# UNION OF INDIA v. M/S. SOHANLAL SAMPATLAL

- **Citation:** [1971] 2 S.C.R. 706
- **Court:** Supreme Court of India
- **Decided:** 1970-10-27
- **Case number:** Civil Revision Application No. 1263 of 1961
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-v-m-s-sohanlal-sampatlal-5230
- **Pages:** 5

## Headnote

706
UNION OF INDIA
v.
M/S. SOHANLAL SAMPATLAL
October 27, 1970
[1. C. SHAH, K. S. HEGDE AND A. N. GROVER, J],]
Indian Post Office Act, 1890, s. 6-Ru/e 81 (g)-Go/d coins sent by
parcel post-Value declared Rs. 2500-Parcel lost in transit-Suit /01
·Compensation-Burden is on insurer to prove that value declared was not
the market value at date and place of posting--S/lght difference does 1101
.absolve iluurer from liability.
The respondent firm sent a parcel containing gold coins which had
been purchased for Rs. 2465-l4-0 by post from Bombay to Bikaner. After
adding Rs. 9-1·6 for insurance and profit at 1 % the value came, according
lo the respondent, to R•. 2499-11·6. The parcel was insured for the
iround figure of Rs. 2500. When it was lost in transit the respondent filed
.a suit for Rs. 2474-15-6 to be paid by the Union of India represented by
ots posal depitrtment. The Union of India resisted the claim on the ground
·that under s. 6 of the Indian Post Office Act, 1898 read with r. 81 (g)
:made thereunder the liability to pay compensation could arise only if the
plaintiff had declared the actual value of the contents on the date of the
:.insurance. It was pointed out that in the present case neither the admitted
purchase price of the coins not- the claim in the plaint amounted to Rs .
.2500 and thus there was a discrepancy between the value declared and the
, actual or market value of the goods. The contract was therefore not enfor-
.ceable. The Single Judge as well as the Full Bench of the Court of Small
•Causes accepted the argument on behalf of the Union of India. However;
ithe High Court took the view that the burden of proving that the market
·value of the gold on the day of posting was different from the value declar·
cd was on the insurer which in the present case the insurer had failed to
uischarge. The Union of India, by special leave, appealed to this Court.
HELD : The statutory provisions of the Act and the rules have to be
-construed and read in a reasonable manne.r.
The rules seem to en.sure
;!hat the insured should not make a declaration in excess of the market
·valu~ so as to avoid. frauduent dealings.
Nor can the insured get more
.compensation than the market value. But this does not and cannot mean
·that any innocent and in~ignificant mistatement by the
insured of the
actual value which has \o' be the market value on a particular date and at
·the plaee of posting can lead to the startling result that he becomes wholly
disentitled to receive any compensation. The market in artides like gold
and bullion exists only in large towns and the value fluctuates from day
to day and from hour to hour. It may be sometimes impossible for any
person sending gold or bullion by post after getting it insured to ascertain
·the exact value on a particular date. This does not mean that he is com·
pletely absolved from the responsibility of ascertaining it but if h~ gives
a valu• which is applroximately the same as the market value the msurer
cannot take up ihe position that owing to an insignificant difference the
insured cannot recover the compensation. [709 F-710 BJ
In the present case the High Court fo~~d that no evidence df a_ny kinJ
regarding the market rate of gold preva1hng on the date of posting was
on record. On general principles which were rightly relied on by the High
A
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G
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UNION v. SOHANLAL (Grover, J.)
707
A
Court, it was for the insurer to load evidence on that point and show that
according to the market rate prevailing on that date the value could not
be Rs. 2500. The mere fact that the respondent was under the impression
or had stated in the plaint that value of the gold was less than Rs. 2500
was not sufficient to absolve the insurer from proving that the value
which was declared i.e. Rs. 2500 was not the market value on the date and
at the place ol posting, 'The appeal must accordingly be dismissed. [710 C-El
B

## Text

706
UNION OF INDIA
v.
M/S. SOHANLAL SAMPATLAL
October 27, 1970
[1. C. SHAH, K. S. HEGDE AND A. N. GROVER, J],]
Indian Post Office Act, 1890, s. 6-Ru/e 81 (g)-Go/d coins sent by
parcel post-Value declared Rs. 2500-Parcel lost in transit-Suit /01
·Compensation-Burden is on insurer to prove that value declared was not
the market value at date and place of posting--S/lght difference does 1101
.absolve iluurer from liability.
The respondent firm sent a parcel containing gold coins which had
been purchased for Rs. 2465-l4-0 by post from Bombay to Bikaner. After
adding Rs. 9-1·6 for insurance and profit at 1 % the value came, according
lo the respondent, to R•. 2499-11·6. The parcel was insured for the
iround figure of Rs. 2500. When it was lost in transit the respondent filed
.a suit for Rs. 2474-15-6 to be paid by the Union of India represented by
ots posal depitrtment. The Union of India resisted the claim on the ground
·that under s. 6 of the Indian Post Office Act, 1898 read with r. 81 (g)
:made thereunder the liability to pay compensation could arise only if the
plaintiff had declared the actual value of the contents on the date of the
:.insurance. It was pointed out that in the present case neither the admitted
purchase price of the coins not- the claim in the plaint amounted to Rs .
.2500 and thus there was a discrepancy between the value declared and the
, actual or market value of the goods. The contract was therefore not enfor-
.ceable. The Single Judge as well as the Full Bench of the Court of Small
•Causes accepted the argument on behalf of the Union of India. However;
ithe High Court took the view that the burden of proving that the market
·value of the gold on the day of posting was different from the value declar·
cd was on the insurer which in the present case the insurer had failed to
uischarge. The Union of India, by special leave, appealed to this Court.
HELD : The statutory provisions of the Act and the rules have to be
-construed and read in a reasonable manne.r.
The rules seem to en.sure
;!hat the insured should not make a declaration in excess of the market
·valu~ so as to avoid. frauduent dealings.
Nor can the insured get more
.compensation than the market value. But this does not and cannot mean
·that any innocent and in~ignificant mistatement by the
insured of the
actual value which has \o' be the market value on a particular date and at
·the plaee of posting can lead to the startling result that he becomes wholly
disentitled to receive any compensation. The market in artides like gold
and bullion exists only in large towns and the value fluctuates from day
to day and from hour to hour. It may be sometimes impossible for any
person sending gold or bullion by post after getting it insured to ascertain
·the exact value on a particular date. This does not mean that he is com·
pletely absolved from the responsibility of ascertaining it but if h~ gives
a valu• which is applroximately the same as the market value the msurer
cannot take up ihe position that owing to an insignificant difference the
insured cannot recover the compensation. [709 F-710 BJ
In the present case the High Court fo~~d that no evidence df a_ny kinJ
regarding the market rate of gold preva1hng on the date of posting was
on record. On general principles which were rightly relied on by the High
A
B
c
D
E
F
G
H
UNION v. SOHANLAL (Grover, J.)
707
A
Court, it was for the insurer to load evidence on that point and show that
according to the market rate prevailing on that date the value could not
be Rs. 2500. The mere fact that the respondent was under the impression
or had stated in the plaint that value of the gold was less than Rs. 2500
was not sufficient to absolve the insurer from proving that the value
which was declared i.e. Rs. 2500 was not the market value on the date and
at the place ol posting, 'The appeal must accordingly be dismissed. [710 C-El
B
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2223 of
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G
H
1966.
Appeal by special leave from the judgment and order dated
August 31, 1965 of the Bombay High Court in Civil Revision
Application No. 1263 of 1961.
L. M. Singhvi, Ram Panjwani
and S. P. Nayar,
for the
appellant.
G. L. Sanghi and Janendra Lal, for the respondent.
The Judgment of the Court was delivered by
<Jrover, J,
This is an appeal by special leave from a judge·
ment of the Bombay High Court made in exercise of its revisional
jurisdiction.
On June.15, 1955 the respondent firm purchased gold coins
for an aggregate price of Rs. 2465-14·0 as commission agents for
transmission and delivery to their cbnstituents at Bikaner.
On
the following .day the parcel containing the gold coins was handed
in at Ramwadi Post Office, Bombay for transmission to the add·
ressee. The parcel was insured for Rs. 2500/ •· It was lost in
the course of transit.
The respondents filed a suit for re~overy
of ab.out 2475/· as compensation under the insurance effected by
the Union of India, the present appellant, represented by its postal
department. The appellant denied its liability for the claim on
the ground that under s.6 of the Indian Post Office Act, 1898,
hereinafter called the "Act", rood· with Rule 8l(g) of th<! rules
framed thereunder, its liability could arise only if the plaintiff
had declared the actual value of the contents on the date of the
insurance. As a wrong declaration had been made there was no
valid and enforceable contract. The case of the plaintiffs in evidence
however, was that in addition to the price paid for the gold coins
a sum of Rs. 9-1-6 had been spent as postal charges and the cost
of insurance, packing, commission and brokerage.
Profit was
added to this at 1% and the total value came to Rs. 2499-11-6
and it was for that reason that the parcel was got insured for Rs.
2500/ •. A learned single judge of the Small Causes dismissed tbe
suit. The matter was taken before the Full Court of Small Causes
by the respondent firm.
While conceding that the difference in
the actual value and the value declared was small the Full Court
held that the rules had not been complied with properly and upheld
788
SUPREME COURT REPORTS
(1971] 2 S.C.R.
the. dismissal of the suit. After examining all the relevant provisions of the Act and the rules the High Court was of the view that
it was for the insurer to prove that it had been discharged from
the liability because of fraud, misrepresentation, mistake or incorrect statements made by the insured and the burden had to be
strictly discharged by the insurer.
As it had not been proved by
the Union of India that the value declared by the plaintiffs on June
16, 1955 was not the actual market value of the gold deliv~red by
the plaintiffs for transmission by means of a postal parcel the·pJaintiffs were entitled to a decree for Rs. 2474-15-6 with interest at 6%
per annum from !he date of the suit.
Section 6 of the Act provides that the Government shall not
incur any liability by reason of the loss, misde!ivery etc. of any
article in the course of transmission by post except in so far as
such liability may in express terms be undertaken by the Govern·
meint. Section 3 Oprovides for insurance of postal articles. Section
3 3 is in the following terms :
.
"Subject to such condition~ and restrictions as the
Central Government may, by rule, prescribe the Central
Goven\ment shall be liable to pay compensation, not exceeding the amount for which a postal article has been
insured, to the sender thereof for the loss of the postal
article or its contents, or for any damage caused to it in
course of transmission by post :
Provided that the compensation so payable shall in
no case exceed. the value of the article lost or the amount
of the damage caused".
The relevant rules may also be referred to.
According to
rule 44(1) gold coin or bullion of value exceeding Rs. 2500/·
shall not be transmitted by post. The value for the purpose of
this sub-rule, the second proviso to rule 72 clause ( g) , the second proviso to rule 81 and ntle 83-A shall be the market
value on the date and at the place of posting. Part IV of the
rules deals with insurance of postal articles. The second proviso
to rule 72 ( 1) · lays down that articles containing government
currency notes or gold coin or bullion shali be insured for the
actual· value of the contents. Rule 7 4 gives the additional fee
chargeable for the insurance.· Under rule 81 the compensation
payable to the sender of an insured article shall not exceed the
amount for which the article has been insured for the loss of the
postal article ·or any of its contents. According to the first proviso the compensation shall in no case exceed· the value of the
article or any of its contents lost. Clause (g) of the second pro·
viso is to the effect that no compensation shall be payable where
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UNION v. SOHANLAL (Grover, J.)
709
the insured article contains gold coins or both and has not been
insured for the actual value of the contents.
Rule 83A makes
it obligatory for the sender to declare on the article the value of
the contents where gold coin, bullion etc. is despatched. Thus Uitider
the rules whenever gold coin or bullion is sent by parcel post
it must be insured for the actual value of the contents. If the articles are lost the amount of compensation cannot exceed the amount
for which the article have been insured and no compensation shall
be payable where the articles have not been insured for the actu ll
value. By reference to rule 44 the value has to be the market
value on the date and at the place of posting.
The argument which has been raised on behalf of the Union
of India is that the respondent firm had purchased the gold coin
for Rs. 2465-14-0 on June 15, 1955.
Its actual market value
therefore, on respondent's own admission was not Rs. 2500 . It
has, further, been pointed out that in para 2 of the plaint it has
been stated that on or about June 16, 1955 the plaintiffs despacheJ
26 tolas gold valued at Rs. 2474-15-6 under insured parcel which
was lost in transit and even the decree was claimed for that amount
and not for Rs. 2500/-. As there was a discrepancy between the
value declared and the actual or market value the respondent
firm was not entitled to any compensation. The plea in defence
substantially was that the respondent ought to have declared the
actual value of the contents on the date of insurance, namely.
June 16, 1955 which it failed to do and therefore there was JJP
contract of insurance between the parties.
Now the statutory provisions of the Act and the rules have
to be construed and read in a reasonable manner. If the interpretation sought to be placed on behalf of the appellant is accepted
it would mean that where a person dec\ares a value which varies
even by one paise from the market value on the date
and at the place of posting the insured would be deprived of the
compensation for the Joss of the article. That could never have
been in the contemplation of the legislature and the rule making
authority. The rules seem to ensure that the insured should not
make a declaration in excess of the market value so as to avoid
fraudulent dealings. Nor can the insured get more compensation
than toe market value. But this does not and cannot mean that
any innocent and insignificant mis-statement by the insured of the
actual value which has to be the market value on a particular
date and at the place of posting can lead to the startling result
that he becomes wholly disentitled to receive any compensation.
It is well known that the market in articles like gold and bullion
exists only in large :towns and the values fluctuates from day to
day and from hour. to hour. It may be sometimes impossible for
~ny person sending gold or bullion by post after getting it insured
710
SUPREME COURT REPORTS
(1971] 2 8.C.R.
to ascertain the exact value on a· particular date. Take for instance the case of a person who is illiterate and has to despatch
gold from a place in the vicinity of which there is no market from
where the market value can be ascertained.
He cannot in the
very nature of things be absolutely precise and accurate about
the market value prevailing at the material time. This does not,
however, mean that he is completely absolved from the responsibility of ascertaining it but if he gives some value which is approximately the same as the market value the insurer cannot take up
the position that owing to an insignificant difference the insured
cannot recover the compensation.
B
The High Court referred to Article 429 in Halsbury's Laws .. C
of England III Edition, Vol. 22, at page 227 and to certain other
text books on the law of insurance according ·to which the burden is on the insurer of showing that the policy is no longer subsisting or that there had been a breach of such a condition which
relieves the insurer from liability. It has not b~n shown that
these general principles will not be applicable y,hen an insurance
has been effected under the provisions of the Act and the rules.
The finding of the High Court was that there was no evidence of
any kind regarding the market rate of gold prevailing on Jur.e 16.
1955 on the record. It was for the insurer to lead evidence on
that point and show that according to the marl:et rate prevailing
on that date the value could not be Rs. 2500/ -. The mere fact
that the respondent was under the impression or had stated in the
plaint that the value of the gold was less than Rs. 2500/- was not
sufficient to absolve the insurer from the responsibility of proving
that the value which was declared i.e. Rs. 2500/. was not the
market valu<~ on the date and at the place of posting.
()
E
There is no merit in this appeal which fails and is dismiss~<l
with costs.
F
G.C.
Appeal dismissed.