Pannalal Jankidas vs Mohanlal
AIR 1951 SC 144
Case Summary
[Section 211 of Indian Contract Act, 1872]
[Section 212 of Indian Contract Act, 1872]
Facts
The plaintiffs were commission agents who purchased goods on behalf of the defendants and stored a portion in a godown in Bombay. The defendants instructed the plaintiffs to insure the goods, which the plaintiffs agreed to do but failed. Before the goods could be dispatched, a large explosion occurred in the Bombay Harbour, resulting in the destruction of the goods.
The Bombay Explosion (Compensation) Ordinance, 1944 was promulgated after the incident, providing:
Full compensation for damage to insured goods.
50% compensation for uninsured goods.
A bar on claims for compensation arising out of the explosion unless made under the Ordinance.
Since the goods were uninsured, the plaintiffs received only 50% compensation from the government. They sued the defendants for the remaining 50%, claiming indemnification as agents. The defendants argued that their loss arose due to the plaintiffs’ failure to insure the goods, and they counterclaimed for damages equivalent to the uninsured loss.
Issues
Did the plaintiffs breach their duty as agents by failing to insure the goods as instructed by the defendants?
Was the loss of 50% of the value of the goods directly caused by the plaintiffs' failure to insure, or was it too remote to be recoverable?
Was the defendants’ counterclaim barred by the Bombay Explosion (Compensation) Ordinance, 1944?
Relevant Legal Provisions
Indian Contract Act, 1872
Section 211 - An agent is bound to follow the instructions of their principal
Section 212 - An agent is liable for damages caused by their lack of diligence or negligence
Judgement
The majority held the plaintiffs liable for the loss of 50% compensation. The defendants were entitled to recover damages for the plaintiffs' failure to insure the goods. The plaintiffs, as agents, had a duty to insure the goods as per the defendants' instructions. Their failure constituted a breach of duty.
The loss of 50% compensation under the Ordinance arose directly from the plaintiffs’ failure to insure, not from the explosion itself. The Ordinance only quantified damages and did not break the chain of causation.
The defendants’ counterclaim was not barred, as it arose from the plaintiffs’ breach of duty, not from a claim for compensation for explosion-related damages.
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