Pannalal Jankidas v Mohanlal

Facts

• The appellant was a commission agent who purchased goods on behalf of the respondent principal.
• The principal instructed the agent to insure the goods.
• The agent charged the principal for insurance but did not in fact effect it.
• The goods were destroyed in the explosion at the Bombay docks.
• Under a government ordinance the principal received compensation covering part of the loss.
• The principal sued the agent for the loss attributable to the absence of insurance.

Issue

1. Whether the agent was liable for failing to insure as instructed, and whether the compensation received by the principal from the government reduced that liability.

Held

• The Supreme Court held the agent liable. Sections 211 and 212 require an agent to conduct the business according to the principal's directions and with the skill and diligence generally possessed by persons engaged in similar business, and make him answerable for the direct consequences of his neglect. The failure to insure was a plain breach of an express instruction, and the loss flowed directly from it. The compensation payable under the government ordinance arose from a wholly separate source and was a matter between the principal and the government; it did not diminish the agent's obligation to make good the loss his neglect had caused.

Ratio Decidendi

An agent's liability under S.212 is measured by the direct consequences of his own neglect, assessed independently of collateral benefits the principal may receive from third parties. A wrongdoer cannot appropriate to himself the benefit of an unconnected indemnity received by the person he has injured.