Judgment:
Sanjay Kishan Kaul, J.
1. The present appeal arises out of a long drawn dispute over the last 27 years with a Public Insurance Company and a Public Sector Corporation arrayed against each other.
2. The claim of the respondent for loss of goods on account of unprecedented rain at Kandla Port was rejected by the appellant-Insurance Company. The only question thus is as to which pocket of the government is enriched.
3. The respondent is a Public Sector Corporation and acts as a canalizing agent of the Government of India inter alia for export of rice. The respondent thus purchases rice from different locations in India which is shipped through different ports including the one at Kandla.
4. The appellant is a subsidiary of the General Insurance Corporation of India. The appellant issued an Open Marine Inland Transit Insurance Policy ('the Policy' in short) for the benefit of the respondent in respect of the rice which was being shipped. Unprecedented rain and cyclone hit the Kandla Port on 09/10.07.1981 which, as per the respondent, affected 22,538 metric tons of rice. The respondent thus made a claim for loss of Rs. 1.64 crores under the Policy. The claim was, however, rejected by the appellant resulting in the suit being filed by the respondent against the appellant on the Original Side of this Court being CS(OS) No. 274/1982 for Rs. 1,73,17,336/- consisting of claim for damages amounting to Rs. 1,64,92,701/- along with interest till the date of filing of the suit along with claim for future interest. The suit stands decreed in terms of the impugned judgment and decree dated 19.03.1996 for a sum of Rs. 1,38,39,684/- along with interest at the rate of 12 per cent per annum from the date of institution of the suit till realization. The appellant has thus come in appeal.
5. The submissions of the learned Counsel for the appellant are two-fold:
i) The storage of the rice at the port was not covered under the said Policy as the said Policy covered goods only during transit;
ii) The failure of the respondent to comply with the warranties and conditions of the insurance policy discharged the appellant of its obligations;
6. In order to appreciate the aforesaid pleas, the factual matrix resulting in the issuance of the insurance cover has to be set out.
7. The appellant to further his business approached the respondent on 02.01.1981 with a request for placing the insurance business covering the risks during transit of rice from different centres of procurement to the port. The formal proposal was sent vide a letter dated 02.01.1981 expressing the reluctance of the appellant to normally accept transit insurance of rice against all risks but in view of the cordial relations between the parties, the appellant expressed its willingness to underwrite the business of the respondent against all risks excluding infestation loss, weevil or web damage and shortage in weight out of sound bags at the rate of Rs. 2.50 % less 5 %. The additional premium was also prescribed against some other kinds of risks. This was followed up by a letter dated 02.02.1981 (Ex P-18) in respect of the finalization of the rates. The respondent in reply sent a letter dated 10.02.1981 (Ex P-17) as a follow up. The rates and terms & conditions were sent by the appellant under the cover of the letter dated 02.03.1981 (Ex P-14) and a provisional bill was also sent for depositing a premium of Rs. 25,001/- (Ex P-15).
8. The respondent in pursuance thereto sent a reply dated 23.03.1981 (Ex P-21). This letter clearly stated that in cases where the stocks of the respondent might be stored at the godown or at the ports for a period of fortnight or so pending shipment, all such risk of fire and rain etc. were to be included in the proposal, but the storage would not exceed three fortnights. The request thus made was for issuance of an Open Cover Policy on the above lines including storage at the warehouses or at the ports and for fire and rain risks for a maximum period of three fortnights.
9. The appellant acknowledged the aforesaid letter of the respondent vide letter dated 26.03.1981 (Ex P-13) stating that the rates indicated were for transits insurance and noting that the stocks may be stored at the godown or at the ports for a maximum period of 45 days. The rates of additional premium for the insurance cover during storage were specified at the rate of Rs. 0.03 % per month or part thereof and that the bill for deposit of premium of Rs. 25,001/- had already been delivered to the respondent and a copy of which was enclosed. The respondent sent the cheque for Rs. 25,001/- under a cover of the letter dated 04.04.1981 (Ex P-20) being the advance premium covering the risk during transit and also covering all risks for stocks stored at the warehouses at the ports. It was specifically stated by the respondents that 'since your cover note mentioned above does not cover the risk of stocks during storage at the port; we would, therefore, request you to please send us amendments covering the risk during storage, both in the cover note and in the original policy head.' The consignment despatches had already started moving to the ports and, therefore, a request was made to issue the declaration to be given so that the respondent could send the statement of despatches to the appellant.
10. The Policy dated 06.04.1981 (Ex P-12) provided for the terms of insurance as under:
Terms of Insurance: Insured against Rail Risks Clause including the risk of theft &/or RFA (OS) No. 16 of 1996 Page No. 6 of 22 non-delivery of a complete bag. Including the risk of Strike, Riots and Civil Commotions.
Subject to Clauses A, H (Revised) and N and as per memorandum attached.
11. It may be noted that Clause A refers to Rail Risks Clause, clause H (Revised) to Theft Pilferage and Non Delivery (Insured Value) Clause and Clause N to Strike, Riots and Civil Commotions Clauses(Inland Transit). A separate Memorandum was also attached to the Policy forming a part of the Policy. Clause 2 of this Memorandum attached provides as a condition of the contract that the assured are bound to declare every consignment without exception and the underwriter is bound to accept the same but not exceeding the sum of Rs. 50,00,000/-. Clause 8 of the Memorandum refers to certain special conditions and sub Clause (iv) of the same is as under:
The Policy will be extended, on request, to cover the storage risk at the intermediary point or part on payment of additional premium @ 0.03%-5% per month or part thereof.
12. The aforesaid also was sent to the respondent by the appellant under the cover of the letter dated 21.04.1981 (Ex P-10) stating that all declarations under the Policy up to 15.04.1981 were awaited. The respondent responded by a letter dated 27.04.1981 (Ex P-22) stating that while examining the policy, it had been found that the appellant had not covered two points that were clearly discussed and agreed to as under:
(i) Coverage of risk for movement of goods by road is not covered.
(ii) Coverage of risk for two stocks stored in the godowns is not mentioned in the policy.
13. The appellant was asked to look into the matter and issue necessary amendments.
14. The appellant in response thereto sent a letter dated 04.05.1981 (Ex P-8) enclosing an endorsement to extend the Policy to cover the movement of goods by road. In respect of the storage, it was stated as under:
As regards to the storage risk, please note that it has already been covered by conditions 8 (iv) of the memorandum attached to the policy.
15. The respondent thereafter sent the statement of despatches of rice to the Kandla Port under the cover of the letter dated 17.06.1981 (Ex P-7) and once again requested for a printed format for sending the details of the despatches. The appellant consequently issued the Marine Certificate of Insurance for a sum of Rs. 1,38,39,684/- (Ex P-6). The column under the premium stated the calculation for the marine as well as the war and/or strikes and civil commotions and the total amount came to Rs. 20,050/-. It is after these communications that the unfortunate incident of cyclone hitting the coastal ports including the one at Kandla Port occurred on 9/10.07.1981. The respondent immediately informed the appellant by a telegram as well as letter dated 10.07.1981 (Ex P-5) and requested for a representative of the appellant to visit the Kandla Port for inspection. The appellant vide letter dated 13.07.1981 (Ex P-4) stated that no cover had been provided against rain or fresh water damage. It was recorded in the letter that the agreement between the parties was that the basic risk would be extended to goods stored in godown if and when request was received from the end of the respondent and no such request was received. It was stated that in the alternative even if such a request was received, the storage cover would only have been against the risks provided in the basic clauses and thereby no cover would have been available against rain and/or fresh water damage.
16. In view of this dispute, a legal notice was sent by the respondent dated 30.07.1981 (Ex P-3) which was replied to by the appellant on 25.09.1981 (Ex P-2). Not only that, the appellant vide letter dated 14.10.1981 (Ex P-1) returned a cheque for Rs. 19,812/- sent by the respondent. This resulted in the institution of the suit. The case set up by the respondent was that the Policy covered the risk of fire and rain while the goods were stored in the godown or at the port awaiting shipment. The respondent used to furnish declarations to the appellant to calculate the premium payable by the respondent which in turn was dependent on the quantities of goods transported from the procurement centres to the port and the period of storage at the ports. The allegation of the appellant that the relevant premium had not been paid was specifically disputed on account of the fact that the Policy in question was an Open Marine Policy and the premium was to be calculated by the appellant as per the rates agreed upon. Thus, on the information of the despatches, it is the appellant who was to inform the premium, the initial amount having been paid of Rs. 25,001/-. Thus, as and when further amounts were to be demanded, the same were to be paid by the respondent.
17. It is necessary to look into the defence set up by the appellant since during the course of arguments,a number of pleas were raised by the learned senior counsel for the appellant and learned senior counsel for the respondent was at pains to emphasize that the same were not even pleaded in the written statement, no evidence had been led and thus at the stage of appeal, pleas of all kinds sought to be urged on behalf of the appellant were not permissible as the very foundation had not been led. We may notice that the submission made by the learned senior counsel for the appellant of warranties and conditions of the Policy not being complied with by the respondent included a plea that only on the memorandum of declarations could the liability be fastened. Thus, making up of a declaration was a condition precedent under the insurance policy and that was to be coupled with a request to be made with respect to the specific commodities stored/intended to be stored for an additional cover. It was claimed that the respondent declared stocks weighing only 5065.9 metric tons as per the Certificate of Insurance (Ex P-6) up to 17.06.1981 while the declarations in respect of the remaining goods were not provided.
18. The second plea linked with this urged by learned senior counsel for the appellant was that since no request for additional cover was made, no premium was charged and in any case stocks kept in open and beyond declarations were not subject to any cover.
19. Learned senior counsel for the respondent submitted that these pleas are devoid of any pleadings in the written statement and thus the substratum of the pleas of the respondent do not even exist in the written statement much less in the evidence led which could only be on the basis of the pleas raised in the written statement.
20. A perusal of the written statement shows that two preliminary objections were taken. Firstly, that the policy of insurance did not cover the period of storage of goods in the godown including the risks of fire and rain. The appellant was stated not to have provided to the respondent with any storage cover in respect of any or all despatches listed in the declarations submitted to the appellant with effect from 17.06.1981. The second preliminary objection was about the failure of the respondent to take all precautions necessary to minimize the losses. On merits, it was stated that the appellant vide its letter dated 26.03.1981 (Ex P-13) had informed the respondent that an additional premium at the rate of Rs. 0.03 % per annum or part thereof would be payable and had enclosed a bill for the same, but the amount of additional premium covering such risk was not paid. Since the additional premium was not paid, the risk was not covered. The policy covered the additional risk only of strikes, riots and civil commotions for which additional premium had been charged, but no additional premium had been charged for risks or damage caused on account of rain or fresh water during the period when the goods remained in the warehouses or at the ports. It was, thus, alleged that the Policy could cover only such risks as were covered. This is the sum and substance of the defence raised in the written statement. The issues framed on the pleadings of the parties are as under:
i) Whether Shri. A.K.Mukherjee is the principal officer of the plaintiff and duly authorized to institute the suit and sign and verify the plaint on behalf of the plaintiff? OPP
ii) Whether 22538.490 metric tons rice of the value of Rs. 5,62,07,672 was stored at Kandla Port on 09.07.81 and 10.07.81 and was badly affected on account of rains? OPP
iii) What is the extent of the loss suffered by the plaintiff on account of damage to the goods? OPP
iv) Whether the plaintiff did not take all precautions necessary to minimize the losses? OPD
v) Whether the policy of insurance Exhibit P-12 does not cover the period of storage in godowns including the risk of fire and rains in spite of Ex. P-8? OPD vi) Whether the cover to storage risk at the intermediary point did not become effective unless the payment of additional premium was made? OPD
vii) Relief.
21. A perusal of the aforesaid issues would also itself show that the same have been naturally framed on the basis of the defence set up by the appellant. Learned Single Judge found all the issues in favour of the respondent and on the basis of the extent of coverage, decreed the suit with interest.
22. The respondent examined 7 witnesses in support of its case while the appellant examined only one witness. A perusal of the impugned judgment shows that the testimony of PW-3, PW-4 and PW-6 clearly established that all necessary precautions were taken by the respondent to cover the stock of rice. The damage due to heavy rainfall , which affected the complete Kandla Port, was more than established by the testimony of PW-5. The respondent had taken immediate steps to inform the appellant of sufferance of the loss. The respondent minimized the loss by selling the same in the open market at the rate of Rs. 2,200/- per metric ton as against the initial tenders received of Rs. 1,700/- per metric ton. The learned Single Judge has acknowledged that the Special Condition 8(iv) of the Policy provided for extension of cover for storage risk by additional premium and a cheque had already been sent by the respondent towards the advance premium and it had been clearly mentioned that the Policy should cover all risks at the stores, warehouses or at the ports. The communications of the respondent were acknowledged by the appellant including vide letter dated 04.05.1981 (Ex P-8). The respondent in letter dated 27.04.1981 (Ex P-22) specifically raised a question of coverage of risk for the stock stored in the godown not being mentioned in the Policy and the appellant assured them vide letter dated 04.05.1981 (Ex P-8) that it had already been covered by Special Condition 8(iv) of the Memorandum attached to the Policy. Thus, the risk of covering the storage of goods at the port was covered on payment of additional premium. It was never the case of the appellant nor could they establish that the respondent had, ever, refused to pay the additional premium. The policy was an open one and the premium had to be demanded from time to time by the appellant depending on the extent of despatches. The learned Single Judge relied upon the Judgment of Bombay High Court in Ramchandra Ramvallabh and Ors v. Gomtibai and Ors. AIR 1926 Bom 82 for the proposition that in such Open Marine Insurance Policy non payment of premium is no defence to claim for insurance loss as there is an undertaking to pay the premium which is to be demanded by the insurer from time to time depending on the shipment.
23. We have examined the testimony of the witnesses and their appreciation by the learned Single Judge. We find that there has been proper appreciation of the evidence consisting of the oral testimony and the documents. The witnesses have given details of the goods purchased and stored as well as the shipments made. The sole witness of the appellant is one Mr. K.K. Dutta. His only deposition was that the additional premium had not been paid by the respondent for coverage of the risk of storage of goods in godown or at the port. The witness had never dealt with the particular policy in issue. He admitted that in Open Marine Insurance Policy, some deposits are taken from the insured which are adjusted after declaration is made by the insured from time to time. No demand was made by the appellant which was not paid by the respondent.
24. We find force in the contention of the learned senior counsel for the respondent that the senior counsel for the appellant has argued his case beyond the pleadings, the evidence led before the learned Single Judge and the issues framed. The hearing, in fact, lasted for different time periods on four days for the submissions of the appellant alone. There is no plea raised in the written statement and naturally nor any evidence led about the absence of declaration on the part of the appellant in breach of the warranties and conditions under the Policy. It is no doubt true that the declarations are required to be made under such an Open Insurance Policy because once transit of the goods started, the premium was liable to be debited to the account of the respondent. All the goods were to be covered for transit insurance and storage. This is completely a new plea sought to be raised by learned senior counsel for the appellant and is sought to be supported only by reference to cross examination of some witnesses of the respondent. Such a course of action is wholly impermissible when neither a plea has been raised nor substantive evidence led in the absence of the plea. A similar situation is in respect of the plea of the counsel about there being no possible coverage for alleged storage outside for loading of shipment. This plea was predicated on the ground that there are three segments of the insurance consisting of the transit, storage at godown and outside for loading of shipment and at best only the first two could have been covered. The sum and substance of the plea of the appellant before the learned Single Judge was that the respondent failed to pay the additional premium for the coverage for which the bill was sent. No evidence whatsoever was led in support of this plea that the appellant demanded some premium and the respondent did not pay the same. The plea was sought to be changed to one of additional premium not being paid as the additional risk was not covered. This plea is completely belied by the exchange of communications between the parties as succinctly discussed by the learned Single Judge consisting of the letter of the respondent Ex P-22 and the response of the appellant Ex P-8. The respondent had raised the issues as per Ex P-22 that i) Coverage of risk for movement of goods by road is not covered and ii) Coverage of risk for the stocks stored in the godowns is not mentioned in the policy.
25. The appellant issued the necessary endorsement to the Policy to cover the movement of goods and categorically stated that the storage of risk was already covered as per the Special Condition 8(iv) of the Memorandum attached to the Policy. The implication was that the storage risk was now covered on payment of additional premium as specified as per the Special Condition 8(iv) of the Memorandum attached to the Policy and as a sequel to the same it was for the appellant to debit the premium. The policy was not one where premium had to be paid fully in advance for the reason that it is an Open Marine Insurance Policy, where tentative amounts are taken in advance and depending on the despatches the insured keeps on making the additional payments. If the appellant wanted some additional advances, it should have asked for the same. It never did so. That is the obvious reason why in the written statement, the defence taken is that the respondent failed to pay the premium on demand which plea of the appellant has been falsified.
26. The learned Counsel for the appellant sought to contend that the premium should be paid in advance in terms of Section 64VB of the Insurance Act, 1938 ('the said Act' for short), the relevant portion of which reads as under:
64VB. 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.
27. A reading of the aforesaid shows that the premium is payable in advance or is guaranteed to be paid in such a manner as may be prescribed. In such Open Marine Insurance Policies, the premium is guaranteed to be paid. The judgment in General Assurance Society Limited v. Chandmull Jain and Anr. : [1966]3SCR500 (1) referred to by the appellant, in fact, reads against the appellant as the principle laid down is that in a contract of insurance if there is any ambiguity or doubt, the contract is to be construed contra proferentem i.e. against the insurance company. The letters exchanged between the parties in the present case leave no manner of doubt as to how the Policy is to be read in view of the assurance given by the appellant. No doubt, the court does not to re-write the contract and the Policy has to be strictly construed as observed in Oriental Insurance Co. Ltd. v. Sony Cheriyan : AIR1999SC3252 and United India Insurance Co.Ltd. v. Harchand Rai Chandan Lal AIR 2004 SC 4794.
28. The judgment in National Insurance Co. Ltd. v. Seema Malhotra and Ors. : [2001]1SCR1131 dealing with Section 64VB of the said Act also does not help the appellant as it deals with the general principle that if the insured fails to pay the promised premium or its cheque is returned as 'dishonoured' then the insurer has no obligation to pay the insurance amount. The same is the view taken in Deddappa and Ors v. Branch Manager, National Insurance Co. Ltd. : AIR2008SC767 and Deokar Exports Pvt. Ltd v. New India Assurance Company Ltd. : AIR2009SC2026 .
29. As noticed above, in the present case the premium is guaranteed and it is an Open Marine Insurance Policy for which the premium demanded by the appellant was paid by the respondent. The learned Single Judge has thus rightly referred to the judgment in Ramchandra Ramvallabh and Ors v. Gomtibai and Ors's case(supra). We fail to appreciate as to what is the incorrect fact disclosed which would absolve the insurer on the principles laid down in P.J.Chako and Anr. v. Chairman, Life Insurance Corporation of India and Ors.; : AIR2008SC424 . It is, in fact, the plea of the appellant which is false as raised in the written statement that it demanded premium which was not paid.
30. Learned Counsel for the appellant made a reference to the judgment in Union Insurance Society of Canton Limited v. George Wills and Co. Privy Council 1916 AC 281 to contend that the declarations and warranties under the Open Marine Insurance Policy are mandatory. As noticed above, it has never been the case put up by the appellant in the written statement that there were any declarations which were not made by the respondent.
31. In the end, we express our anguish at the fact that so much of judicial time has been taken in a fight between an Insurance Company of the Government and a Public Sector Corporation which ought to have been settled between the parties. Learned senior counsel for the appellant argued the case at length on pleas which were never raised in the written statement for which evidence was not led, issues were not framed and submissions were not advanced before the learned Single Judge. A completely different colour is sought to be given in the appeal to the defence of the appellant which was principally one of non payment of premium demanded by the insurer which plea itself was false. The issue of declarations not being submitted was never raised in the written statement. The original plea is totally false. A witness not familiar with the policy and the facts entered the witness box and there was no other witness.
32. We had put the parties to notice that the party which fails in this appeal must pay actual costs to the other party. The parties have filed their bill of costs. The appellant claims to have spent Rs. 9,00,384/- on the litigation while the respondent claims to have spent Rs. 2,54,800/- on the litigation. The respondent must thus get the actual costs.
33. We may note that the decretal amount was directed to be deposited in the Court in terms of the Order dated 17.06.1996. The appeal was admitted on 18.09.1996 and in terms of the Order dated 19.02.1997, the decretal amount was permitted to be withdrawn by the respondent on furnishing a bank guarantee to the satisfaction of the Registrar of this Court. The respondent furnished the bank guarantee and the Registrar of the Court was pleased to accept the same with the result that the respondent withdrew the amount. The amount thus lying in the Court in the interregnum period in the FDR along with interest accrued thereon was released to the respondent.
34. In view of the fact that we find no merit in the appeal, the same is dismissed with costs quantified at Rs. 2,54,800/-. The bank guarantee furnished by the respondent stands discharged and the same be returned to the respondent.