National Insurance Company Ltd. and Another Vs. Raja Gogia - Court Judgment

Lokeshwar Prasad, President:

1. The present appeal filed by the appellants under Section 15 of the Consumer Protection Act, 1986 (hereinafter referred to as ‘the Act) is directed against order dated 30th May, 2000, passed by District Forum-VII, Sheikh Sarai, New Delhi, in Complaint Case No. 293/1999 - entitled Shri Raja Gogia v. National Insurance Co. Ltd. and Anr.

The facts, relevant for the disposal of the present appeal, briefly stated, are that the respondent Shri Raja Gogia, had filed a complaint under Section 12 of the Act, in the District Forum, averring therein that he got his Maruti Van insured with the appellants on 14th July, 1997 at 9.30 p.m. and had issued a blank cheque towards payment of premium in respect of the insurance taken by him. It was stated that next morning i.e., on 15th July, 1997 at about 6.30 a.m. he noticed that his Maruti Van had been stolen. It was stated that about the theft of the vehicle in question the Authorities of the police were informed and a claim under the policy was preferred with the appellants. It was stated that on 18th July, 1997 he was informed by the appellants that his insurance policy had been cancelled and his file had been closed. The respondent got a notice served on the appellants, but there was no response to the same. Consequently, the respondent filed a complaint before the District Forum under Section 12 of the Act.

2. The claim of the respondent, in the District Forum, was resisted by the appellants. In the reply/written version, filed on behalf of the appellants, certain preliminary objections were taken by the appellants with regard to the maintainability of the complaint, filed by the respondent, before a redressal agency, established under the Act. On merits it was stated that there was no valid contract of insurance in existence between the parties on the date when the theft of the vehicle took place. It was also contended in the reply/written version, filed on behalf of the appellants that the respondent was not a ‘consumer as defined in Section 2(1)(d)(ii) of the Act. It was stated that the insurance of the vehicle in question, taken by the respondent had expired on 26th March, 1997, and thereafter, the respondent visited the Basant Lok Branch of the appellant on 14th July, 1997 and requested for the insurance of his Maruti Van. It was stated that the respondent had tendered a cheque for Rs. 3,668/- towards premium and a receipt was issued to the respondent, subject to realization of the cheque. It was stated that on a scrutiny, the cheque was found to be defective as the amount in words mentioned in the cheque differed from the amount given in figures. It was stated that the appellants found that the cheque of the respondent could not be encashed and, therefore, the receipt issued against the cheque was cancelled, and the vehicle in question was not covered till fresh remittance was made in cash or through demand draft. It was stated that the appellants could not assume risk until unless the premium was received from the respondent and as the appellants had not received any payment towards premium from the respondent, the appellants were not liable to indemnify for any loss. It was stated that the respondent was not entitled to any relief and the complaint, filed by him, was liable to be dismissed with costs.

3. The learned District Forum, vide impugned order, has held that there was deficiency in service on the part of the appellants and on the basis of the above finding, has directed the appellants to pay to the respondent the amount of insurance, amounting to Rs. 84,000/-, together with interest at the rate of 12% per annum, from the date of theft i.e. 15th July, 1997 till payment, besides a sum of Rs. 2,000/- as cost of litigation.

4. Feeling aggrieved, the appellants have preferred the present appeal under Section 15 of the Act.

5. A notice of the appeal was issued to the respondent, who has entered appearance through his Advocate and has also filed a detailed reply to the memorandum and grounds of appeal. A rejoinder to the reply, filed on behalf of the respondent, has been filed on behalf of the appellants.

6. We have heard the learned Counsels for the parties at length and have also carefully gone through the documents/material on record. The only question requiring consideration in the present appeal by us is as to whether was there any deficiency in service on the part of the appellants, in the given facts, within the meaning of Section 2(1)(g) of the Act. The main thrust of the arguments advanced by the learned Counsel for the appellants was that there was no privity of contract between the appellants and the respondent, because the cheque, due to the difference in the amount written in words and figures, given by the respondent towards premium could not be encashed. In other words, for want of premium there was no valid contract of insurance between the appellants and the respondent. It was stated that in view of specific provisions contained in Section 64-VB of the Insurance Act, 1938 the obligation of the respondent was to have paid the premium of the policy in advance, which unfortunately was not discharged by him because the cheque due to defect on the part of the respondent himself, could not be encashed. The learned Counsel for the appellant further contended that as there was no valid contract of insurance on the date of the alleged theft of the vehicle took place, the repudiation of respondents claim by the appellants did not constitute any deficiency in service. On the other hand, the learned Counsel for the respondent vehemently contended that the repudiation of the claim of the respondent by the appellants was wholly unjustified because the respondent in good faith had handed over a blank cheque towards payment of the premium on 14th July, 1997 at about 3.30 p.m. for which a receipt bearing No. 402855 was issued by the concerned functionaries of the appellants. It was contended by him that there was deliberate mischief on the part of the functionaries of the appellants, who had deliberately filled in different amounts in words and also in figures in the cheque in question. It was stated by him that the return of the cheque given by the respondent towards the premium of insurance policy was malafide.

7. On the basis of material on record and the contentions advanced at the Bar, it is not in dispute that the respondent had approached the concerned functionary of the appellant on 14th July, 1997 and had handed over a cheque, and a cover note covering the risk in respect of the vehicle in question was issued by the concerned functionaries of the appellants. The case of the appellants in brief is that the cheque in question, issued by the respondent towards payment of insurance premium, was returned unpaid as there was difference in the amount mentioned on the cheque in words and figures. The above fact was duly intimated to the respondent by the concerned functionary of the appellants, vide letter dated 15th July, 1997. The operative portion of the above said communication is as under :

“We regret to inform you that the cheque for Rs. 3,668/- received from you in settlement of motor has been returned unpaid by Bank with remark :

‘Amount in words and figures differ.

Please note that our Receipt No. 402855 dated .... stands cancelled. Please also note that the Company is not on risk under policy issued to you till such time a fresh remittance is received by cash or demand draft.”

8. On a bare perusal of the above said document, which has been annexed with the memoradum and grounds of appeal at page 36 of the paper book, it is apparent that the cheque in question was presented by the functionaries of the appellants to their bankers and the same was returned by the bankers of the appellant with the remark “amount in words and figures differ”. In the reply, filed on behalf of the respondent, it has been stated that the above averment made on behalf of the appellants is not factually correct because the cheque in question was never deposited/presented to their bankers by the appellants. In the rejoinder filed on behalf of the appellants, the above fact has been admitted that at no point of time the cheque in question was presented to the bankers. Since the cheque in question admittedly at no point of time was presented by the appellants to their bankers, there was no occasion for the appellants to have addressed communication dated 15th July, 1997 stating that the cheque had been returned unpaid by the Bank, with the remark ‘amount in words and figures differ. The stand taken by the learned Counsel for the appellants is that as the amount mentioned in the cheque in words and figures differed, there was no use in presenting the cheque to their bankers as the same, on account of the above defect, would have been returned unpaid by their bankers, if presented. In our opinion, the above contention, being advanced by the learned Counsel for the appellants, is devoid of substance because a cheque, payable either to order or bearer, which is a negotiable instrument under Section 13 of the Negotiable Instruments Act, 1881 (hereinafter referred to as “N.I. Act”), is governed by the provisions contained under the N.I. Act. Section 18 of the N.I. Act reads as under :

“Where amount is stated differently in figures and words—If the amount undertaken or ordered to be paid is stated differently in figures and in words, the amount stated in words shall be the amount undertaken or ordered to be paid.”

9. On a plain reading of the above provisions, it is apparent that in respect of negotiable instruments, which includes a cheque also, when a difference arises between the sum expressed in words in the body of that instrument and that mentioned in figures therein, the amount mentioned in words will be taken to be the sum for which the instrument was made payable. The mandatory nature of Section 18 of the N.I. Act leaves no scope for any doubt whatsoever. In view of the above statutory provisions contained in the N.I. Act, had the concerned functionary of the appellants presented the cheque in question to their bankers, the same in such an eventuality would have been honoured for the amount mentioned in words and, therefore, there was no occasion for the appellants to return that cheque with that remark.

10. From the narration of the above facts, it is apparent that decidedly there was ‘deficiency in service on the part of the concerned functionaries of the appellants, in returning the cheque tendered by the respondent towards the premium of the insurance policy in violation of the statutory provisions of the N.I. Act.

11. The learned Counsel for the appellants during the course of arguments submitted that in terms of the provisions contained in Section 64-VB of the Insurance Act, 1938, no risk is to be assumed unless the premium was received in advance. It was stated by him that as, in the present case, the insurer (appellants) had not received the premium in advance, there was no question of their assuming any risk. In our opinion, the above contention advanced by the learned Counsel for the appellants is also devoid of substance. Section 64-VB of the Insurance Act, 1938, relied upon by the learned Counsel for the appellant, provides—

“64-VB. No risk to be assumed unless premium is received in advance—(1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner.

(2) For the purposes of this section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer.

Explanation—Where the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money is booked or the cheque is posted, as the case may be.

(3) Any refund of premium which may become due to an insured on account of the cancellation of a policy or alteration in its terms and conditions or otherwise shall be paid by the insurer directly to the insured by a crossed or order cheque or by postal money order and a proper receipt shall be obtained by the insurer from the insured, and such refund shall in no case be credited to the account of the agent.

(4) Where an insurance agent collects a premium on a policy of insurance on behalf of an insurer, he shall deposit with, or dispatch by post to, the insurer, the premium so collected in full without deduction of his commission within twenty-four hours of the collection excluding bank and postal holidays.

(5) The Central Government may, by rules, relax the requirements of Sub-section (1) in respect of particular categories of insurance policies.”

12. Explanation to Sub-section (2) of Section 64-VB of the Insurance Act is of utmost significance because the same specifically provides that when the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money order is booked or the cheque is posted, as the case may be. Thus, in terms of the provisions contained in Explanation to Sub-section (2) of Section 64-VB of the Insurance Act, 1938, the risk can be assumed not from the date of realization of the cheque amount but even from the date when the cheque is posted. In the present case the cheque towards premium was tendered personally by the respondent to the concerned functionary of the appellants which is not in dispute. In view of the position already explained, even if there was some difference in the amount mentioned in the cheque in words and figures, even then the same could not have been dishonoured and should have been honoured by the Bank in respect of the amount mentioned therein in words.

No other point has been urged or pressed before us by the learned Counsel for the appellants.

In view of the above discussion, the present appeal, filed by the appellants, viewed from all angles is devoid of substance. The same merits dismissal. Accordingly, the same is dismissed. The order being impugned in the present proceedings is upheld. It is directed that payment in terms of the orders passed by the District Forum be made by the appellants to the respondent within sixty days from the date of receipt of this order, failing which the respondent would be at liberty to file an application under Section 25/27 of the Act, as the respondent may be advised, before the District Forum for the implementation of the orders of the District Forum.

The present appeal, filed by the appellants, stands disposed of in above terms.

Appeal disposed of.