case analysis report

STATE OF ORISSA VS UNITED INDIA INSURANCE CO. LTD.

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THE NATIONAL UNIVERSITY OF ADVANCED LEGAL

STUDIES

(A State University Est. by Act 27, 2005 of Kerala State Legislature)

Kalamassery, Kochi - 683503, Kerala

SKILL-BASED LEARNING
SEMESTER 2

Submitted By:
Yana S Jacob (1804)
B.A LL. B. (Hons.),
The National University of Advanced Legal Studies (NUALS)

Submitted To:
Aparna Sreekumar
Assistant Professor
The National University of Advanced Legal Studies
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Contents
FACTS OF THE CASE...................................................................................................................................3
ISSUES RAISED..............................................................................................................................................4
JUDGEMENT..................................................................................................................................................5
REASON FOR THE JUDGEMENT..............................................................................................................6
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FACTS OF THE CASE

1. Vijay Commercial Corporation requested insurance covering certain risks, including the supply
of 12 bulldozers of Yugoslavian makes, under a policy dated July 23, 1966; this policy was later
extended by a new one, dated July 27, 1966, in which the Chief Engineer of the State of Orissa
was added as an insured. The insurance limit was of 27 lakhs rupees.

2. On December 6, 1966, a notice was issued from the insurance company to inform about the
insurance cancellation before the contract’s start for the aforementioned supply. Aggrieved by
this, Vijay Commercial Corporation filed a case in the High Court of Andhra Pradesh. The trial
court passed a decree in favour of the insurance company, and the plaintiff filed an appeal.

3. Due to the appellant's insurance claim, Hindustan Ideal Insurance Company Ltd. filed a lawsuit
in the trial court seeking confirmation that the insurance coverage was properly cancelled and a
corresponding injunction. The trial court granted the decree, and the High Court's decision in the
aforementioned appeal case confirmed the same. Hence, this is a special leave appeal.
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ISSUES RAISED

The issue raised in this case is whether the appellant (State of Orissa) is entitled to compensation from the
insurance company (Hindustan Ideal Insurance) for the insurance company's agent, Vijay Commercial
Corporation, who failed to deliver 12 bulldozers as promised.
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JUDGEMENT

 The High Court took the insurance contract apart and determined that it was a "Marine and Transit
Insurance" policy and that the non-supply of bulldozers was not a requirement of this policy.
Additionally, the court determined that because the insurer had the right to end the insurance
contract, the cancellation was legal and that the respondents were not liable for damages due to the
non-supply of the goods. According to Section 3 of the Maine Insurance Act, 1963, a contract for
marine insurance is an agreement whereby the insurer agrees to indemnify the assured against marine
losses, that is, losses that are incidental to marine adventure, in the manner and to the extent thereby
agreed.
 Any adventure where any insurable property is exposed to maritime risks is referred to as a "Marine
Adventure" under Section 2(d). In Section 2(e), the term "maritime perils" is defined as perils
resulting from or incidental to the navigation of the sea, including perils of the seas, fire, war-related
perils, pirates, rovers, and thieves, as well as captures, seizures, restraints, and any other perils that
may be of a similar nature or that the policy may designate.
 Additionally, it can be evident from the High Court's findings that the insurance covered a port-to-
port journey from Yugoslavia to Calcutta. As a result, the insurance must be a transit policy in order
for it to be effective, and the insurance company assumes responsibility for non-supply during
transit. But before that commitment took effect, the Insurance Company sent out a notification
cancelling it. One of the contract's provisions states that "this contract is subject to a 7-day written
notice of cancellation by either side." Therefore, the ability to terminate a properly executed contract
is a right shared by the parties.
 Hence, the High Court declared that the contract was duly cancelled clearly within the power and
legal competence. The Supreme Court also upheld this decision.
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REASON FOR THE JUDGEMENT

 The High Court has found that the insurance company's branch manager overstepped his bounds as
an agent when he included a guarantee against the non-supply of bulldozers in the policy. Under the
terms of Section 237 of the Contract Act, the principal is not bound by such an undertaking.
 In a contract of indemnity, one party makes a pledge to protect the other from harm brought on by
the actions of any third party, as defined by Section 124 of the Indian Contract Act. However, an
indemnity as it relates to maritime insurance must not be one as defined by the Indian Contract Act
because the loss in such a contract is covered by the contract itself and was not brought on by the
actions of the insurer or any other party.
 According to this contract, the assured will always receive full indemnification in the event of a loss
for which the policy has been written, but never more. That is the fundamental tenet of insurance,
and any proposal that departs from it, i.e., one that either denies the assured of receiving a complete
indemnity or one that provides the assured with more than a full indemnity, must unquestionably be
incorrect.
 Because the Branch Manager was not authorized to assume the risk of the loss due to non-supply, the
agent, the Insurance Company, is exempt from liability for any harm. However, given that the
contract had been properly cancelled under the insurance itself, the certification requested—that the
contract was properly cancelled—is obviously within the authority and legal competence.