JUDGMENT : M. Satyanarayana Murthy, J. The 1st defendant in OS No.948 of 1989 on the file of the Court of IV Senior Civil Judge, City Civil Court, Hyderabad (for short, "the trial Court"), preferred this appeal against the impugned decree and judgment dated 17.8.1999, whereby and where under the 1st defendant was directed to pay loss sustained by the plaintiff to a tune of Rs. 4,45,701.60/- ps., together with interest @ 21% p.a., from the date of suit till the date of decree and 6% p.a., from the date of decree till realization. The appellant was the 1st defendant and the 1st respondent was the plaintiff and respondent Nos. 2 and 3 were defendant Nos. 2 and 3 respectively before the trial Court and they will hereinafter be referred as arrayed before the trial Court for convenience. 2. The plaintiff filed this suit for recovery of a total sum of Rs. 4,45,701.60/-ps., against defendant Nos. 1 and 2 only towards loss sustained by the plaintiff in a fire accident since the 3rd defendant was only a formal party. 3. The plaintiff is a manufacturer of wax coated paper for the purpose of wrapping of biscuits and other products. In the course of its business, the plaintiff used to purchase paper from market so also wax which is a byproduct in the fractional distillation of petroleum and other raw material such is ink etc.,. The paper will be printed with designs and description of biscuits to be contained in it and thereafter, wax is coated by special process by virtue of which it is evenly spread. 4. In addition to purchase of raw material directly by the plaintiff, the plaintiff also receives stock belonging to biscuit manufactures and certain other third parties for whom the plaintiff does job work. The job work undertaken by the plaintiff was only printing and wax coating. During the said process, material belonging to third parties will be lying in the premises of the plaintiff only and the plaintiff alone is responsible for damage if any caused. The plaintiff obtained loan for working capital from the 1st defendant supplying raw material, finished products and goods in process lying in the premises of the plaintiff. To secure interest of the 1st defendant, the appellant bank, by following banking procedures, issued raw material and finished products lying at the premises of the plaintiff with the 2nd defendant. The plaintiff obtained loan for working capital from the 1st defendant supplying raw material, finished products and goods in process lying in the premises of the plaintiff. To secure interest of the 1st defendant, the appellant bank, by following banking procedures, issued raw material and finished products lying at the premises of the plaintiff with the 2nd defendant. However, the plaintiff is the direct beneficiary and the amount paid towards premium by the 1st defendant to the 2nd defendant will be debited to the account of the plaintiff. Accordingly, a policy covering risk to a tune of Rs. 8,00,000/- was obtained against fire and other risks. 5. The 1st defendant also obtained a policy for a sum of Rs. 5,00,000/- vide policy bearing No.090800/01/1/00863 with the 2nd defendant valid from 26.1 1.1984 to 26.11.1985. While the matter stood thus, stock in trade of the plaintiff was reduced to Rs. 3,57,000/- by 31.3.1985. In addition to the plaintiffs material, there was stock approximately value of Rs. 1,80,000/-belonging to third parties. Thus, the total value of the material lying in the premises is more than Rs. 5,00,000/-. As the plaintiff already insured stock with Secunderabad Branch of United India Insurance Company for a sum of Rs. 8,00,000/-, obtaining any other policy for the period covering from 26.11.1984 to 26.1 1.1985 became unnecessary. Accordingly, the plaintiff addressed letter dated 24.12.1984 to the 1st defendant requesting the above referred policy obtained by the 1st defendant from the 2nd defendant be cancelled and for refund of amount. The said letter was immediately forwarded to the 2nd defendant by the 1st defendant with a request to cancel the policy and for refund of premium. The 2nd defendant did not act upon the letter of the 1st defendant and no steps were taken to cancel the policy or for refund of premium. However, the plaintiff again requested the 1st defendant for cancellation of policy and remittance of premium collected by letter dated 27.5.1985. In pursuance of the request of the plaintiff, the 1st defendant again addressed another letter on the very same day but no purpose was served. 6. When the 2nd defendant neglected to act upon these letters, the plaintiff again demanded the 1st defendant for refund of premium paid for the year 1984-85. In pursuance of the request of the plaintiff, the 1st defendant again addressed another letter on the very same day but no purpose was served. 6. When the 2nd defendant neglected to act upon these letters, the plaintiff again demanded the 1st defendant for refund of premium paid for the year 1984-85. Then, the 1st defendant erroneously addressed letter dated 2.12.1985 to the 2nd defendant requesting for cancellation of policy for the year 1985-86 and this is only a clerical mistake and the 1st defendant's inadvertent request for cancellation of policy for the year 1985-86 resulted in cancellation of policy obtained by the 1st defendant on behalf of the plaintiff for the year 1985-86 instead of cancelling 1984-85 policy, crediting premium to the account of the plaintiff with the 1st defendant bank. Thus, the policy covering risk for Rs. 5,00,000/- for the year 1985-86 was cancelled and thereby, the contract of insurance was terminated between the 1st defendant, on behalf of the plaintiff, and the 2nd defendant. 7. To the misfortune of the plaintiff, a fire accident took place in the premises of the plaintiff on 8.5.1986. In the said accident, plant and machinery and stock worth approximately Rs. 20,00,000/- was gutted in fire. Thereby, the plaintiff sustained huge loss. Immediately, the plaintiff lodged a claim with the 2nd defendant, Dilsukhnagar Office, claiming damages for plant and machinery, building and part of the stock and for the other part of damage, the plaintiff filed claim with the 2nd defendant. 8. The 3rd defendant appointed Sri N.V.P. Sharma, Insurance Surveyor, to assess the loss suffered by the plaintiff. He assessed the loss approximately at Rs. 12,45,701.60/- ps. and recommended the insurance company for payment of the same. At this stage, the 2nd defendant declined to settle the claim on the ground that the policy was already cancelled and the contract of insurance was terminated and sought for exemption from payment of any insurance claim. Thereupon, the 1st defendant addressed letter dated 27.5.1986 informing the 2nd defendant about sending of two letters for cancellation of policy obtained for the year 1984-85 but due to mistake in the second reminder, policy for the year 1985-86 was referred and requested for restoration of the policy and for settlement of claim at an early date. The 2nd defendant did not act upon the letter of the bank. The 2nd defendant did not act upon the letter of the bank. Again on 27.2.1987, the 1st defendant addressed a letter to the 2nd defendant clarifying that the 1st defendant had asked for cancellation of policy for the year 1984-85 and mention of policy number for the year 1985-86 was clerical error and when cancellation endorsement was received, the 1st defendant thought it to be for the year 1984-85 but when fire accident took place, the 1st defendant realised its mistake and requested to revive the policy and settle the claim of the plaintiff. The 2nd defendant credited premium of Rs. 1,692/- to the account of the 1st defendant in accordance with the intention of the parties. 9. As per practise, the 1st defendant used to renew policy every year. Accordingly, the 1st defendant requested the 2nd defendant to renew the policy for the year 1985-86 also but in fact, a fresh application for issue of policy for the year 1985-86 was made by the 1st defendant on the assumption that the policy for the year 1984-85 was revived. Since the earlier policy for the year 1984-85 was cancelled, the 1st defendant submitted a fresh application for insurance of stock etc., with the 2nd defendant and obtained policy but due to mistake, the policy covering risk for the year 1985-86 was cancelled. Therefore, the 1st defendant debited the premium to the account of the plaintiff. The 2nd defendant acted upon the request of the 1st defendant and cancelled the policy. Therefore, both defendant Nos. 1 and 2 are liable to pay damages towards loss sustained by the plaintiff in the fire accident and prayed to pass a decree against both defendant Nos. 1 and 2 for the suit amount of Rs. 4,45,701.60/- ps. 10. The 1st defendant filed written statement admitting everything including obtaining policies from time to time from the 2nd defendant debiting premium to the account of the plaintiff. It is specifically contended that the 1st defendant obtained policy covering risk of Rs. 3,00,000/- up to 1984. In addition to that, another policy for Rs. 2,00,000/- was obtained during the year 1984 vide Policy No.090800/01/1/00863 and thus, policy for Rs. 5,00,000/- was issued by the 2nd defendant. At that time, to avoid double insurance, the 1st defendant requested the 2nd defendant not to insure the plaintiff since insurance was already effected. 3,00,000/- up to 1984. In addition to that, another policy for Rs. 2,00,000/- was obtained during the year 1984 vide Policy No.090800/01/1/00863 and thus, policy for Rs. 5,00,000/- was issued by the 2nd defendant. At that time, to avoid double insurance, the 1st defendant requested the 2nd defendant not to insure the plaintiff since insurance was already effected. In spite of the request, Secunderabad Office of the 2nd defendant effected insurance for Rs. 8,00,000/- vide Policy Nos.050302/01/1/5216/84 and 050302/ 01/1/5215/84 expiring in the month of November, 1985, as the policy covered risk for the year 1984-85. Since the total stock was below Rs. 8,00,000/-, the plaintiff requested the 1st defendant to cancel the policy by letter dated 24.12.1984. The 1st defendant addressed letter on the very same day i.e., on 24.12.1984 to the 2nd defendant for cancellation of Policy No.090800/01/01/ 863 but it was not acted upon. Again, reminder was issued on 3.12.1985 to cancel but by mistake, wrongly mentioned Policy No.090600/01/1/02530 /85 in the letter instead of Policy No.090800/01/01/00863/84. Thus, the plaintiff, believing that the policy is still in force, received and accumulated stock and insured the stock obtaining policy for Rs. 8,00,000/-. However, it is clear that due to mistake of staff of the 1st defendant, a letter mentioning wrong policy number covering risk for the year 1985-86 was asked to cancel instead of policy obtained for the year 1984-85. Therefore, the mistake of the 1st defendant would not enure any benefit to the 2nd defendant and still, the 2nd defendant is liable to pay compensation and that the 1st defendant is not liable to pay any compensation or damages to the plaintiff. 11. The 2nd defendant filed written statement admitting obtaining of policies etc. and denied liability to pay damages or compensation on the ground that the policy bearing No.09080/01/1/00863 for Rs. 5,00,000/- does not cover risk of third party stock. It is further contended that the 1st defendant never addressed any letter for cancellation of policy covering risk for the year 1984-85 and that the 1st defendant only addressed letter for cancellation of policy bearing No.90800/01 /1/2530/85 covering risk for the period 1985-86. Thereby, contract of insurance came to an end on account of termination of contract at the request of the 1st defendant. Thereby, contract of insurance came to an end on account of termination of contract at the request of the 1st defendant. According to Condition No.7 (a) of the policy, goods received in trust or on commission basis are not covered by policy issued for the year 1985-86. Therefore, the 2nd defendant is not liable to pay any damages or compensation and prayed for dismissal of the suit against the 2nd defendant. 12. Basing on the above pleadings, the trial Court framed the following issues : (1) Whether the policy issued by the 2nd defendant does not cover the liability of 3rd parties? (2) Whether the 2nd defendant is only liable to pay the suit amount? (3) Whether the defendants 1 to 3 are liable to pay the suit amount? (4) To what relief? 13. During the course of trial, on behalf of the plaintiff, PW1 was examined and Exs.A1 to A21 were marked. On behalf of the 1st defendant. DW1 was examined and marked Exs.B 1, B1 (a) and B1 (b). On behalf of the 2nd defendant, DW2 was examined but no documents were marked. 14. Upon hearing argument of both Counsel and considering oral and documentary evidence available on record, the trial Court decreed the suit against the 1st defendant while dismissing the suit against defendant Nos. 2 and 3. 15. Aggrieved by the impugned decree and judgment of the trial Court, the 1st defendant-appellant preferred this appeal on various grounds. The main contentions of the appellant-1st defendant are as follows : (a) The trial Court did not consider the oral evidence of DW2, wherein he admitted about receipt of originals of Exs.A4 to A8. If that is considered, the 1st defendant is not liable to pay any compensation or damages to the plaintiff and the 2nd defendant alone is liable to pay damages towards the loss sustained by the plaintiff' and (b) The trial Court, even without granting any specific permission under Section 65 of Evidence Act, allowed to mark Exs.A4 to A10 though they are inadmissible in evidence. If those documents are not admitted, no liability can be attached to the 1st defendant. Apart from that, the observation of the trial Court that the 2nd defendant was not bound to produce originals of Exs.A4 to A8 is an error on the face of record and against the principles of law. If those documents are not admitted, no liability can be attached to the 1st defendant. Apart from that, the observation of the trial Court that the 2nd defendant was not bound to produce originals of Exs.A4 to A8 is an error on the face of record and against the principles of law. If the trial Court accepted the mistake of the 1st defendant in addressing letter for cancellation of policy for the year 1985-86, certainly the 2nd defendant alone is liable to pay compensation and finally prayed to dismiss the suit against the 1st defendant setting aside the impugned decree and judgment of the trial Court in OS No.948 of 1989 dated 17.8.1999. 16. During the course of argument, learned Counsel for the appellant-1st defendant mainly contended that cancellation was only due to mistake by staff of the 1st defendant in mentioning policy number but in the earlier letters, the 1st defendant requested to cancel policy for the year 1984-85 only. Therefore, on coming to know about cancellation, immediately addressed a letter to the 2nd defendant for revival of the policy but before to that, fire accident took place. Therefore, on account of mistake of the 1st defendant, the 2nd defendant is not entitled to disown its liability to pay damages or compensation and thereby, the 2nd defendant alone is responsible to pay damages or compensation to the plaintiff-1st respondent, and prayed to allow the appeal setting aside the impugned decree and judgment passed against the 1st defendant. 17. Learned Counsel for the 2nd defendant, reiterating the contentions urged before the trial Court, contended that when the contract of insurance is terminated, question of payment of any damages or compensation for the loss sustained by the plaintiff does not arise as there is no contractual obligation on the part of the 2nd defendant to pay damages or compensation as on the date of alleged fire accident. Therefore, the 2nd respondent is not liable to pay any compensation whereas learned Counsel for the plaintiff-1st respondent contended that both the appellant and the 2nd defendant are jointly and severally liable to pay compensation and prayed to pass a decree against the 2nd defendant also for payment of damages or compensation towards the loss sustained by the plaintiff-1st respondent. 18. 18. Considering rival contentions and perusing material available on record, the points that arise for consideration are as follows : (1) Whether the contract of insurance between the plaintiff, defendant No. 1 and defendant No.2 was subsisting as on the date of fire accident that occurred on 8.5.1986? (2) Whether liability to pay damages for the goods of third parties lying in the premises is covered by Ex.Al policy? (3) Whether the plaintiff is entitled to recover damages, if so, at what rate and from whom? 19. In Re. Point No.l : Admittedly, the plaintiff obtained loan towards working capital and for securing payment of amount by pledging building, stock in trade and goods under process and to secure the same, the 1st defendant obtained an insurance policy from the 2nd defendant. Premium paid under the policy was being debited to the account of the plaintiff by the 1st defendant. Thus, it is an undisputed fact that the 1st defendant obtained policy for the benefit of the plaintiff and the plaintiff indirectly paid the premium under the policy. The same practise was being continued by the 1st defendant as per banking practise. However, plaint and machinery and stock were insured with Secunderabad Branch for Rs. 9,00,000/- for the year 1984-85 covering risk for an amount of Rs. 8,00,000/- and at the same time, the 1st defendant also obtained another policy from the 2nd defendant covering risk for the year 1984-85 for a sum of Rs. 5,00,000/-. Thereby, the plaintiff thought that it amounts to double insurance and, to avoid further complications, addressed a letter to the 1st defendant. In turn, the 1st defendant addressed a letter to the 2nd defendant under the original of Ex.A9 dated 24.12.1984 and again reminder dated 27.5.1985 under the original of Ex.A10 by the 1st defendant to the 2nd defendant. Ex.A11 is Xerox copy of letter addressed by the plaintiff requesting cancellation of policy issued for the year 1984-85. Exs.A12 and A13 are reminders for the same purpose dated 27.5.1985 and 2.12.1985 respectively. As seen from Exs.A9 to A13, it is evident that the 1st defendant addressed a letter to the 2nd defendant for cancellation of policy bearing No.090800/01/1/00863 dated 30.1 1.1984 issued in favour of the plaintiff-M/s. Sunita Industries, Patancheru, and credit the premium to the head office account. As seen from Exs.A9 to A13, it is evident that the 1st defendant addressed a letter to the 2nd defendant for cancellation of policy bearing No.090800/01/1/00863 dated 30.1 1.1984 issued in favour of the plaintiff-M/s. Sunita Industries, Patancheru, and credit the premium to the head office account. Ex.A10 is reminder addressed by the 1st defendant to the 2nd defendant with the same request. Basis for issuing originals of Exs.A9 and A10 is Ex.Al dated 24.12.1984, wherein the plaintiff requested the 1st defendant to address a letter to the 2nd defendant for cancellation of policy covering of a sum of Rs. 5,00,000/- for the year 1984-85 since a policy for Rs. 8,00,000/- was already obtained for the same period and to avoid double insurance, the plaintiff sought for cancellation and refund of premium to the plaintiff account. Exs. A121 and A13 are reminders to Ex.A11. Therefore, it is clear from the recitals of Exs.A9 to A12, the plaintiff sought cancellation of the policy issued for the period 1984-85 for Rs. 5,00,000/- bearing Policy No.090800/01/1/00863. In the letter addressed by the 1st defendant to the 2nd defendant on 3.12.1985 to cancel the policy for the year 1984-85, policy number was wrongly mentioned as 090600/01/1/02530/ 85 instead of policy bearing No.090800/01/ 1/00863/84. Immediately, policy for the year 1985-86 was cancelled acting upon the letter dated 3.12.1985 addressed by the 1st defendant to the 2nd defendant. Premium paid under the policy was credited to the account of the plaintiff with the 1st defendant bank. Therefore, due to mistake of the employees of the 1st defendant, the policy was cancelled. However, certain judicial admissions arc made in unnumbered Para 2 at Page No.2 of the written statement of the 1st defendant and they are as follows : "This defendant addressed letter, dated 24.12.1984 same day to the defendant No.2 requesting to cancel the Policy No.090800/ 01/01/863. But no compliance was made by defendant No.2 while sending a reminder on 3rd December, 1985, to cancel the November, 1984 to 1985 policy this defendant by mistake wrongly mentioned the Policy No.090600/01/1/02530/85 in the letter instead of Policy No.090800/01/01/00863/84. The plaintiff believing that the policy is still in force and since more stock was accumulated the plaintiff have renewed the additional policy of Rs. 8,00,000/- covering the entire stock of Rs. 13,00,000/- lying in their premises." 20. The plaintiff believing that the policy is still in force and since more stock was accumulated the plaintiff have renewed the additional policy of Rs. 8,00,000/- covering the entire stock of Rs. 13,00,000/- lying in their premises." 20. Even if this judicial admission is accepted, without the intervention of the plaintiff, the policy obtained from the 2nd defendant by the 1st defendant for securing pledged goods was cancelled. Therefore, unilateral cancellation of the policy covering the period 1985-86 is not binding on the plaintiff. However, on account of mistake of the 1st defendant, the plaintiff shall not be put to loss. Therefore, judicial admissions, which are conclusive in nature in view of Section 58 of Indian Evidence Act, need no further proof. Therefore, basing on the judicial admissions of the 1st defendant, cancellation of policy covering risk for the period 1985-86 was not at the instance or request of the plaintiff but the 1st defendant alone by mistake got the policy cancelled by addressing letter dated 3.12.1985 to the 2nd defendant. When the 1st defendant addressed such letter, the 2nd defendant is bound to cancel the same and credit the premium to the account of the plaintiff with the 1st defendant. When I adverted to the oral evidence on record, there are clear evidentiary admissions which clinch the issue. DW1 is an important witness examined on behalf of the 1st defendant whose evidence is relevant and worthy of consideration for deciding the real controversy. In the examination in chief, he marked Exs.A9 and A10 which bear the signature of Assistant Manager, Gunasekharan. Therefore, addressing letters for cancellation of policy covering risk for the year 1984-85 under Exs.A9 and A10 is not disputed. In the cross-examination by learned Counsel for the plaintiff, DW1 admitted that he was aware of the letters dated 24.12.1984 and 27.5.1985 for cancellation of policy issued for the year 1984-85 but admitted that due to mistake on the part of the bank in addressing letter dated 2.12.1985 to the 2nd defendant, policy covering risk for the year 1985-86 instead of 1984-85 was sought to be cancelled. In the cross-examination by learned Counsel for defendant Nos.2 and 3, when a suggestion was put to DW1 that Exs.A9 and A10 were fabricated letters and brought into existence, he denied. He further admitted that Policy Bearing No.2530/85 was cancelled and premium of Rs. In the cross-examination by learned Counsel for defendant Nos.2 and 3, when a suggestion was put to DW1 that Exs.A9 and A10 were fabricated letters and brought into existence, he denied. He further admitted that Policy Bearing No.2530/85 was cancelled and premium of Rs. 1,692/- was received on 14.12.1985 and the bank did not raise any objection in crediting the premium after cancellation of the policy covering risk for the period 1985-86. However, a letter was dispatched on 27.2.1987 stating that there was a clerical mistake in the letter dated 2.12.1985 seeking cancellation of the policy. These evidentiary admissions if taken into consideration along with judicial admissions, which remained unrebutted in the written statement filed by the 1st defendant, it is clear that the 1st defendant got cancelled the policy covering risk for the period 1985-86 instead of 1984-85. Even after crediting premium to the account of the plaintiff with the 1st defendant, the 1st defendant did not raise any objection for such crediting. Having maintained silence, when a claim was made for recovery of damages by the plaintiff, the 1st defendant realised its mistake and addressed a letter for revival of the policy after occurrence of fire accident. In other words, the 1st defendant, in utter disregard to the letters marked as Exs.A9 and A10 and the letters addressed by the plaintiff, in a most callus manner addressed letter for cancellation of the policy covering risk for the year 1985-86 and immediately, the 2nd defendant acted upon the request, cancelled the policy and credited premium of Rs. 1,692/-. The said fact was pleaded in clear terms in the written statement filed by the 2nd defendant and the same is supported by the evidence of DW2. In the entire cross-examination, nothing was elicited to rebut the evidence of DW2. 21. It is the main contention of the 1st defendant that DW2 admitted about receipt of originals of Exs.A9 and A10 but the trial Court ignored the admission and did not insist for production of those documents. Infect, on close analysis of the entire cross-examination of DW2, we find no such admission as pointed by learned Counsel for the 1st defendant. On the other hand, in the first sentence of cross-examination, DW2 pleaded ignorance about receipt of originals of Exs.A9 and A10 by the 2nd defendant's office. Infect, on close analysis of the entire cross-examination of DW2, we find no such admission as pointed by learned Counsel for the 1st defendant. On the other hand, in the first sentence of cross-examination, DW2 pleaded ignorance about receipt of originals of Exs.A9 and A10 by the 2nd defendant's office. At the first page of cross-examination, DW2 further stated that as per the record available in the head office, originals of Exs.A9 and A10 were not received by the 2nd defendant's office. However, Ex.A5 contained seal of the 2nd defendant's office. Thus, whatever elicited in the cross-examination of DW2 would not go to establish receipt of originals of Exs.A9 and A10. Therefore, the contention of the 1st defendant that there is an admission about receipt of originals of Exs.A9 and A10 and the trial Court did not consider the same is without any basis and this contention is totally against the evidence of DW2 on record. 22. One of the contentions urged before this Court is that the documents marked on behalf of the plaintiff are only Photostat copies and they are inadmissible in evidence without obtaining any prior permission to adduce secondary evidence. But, at the time of marking documents, it appears that no objection was raised and the documents are already marked as exhibits before the trial Court. When the trial Court applied its mind and received and admitted documents in evidence assigning exhibit number, it amounts to applying mind and impliedly permitting the plaintiff to adduce secondary evidence ' though no specific order is passed permitting to adduce secondary evidence. Even assuming for a moment that Photostat copies are inadmissible in evidence, still the crucial judicial admissions, which estopps the 1st defendant to contend otherwise in view of Section 18 of Evidence Act, are suffice to hold that only on account of mistake or inadvertent addressing of letter to the 2nd defendant by the 1st defendant is suffice to believe that on account of misdeeds of staff of the 1st defendant, this chaos is created. The fact remains that on account of the act of staff of the 1st defendant alone, policy covering risk for the rear 1985-86 was cancelled by the 2nd defendant and apart from that, the 1st defendant also received the refund premium of Rs. 1,692/- covering risk for the period 1985-86 only. The fact remains that on account of the act of staff of the 1st defendant alone, policy covering risk for the rear 1985-86 was cancelled by the 2nd defendant and apart from that, the 1st defendant also received the refund premium of Rs. 1,692/- covering risk for the period 1985-86 only. This acceptance of premium is nothing but accepting the callus attitude of the 1st defendant. Therefore, on account of such acts, the plaintiff shall not suffer. 23. In view of my discussion in the earlier paras, liability under the policy by the 2nd defendant was not subsisting in view of termination of contract of insurance on account of letter addressed by the 1st defendant dated 2.12.1985. When once the contract is terminated, the insurance company cannot be saddled with any liability to pay damages or compensation for the loss sustained by the plaintiff in the fire accident. Hence, we hold that the 2nd defendant is not liable to pay anything to the 1st defendant for the loss sustained by him in the fire accident. Contract of insurance is a contract of indemnity as defined under Section 124 which reads as follows : "A contract by which one party promises to save the other from loss caused to him by the conduct of promisor himself, or by the conduct of any other person, is called a contract of indemnity." 24. When once contract is terminated, liability under the contract is ceased to exist. Accordingly, the trial Court rightly exonerated the 2nd defendant from payment of damages or compensation and this finding needs no interference. 25. As cancellation took place due to the act of staff of the 1st defendant, which resulted in huge loss to the plaintiff, the 1st defendant alone is liable to pay damages or compensation. Therefore, we hold that the 1st defendant alone is liable to pay damages to the plaintiff. Accordingly, the point is answered. 26. In Re. Point No.2 : The main contention of the 2nd defendant is that even if the 2nd defendant is found liable to pay damages or compensation for the loss sustained by the plaintiff in the fire accident, at best the 2nd defendant agreed to indemnify the loss caused to stock in trade and goods in process but not the goods of third parties. Learned Counsel for the 2nd defendant drawn attention of this Court to the terms and conditions of the policy marked as Ex.Al, which was terminated subsequently on the letter addressed by the 1st defendant, and they are extracted hereunder for better appreciation: 'Condition No.7 : Unless otherwise expressly stated in the policy, this insurance does not cover : (a) Goods held in trust or on commission; (b) Bullion or unset precious stones; (c )........... (d) ........... (e) ........... (f) Explosives. 27. If the contention of the 2nd defendant is read together with Condition No.7 of terms and conditions of the policy, liability of the 2nd defendant is limited to the goods in process and raw-material etc., belonging to the plaintiff but not the goods of third parties. Whatever material entrusted to the plaintiff by third parties for undertaking work is nothing but handing over material for the purpose of work and on completion of work, it shall be returned. So, the plaintiff is not the absolute owner of the material entrusted to him by third parties. Thus, in view of Condition No.7 of Ex.Al, the insurance company is not liable to pay any amount since the policy covers risk in respect of stock of paper, polythene, wax, spirit, printing ink, solvents such other goods of hazardous nature, stored and/or lying and/or in process in a building of 1st class construction bearing Plot No.D/5, Phase-V, situate at I.D.A., Patancheru, Hyderabad, and occupied as wax manufacturing unit only. The cumulative effect of coverage of risk mentioned in the policy so also the clause exempting certain items belonging to others clearly shows that the insurance company is liable to pay only the goods in process and other material belonging to the plaintiff in the premises bearing Plot No.D/5, Phase-V, situate at I.D.A., Patancheru, Hyderabad. Hence, the liability is restricted to the material belonging to the plaintiff. Even if liability under Ex.Al policy was subsisting by the date of fire accident, the plaintiff is entitled to recover only goods in process and other material belonging to him but not material belonging to third parties. Though policy was terminated illegally by the 1st defendant, liability of the 1st defendant is only limited to the extent of liability agreed to be indemnified by the 2nd defendant. Though policy was terminated illegally by the 1st defendant, liability of the 1st defendant is only limited to the extent of liability agreed to be indemnified by the 2nd defendant. Hence, liability of the 1st defendant is only for the damage caused to material and goods in process mentioned in the first page of Ex.Al subject to Condition No.7. Thus, the plaintiff is entitled to recover only Rs. 3,57,000/- as the value of goods in process and material belonging to the plaintiff as on the date of fire accident i.e., 8.5.1986 was only Rs. 3,57,000/-. Accordingly, the point is held in favour of the 1st defendant-appellant and against the plaintiff-1st respondent. 28. In Re. Point No.3 : In view of my findings on Point Nos. 1 and 2, the plaintiff is entitled to recover damages or compensation sustained by him in the fire accident only from the 1st defendant as the insurance policy was terminated by addressing letter dated 2.12.1985 covering risk for the year 1985-86. Thereby, the 2nd defendant is not liable to pay compensation since liability under contract of insurance was no more subsisting in view of termination of contract. 29. The policy marked as Ex.Al covers risk of material and goods in process belonging to the plaintiff stored or lying in the premises bearing Plot No.D/5, Phase-V, situated at I.D.A., Patancheru, Hyderabad. Therefore, in view of my finding on Point No.2, the plaintiff is entitled to recover the value of material and goods in process to an extent of Rs. 3,57,000/- as the 1st defendant stepped into the shoes of the 2nd defendant in view of illegal termination of contract and whatever loss the 2nd defendant agreed to indemnify' alone is to be paid by the 1st defendant Therefore, the trial Court did not consider liability of the 1st defendant in proper perspective with reference to Condition No.7 and committed an error in attaching liability to the 1st defendant ignoring terms and conditions of the policy. Hence, the decree is modified limiting liability of the 1st defendant to Rs. 3,57,000/-. Accordingly, the point is answered. 30. In view of my foregoing discussion and findings on Point Nos. 1 to 3, the plaintiff is entitled to recover only Rs. 3,57,000/- from the 1st defendant. Accordingly, the appeal is allowed in part limiting the decree to Rs. 3,57,000/-. 31. 3,57,000/-. Accordingly, the point is answered. 30. In view of my foregoing discussion and findings on Point Nos. 1 to 3, the plaintiff is entitled to recover only Rs. 3,57,000/- from the 1st defendant. Accordingly, the appeal is allowed in part limiting the decree to Rs. 3,57,000/-. 31. In the result, the appeal is allowed in part reducing liability of the 1st defendant to Rs. 3,57,000/- with proportionate costs and interest @21% p.a., from the date of suit till the date of decree and future interest @ 6% p.a., from the date of decree till realization. Pending miscellaneous petitions in this appeal, if any, shall stand closed in consequence.