Kona Mohan Rao vs NEW INDIA ASSURANCE LTD

V .K.Jain, Presiding Member 1. The petitioner / complainant purchased a godown erected on Plot No. 93 in Khata No.8/58 of Mouza in Rayagada and he claims to have got the said godown insured with the respondent New India Assurance Co. Ltd. on 09.8.2006 for the insured value of Rs.10.00 lacs. The premium amounting to Rs.3,592/ - was paid by him to the insurance company on 09.8.2006. The building of the aforesaid godown having collapsed on 17.7.2006 and 18.8.2006, due to heavy rains, he lodged a complaint with the insurance company. Vide letter dated 24.8.2006, the insurance company informed the complainant that since no -one from their office had verified his godown before insurance, he should inform them as to who had inspected the said building. The complainant informed the insurance company that the godown was seen by a Development Officer, along with him and thereafter, the premium was deposited in the office of the insurance company. The aforesaid letter was followed by correspondence exchanged between the parties, but the claim was not paid by the insurance company. Being aggrieved, the complainant approached the concerned District Forum by way of a complaint, seeking payment of the insured amount of Rs.10.00 lacs, along with interest and cost of litigation amounting to Rs.50,000/ -.

THOUGH , the complainant / petitioner has not filed a copy of the reply submitted by the insurance company, a perusal of the order passed by the District Forum would show that the insurance company stated in its reply that since the proposal for taking insurance cover was not submitted with clarity and was not accompanied by documents, it was not accepted by the Divisional Office. As regards the premium, it was stated in the reply that it was accepted in routine. The insurance company maintained that no insurance policy having been issued to the complainant, the contract of insurance did not come into operation. It was also claimed by the insurance company that the complainant had suppressed material facts in the proposal submitted by him.

VIDE order dated 28.11.2008, the District Forum dismissed the complaint holding that there was no valid contract of insurance between the parties. Being aggrieved from the order passed by the District Forum, the complainant approached the concerned State Commission by way of an appeal. The said appeal having been dismissed vide impugned order dated 26.2.2009, he is before us by way of this revision petition.

THE main question which arises for our consideration in this petition is as to whether there was a valid contract of insurance between the parties. The District Forum ruled against the complainant and the said finding was accepted by the State Commission though by way of a brief order, it is not open to us to interfere with the aforesaid concurrent finding, in exercise of revisional jurisdiction, unless it is shown to be perverse.

IT is not in dispute that the complainant / petitioner had submitted a proposal to the insurance company. The aforesaid proposal is available at page 26 -30 of our paper book. There is an endorsement of acceptance dated 14.8.2006 on the aforesaid proposal, which would indicate that the proposal was accepted by someone in the insurance company on the aforesaid date. The case of the insurance company in this regard is that the proposal was not accepted by a competent person since the authority to accept the proposal vested with the Divisional Manager and not with the Branch Manager as the insured amount was more than Rs.50,000/ -. Be that it may, in our opinion, even if we proceed on the basis that the aforesaid proposal was accepted by a competent officer of the insurance company, since the acceptance of the proposal was never conveyed to the complainant, a valid contract of insurance did not come into force between the parties.

SECTION -4 of the Indian Contract Act to the extent it is relevant provides that the communication of an acceptance is complete, as against the acceptor, when it comes to the knowledge of the proposer. In the case before us, the acceptance of the proposal by the insurance company never came to the knowledge of the complainant at any time before the loss to the building of the complainant occurred. Admittedly, no cover note or insurance policy was issued to the complainant at any point of time. There is no document at all sent by the insurance company to the complainant accepting the proposal submitted by him. Therefore, it would be difficult for us to say that the proposal submitted by the complainant had culminated into a contract of insurance between the parties.

THE learned counsel for the complainant / petitioner drew our attention to the policy number mentioned in the receipt dated 09.8.2006 and contended that the aforesaid number clearly shows that the insurance company had actually issued the policy, accepting the proposal submitted by the complainant. We however, find no merit in the contention. As explained by the learned counsel for the insurance company, unless a policy number is generated, the system of the insurance company does not accept a premium even if it is an advance payment is made with a proposal. The insurance policy on the other hand is issued only when the proposal submitted by a person is duly considered and accepted by a competent person. In the case before us, the proposal itself having been accepted on 14.8.2006, as is evident from the endorsement appearing on the documents, it cannot be said that a policy of insurance was issued by the company on 09.8.2006 itself. Therefore, we hold that mere acceptance of premium vide receipt dated 09.8.2006 does not prove the acceptance of the proposal and consequent communication of the said proposal to the complainant.

IN LIC of India Vs. Raja Vasireddy Komalavalli Kamba and Ors., 1984 2 SCC 719, the Hon''ble Supreme Court inter -alia held as under: "Mere receipt and retention of premia after the death of the appellant or mere preparation of the policy document is not acceptance and, therefore, do not give rise to a contract. The general rule is that the contract of insurance will be concluded only when the party to whom an offer has been made accepts it unconditionally and communicates his acceptance to the person making the offer whether the final acceptance is that of the assured or insurers, however, depends on the way in which negotiations for an insurance have progressed. Mere delay in giving an answer cannot be construed as an acceptance. Though in certain human relationship silence to a proposal might convey acceptance but in the case of insurance proposal, silence does not denote consent and no binding contract arises until the person to whom an offer is made says or does something to signify his acceptance".

SINCE there was no contract of insurance between the parties on the date the loss allegedly happened, insurance company is not liable to pay any amount to the complainant. No exception can therefore be taken to the orders passed by the fora below. The revision petition is devoid of any merits and is therefore dismissed.