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Judgment
This group of six Appeals (CIA No. 727 1995 Oriental Insurance Company Limited Versus Ghulam Mohammad Siraj and Another; CIA No.
214/1996, Oriental Insurance Company Ltd. Versus Mohammad Shafi Sofi; CIA No. 215/1996, Oriental Insurance Co. Ltd., Versus Khursheed
Ahmad Shah; CIA No. 217/1996, Oriental Insurance Co. Ltd. Versus Abdul Gaffar 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 Judgement, 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 it 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
along with stocksintrade 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 or may be pending. The 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. 121 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 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 ofSurveyor 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, Commission 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 the
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 time, 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 filing 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 same were 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 done, 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 not
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 of India vs. Raja Vasireddy Komalavalli Kamba and others). We find 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
this 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 issuance 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 Judgement. 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 cheque 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 cheque 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 dispatched
by postal order or a cheque, 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 dispatch 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 it 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 order that no other ground was also taken before the Commission, therefore, this
appeal is without any merit and is dismissed.
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 Khuroo, 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 dispatched the same to the Appellant on the same date
through registered post, as required by 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 ICCC meeting of Managers in Northern Region of all subsidiary companies dated 141 1991
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 cheque which 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 cheque which so far 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
proposer/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 that 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 far 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.
CIA No. 72/1995
In this case, sum of Rs.2.50 lacs and interest at the rate of 18% from the date of incident till the date of final payment has been allowed, apart
from compensation of Rs. one lacs 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 lacs. 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. 214/1996.
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 lacs for which the premium had been paid by the claimant as already mentioned in the preceding
paras of this Judgement. 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, Shri 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 of 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 background, interest of justice would not suffer if this amount is reduced to Rs.30.000/ without carrying
interest.
CIA No. 214/1996
In this case, shop was insured for Rs. One lacs and the stocksintrade for Rs. two lacs. Claim was made for the total amount. Commission has
allowed Rs.2.25 lacs with 18% interest per annum payable from the date of loss till the date of payment. This apart, compensation of Rs.40, 000/
has been allowed. We have considered the matter. We find that payment of Rs.2.25 lacs 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.15,0007 for reasons recorded in CIA No. 72/1995.
CIA No. 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 18% 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. 721 1995.
CIA No. 217/1996
In this case, property insured in 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.
CIA No. 218/1996
In this case, stocksintrade 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 the 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.
CIA No. 88/1995
In this case, stocksintrade 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.2,89,6821
allowed by the Commission, but the rate of interest is reduced to 12% payable from July 1991 till the date of final payment. The compensation is
also reduced to Rs.30,000/ for reasons recorded in CIA No. 72/1995.
We make it clear that:
Amount of compensation will not carry interest;
The claimants shall be 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 Judgement passed by this
Court;
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
The parties are allowed three months time for making the payments to whomsoever it becomes due.
Cost on parties.