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PETITIONER: PANNALAL JANKIDAS

       Vs.

RESPONDENT: MOHANLAL AND ANOTHER.

DATE OF JUDGMENT: 21/12/1950

BENCH: KANIA, HIRALAL J. (CJ) BENCH: KANIA, HIRALAL J. (CJ) SASTRI, M. PATANJALI DAS, SUDHI RANJAN

CITATION:  1951 AIR  144            1950 SCR  979

ACT:     Contract--Damages--Remoteness of damage--Agent  neglect- ing to insure goods against fire--Goods destroyed by exploi- sion--Liability  of agent--Bombay  Explosion  (Compensation) Ordinance, 1944,    ss. 14,18--Ordinance grantinq  compensa- tion  for damage by explosion-Loss by explosion not  covered by  policy--Loss of compensation under Ordinance by  failure to insure---Whether direct or remote damaqe--Claim by  prin- cipal  against  agent, whether barred  by  Ordinance--Indian Contract Act, 1872, s. 212.

HEADNOTE:     The  plaintiffs  who were  commission  agents  purchased piecegoods according to defendant’s instructions and  stored a portion of the goods in a godown in Bombay pending receipt of  a permit from the Government authorities for  consigning the  same  to  the defendants.  Before the  goods  could  be despatched,  a big explosion occurred in the Bombay  Harbour and  the goods stored were destroyed either by the  fire  or the  explosion.   A few months  later  the  Governor-General promulgated the Bombay Explosion (Compensat,ion)  Ordinance, 1944,  which provided, inter alia, (i) that  the  Government shall  pay  a  compensation of 50 per cent.  of  the  damage caused in respect of uninsured goods, and the entire  damage in respect of insured goods; and (ii) that no person   shall have or be deemed ever to have had, otherwise than under the Ordinannce  any  rights whether in contract or in  tort   or otherwise  to  any  compensation for damage to  or  loss  of property  arising out of the explosion and no suit or  other legal  proceeding for any such compensation or damage  shall be  maintainable  in any civil courts.  The  plaintiffs  re- ceived  50 per cent of the value of the destroyed  goods  as they 980 were not insured, and, alleging that as agents they had  the right  to be indemnified by the defendants, sued the  latter for  recovery of the remaining 50 per cent of the  value  of the  goods.  The defendants pleaded, and it was found  as  a fact,  that  they  had instructed the  plaintiffs,  and  the latter had agreed, to insure the goods but had omitted to do so,  and they claimed that inasmuch as they would have  been

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entitled to receive the full value of the goods as compensa- tion under the Ordinance if the plaintiffs had insured, they were  entitled to set off or counter claim the value of  the goods as damages caused to them by the neglect or breach  of duty of the plaintiffs.     Held  per  KANIA C.J. and  DAS J.  (PATANJALI  SASRI  J. dissenting).--(i)  As full compensation under the  Ordinance was  payable on proof of the existence of a  fire  insurance policy  irrespective  of the terms of the  policy,  and  the non-recovery of half the value of the goods from the Govern- ment  under the Ordinance was due to the obsence of  a  fire insurance policy, the loss to the defendants arose  directly from  the  neglect or breach of duty of  the  plaintiffs  to insure  the goods as they had been instructed and agreed  to do; intervention of the Ordinance did not break the chain of causation or make the loss remote or indirect; the Ordinance did  not  create any new liability but only  quantified  the damages;  and the fact that it did not exist at the time  of the  explosion and could not have been in the  contemplation of  the parties was irrelevant for deciding the question  of liability;     (ii)  the plea of the defendants was not barred  by  the Ordinnance  inasmuch  as their cause of action  against  the plaintiffs  was misconduct of the latter in the business  of their agency, and this cause of action was completed by  the averment that there was a dnty or agreement to insure,  that there was failure to per. form that duty and that the  fail- ure had caused damage to the defendants, and the quantum  of the damages was not a part of the cause of action.     Per PATANJALI SASRI J.--(i) The defendants’ inability to recover  the  full value of the goods  from  the  Government under the Ordinance did not arise directly and naturally  in the  usual course of things from the plaintiffs’ failure  to insure, but from independent and disconnected events,  name- ly,  the Government’s scheme for compensation,  embodied  in the  Ordinance, the agreement with the  insurance  companies regarding  contribution  and the  consequent  discrimination made by the Government between insured and uninsured  goods. The Ordinance did not, displace the ordinary rules of law as to  remoteness of damage or amend or abrogate any  terms  in the fire insurance policies and it was further difficult  to see  how by virtue of an Ordinance passed some months  after the  explosion, the right to damages could become  enlarged. The broad principle of restitutio in integrum upon which the assessment  of  the quantum of damages is  based  cannot  be carried  to its utmost logical results but must be  qalified by the rule of remoteness-   981     (ii) The bar under the Ordinance was not based upon  the nature  of the cause of action but upon the damage  or  loss being  "due to or in any way arising out of"  the  explosion and the claim of the defendands was clearly barred.  In  any event  the  defendants cannot be allowed to claim  that  the loss  of the goods was explosion damage so as to  bring  the case under s. 14 and at the same time contend that the  loss was not due to or did not in any way arise out of the explo- sion in order to avoid the bar under s. 18.In  re  an Arbitration between Polemis  and  Another  and Furness Withy & Co.   Ltd. [1921] 3 K.B. 560,  Weld-Blundell v. Stephens [1920] A.C.   983,  Monarch Steamship  Co.  Ltd. v.  Karlshamns  Oljefabriker   [1949] A.C.  196,  Hadley  v. Baxendale  (9 Ex. Livingstone v. Rawyards Coal Co. (1880)  5 App. Cas. 25, British Westinghouse Electric and  Manufactur- ing  Co.  Ltd. v. Underwood Electric  Railways  Co.,  London [1919]  A.C.  673,  Liesbosch (owners)  v.  Edison  (owners)

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[1933]  A.C.  449, Smith Hogg & Co. Ltd. v.  Black  Sea  and Baltic General Insftrance Co. Ltd. [1940] A.C. 997, Standard Oil  Co. of New York v. Clan Line Steamers Ltd. [1924]  A.G. 100 referred to.

JUDGMENT: APPELLATE JURISDICTION: Civil Appeal No. 71 of 1949.     Appeal  from a judgment and decree of the High Court  of Judicature  at Bombay dated 11th April, 1947,  (Sir  Leonard Stone C.J. and Chagla J.) in Appeal No. 39 of 1946 reversing the  judgment and decree of Bhagwati J., dated  27th  March, 1946, in Civil Suit No. 1373 of 1944 of the said High  Court in its Original Jurisdiction.     Rang Behari Lal (Rajeswar Nath Nigam, with him) for  the appellants.     M.C. Setalvad (Ram Ditta Mal and B. Sen, with hirn)  for the respondents.     1950.  December  21.  The Court  delivered  judgment  as follows :---     KANIA  C.J.--This  is an appeal from a judgment  of  the High Court at Bombay.  Although the record is heavy and many points  were argued in the trial court and in the  court  of appeal  at Bombay, the important point argued before  us  is only one.     The  appellants  (plaintiffs) are a firm  of  commission agents in Bombay.  The respondents  (defendants) 982 were  their  constituents.  Accounts between  the parties in respect of their dealings were made up and settled up to the 30th of October, 1943.  Piecegoods and yarn continued to  be purchased and consigned by the plaintiffs to the  defendants joint  family firm thereafter.  One bale of  piecegoods  was purchased  and despatched in November, 1943.    In  January, 1944,  restrictions were imposed against the consignment  of piecegoods  and/or  yarn  outside Bombay  by  rail  without. obtaining  the  necessary previous permit from  the  Textile Commissioner at Bombay.  On or about the 8th February, 1944, Mohanlal of the defendants’ joint family firm came to Bombay and  the plaintiffs purchased on their behalf 278  bales  of piecegoods. Ninetyfour out of those were despatched  accord- ing to the defendants’ instructions. The plaintiffs, accord- ing  to  the defendants’ instructions, applied for  and  ob- tained permit to consign several more bales. On the  permits being issued they were despatched on 14th February, 1944, to destinations  given by the defendants.  On the  10th  April, 1944, the plaintiffs, after obtaining the necessary permits, despatched  more bales as directed by the  defendants.   The dispute  between  the parties relates to  the  remaining  92 bales  which were stored in godown No. 424,  Baroda  Street, Argyle  Road,  Bombay,  pending the receipt  of  permit  for consigning the same On  the 14th April, 1944, there occurred a big explosion  in the Bombay harbour which destroyed several immovable proper- ties  and  godowns with moveable property covering  a  large area  near the port. Fires were caused by the explosion  and they  also caused considerable destruction of  moveable  and immoveable  properties.  These  92 bales  purchased  by  the plaintiffs on account of the defendants were also  destroyed either by the fire or the explosion.  The plaintiffs filed a suit  to recover the price of these 9’2 bales from  the  de- fendants  on the ground of the agent’s right  to  indemnity. The  defendants  contended that the  plaintiffs  were  their

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pucca adatiyas, that the property in the goods did not  pass to them and that they were not liable for the price      983 till delivery of the goods was given to them.  In the alter- native, in para. 4 of their written statement, they  pleaded that when Mohanlal of the defendants’ firm was in Bombay and the  plaintiffs  stated that the goods could not  be  railed until  permits  were  obtained, it was  agreed  between  the plaintiffs  and the defendants that the defendants  were  to pay  annas  four per bale per month to  the  plaintiffs  for insurance charges and the goods were thus to remain  insured till  despatched according to their instructions.  In  para- graph 21 of their written statement, they contended that  if their  plea that the plaintiffs were pucca adatiyas was  not accepted. and the plaintiffs were  held to be their  commis- sion   agents, the  plaintiffs  were guilty   of  negligence and  misconduct  in the business of agency, as in  spite  of specific  instructions  and  agreement they  bad  failed  to insure the goods.  They contended that owing to this  negli- gence and misconduct the plaintiffs were not entitled to the indemnity  claimed.  In the alternative they contended  that the  plaintiffs were liable to make good the loss caused  to the  defendants by their failure to insure the  said  bales. They contended that they were entitled to set off this  loss against  the claim for the price.  They also  counterclaimed the same amount if their set-off was not allowed.  On  these pleadings  the parties went to a hearing.  Issue to  covered the  defendants’ plea about the plaintiffs’  negligence  and misconduct  in  not insuring the 92 bales and  the  counter- claim arising therefrom.     Numerous  witnesses were called before the  trial  court and the learned judge after considering their demeanour  and hearing  their  evidence  came to the  conclusion  that  the plaintiffs’ witnesses were unreliable, except when they were corroborated  by documentary evidence.  He also  disbelieved the  defendants’  evidence. He held that  the  agreement  to insure  the  goods  was not proved and passed  a  decree  in favour  of  the plaintiffs.  On appeal, differing  from  the view of the trial court, the appeal court held that instruc- tions were given by Mohanlal to insure the goods and that 984 the agreement was proved.  In thus differing from the  trial court’s decision, they accepted the well-recognised  princi- ple  to give full weight to the trial  judge’s  observations about the witness. They however found that on the  documents the  view  of the learned trial judge was  not  correct.  In doing  so, they principally relied on statements of  account sent by the plaintiffs to the defendants in respect of bales purchased  in February, 1944, and despatched by them out  of the lot of 278 bales previously and where the plaintiffs had charged  the defendants insurance premia at the  rates  men- tioned in the defendants’ written statement.  They  rejected the  plaintiffs’  explanation, which was   accepted  by  the trial  judge, that these entries were foolishly made out  of cupidity by the plaintiffs.     After  a brief discussion in which this point was  halt- ingly  urged before us, the learned counsel for  the  plain- tiffs  did not very properIy dispute this conclusion of  the appeal  court.  In our opinion, the finding  of  the  appeal court, having regard to the documents, was correct.     That left for decision the important question of damages to which the respondents  were  entitled. Before the  appel- late  court in Bombay, it was conceded by  the  respondents’ counsel  that the insurance which was to be effected by  the appellants  under  the agreement was on the usual  terms  of

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fire  insurance policies prevalent in Bombay.  Clause  7  of that form  of policy, inter alia, provided as follows :--      "Unless otherwise expressly stated in the policy,  this insurance does not cover......      (h)  any loss or damage occasioned by or through or  in consequence of explosion but loss or damage by explosion  of gas used for illuminating or domestic purposes in a building in  which gas is not generated and which does not form  part of any gaswork will be deemed to be lost by fire within  the meaning of this policy-"      The  appellants urged that granting that they  were  in default and had committed a breach of duty in not 985 insuring  the  goods according to the  instructions  or  the agreement,  the respondents could not recover anything  from them  due to damage arising from the explosion, because  the policy of fire insurance, if taken out, would not have given to  the  respondents  the money claimed by  them.  For  this purpose they relied on a statement n Mayne on Damages, (11th Ed.) at page 592, as follows :--     "Therefore if an agent is ordered to procure a policy of insurance  for his principal and neglects to do it, and  yet the policy, if procured, would not have entitled the princi- pal, in the events which have happened, to recover the  loss or damage, the agent may avail himself of that as a complete defence."     In  the present case, after the  explosion  considerable discussion  about the liability of the  insurance  companies under their policies of fire insurance and the liability  of Government   for   alleged  negligence   in  unloading  high explosives  from a ship on the docks appears to  have  taken place.  On the 1st of July, 1944, the Governor-General  pro- mulgated  the  Bombay Explosion  (Compensation)  (Ordinance, 1944. The preamble to that Ordinance runs as follows:-     " Whereas an emergency has arisen which makes it  neces- sary to provide for and regulate the payment of compensation for......  damage to property due to, or arising out of, the explosions  and fires which occurred in the Bombay Docks  on the  14th April, 1944, to restrict  litigation  in   connec- tion   with   the   said explosions and fires  and  to  make certain other provisions in connection therewith."     The  other  relevant provisions may be also  noticed  at this stage. Uninsured property was defined to mean  property which  was  not covered whether wholly or partially  by  any policy  of  fire, marine or miscellaneous insurance  at  the time  of  the explosion. After providing for  the  procedure according  to  which compensation may be claimed  and  dealt with  by the Claims Committee to be set up under  the  Ordi- nance and an appeal and review from their decision,  section 14 provided as follows :-- 986     14. "Subject to the provisions of this Ordinance,  there shall  be  paid by the Central Government  compensation  for explosion damage to property being     (a)  damage caused by fire to property  insured  whether wholly  or  partially at the time of the  explosion  against fire  under a policy (other than a policy of  marine  insur- ance) covering fire risk, or damage caused by blast  without fire  intervening  to  property insured  whether  wholly  or partially at the time of the explosion under a pollcy (other than a policy of marine insurance) covering fire and  explo- sion risks, of an amount equal to the proved loss, or     (b)  damage caused by blast without fire intervening  to property insured whether wholly or partially at the time  of the  explosion  against fire under a policy  (other  than  a

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policy  of  marine  insurance) covering fire  risk  but  not explosion  risk, of an amount equal to 871/2 per  centum  of the  proved loss, to the holder of the policy  of  insurance covering the damaged property, or if he is deceased, to  his legal representatives.     Section  15  provided for contribution by  the  insurers towards  the payment of amounts to be paid under  the  Ordi- nance.  Section 18 of the Ordinance runs as follows :--     18.  (1)  Nothing in this Ordinance  shall  prevent  the recovery of compensation for death or personal injury  under the  Workmen’s  Compensation Act, 1923 (V/11  of  1923),  or under  any  policy  of life insurance  or  against  personal accident or under any other contract or scheme providing for the payment of compensation for death or personal injury, or for damage toproperry under any policy’ of marine or miscel- laneous insurance.     (2) Save as provided in sub-section (1), no person shall have,  or be deemed ever to have had, otherwise  than  under this  Ordinance any right whether in contract or in tort  or otherwise  to  any compensation or damages  for  any  death, personal injury or damage to or loss of any property, rights or interests, due to or in any way arising out of the explo- sion; and no suit or other     987. legal   proceedings  for any  such compensation  or  damages shall,  save  as  aforesaid, be maintainable  in  any  Court against  the Crown or the Trustees of the Port of Bombay  or the  Municipal Corporation of the City of Bombay or  against any servants or agents of the Crown or of the said  Trustees or Municipal Corporation or againt any other person  whomso- ever; and no act or omission which caused or contributed  to the explosion shall be deemed  to have been done or  omitted to be done otherwise than lawfully.     (3)  No  suit,  prosecution or  other  legal  proceeding whatsoever shall lie against any person for anything in good faith done or ordered to be done in combating or  mitigating the effects of the explosion, or for anything in good  faith done  or intended to be done in pursuance of this  Ordinance or any rules or orders made thereunder."     It is common ground that in respect of uninsured  merch- andise  fifty  per cent. compensation was to be  paid  under the  Ordinance.  The appellants  have recovered that  amount and  have now agreed to give credit of the same to  the  re- spondents.  The dispute is in respect of the remaining fifty per  cent.   It is not disputed that if the goods  had  been insured,  under section 14 of the Ordinance, full  compensa- tion would have been recovered by the appellants and  become payable to the respondents.     The appellants’  contention is two-fold.  Firstly,  that if  they had insured the goods the ordinary fire insurance policy  would  not have covered the risk and  therefore  al- though they had committed a breach of the agreement or  been negligent  in their duty as agents, they were not liable  to pay anything more to the respondents.  In the alternative it was argued on their behalf that the intervention of  Govern- ment in passing this Ordinance could not increase or add  to the  liability of the appellants for the breach of  contract or breach of duty and therefore they were not liable to  pay the  compensation which  would have been receivable  by  the respondents if the goods had been 988 insured.  The second contention is that the counterclaim  of the respondents is barred under section 18 (2) o[ the  Ordi- nance.  In  the Indian Contract Act, sections  211  and  212 provide  for the consequences of an agent  acting  otherwise

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than  according  to his duty towards the  principal.   Under section  211  when  an agent conducts the  business  of  the principal  otherwise than according to the directions  given by  the principal, ii any loss be sustained he must make  it good  to  his principal and if any profit  accrues  he  must account  for it. In Smith v. Lascelles(1), it was held  that if an agent was instructed to insure goods and neglected  to do so he was liable to the principal for their value in  the event  of their being lost.  Section 212 of the Indian  Con- tract Act provides as follows :---     "An  agent is always bound to act with reasonable  dili- gence and use such skill as he possesses; to make  compensa- tion to his principal in respect of the direct  consequences of  is own neglect, want of skill or misconduct, but not  in respect  of loss or damage which are indirectly or  remotely caused by such neglect, want of skill or misconduct."     These sections make it clear that in case of the agent’s negligence  he is liable to make  good the  damage  directly arising  from  his neglect but not  indirectly  or  remotely caused  by such neglect or misconduct.  The question  there- fore  is  whether in the present case the claim of  the  re- spondents  based on the neglect or misconduct can be  stated to be a direct consequence of such neglect or misconduct  or is only indirectly or remotely caused by such neglect.     Two  positions  can be visualized as  arising  from  the appellants’  neglect in this case.  The appellants could  be treated  either as insurers themselves or can be  considered as having agreed to cause the goods insured by a  recognised insurance company on the usual fire insurance policy  terms. In  Tickel v. Short(2), the Lord Chancellor  shortly  stated the  proposition  of  law in these terms :--"  The  rule  of equity is, that if an order (1) (1788) 2 T.R. 187.            (2) 2 Ves. Sen, 239. 989 is sent by a principal to a factor to make an insurance; and he charges his principal, as i[ it was made; if he never  in fact has made that insurance, he is considered as the insur- er himself" If therefore, as in the present case, the appel- lants  were given instructions to insure the goods and  they charged  the respondents as if they had insured  the  goods, the law would throw upon them the liability of an insurer as if  they stood in the position of insurers, i.e., the  Court will  then be -entitled in equity to proceed on the  footing as if an insurance had been  effected by the appellants  and the  goods  stood  covered under a  fire  insurance  policy. Whatever  consequences follow  from  that position  must  be accepted  and  enforced  in a court of  equity  against  the appellants.  Proceeding  on  that line  of  reasoning  under section 14 of the Ordinance the only thing which is required to be considered is whether the goods were covered by a fire insurance  policy.  The terms of the policy are  immaterial. If,  therefore,  the  appellants are  considered  as  having insured  the  goods and are precluded from saying  that  the goods were not covered by a fire insurance policy, the  loss arising from the fact that the goods were not so covered  is a direct consequence of their neglect and they must make  it good.  That will make them liable to pay what was claimed by the respondents.     If,  however, it is considered that they were not  them- selves  insurers but that they had agreed only to  keep  the goods  insured under a policy of insurance of  a  recognised insurance company on the usual fire insurance policy  terms, the question is whether the damages claimed by the  respond- ents  directly flow from their neglect of duty in not  being able to produce such a fire insurance policy.  Our attention

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has  been drawn to an instructive judgment  which makes  the distinction  between direct and remote damages clear. In  In Re  An  Arbitration between Polemis &  another  and  Furness Withy  & Co. Ltd.(1) there is a discussion on this point  in the judgment of Banks L.J.  He drew attention to the  obser- vations of Lord Sumner in Weld-Blundell v. [1921] 3 K.B. 560. 990 Stephens  (1), who observed as follows:--"What are  natural, probable  and necessary consequences ? Everything that  hap- pens, happens in the order of nature and is therefore  natu- ral.  Nothing that happens by the free choice of a  thinking man is necessary except in the sense of pre-destination.  To speak  of probable consequences is to throw everything  upon the jury.  It is tautologous to speak of effective cause  or to say that damages too remote from the cause are irrecover- able,  for an effective cause is simply that  which  causes, and in law, what is ineffective or too remote is not a cause at  all.  I still venture to think that direct cause is  the best expression..................  What a defendant ought to have  anticipated as a reasonable man is material  when  the question is whether or not he was guilty of negligencee that is,  of  want of due care according  to  the  circumstances; This  however  goes  to capability,  not  to  compensation." Banks  L.J., after  noticing the above observations,  stated as follows :--" Under these circumstances I consider that it is  immaterial that the causing of the spark by the  falling of the plank could not have been reasonably anticipated. The appellants’  junior  counsel sought to  draw  a  distinction between  the anticipation of the extent of damage  resulting from  a negligent act, and the anticipation of the  type  of damage  resulting  from such an act............   I  do  not think  that  the  distinction can be  admitted.   Given  the breach  of duty which constitutes the negligence, and  given the  duty damage as a direct result of that negligence,  the anticipations of the person whose negligent act has produced the damage appear to me to be irrelevant,"     The question of what is remoteness of damages in a  case of negligence has been reviewed in detail in a recent  deci- sion of the House of Lords in Monarch Steamship Co. Ltd.  v. Karlshamns  Oljefabriker(2).   In that  case  the   question arose  in  respect of damages due to the  late  delivery  of goods shipped for a port in Sweden, but which ship, owing to its unseaworthiness, was delayed in its voyage and owing  to the outbreak of war (1) [1920] A.C, 983-981          (2) [1949] A.c. 196, 991 under  orders of the British Admiralty, was directed not  to proceed  to  the Swedish port but ordered to  discharge  the cargo at Glasgow. The assignees of the bills of lading  from the  shippers  had  to forward the goods  in  neutral  ships chartered for the purpose to the Swedish port.  A war  risks clause  in  the charterparty exonerated the  owners  of  the vessel  in the event of compliance with any orders given  by the   government  of the nation under whose  flag  the  ship sailed, as to destination delivery or otherwise.  The  hold- ers  of  the bills of  lading  claimed   the    re-transport charges  from  Glasgow to the Swedish       port.    It  was contended that these damages were too remote.   The House of Lords  rejected  the  contention.   In the  speech  of  Lord Wright  most of the relevant authorities have been  reviewed and  the  ratio decidendi has been set out.   In  Hadley  v. Baxendale  (1)   Alderson  B., giving the  judgment  of  the CoUrt, thought that the proper rule in such a case consisted of two alternatives. He said:  "Where two parties have  made

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a  contract which one of them has broken the  damages  which the  other party ought to receive in respect of such  breach of  contract should be such as may fairly and reasonably  be considered  either  arising  naturally, i.e.,  according  to the  usual  course of things, from such breach  of  contract itself,  or such as may reasonably be supposed to have  been in  the contemplation of both parties at the time they  made the  contract, as the probable result of the breach of  it." In the opinion of Lord Wright this in truth gives effect  to the  broad general rule of the law of damages that  a  party injured by the other party’s breach of contract "is entitled to  such money compensation as will put him in the  position in  which he would have been but for the breach." This  rule was stated by Lord Blackburn in Livingstone v. Rawyards Coal Co. (2) as follows :--"Where any injury is to be compensated by  damages,  in settling the sum of money to be  given  for reparation  of damages you should as nearly as possible  get at  that sum of money which will put the party who has  been injured, (1) 9 Ex. 341.              (2) (1880) 5 App. Cas. 25, 39. 992 or  who has suffered, in the same position as he would  have been in if he had not sustained the wrong for which    he is now  getting  his  compensation or  reparation."  The  ’rule stated  by  Alderson B. has consistently  been  accepted  as correct;the  only difficulty has been in applying  it..  The distinction  drawn  is  between  damages  arising  naturally (which  means in the normal course     of things) and  cases where  there were special and  ex-traordinary  circumstances beyond  the reasonable prevision of the parties.   The  dis- tinction between these types is usually described in English Law  as that between generaland special damages; the  latter are  such that if they are not communicated it would not  be fair  or  reasonable to hold the defendant  responsible  for losses which he could not be taken to contemplate as  likely to result from his breach of contract. Viscount Haldane L.C. in  The  British Westinghouse Electric &  Manufacturing  Co. Ltd. v, The Underground Electric Railways Co. of London (1), on the question of damages said :In some of the cases  there are  expressions as to the principles governing the  measure of  general damages which at first sight seem  difficult  to harmonize.  The  apparent   discrepancies   are,    however, mainly due to the varying nature of the particular questions submitted for decision.  The quantum of damage is a question of  fact, and the only guidance the law can give is  to  lay down  general  principles which afford at times  but  scanty assistance.in dealing with particular cases.  The Judges who give  guidance to juries in these cases have necessarily  to look  at  their  special character, and to  mould,  for  the purposes of different kinds of claim, the expression of  the general  principles which apply to them and this is  apt  to give  rise to an appearance of ambiguity.-.It was  necessary to  balance loss and gain and no simple solution was  possi- ble."  The  House of Lords in Liesbosch (Owners)  v.  Edison (Owners) (2) has stated at page 463 that it is impossible to lay down any universal formula.  The dominant rule of law is the principle of restitutio in integrum and subsidiary rules can only be justified if (1) [1912] A.C. 678. 689.             (2) [1933] A.C. 449, 993 they  give,  effect to that rule.  (The italics  are  mine). In  Smith,  Hogg & Co. Lid. v. Black Sea  &  Baltic  General Insurance  Co.  Ltd.  (1), the loss  of  a  vessel  occurred through   the   negligence   of  the  master   operating  on conditions  of   unseaworthiness  existing  since  the  com-

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mencement  of  the  voyage.   The  loss  was  held   to   be caused  by  the   breach  of  the warranty of  seaworthiness and  recoverable  accordingly.  There was  an  exception  of negligence.  At page 1005 in the judgment of that case it is stated  "no distinction could be drawn between  cases  where the  negligent  conduct of the master is a cause  and  cases where  any other cause, such as perils of the sea, is a  co- operating cause.  A negligent  act is as much a co-operating cause  if  it  is a cause at all., as an act  which  is  not negligent."   What  was  then being emphasized  was  that  a voluntary  act  (negligent or not) of a human agent  is  not generally an independent or new cause for this purpose which breaks  the  chain of causation, as it is called, so  as  to exclude  from consideration the causal effect of the  unsea- worthiness.  In that case it was held that the  unseaworthi- ness created in the vessel instability which, combined  with negligence  of the master, caused the loss. No new  law  was laid  down in that case.  Similarly in The Standard Oil  Co. o[  New  York  v. Clan Line Steamers Ltd.  C"),  the  vessel capsized  because  the  master not being instructed  by  his owners     as  to  the peculiarities of a  turret  ship,  so handled  her that she capsized.  That loss  was  immediately due  to  perils of the sea which overwhelmed  her  when  she capsized, liability for which was excepted, but the dominant cause  was her unseaworthiness in that her  master,  though’ otherwise  efficient, was inefficient in not being aware  of the  special danger. In general, all the authorities are  in agreement  in  this respect and embody the  same  rule.  TIm shipowner,  of course, under the familiar general  rule,  is debarred by his breach of duty from relying on the  specific exception.   Though  he would not be liable for  the  conse- quences  caused by the specific excepted peril or the  acci- dent alone if he (1)[1940] A.G. 997.               (2) [1924] A.C. 100. 994 were not in default, though the unseaworthiness existing  at the  commencement  Of the voyage might not be  operative  or known until the time when the accident occurs, yet then  the breach  of  the warranty operates directly as a  cause  and, indeed,  a dominant cause. Causation in law does not  depend on remoteness or immediacy in time," These observations meet the  appellants’ contention about the  Government  Ordinance intervening to fix the damages.  They show that such  inter- vention  does not break the chain of causation, nor does  it make  the loss, i.e., damages, remote. The statement of  law in Mayne on Damages quoted above, only reproduces  the prin- ciple  of law stated by Lord Blackburn in    Livingstone  v. Rawyards Coat Company(1).     Bearing  in mind this state of the law  itappears  clear that  in the present case it was the duty of the  appellants to insure the goods, as they had agreed to do. Once  miscon- duct is admitted or proved, the fact that the Ordinance  did not  exist and could not have been in the  contemplation  of the   parties  is  irrelevant for deciding the  question  of liability.   The  liability was incurred by  reason  of  the breach  of  their duty and the  appellants  made  themselves liable  to pay damages. The measure of damages was the  loss suffered  by  the respondents on account of  the  goods  not being insured. The next point to be decided is what  differ- ence the promulgation of the Ordinance makes in the liabili- ty  of  the appellants. The relevant  provisions  are  noted above. The scheme of the Ordinance clearly is, as stated  in the  preamble,  to provide for and regulate the  payment  of compensation  and  to  prevent  litigation,  amongst   other things.   It is thus a comprehensive legislation  which  re-

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places  the  rights of parties either under  the  policy  of insurance  against insurance companies, or on the ground  of negligence against Government by the owners of the goods, as also  claims by insurance companies against Government.  The validity  of this legislation is not challenged. Section  18 gives  it a retrospective effect.  Therefore  the  Ordinance only (1) (1880) 5 App. Cas. 25 995 substitutes  a new basis for assessing compensation for  the ordinary  basis  for  assessing  unliquidated  damages.  The compensation under the Ordinance is payable on proof of  the existence  of  a fire insurance policy irrespective  of  the terms of the policy.  The non-recovery of half the amount of the  respondents’ claim from the Government under the  Ordi- nance  because  of the absence of a fire  insurance  policy, thus  directly arises from the neglect of the appellants  to insure  the  goods,  as they had been instructed  to  do  or agreed  to do and which in fact they represented  that  they had done.  In our opinion, these are not indirect or  remote damages.     The  contention that under the policy of  insurance  the assured could not have recovered anything for loss caused by the fire due to explosion cannot be accepted. Firstly,  this contention of the assured’s inability to receive any compen- sation because of clause 7 of the form of common policy  was not  raised in the trial court. No issue was raised  in  re- spect thereof and no arguments in support or against it were heard.  It was suggested for the first time, as appears from the  judgment  of Chagla J., in the court  of  appeal.   The assumption that because of clause 7 of the policy no  insur- ance  company would have paid the loss cannot be assumed  to be  necessarily and unquestionably sound and in view of  the terms  of  the Ordinance not capable  of  being  determined. There  appears no reason under the circumstances to  proceed as  if  an  adverse decision on the  interpretation  of  the policy  had been given against the respondents and  to  hold the  appellants free from liability for not recovering  half the  value of the goods which could have been  recovered  if the  goods  had been insured (irrespective of the  terms  on which the policy stood) as agreed to be done by them.  I  do not  think when the relations between the parties are  of  a principal  and an agent and the agent is found to have  com- mitted a breach of his duty, it is correct to take a  narrow view  of  the situation.  The agent chose to gamble  in  not insuring the goods and desired to charge the agreed  premia, on  the  footing that the goods were covered  by  insurance. If so,  he must take the 996 consequences  of his default.  The argument that  their  li- ability  as  an  agent who had agreed to  insure  should  be ascertained as on the date of the explosion is no answer  to the  claim of the respondents.  The position would be  this. Assuming  that the appellants had insured  the goods on  the terms of the usual fire insurance  policy..  the respondents could  ask them either to assign the policy to the  respond- ents  or to file a suit against the insurance  company  con- tending that the fire, and not the explosion, was the; cause of  the  loss and was covered by the  policy  of  insurance. Before the Court could decide the rights of the parties, the Ordinance promulgated by the Governor-General prevented  the decision of the dispute, but the Government undertook to pay the  loss on the footing that the policy covered  the  risk. Tile misconduct gave rise to the liability to make good  the damage  and to put the respondents in the same  position  in

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which they would have been if their goods had beeen insured.     On behalf of the appellants it was urged that because of the  Government intervention in  issuing the Ordinance  they were sought to be made liable under a new liability.   Their liability  has  been  and exists on the basis  that  a  fire insurance policy existed, as they were instructed to  insure the  goods  and which they represented they  had  done.  The liability arises not because of the Ordinance but because of the  breach  of their duty in failing to insure,  which  has taken  place apart from the Ordinance and which is  not  af- fected by the Ordinance.  The utmost that they could urge is that  the extent of their liability arising from their  mis- conduct  was  not anticipated by them when  they  agreed  to perform their duty. That however is no defence in law if the damages directly flow from the breach of duty. The Ordinance only quantifies the damages instead of leaving the  unliqui- dated  damages to be assessed in the usual way.   The  Ordi- nance  lays down the yardstick for fixing the damages  under different circumstances, which cover all alternative  situa- tions,  and the liability for failure to insure must now  be measured  by the new basis. It does not create any  new  li- ability. 997 The  appellants’ contention on this point therefore must  be rejected.     The  only other point urged before us was based  on  the construction of section 18 of the Ordinance. It  was  argued on   behalf of the appellants that apart from what could  be recovered  under  clause (1) of section 18,   the  Ordinance extinguished  all right,  whether in  contract or   tort  or otherwise,  to any compensation or damage for loss  of  an), property due to, or in any way arising out of, the explosion and provided that no suit or other legal proceedings for any such  compensation or damages shall, save as  aforesaid,  be maintainable  in any court against the Crown or against  any other  person whatsoever. It was urged that in  establishing their claim, the respondents must plead the right to recover the  amount due to explosion and that was barred under  sec- tion  18  (2). In our opinion, this contention  is  unsound. The appellants have filcd this suit to recover the price  of the  goods  on the ground of  indemnity.   The  respondents’ answer is that the appellants are not entitled to the indem- nity  because  they are guilty of a breach of  duty  in  the business  of  the agency. They contend that  they  would  be liable to pay for the goods only if the appellants give them the  goods or deliver the same according to  their  instruc- tions.  They counterclaim that if the appellants are  unable to give them the goods, they must pay them the value  there- of.  The appellants plead by way of defence to the  counter- claim  that the goods were destroyed without any neglect  on their  part  by fire caused by the explosion  and  therefore they  were not liable.  The respondents’ rejoinder  is  that they had asked the appellants to insure the goods and if the appellants  had  not failed in their duty  they  would  have reimbursed  the respondents. The appellants then plead  that even if they had insured the goods the respondents could not have recovered anything from the insurance companies.  It is in  reply to this contention that the respondents say   that the appellants’  liability to recover money from the  insur- ance company on the terms of the usual fire insurance policy is irrelevant 998 because  they  could have recovered the money  if  they  had insured  in fact, irrespective of the terms of  the  policy, under the Ordinance.  The respondents are not thus  claiming

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to  recover money from the appellants otherwise  than  under section  18 (1) of the Ordinance. Their cause of  action  is the misconduct of the agent in the business of agency and is quite  different.  It is not for compensation  arising  from explosion.     It  was argued that damages formed part of the cause  of action  of the respondents in framing the  counterclaim  and therefore  section 18 (2) stood in the way of  the  respond- ents.  The contention is unsound because the cause of action is completed by the averment that there was a duty or agree- ment  to  insure, that there was a failure to  perform  that duty, that loss had occasioned to the respondents because of the  failure  to perform the duty and  the  appellants  were therefore liable for the  breach of the duty. The quantum of damages is not a part of the cause of action. It is a matter to  be ascertained by the court according to well laid  down principles of law.     The  result  is that the appeal fails and  is  dismissed with costs. PATANJALI SASTRI J.--I regret I am unable to agree with  the judgment  just  delivered  by my Lord which I  have  had  an opportunity of reading.  As the facts of the case have  been fully stated in that judgment it is unnecessary to  re-state them here.     The  main  question arising for  determination  is  what damages are the appellants liable to pay to the  respondents for  their  failure to insure the respondents’  goods  which were  destroyed by fire caused by the big  explosions  which occurred  in  the Bombay Docks on 14th April,  1944  ?   The goods had been purchased by the appellants in Bombay as  the commission agents of the respondents and were left in  their godowns pending their despatch to the respondents’ place  of business.  It was found by the appellate bench of the  Court below  that  the appellants had agreed to  keep  ’the  goods insured against fire while in their custody     999 and  had  debited the respondents in their  books  with  the insurance  charges.  A suggestion was made in the course  of the arguments before us that the appellants agreed to be the insurers themselves, but the findings of the appellate bench leave no room for doubt that all that the appellants  agreed to  do  was  to procure a policy of fire  insurance  in  the ordinary or common form and subject to the conditions usual- ly  stipulated  in that form of policy.  This is  also  made clear  by the concession of the respondents’ counsel in  the court  below that "he was only relying on the  agreement  to the  extent that the insurance was to be   effected  against fire  on an ordinary fire insurance policy".  It  is  common ground  that one of the general conditions in that  form  of policy is that "it does not cover" among others any loss  or damage occasioned by or through or in consequence of  explo- sion".  Relying on that condition, it was contended for  the appellants  that even if they had effected an  insurance  on the goods according to the agreement, the loss of the  goods by fire caused by the explosion would have been an  excluded loss  for which no damages could have been claimed from  the insurer  and that, therefore, the respondents would  not  be entitled  to recover from the appellants anything more  than nominal  damages  for failure to  insure.   This  contention must, in my opinion, prevail. As pointed out by Mr. Mayne in his  Treatise  on Damages (p. 591, 11th Edition)  "When  the agent can show that under no circumstances could any benefit to the principal have followed from obedience to his orders, and therefore that disobedience to them has produced no real injury,  the action will fail.  There fore, if an  agent  is

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ordered to procure a policy of insurance for his  principal, and  neglects  to do it, and yet the  policy,  if  procured, would  not have entitled the principal, in the events  which have happened, to recover the loss or damage, the agent  may avail himself of that as a complete defence."     A complication, however, is  introduced by an  Ordinance promulgated   by  the  Governor-General known as the  Bombay Explosion  (Compensation) 1000 Ordinance  (No.  32 of 1944) which came into  force  on  1st July, 1944.  The preamble states ’,Whereas  an emergency has arisen which makes it necessary to provide for and  regulate the payment of compensation for.........  damage to property due  to, or arising out of, the explosions and  fires  which occurred  in  the Bombay Docks on 14th April, 1944,  to  re- strict    litigation   in   connection   with    the    said explosions......".  By section 2 "the explosion" is  defined as  meaning  "the explosions which occurred  in  the  Bombay Docks on 14th April, 1944, and the fire. which ensued there- from."  An  "explosion damage" is defined as  "damage  which occurred, whether accidentally or not, as the direct  result of  the explosion..." "Uninsured proPerty  means  "pro-perty which  was not covered whether wholly or partially  by    an policy     of     fire,     marine     or      miscellaneous explosion"   Section  14  insurance  at  the  time  of  tile 1  ..... so far as it is material here, provides that "there shall  be  paid by the Central Government  compensation  for explosion damage to property, being damage caused by fire to property insured whether wholly or partially at the time  of the  explosion  against fire under a  policy  covering  fire risk...of  an amount  equal to the proved  loss."Section  15 provides for coutribution to Government by insurance  compa- nies.  Section 16 provides  for compensation for such damage to  uninsured property on a certain scale mentioned in  that section.   Section 18(2) enacts, subject to certain  exccep- tions  not  material  here, "no person shall  leave,  or  be deemed ever to have had, otherwise than under this Ordinance any  right, whether in contract or in tort or  otherwise  to any compensation or damages for any...or damages to or  loss of any property, rights or interests. due to  or in any  way arising  out  of the explosion; and no suit or  other  legal proceedings for any such compensation or damages shall, save as  aforesaid.  be  maintainable in any  court  against  the Crown...or against any servants or agents of the Crown  .... or against any other person whomsoever; and no act or  omis- sion  which caused or contributed to the explosion shall  be deemed  to  have been done or omitted to be  done  otherwise than lawfully." 1001     It  is admitted that the appellants recovered  from  the Central  Government under section 16 nearly one-half of  the value of the goods destroyed by fire while in their  custody as  compensation  fox’ the loss of the  respondents’   goods and   have  given credit  to  the respondents in  their  ac- counts  for the amount thus received.  The dispute  now  re- lates to the respondents’ claim to the balance of the  value of the goods as damages for the appellants’  failure to keep them insured according to the agreement between the  parties as  the full value of the goods and have been obtained  from the  Government under section 14 without regard to  any  ex- cepted  risk if only they had been insured against  fire.The scheme  of the Ordinance appears to be that the  Government, instead  of having probably to fight out numerous law  suits for  compensation for loss or damage to property based  upon alleged  negligence of their officers in having allowed  the

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explosion  to take pleace, undertook to pay an amount  equal to  the  "proved loss" in cases of loss or damage  to  goods which  had  been  insured against  fire,  etc.  and  smaller amounts  for loss or damage to uninsured goods,  putting  an end,  at  the same time, to all rights  to  compensation  or damages arising out of the explosion, and barring all  suits or legal proceedings for the same.     On  the  basis of these provisions it was  contended  on behalf of the respondents that the appellants, by reason  of their  failure to keep the goods insured, were liable  under the law to place the respondents, who had suffered the loss, in  the  same position as if the  appellants  had  performed their  agreement  or  carried out the  instructions  of  the respondents.  Learned counsel for the respondents based  the claim  on the neglect of duty on the part of the  appellants as  commission  agents in carrying out the  instructions  of their  principals, and relied on the provisions  of  section 212 of the Indian Contract Act, which provides, inter  alia, that an agent is bound "to make compensation to his  princi- pal in respect of the direct consequence of his own neglect, want  of skill or misconduct, but not in respect of loss  or damage which are indirectly or remotely 1002 caused by  such neglect,  want of skill or misconduct."   On the  other  hand, it was urged on behalf of  the  appellants that  the  question had to be determined on the basis  of  a breach  of contract for the consequences of which  provision is  made  in  section 73 of the Indian  Contract  Act.  That section  says  that "when a contract has  been  broken,  the party  who suffers by such breach is entitled  to   receive, from  the  party  who  has broken the contract, compensation for any loss or damage caused to him thereby, which natural- ly arose in the usual course of things from such breach,  or which  the parties knew, when they made the contract, to  be likely to result from the breach of it. Such compensation is not  to be given for any remote or indirect loss  or  damage sustained  by reason of the breach." I do not think that  it makes  much difference, so far as the assessment of  general damages is concerned, whether the default of the  appellants is  treated as a breath of contract between two  contracting parties  or a neglect of duty by agents in failing to  carry out the instructions of their principal. Although the Indian Contract Act makes separate provisions for the  consequences in  each case, the rule laid down as to measure of   damages is s the same, namely, the party in breach must make compen- sation  in respect of the direct consequences  flowing  from the  breach and not in respect of loss or damage  indirectly or remotely caused, which is also the rule in English common law. The rule is based on the broad principle of  restitutio in integrum, that is to say, that the party who has suffered the  loss should be placed in the same position, as  far  as compensation  in money can do it, as if the party in  breach had  performed  his  contract or fulfilled  his  duty.  That principle  was once carried to its utmost logical,  if  gro- tesque, result as in an old English case to which Willes  J. referred    in    British   Columbia   Saw-Mill    Co.    v. Nettleship(1):’’  Where a man going, g to be married  to  an heiress,  his horse having cast a shoe on the  journey,  em- ployed a blacksmith who did the work so unskilfully that the horse was lamed, and the rider not having (1) L. L. 3.  C.P. 409, 508 1003 arrived in time the lady married another; and the blacksmith was  held  liable  for the loss of the  marriage."  And  the learned  Judge  warned  "We should inevitably  fall  into  a

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similar absurdity unless we applied the rules of commonsense to  restrict  the extent of liability for the  breach  of  a contract  of this sort."  The commonsense point of view  was thus put by Lord Wright in Liesbosch, Dredger v. Edison S.S. (Owners)(1):  ,, The law cannot take account  of  everything that  follows  a wrongful act; it  regards  some  subsequent matters  as outside the scope of its selection  because  ’it were infinite for the law to judge the cause of causes,’  or consequence  of  consequences. Thus the loss of  a  ship  by collision due to the other vessel’s sole fault may force the shipowner  into  bankruptcy and that again may  involve  his family  in suffering, loss of education or opportunities  in life, but no such loss could be recovered from the  wrongdo- er. In the varied web of affairs the law must abstract  some consequences  as  relevant, not perhaps on grounds  of  pure logic  but simply for practical reasons."  These  considera- tions have led the courts to evolve the qualifying rules  of remoteness  subject  to which alone the broad  principle  of restitutio in integrum now finds its application.     Applying  these principles to the facts of  the  present case, what is the position ? The respondents lost their  go- ods by fires arising out of the explosion presumably due  to the negligent conduct of the Government’s officers or  serv- ants  at the docks. Even if the appellants had taken  out  a fire  insurance  policy in ordinary form it would  not  have covered  the  loss, for fire due to explosion  would  be  an excepted  peril. So, the appellants’ failure keep the  goods insured  produced  no direct consequence for  which  damages could  in law be claimed. It is true enough to say  that  if the  appellants  had taken out a fire policy   covering  the goods,   the respondents could have obtained the full  value of  the goods from the Government. But did the  respondents’ inability  to  recover such full value from  the  Government arise directly or naturally in the usual course [1933] A.C. 449. 1004 of things out of the appellants’ failure to insure? I  think not, since independent  and disconnected events had to occur to  produce  the result, viz., the  Government’s  scheme  of compensation  embodied in the Ordinance, the agreement  with the  Insurance Companies regarding their  contribution,  and the  consequent distinction made between insured  and  unin- sured property in  providing  compensation  for  their loss. Suppose  the  fire  was caused by an explosion  due  to  the negligence  of a private individual.  The respondents  would have  their remedy  by suing him for damages.  But if he was insolvent,  could  the  respondents’  inability  to  recover damages from him be a direct and natural consequence of  the appellants’ failure to insure ? Surely not, for even if  the appellants  had insured the goods according to their  agree- ment with the respondents, the latter would be in no  better position. Here, the Government, presumably being  satisfied, or  at any rate apprehending, that the explosion was due  to the  negligence of their servants, got the Ordinance  passed providing  for payment of compensation by the Government  on the terms stated therein and at the same time putting an end to  all rights to recover compensation save as  provided  in the  Ordinance and barring all suits and  other  proceedings for that purpose.  As any claim  to compensation against the Government must be based upon the negligence of their  serv- ants,  the  Government  took no note of  excepted  risks  in insurance  policies  and  undertook liability  to  pay  full compensation  in  case of all  insured  property,  doubtless because, under an arrangement with certain Insurance  Compa- nies the Government obtained a proportionate contribution as

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provided  for  in section 15, though on  the  hypothesis  of their  servants’ negligence their liability in law would  be the  same in respect of insured and uninsured  property.  if the Ordinance had provided for partial compensation in  both cases,  as  it  would probably have done  if  the  Insurance Companies had not agreed to come into the scheme with  their contributions, the respondents could have no claim to recov- er the balance from the appellants,     1005 notwithstanding  that the supposed direct causal  connection between  the  appellants’ default and  the respondents’ loss would  still be there.  The truth is there was no such  con- nection  and it was because of the provisions of  the  Ordi- nance which made a distinction between insured and uninsured property in the matter of compensation for explosion damage, and  barred  rights and remedies under the  general  law  in relation  theretto,  that  the respondents  were  unable  to recover the balance of the value of their goods destroyed by fire.   But  such inability cannot be  regarded  as  flowing naturally or directly from the appellants’ default.     It  was suggested that the provisions of  the  Ordinance must be taken to have displaced the ordinary rules of law as to  remoteness  of damage, as section 18  (2)  extinguished, retrospectively  from the date of the explosion, all  rights and  remedies under the general law for obtaining  compensa- tion for explosion damage and substituted the rights therein provided.  The substituted right to compensation, so far  as the Government and insured property were concerned, was  not subject  to any restrictive conditions in the policies,  and therefore,  it was claimed, the measure of damages  in  this case  must be determined irrespectively of the existence  of the  clause  excluding  "explosion" from the  scope  of  the common form of policy.  The argument is, m my opinion,  more ingenious  than sound.  The short answer to it is  that  the Ordinance did not purport to displace or supersede any  rule of law as to measure of damages or to amend or abrogate  any terms  in  insurance.  policies.  There is  nothing  in  the Ordinance  to indicate that the  clause excepting  explosion contained  in the fire insurance policies issued  in  Bombay should  be deemed to be null and void.  As  already  stated, the  Government,  having accepted  liability  for  explosion damage,  were  not  really concerned  with  the  restrictive conditions  in the policies.  Their liability did not  arise out  of such policies.  In view of certain Insurance  Compa- nies  having agreed to contribute a certain proportion,  the Government undertook liability 1006 to  pay  full  compensation for loss  of  insured   property regardless of the terms o[ insurance, which had no relevance to  the liability which they assumed.  To suggest,  in  such circumstances,  that the clause excepting explosion risk  in all fire policies issued in common form in Bombay was legis- latively  abrogated is, in my opinion, extravagant and  far- fetched.  The  respondents’ goods were  destroyed  when  the explosion occurred on the  14th April,  1944, and  on   that date  they could  have  recovered  nothing  except   perhap- snominal  damages for the appellants’ failure to insure  the goods  as  they agreed to do.  It  is difficult to  see  how by  virtue  of  the Ordinance  passed more than  two  months later,  their  claim against the appellants, which  the  re- spondents  themselves are contending is not in any  way  af- fected  by  the  provisons of the  Ordinance,  could  become enlarged. The next contention raised on behalf of the apellants before us relates to the maintainability of the respondents’  coun-

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ter-claim-   The contention is based upon section 18 (2)  of the  Ordinance which provides that "no suit or  other  legal proceedings  for any such compensation or  damages"   (i.e., compensation  or  damages for any damage to or loss  of  any property,  rights or interests due to or in any way  arising out of the explosion)"shall, save as aforesaid"  (exception- snot material here)           "be maintainable in any  court against  the  Crown  ......... or against any  other  person whoms  oever......". The learned Chief Justice in the  Court below makes no reference in his judgment to this contention, but  Chagla  J. repelled it thus. "Now, in my  opinion,  the defendants’ claim does not arise out of the explosion nor is it  in  any way due to the explosion.  The  plaintiffs  have filed the suit as agents on an indemnity and the defendants’ answer  is  that they were entitled to set off  against  the amounts due to the plaintiffs, the loss incurred by them  by reason  of the fact that the plaintiffs as  the  defendants’ agents  did not carry out the defendants’ instructions.   If the plaintiffs’ claim on the indemnity does not arise out of the explosion equally so does the defendants’ set-      1007 off not so arise.  The defendants’ cause of action is  fail- ure  by the plaintiffs to carry out their  instructions  and that  cause  of action has nothing whatever to do  with  the explosion’". With all respect I find it difficult to  follow this reasoning.  The appellants’ claim on the indemnity does not certainly arise out of the explosion, for their case  is that  they purchased the goods in question paying the  price on the respondents’ instructions, and they claim to  recover the  price  so paid notwithstanding the destroction  of  the goods by fire for which they say they were in no way respon- sible.   But the basis of the respondents’ counter-claim  is quite  different.  They say that if the appellants had  kept the  goods  insured according to the  agreement,  they  (the respondents)  could  have recovered the full  value  of  the goods from the Government under section 14 of the Ordinance, and  the appellants, having failed to do so, are  liable  to pay by way of damages the balance of the value of the goods. It  is a little difficult to see how it could be  said  that the respondents’ claim "does not arise out of the  explosion nor  is it in any way due to the explosion".  The bar  under section  18  is not based upon the nature of  the  cause  of action  for  the  suit or proceeding barred,  but  upon  the damage or loss of property having been "due to or in any way arising  out    of" the explosion.  Indeed, the  respondents appear  to  my  mind to be in a dilemma in  regard  to  this point. They must necessarily say, in order to have been able to claim the full value of the goods from the Government  if they  had  been insured, that the damage to  the  goods  was "explosion   damage  to  property,  being damage  caused  by fire to property insured whether wholly or partially at  the time  of the explosion against fire under a policy  covering fire  risk".  For, unless they said that, no claim could  be made  against  the Government under section 14, and  so  the very  basis of their claim against the appellants that,  but for  the appellants’ neglect of duty, the respondents  could have recovered the full value of the goods from the  Govern- ment, would fail. But if they had to say that the goods were lost by explosion damage within the meaning 1008 of section 14, it seems to me, they would be bringing  them- selves   under  the bar of section 18 (2).  The  respondents cannot therefore claim that the loss of the goods was explo- sion  damage  within the meaning of the Ordinance so  as  to bring  the case within section 14 and at the same time  con-

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tend  that  the loss was not "due tO or did not in  any  way arise out of the explosion" in order to avoid the bar  under section 18.  Both section 14 and section 18 have in view the physical cause for the loss or damage to property for  which compensation  is  claimed  and not the cause  of  action  in relation  to the person against whom relief is sought.   The respondents  cannot,  in my opinion, be allowed to  take  up inconsistent  positions in order to bring themselves  within the one and to get out of the other.     I  would  therefore  allow the appeal  and  dismiss  the counter-claim. DAS J. agreed with the Chief Justice.                                         Appeal dismissed. Agent  for the appellants: Mohan Behari Lal. Agent for the respondents:/. N. Shroff.