Whether a party is entitled to get damages for entire contract if there is fundamental breach of contract by other side?

 That apart, we also find that the Arbitral Tribunal, while awarding the damages, has relied upon the judgment of this Court in Union of India and Ors. v. Sugauli Sugar Works (P) Ltd. MANU/SC/0056/1976 : (1976) 3 SCC 32 wherein a cardinal principle of damages had been laid down to the effect that the injured party should be placed in as good a position as money could do as if the contract had been performed. Following passage from the said judgment was kept in mind by the Arbitral Tribunal:

22. The market rate is a presumptive test because it is the general intention of the law that, in giving damages, for breach of contract, the party complaining should, so far as it can be done by money, be placed in the same position as he would have been in if the contract had been performed. The Rule as to market price is intended to secure only an indemnity to the purchaser. The market value is taken because it is presumed to be the true value of the goods to the purchaser. One of the principles for award of damages is that as far as possible he who has proved a breach of a bargain to supply what he has contracted to get is to be placed as far as money can do it, in as good a situation as if the contract had been performed. The fundamental basis thus is compensation for the pecuniary loss which naturally flows from the breach. Therefore, the principle is that as far as possible the injured party should be placed in as good a situation as if the contract had been performed. In other words, it is to provide compensation for pecuniary loss which naturally flows from the breach. The High Court correctly applied these principles and adopted the contract price in the facts and circumstances of the case as the correct basis for compensation.

58. In the aforesaid backdrop, we agree with the approach of the High Court in spelling out the proposition of law that once it is established that the party was justified in terminating the contract on account of fundamental breach thereof, then the said innocent party is entitled to claim damages for the entire contract, i.e. for the part which is performed and also for the part of the contract which it was prevented from performing. 

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 10466 of 2017

Decided On: 18.01.2018

 Maharashtra State Electricity Distribution Company Ltd. Vs.

 Datar Switchgear Limited and Ors.

Hon'ble Judges/Coram:

A.K. Sikri and Ashok Bhushan, JJ.

Citation: (2018) 3 SCC 133

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Whether driver of truck giving lift to some persons amounts to fundamental breach of insurance policy?

In Lakhmi Chand case (supra), this Court held that to avoid its liability, the insurance company must not only establish the defence that the policy has been breached, but must also show that the breach of the policy is so fundamental in nature that it brings the contract to an end.

7. In the present case, the Appellant who is the owner, was not at fault. His driver gave a lift to some passengers. Carrying such passengers may be a breach of the policy, but it cannot be said to be such a fundamental breach as to bring the insurance policy to an end and to terminate the insurance policy. The driver, on a cold wintery night, gave lift to some persons standing on the road. It was a humanitarian gesture. It cannot be said to be such a breach that it nullifies the policy. No doubt, these passengers turned against the driver and stole the truck, but this, the driver could not have foreseen. In the cases cited above, such claims where there is breach of policy, have been treated to be non-standard claims and have been directed to be settled at 75%.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 21552 of 2017 (Arising out of Special Leave Petition (C) No. 34605 of 2015)

Decided On: 08.12.2017

 Manjeet Singh Vs National Insurance Company Ltd. and Ors.

Hon'ble Judges/Coram:

Madan B. Lokur and Deepak Gupta, JJ.

Citation: (2018) 2 SCC108

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Whether overloading of vehicle by passengers amounts to fundamental breach of policy?

  The Apex Court in the case titled as National
Insurance Company Limited versus Anjana Shyam &
others, reported in 2007 AIR SCW 5237 has laid down
the same principles of law. It is also apt to reproduce
para 15 of the judgment of, herein:
“15. In spite of the relevant provisions of the
statute, insurance still remains a contract between
the owner and the insurer and the parties are
governed by the terms of their contract. The statute
has made insurance obligatory in public interest
and by way of social security and it has also
provided that the insurer would be obliged to fulfil
his obligations as imposed by the contract and as
overseen by the statute notwithstanding any claim
he may have against the other contracting party,
the owner, and meet the claims of third parties
subject to the exceptions provided in Section
149(2) of the Act. But that does not mean that an
insurer is bound to pay amounts outside the
contract of insurance itself or in respect of persons
not covered by the contract at all. In other words,
the insured is covered only to the extent of the
passengers permitted to be insured or directed to
be insured by the statute and actually covered by
the contract. The High Court has considered only
the aspect whether by overloading the vehicle, the
owner had put the vehicle to a use not allowed by
the permit under which the vehicle is used. This
aspect is different from the aspect of determining
the extent of the liability of the insurance company
in respect of the passengers of a stage carriage

insured in terms of Section 147(1)(b)(ii) of the Act.
We are of the view that the insurance company can
be made liable only in respect of the number of
passengers for whom insurance can be taken
under the Act and for whom insurance has been
taken as a fact and not in respect of the other
passengers involved in the accident in a case of
overloading.”
 11. This Court in batches of appeals, FAO No.
257 of 2006, titled as National Insurance Company
Ltd. versus Smt. Sumna @ Sharda & others, being the
lead case, decided on 10.04.2015, FAO No. 224 of 2008,
titled as Hem Ram & another versus Krishan Chand &
another, being the lead case, decided on 29.05.2015,
and FAO No. 256 of 2010 titled Oriental Insurance
Company versus Smt. Indiro and others, being the
lead case, decided on 19.6.2015, has laid down the same
principle, which is not disputed by the learned counsel for
the insurer.
 12. The apex Court in case titled Lakhmi Chand
versus Reliance General Insurance Co. Ltd. reported
in (2016) 3 SCC 100, held that the mere factum of
carrying more passengers than the permitted seating
capacity in the goods carrying vehicle by the insured
does not amount to a fundamental breach of the terms
and conditions of the policy so as to allow the insurer to
eschew its liability towards the damage caused to the

vehicle. 
IN THE HIGH COURT OF HIMACHAL PRADESH
SHIMLA
FAO (MVA) No. 72 of 2011

 Date of decision: 12th August, 2016
 FAO No. 72/2011.
Oriental Insurance Co. Ltd. V Shri Hitender Singh 
Coram:
The Hon’ble Mr. Justice Mansoor Ahmad Mir, Chief Justice.

Citation: 2017(1) ALLMR(JOURNAL) 102

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What is fundamental breach of policy terms entitling Insurance company to disown liabliity to pay compensation?

 It is also relevant from the rules quoted above that, on

obtaining authorisation to drive transport vehicle, the person

concerned shall be given a metallic badge showing him as a

driver as contemplated therein. In other words, a 'badge' is a

material object given to the party, who is authorised to drive a

transport vehicle, to be given while returning the licence after

effecting endorsement as to his authorisation as provided in

Rule 11 of the Kerala Rules.          This being the position,

authorisation to drive a transport vehicle is one thing; while

'badge' supplied after effecting the endorsement of authorisation

in the licence is another thing.  As such, if the person concerned

has not applied for and obtained a badge to be worn on his left


chest, as prescribed by the rules does not do so, the absence of

badge by itself cannot be said to be 'fundamental breach' and

that it could only be 'technical'. Under such circumstance, the

Insurance Company cannot disown the liability or claim the right

of recovery from the insured. But if there is no authorisation at

all, enabling the driver to drive the transport vehicle, it is a

fundamental lapse and under such circumstance, it is open for

the Insurance Company to proceed with           steps for  recovery

from the insured, who is violator of law. This is more so since, as

observed by the Apex Court in Swaran Singh's case (cited supra),

insurance is    also a contract     and the provisions have to be

strictly interpreted to give effect to the terms agreed between the

insured and the insurer.

      24. The statute/M.V Act is of course a welfare legislation,

which intends to extend       benefit/welfare   to the victims/third

parties/claimants.       A person who is committing any breach

involving an offence under Section 3(1) of the Act r/w Sec.181

of the MV Act is a person who is having no regard to the rule of

law and as such, the provision is not intended to extend any



benefit to such wrong-doer. It is settled law that, provision of

law is not liable to be interpreted in favour of a 'wrong-doer'.
IN THE HIGH COURT OF KERALA AT ERNAKULAM

                                PRESENT:

            THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON
                                   &
                  THE HONOURABLE MR.JUSTICE K.HARILAL

        MONDAY, THE 9TH DAY OF NOVEMBER 2015
                       MACA.No. 1026 of 2014 ()
                 
       SHAJI
Vs
          PRADEESH, 
Citation: 2016(2) ALLM(JOURNAL)75

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