should be in a position to reduce the extent of his liability
within limits.
(5) Where, therefore, an insurer is surrogated to the rights and remedies of the
assured, the former is to be more or less in the same position as the assured in
respect of third parties and his claims against them founded or tortious liability in
cases of motor accidents. But it should be noted that the fact that an insurer is
subrogated to the rights and remedies of the assured does not ipso jure enable him
to sue third parties in his own name. It will only entitle the insurer to sue in the
name of the assured, it being an obligation of the assured to lend his name and
assistance to such an action. By subrogation, the insurer gets no better rights or no
different remedies than the assured himself. Subrogation and its effect are,
therefore, not to be mixed up with those of a transfer or an assignment by the
assured of his rights and remedies to the insurer. An assignment or a transfer
implies something more than subrogation, and vests in the insurer the assured's
interest, rights and remedies in respect of the subject matter and substance of the
insurance. In such a case, therefore, the insurer by virtue of the transfer of
assignment in his favour will be in a position to maintain a suit in his own name
against third parties. It is here, I think, the Principal City Civil Judge went wrong
in his reasoning for his view that the insured's suit, in his own name, was
maintainable. As I indicated, however, his view as to maintainability of the suit is
quite right. But the reason on which it is found is wrong. I say he is right to
sustaining the suit because the insurer had armed himself with an assignment from
the assured
(6) .I now turn to authority.22 Halsbury's Laws of England, Simonds Edn. states in
paragraph 512 that--"subrogation" is a right inherent in all contracts of indemnity,
and further--"the doctrine of subrogation applies to all contracts of non-marine
insurance which are contracts of indemnity, such, as, for example, contracts of
fire insurance, motor vehicle insurance and contingency insurance covering non-
payment of money. It applies whether the loss is total or partial, and is a corollary
of the principle of indemnity. By requiring any means of diminishing or
extinguishing a loss to be taken into account it prevents the assured from
recovering more than a full indemnity."In paragraph 518, it is again
stated:"Subrogation, in the strict sense of the term, expresses the right of the
insurers to be placed in the position of the assured so as to be entitled to the
advantage of all the rights and remedies which the assured possesses against third
parties in respect of the subject matter. The right does not arise until the insurers
have admitted the liability to the assured, and have paid him the amount of the
loss."
(7) Shawcross on "Motor Insurance" which is a leading authority on the subject, in an
elaborate discussion of the principles of subrogation as applied to motor
insurance, mentions that the effect of the doctrine of subrogation is that the
insurers are entitled to be placed in the position of the assured and to succeed to
all his rights and remedies against third persons in respect of the subject matter of
insurance, and explains that the test upon which the doctrine rests is the
a distinction between subrogation and transfer and says:
"The doctrine of subrogation does not apply so as automatically to transfer rights
of action against third parties to the insurers, but it only entitles them, unless there
has been an express agreement or transfer, to the benefit of such rights as are and
remain vested in law in the assured. Actions, therefore, to enforce such rights
must be brought in the name of the assured as a rule, and my defence which is
valid against the assured as, for example, that he has released or compromised his
right of actin, is available to the defendant in such proceedings."
As regards rights of action, Shawcross, referring to Castellain v. Preston, 1883-11
Q.B.DD. 380 and Simpson v. Thomson, 1877,-3 A. C. 279 gives his view:
"It is clear that amongst those rights and remedies of the assured to which the
insurers succeed, and for the purposes of which they stand in his shoes, are such
rights of action as he was entitled to enforce towards the recoupment of that loss
against which his insurers have provided indemnity. It is equally clear, on the
other hand, that the doctrine is one operative as a rule between insurers and
assured only, and that the insurers are therefore not entitled to proceed in their
own names against such persons as may be liable to the assured in respect of the
loss or liability concerned. Thus, unless an express assignment of the assured's
rights has been made to the insurers, which will entitle them without his
intervention to take action against third parties, the insurers must proceed in he
name of the assured, who may be compelled to lend it for the purpose."
These two authorities clearly bring out the English principles of subrogation as
implied in contracts of indemnity and the effect of subrogation as distinguished
from that of transfer or assignment as regards rights of action.
(8) Normally, an assignment of a right of action for a tort is not valid. Such a right is
but a bare right to sue, and the principle of non-assignability of such a right of
action has received statutory recognition under S. 6(a) of the Transfer of Property
Act, But case of subrogation as applied to insurance for indemnity are an
exception to the rule. One justification may be that subrogation in such cases is
brought about, not by assignment, but by operation of law. But the decided cases
in England appear to go further to hold that assignments by an assured to the
insurer of his rights and remedies are permissible and are valid. King v. Victoria
Insurance Co. Ltd. 1896 A. C. 250 is one such authority. That was an interesting
case of an insurer, who, having paid the assured an indemnity, sued the
Government of Queensland, a third party, whose negligence caused damage to the
assured, to recoup itself to the extent of the indemnity paid. The insurer sued in its
own name, and one of the contentions before the Privy Council was that the
insurer could not maintain the action in its own name. Lord Hobhouse, speaking
for the Board, overruled the contention in these words:
"It is true that subrogation by act of law would not give the insurer a right to sue
in a court of law in his own name. But the difficulty is to over by force of the
express assignment of the bank's claim, and of the Judicature Act, as the parties
must have intended that it should be when they stipulated that nothing
in the assignment should authorise the use of the bank's name."
Thus, this view of the law never since appears to have departed from in English
courts. Though the facts in 1883-11 Q. B. C. 380 which was decided by the
English Court of Appeal were different, the doctrine of subrogation as applied to
contracts of insurance, as in this case, has been elaborately discussed and it is
made clear that by reason of subrogation, defined as it is in a wide sense the, will
not by itself enable the insurer to maintain an action in its own name to recover
from third parties in order to recoup itself. In my opinion, these well established
English principles of the law of insurance, as applied particularly to contracts of
indemnity in insurance, are part of the laws of this country as well. They are
founded not only on the nature of insurance involving indemnity, but also on
equitable principles and business consideration.
(9) It is true that S. 130-A of the Transfer of Property Act provides for the transfer or
assignment of a policy of marine insurance; but I do not accept the argument for
the appellant that this express enabling provision means that impliedly assignment
of insurance policies either before or after loss, is prohibited. Section 6(e) of the
same Act forbids only transfer of a mere right to sue. It seems tome that an
assignment or a transfer by an assured of his rights and remedies to the insurer is
not of a mere right to sue, and is, therefore not within the statutory inhibition.
1896 AC 250 is in effect an authority for it. This case was refereed to by a
Division Bench of this court inn Seetamma v. Venkataramanayya, ILR 38 Mad
308: (AIR 1916 Mad 473(1)) and was distinguished for purposes of S. 6(e) by
pointing out that the right of an insurer under a contract of insurance to be
subrogated to the rights and remedies of the assured could not be regarded as
arising merely from the transfer of a mere right of action. An assignment of such a
right is not on a par with an assignment of a claim for past mesne profits or a
claim for damages for negligence and is not hit by S. 6(e). Union of India v.
Alliance Assurance Co. Ltd. 66 Cal WN 419 takes the same view.
(10) I hold, therefore, that the assignment in favour of the respondent-insurer clearly
entitled it to sue the defendant in its own name. The second appeal fails and is
dismissed with costs of the first respondent. No leave.
(11) Appeal dismissed.
















Bibliography
Websites:
http://indiankanoon.org/doc/488191/

http://www.indiankanoon.org/doc/458151/



















Content
Sr.no topic
01 Shanti Devi v/s Shri Ram Lal

02 Vasudev Mudaliar V/S Caledonian

03 Bibliography