Oriental Insurance Company Ltd. vs Ghulam Mohd.Siraj and Another

Bhawani Singh, Chief Justice

This group of six Appeals (CIA No 121 1995, Oriental Insurance company limited versus Ghulam Mohammed Siraj and Another CIA No.

214/1995,oriental Instance company Ltd. versus Mohammad Shaft Soil; CIA No.215/1996, Insurance co. Ltd. versus Abdul Gaffer Sofi, CIA

no. 218/1996, oriental Insurance co Ltd. versus M/S Abdul Rehman Ab. Rashid Book Sellers and General Merchants and CIA no.88/1995,

oriental Insurance co Ltd. versus Amir Ahmad and Mohd Zia is proposed to be disposed of by common Judgment, since main issues raised in all

of them are practically same. However, particular reference to individual case would be made wherever necessary. For the sake of understanding

the cases, relevant if would be to make mention of facts from first case.

GENERAL FACTS

Claimants belong to Handwara (Kashmir). They had their shops at this place for the past many years. They carried insurance of the premises

alongwith stocks in trade with the Appellant. For the last occasion, premium was paid to the agent of Appellant, who issued cover notes in favour

of the claimants. This happened on September 14, 1990 and the cover notes were also issued on the same date. Unfortunately, the premises were

gutted in fire on 1101990, resulting in total loss to the claimants and large number of other buildings in Handwara Town with respect to which

many other similar cases have either been disposed of may be pending. This Appellant returned the bank drafts to the claimants, thereby refusing to

issue Insurance policies sought by the claimants, in April 1991. Since in CIA NO 72/1995, (Oriental Insurance company Limited versus Ghulam

Mohammad Siraj and Anr.), the surveyor had assessed the loss, but his report was not furnished before the commission. Shri Khuroo wants to

place this report before us, but it is too late to accept it at this stage. In CIA NO .217/1996, (Oriental Insurance Company Ltd. versus Abdul

Gaffar Sofi), report of surveyor was filed before the commission, In CIA No.214/1996, (oriental Insurance company Ltd. versus Mohammad

Shafi Sofi), the report of surveyor was not furnished before the commission, though it is annexed with the Memorandum of Appeal. In CIA

No.215/ 1996, (Oriental Insurance company Ltd. versus Khursheed Ahmad Shah), report has neither been furnished before the commission nor

before this court, in CIA No 218/1996, (Oriental Insurance Co Ltd. versus M/S Abdul Rehman Ab Rashid Book Sellers and General Merchants)

there is no report of surveyor before this court or before the commission. In CIA No.88/1995, (oriental Insurance Co Ltd.versus Amir Ahmad

and Mohd Zia,) report by surveyor was furnished before the Commission.

When the Appellant failed to meet the claims commissions was approached by the claimants which has decided the cases through the impugned

orders.

Shri N.H. Khuroo contended that these claims are barred by time, therefore, they should not have been entertained by the commission. On

being asked from which date the limitation for Initiation of these cases before the commission is to be taken shri Khuroo contended that it is to be

counted from the date of repudiation. But repudiation of the claims in these cases has not been established . Simply because certain documents are

available on the file of the Appellant, that would not mean that claims were repudiated, or in the absence of satisfactory evidence showing that die

repudiation was communicated against postal receipt or postal certificate. Since they are not available in these cases it is difficult to say that these

claims are barred by lime as contended, more over, incident took place on October 1, 1990. In some cases the cheques were returned in April

1991, Exactly when they were received by the claimants is not established. Therefore, in these cases the claims are within time. We also find that

Appellant had been looking into these cases by appointing surveyors to investigate and find out the loss. These claims from the date of receiving the

reports till the date of filling these cases cannot be said to be barred by time. We also notice although objections as to limitation had been taken in

similar cases, however the somewhere not pressed before the commission since it is not recorded in the order of commission. Above all

commission had competence to condone the delay, therefore since these claims have been entertained, it is to be taken that commission has

allowed these cases in the peculiar facts and circumstances of these cases and in the background of extreme militancy and disturbed condition

prevailing in this part of the state at that time.

Next, it was contended that assuming the premium was paid by the claimants to the agent of Appellant namely Ghulam Mustafa Wani he did not

pass over the same to the appellant within time and when it was dome by that time the property had been destroyed in fire. Since policy of

insurance had not been issued in favour of the claimants no contract of Insurance had come into existence therefore Appellant is not liable to meet

the loss. With a view to bring home the contention learned counsel sought assistance from decision of Apex court reported in AIR 1984 supreme

court 1014. (Life Insurance corporation India V. Raja Vasi Reddy Komalavalli Kamba and others) we final that section 64 VB of the Insurance

Act, 1938 has not been considered in this case. Therefore the decision turns on its own facts and no assistance can be taken from tins decision by

the Appellant. There are two decisions of this court, where this question has been raised considered and decided. These decisions are CIA No. 36

of 1997 (United India Insurance Co. Ltd. versus Gh. Hassan Sofi decided on 2171997 and 1996 SLJ page 64 (Oriental Insurance Co. Ltd versus

Mrs. Asha Paul). In the first case the learned judges said :

That the risk has to run from the date of insurance of the cover note which later on gets converted into issuance of a policy.

In the second case, section 64 VB has been considered in paras 8 and 9 of the Judgment. They are reproduced:

The subsection (2) of section 64 VB makes it clear that the insurance company becomes liable for making good any losses from the date the

premium is paid in cash or by cheques to the insurer. This subsection (2) of section 64 VB has been further explained by an explanation which has

been quoted above by which it is made clear that the liability starts from the date on which the money order is booked or the cheques is posted if

the payment of premium is tendered by money order or sent by post. These provisions make it clear that once premium is paid or even despatched

by postal order or a cheques, the insurance company becomes liable but Mr. Gupta submits that there is a liability on the agent under subsection 4

that if he collects the premium, he had to deposit it or despatch it by post to the company within twentyfour hours of its collection.

Since the agent had not dispatched the premium within twentyfour hours, the insurance company is not liable. I am afraid, this argument will not

help Mr. Gupta because, looking from another angle, subsection (4) of section 64 VB in fact gives power to the insurance agent to collect the

premium and if premium is collected by the insurance agent, the company becomes liable and collection of premium by an insurance agent is

collection by the company as far as the insurer is concerned. In view of subsection 4, it is abundantly clear that, an insurer can pay his premium to

insurance agent but if an insurance agent fails to do his duty in terms of subsection 4, he may be liable to the company but is cannot be at the cost

of the insured. The question whether company is liable if the agent receives the amount of premium has its answer in subsection 4 itself Which gives

power to an insurance agent to collect the premium. For these reasons. I do not consider there is any merit in the arguments of Mr. Gupta. No

other ground has been taken and it appears from the impugned of order that no other ground was also taken before the commission, therefore, this

appeal is without any merit and is dismissed."" 7. We find ourselves in complete agreement with the view taken by this court in the two decisions

referred to above and proceed to reject the contention raised by Shri Khroo, and we hold that after the premium was paid to the agent of the

Appellant and the cover notes were issued, the Appellant is responsible to pay the loss. Even on facts the claimants cannot be defaulted. They had

paid the premium within time to the agent of the Appellant. The agent converted the premium into bank draft on the same date and despatched the

sane to the Appellant on the same dale through registered post, as required b> subsection (4) of section 64 VB. Therefore, the responsibility of the

agent is also over, The Appellant was expected to issue the policy immediately. Normally, it should have reached the Appellant the next day, since

the distance between the two places is 18 Kilometers. In case Appellant did not receive the same for reason of strike for 72 days in the valley, the

fault is not of the claimants, but responsibility has to be shouldered by Appellant whose agent had already issued cover notes with respect to the

premises, the subject matter of insurance. This apart, the following decision of 53rd ccc meeting of managers in Northern Region of all subsidiary

companies dated 1411991 makes the position all the more clear beyond doubt

Title. Position of claims arising against state cheques in Kashmir valley and how to deal with claims

There may be cases where the claim may have been lodged or will be lodged but the premium could not be accounted for against payment of

premium by a cheques winch remains stale in view of disturbed conditions of the valley where the banks either remained closed or were not fully

operational from January, 90 onwards. This issue was discussed in detail and the consensus was as under:

Of premium for renewal or fresh cover was paid by the insured before renewal by a cheques which so for could not be accounted for in view of

the circumstances mentioned above, the compliance of section 64 VB should have been deemed to be complied with provided the proposed

insured had adequate funds in his /their bank account which should have been released in normal circumstances but could not be done due to

conditions beyond control.

Therefore, we hold mat property in question stood insured with the Appellant and the contention raised by Shri Khuroo is not sustainable.

Having decided the main question , we proceed to deal with the individual cases so for as the amount of loss, interest and compensation is

concerned, since Shri Khuroo has serious objections with respect to this aspect of the matter as decided by the commission. CIANo.72/1995

In this case sum of Rs.2.50 lac and interest at the rate of 3 8%from the date of incident till the date of final payment has been allowed, apart

from compensation of Rs. one lac for the sufferings faced by the claimant at the hands of the Appellant, The machinery for tyre retreading and

allied works was insured with Appellant for Rs.2.50 lac claim is for the total amount. Shri Khuroo contends that the commission should have

declared it a substandard claim and allowed 25% deduction on the sum assured as has been done in CIA No.215/1996 and CIA No. 214/3996.

We do not agree with this contention. There is no evidence how much old the machinery was. There is no report by surveyor in this case. Fact

remains that the property was insured for Rs.2.50 lac for which the premium had been paid by the claimant as already mentioned in the preceding

paras of this judgment. Appellant should have produced evidence to justify claim for depreciation in this case, which has not been done. Further,

cases referred to by Shri Khuroo pertain to shops and not machinery. For these reasons, the contention is not accepted. Next is the question of

rate of interest. Here, Sliri Khuroo has in view large number of decisions rendered by this court holding that proper rate of interest in such cases

should be 12% per annum payable two months from the receipt of Surveyor's report or eight months after the date of incident. In this case, there is

no report by surveyor, therefore, interest at the rate of 12% shall be paid from July 1991 till the date for payment.

Now remains the question of compensation allowed by the commission. True it is that long delay has been committed by the Appellant in

settling the claim with the result that the claimant had to suffer for some years, but it cannot be said that conduct of Appellant was completely

blameworthy, since it was moving on the assumption that insurance policy had not been issued, receipt of premium and cover note did not satisfy

the requirement under the Act. In this back ground, interest of justice would not suffer if this amount is reduced to Rs.30,000/without carrying

interest.

CIANo.214/1996

In this case, shop was insured for Rs. one lac and the stocks in trade for Rs. two lac. Claim was made from the total amount. Commission has

allowed Rs.2,25 lac with 18% interest per annum payable from the date of loss till the date of payment. This apart, compensation of Rs .40,00/has

been allowed. We have considered the matter. We find that payment of Rs.2.25 lac is quite reasonable after making deduction of 25% towards

depreciation With respect to interest, rate of interest shall be 12% per annum from July 1991 till the date of payment. Compensation is reduced to

Rs.15.OGO/for reasons recorded in CIA No. 72/1995

CIANo.215/1996

In this case, the claimant had insured his stocks and cash for Rs. two lac. He claimed this amount from the Appellant. Commission has allowed

Rs. 1.50 lac with ! 8% interest from the date of loss till the date of payment. In addition, Rs. 40,000/ towards compensation. 25% deduction

towards depreciation. Amount allowed by the commission is maintained. We reduce the interest to 12% payable from July 1991 till the date of

payment and compensation to Rs. 15.000/ for reasons mentioned in CIA No. 72/1995

CIA No 218/1996

In this case, property insured is house and shop for Rs. five lac . Commission has allowed Rs.3,50,499/ with interest at the rate of 18% per

annum from the date of loss till the date of payment. Damage loss for Rs. 3,50;499/ is maintained, but the rate of interest is reduced to 12%

payable from July 1991 till the date of payment, and compensation amount is reduced to Rs.20,000/for the reasons recorded in CIA No. 72/1995

CIANo.218/1996

In this case, stocks in trade had been insured for Rs.2,60 lac. The commission has allowed Rs.1,95 lac with interest at the rate of 18% per

annum from the date of loss till date of final payment. The loss amount of Rs. 1,95 lac is maintained. However, rate of interest is reduced to 12%

payable from July 1991 till the date of payment. Compensation is reduced to Rs. 15,000 / for the reasons already recorded in CIA No. 72/1995.

CIANo.S8/1995

In this case, stocksin trade were insured for Rs. three lac. The commission has allowed Rs.2,89,682/ with interest at the rate of 18% from the

date of loss till the date of final payment,. Compensation of Rs. one lac has also been allowed. We maintain the damage amount of Rs.2,89,682/

allowed by the commission but the rate of interest is reduced to 12% payable from July 1991 till the date final payment. The compensation is also

reduced to Rs.30,000/ for reasons recorded in CIA No. 72; 1995 We make it clear that:

a) Amount of compensation will not carry interest;

b) The claimants shall fie entitled"" to interest on the amount of loss up to the date they received the amount from the commission. However it shall

be paid on the balance amount to which the claimants become entitled to by virtue of decision of commission, read with judgment passed by this

court;

c) in case excess amount has been deducted/ withdrawn by the commission from the account of the Appellant, that shall be returned to the

Appellant by the claimants and the commission shall recover excess amount from the claimants. However, no interest shall be payable to the

appellant on this amount; and

d) The parties are allowed three months time for making the payments to whomsoever it becomes due.

Cost on parties.