The New India Assurance Co. Ltd. Vs. Radheshyam Motilal Khandelwal and ors. - Court Judgment

Chandurkar, J.

1. This is an appeal by the defendant, the New India Assurance Company Limited, Bombay, challenging a decree for Rs. 16,494.80 passed against them in favour of the plaintiffs. The plaintiffs claimed to be partners of a partnership firm carrying on the business of million rice in the mill known as Alibhai Rice Mills at Gondia. Admittedly, in November, 1959 plaintiff No.1 Radheshyam purporting to act on behalf of Messrs. Alibhai Rice Mills, Gondia, signed an inventory of the property to be insured with the defendant Company, with an endorsement that only engine risk was to be covered and that plaintiff No. 1 Radheshyam should be informed as to how much premium would be required to be paid. The inventory referred to two items:(1) Ruston Oil Engine Make, Ruston & Hornsby Lincoln Ltd., England, and (2) Rice Mill Automatic Plant, one ton Behares Industrial Work, Dehanu Road. Against the first item the sum insured was shown as Rs. 35,000/- and against the second item it was shown to Rs. 25,000/-. the form of inventory is on the reverse of the form which is really a form of proposal for machinery insurance. It contains several items of information to be supplied by the proposed. It also contains a column for the proposer's signature but the plaintiff No. 1 has not signed this proposal form and his signature appears in the column 'proposer's signature' at the foot of the inventory of the property to be insured. he defendant Company in its transaction with the plaintiff No. 1 who is described as a contractor representing Messrs. Alibhai Rice Mills, Gondia, was represented by their local agent Waman Tukaram Dhomaney (D.W. 1). The premium amount of Rs. 890/- paid by the plaintiffs was received by Dhomaney on 30.11.1959. He passed a duly stamped receipt on behalf of the defendant Company on the same day and the receipt stated that it was in respect of machinery breakdown insurance. This receipt is Ex. 101. it is not in dispute that the policy incorporating the terms of the insurance contract was not sent to the plaintiffs No. 1 immediately. According to the plaintiffs, an accident took place on 14.12.1959 in their mills resulting in the cracking of the engine head and the main bearing with the result that these two parts were a total loss. At the same accident further damage was seen to have been caused to the big end bearing metal and the plaintiff No.1, therefore, issued a telegram (Ex. 103-A) to the Head Office of the defendant Company at Bombay informing them about the accident and asking them to settle the claim. a letter confirming the sending of the telegram was also sent by the plaintiff No. 1 to the defendant Company at Bombay with copies to the branch office of the Company at Nagpur and Raipur. This letter is Ex. 104. In the same letter the plaintiff No. 1 informed the defendant company that he had in his possession one old repaired head which will be fitted and the mill will start, so that the loss of Rs. 600/- per day which was being caused could be obviated. on the same day the Nagpur Branch of the defendant company informed the plaintiff's firm that a gentleman called Sarman (P.W. 2) was being deputed to inspect the damage. On 15.12.1959 the defendant company wrote from Bombay to the plaintiffs acknowledging the plaintiffs telegram dated 14.12.1959 and they also sent a 'Notification of loss or Damage Form' and directed the plaintiffs to return the same duly completed together with the bills of repairs. This letter (Ex. 105) referred to Policy No. Mach 1567 and the claim made by the plaintiffs was numbered as 1516. Sarman (P.W. 2) visited the rice mill of the plaintiffs, and on 17.12.1959 he addressed a letter (Ex. 19) to the defendant company's Branch Office at Nagpur. he explained in the letter the nature of the damage and opined that it was a case of accidental breakdown and that he did not suspect any foul play even after making independent and confidential inquiries. |Sarman also stated in his letter that he had advised the plaintiffs through Inspector Dhomaney that they could not re-start the engine by fitting the repaired head on hand till their claim was finally assessed. Sarman also further stated that there were two engineering workshops at Gondia who could handle the repairs, that there was also an authorised Ruston dealer at Gondia and that the salvage rate at Gondia was Rs. 7 to 8 per maund for ferrous and Rs. 1/6/0 per lb. for non-ferrous scrap. Sarman was then asked to complete the final survey and the assessment of the claim and he sent his final report of survey and assessment on 26.12.1959 (Ex. 17). This final report refers to Machinery Policy No. 1567. His report shows that according to him the rice milking hullers etc. insured with the value of Rs. 25,000 under Schedule 2 of the policy were intact without any damage and only the oil engine was damaged. he had called for estimates for repairs of the engine and replacement of parts. He had received three estimates. One was from Chawra Engineering Works, Gondia, for Rs. 5,145 which he declined to consider because it was high. The second estimate was by Asha engineering Works, Gondia, for SR. 5,095 for charges on account labour, bearings and bolts. The third estimate was of Deorambhai & Brothers, Gondia, who, were Ruston Dealers for Rs. 13,292.46 P. or Rs. 15,285 including 15% for local delivery at Gondia for the parts including the price of two bearings main and big end. After considering these estimates Sarman assessed the net claim at Rs. 13,479, and by the same final report he informed the defendant company that the party, i.e. the plaintiff No. 1 had agreed to this amount and he also obtained a consent letter of the same date which was sent to the defendant company. At the end of the report Sarman stated that the party desired the payment of the claim in the name of 'Allibhai Rice Mills Contractor Radheshyam Khandelwal' as that was the titled in which their policy was made out and in that style they had their monetary transactions. It appears that Sarman was further asked about the details of certain items of the claim and he supplied those details by Ex. 18 on 9.1.1960, to the Manager, Machinery Claims Department of the defendant company at Bombay. It is the case of the plaintiffs that pending the settlement of the claim by the defendant Company they were required to spend Rs. 15,167.84 on account of repairs and replacements and that they had also a new part to be replaced for the old part. Sch. A to the plaint which gives these details is in two parts. The first part refers to the expenses of Rs. 10,072.84 P. incurred by the plaintiffs and it is not now disputed that his figure represents the price of certain new parts purchased by the plaintiff No. 1 at Bombay and the transport charges of Rs. 101/- for these parts from Bombay to Gondia by truck. The second part of the Schedule relates to the expenses incurred on account of repairs and the expenses incurred are shown to be Rs. 5,095.00 According to the plaintiffs, they were entitled to be reimbursed to the extent of Rs. 15,167.84 P. In addition, the plaintiffs also claimed compensation by way of interest at 1 per cent, per month on the two earlier mentioned amounts. Interest on Rs. 10.072.84 P. was claimed from 15.2.1960 to 17.7.1961 and interest on Rupees 5,095.00 was claimed form 31.12.1959 to 15.7.1961. The total amount of interest came to Rs. 2,653.93 P. according to the plaintiffs, and, therefore, the total amount due from the defendant company was Rs. 17,821.87 P. the plaintiffs gave up the claim for Rs. 821.87 P. and filed a suit on 18.7.1961 claiming Rs. 17,000 from the defendant Company.

2. The defendant Company contested the claim of the plaintiffs. The substantial challenge to the plaintiffs claim was that the plaintiffs had not spent the amounts of Rs.10,072.00 and Rupees 5,095.00 as claimed by them. The defendant's case was that the cash memo (Ex. 121) for Rs. 5,095 purported to have been issued by Asha Engineering Works, who are alleged to have carried out the repair work was to a genuine document and that this cash memo was a bogus document. According to the defendant, Ex. 126 which purports to be a receipt for Rs. 9,971.84 P. purporting to have been issued by one K. Ramanlal evidencing the purchase of spare parts of Ruston 10 H.P. Oil Engineer No. 118930 is also not a genuine document. even this document, according to the defendant was a bogus one and the plaintiffs were not, therefore, entitled to claim this amount on the basis that they had incurred an expenditure to the extend of Rs. 9,971.83 P. and Rs. 101 by way of transport charges. The second material defence to the claim of the plaintiffs was that the plaintiffs claim was repudiated by the defendant company on 2.1.1961 when in reply to the notice by the plaintiffs Solicitors, the plaintiffs solicitors were informed by the defendant Company that their clients had failed to prove the loss, and had also failed to prove the quantum of the loss if any. By this letter, which is Ex. 28, the plaintiffs Solicitors were informed that the plaintiffs were already informed by the defendant Company that the company was to liable to pay anything to them under the policy and had explained the reasons for repudiation. Repudiation was reiterated in Ex. 28. The case of the defendant Company was that a policy evidencing the contract of Insurance between the plaintiffs and the defendant was duly issued on 7.12.1959 covering the period from 29.11.1959 to 29.11.1960 and that this policy was delivered to the plaintiff No. 1 According to the defendant, the claim of the plaintiffs could not be allowed in view of the specific provision in condition No. 11 in the policy issued to the plaintiff No. 1 Ex. 8 is a copy of the policy which according to the defendant, was issued, Condition No. 11 of this policy reads as follows:-

'If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if nay fraudulent means or devices are used by the insured or any one acting on his behalf to obtain any benefit under this policy, or if the claim be made and rejected and an action or suit be not commenced within three months after such rejection, or in case of an arbitration taking place as provided herein within three months after the arbitrator or arbitrators or umpire shall have made their award all benefit under this policy shall be forfeited'.

The defendant company invokes the protection of this condition in two ways. firstly, according to the Company, the claim of the plaintiffs having been repudiated by the letter (Ex. 28) on 2.1.1961, the suit filed in July 1961 was liable to be dismissed as not having been filed within three months of the repudiation. Secondly the plaintiffs were guilty of a false declaration which they are seeking to make use of in support of their claim in the sense that while making a claim on the footing that the plaintiffs had already incurred expenditure by payment of the repairs bill of Asha Engineering Works and by payment of the price of the newly purchased parts from K. Ramanlal of Bombay, they had in fact not incurred this expenditure at all and, therefore, they were not entitled to be reimbursed to the extent claimed in the plaint. When the defendant claimed protection of condition No. 11 in the insurance policy (Ex. 8), the plaintiffs amended the plaint by making an allegation that condition No. 11 was never a term of the contract between he parties and it was never made known to the plaintiffs, nor were the plaintiffs aware of the same. They further stated that the proposal form (Ex. 102) which was accepted by the defendant company did not contain any reference to condition No. 11 and the same was not binding on the plaintiffs. it was further alleged that condition No.11 and other printed terms in the policy (Ex. 8) were added behind the back of the plaintiffs without their consent and they could not, therefore, form the terms of the contract between the parties. It was also alleged that the plaintiffs were never informed of the alleged repudiation. Alternatively it was pleaded that if the condition of forfeiture in condition No. 11 was held to bind the parties, the forfeiture was waived by the defendant company inasmuch as the defendant company was negotiating the finalisation of the claim with the plaintiffs, and the defendant had specifically sent Mr. M.R. Radikar and Mr. Joshi for negotiating the settlement of the claim.

3. The trail Court found that the plaintiffs formed a partnership under the India Partnership Act, that plaintiff No. 1 Radheshyam had entered into a contract of insurance of the rice mill with the defendant company. it further held that the machinery of the rice mill was damaged due to an accident., The trail court took the view that the defendant had failed to prove that the policy was delivered to the plaintiff No. 1. It also found that Ex. 101 which was a receipt issued by Dhomney (D.W.1) did not lay down any conditions subject to which the proposal for insurance was to be accepted by the defendant company and, therefore, the acceptance of the proposal under Ex. 101 was absolute and unconditional. The trail Court also took the view that since Ex. 101 did not contain any terms of the policy, the terms of the policy as per the specimen copy of the policy did not form the terms of the contract between the parties, more so when those terms were not proved to have been brought to the notice of the plaintiff No. 1 or any of the plaintiffs before the acceptance of the contract under Ex. 101 and no consent on the part of the plaintiffs to those terms could be inferred. The trail Court no doubt, found that the term in condition No. 11 was not void and did not violate the provisions of Section 28 of the Contract Act, but on the view which it took that the terms of the policy were not shown to have been known to the plaintiffs before the completion of the contract, it was though unnecessary by the trail Court to discuss the question whether the claim was repudiated by the defendant company as alleged by them. With rearguard to the breakdown, the trail Court took the view that on the evidence of plaintiff No. 1 Radheshyam (P.W.1) and Sarman (P.W.2) it was proved that the breakdown was due to an accident as claimed by the plaintiffs. The trial Court found that the production of Ex. 121 which purported to be a receipt for Rs. 5,095.00 issued by Asha Engineering Works, the burden was on the defendant to show that no payment was made to Asha Engineering Works and the trail Court, therefore, rejected the case of the defendant that the voucher (Ex. 121) was a bogus one. Accepting the evidence of Deorambhai (P.W. 9), Harubhai and Dhirubhai, the trial Court found that Rs. 9,971.84 were paid by the plaintiff No. 1 to K. Ramanlal and the goods so purchased were brought by a truck of Azad Goods Transport Company, Gondia and the transport charges of Rs. 101/- were paid under receipt (Ex. 128) to Bharatlal (P.W 4). In view of these findings, the trial Court held that the claim made by the plaintiffs as per Schedule A to the plaint was proved and that the plaintiffs were entitled to interest at 6 percent. per annum from the date when they spent the amount for purchasing the machinery and the spare parts and for re-fitting the machinery. The amount of interest, according to the trial Court, came to Rs. 1,326.96 and it, therefore, passed a decree for Rs, 16, 493.80 P. and proportionate costs of the suit with future interest on Rs, 15, 167.84 P. at 6 per cent. per annum from the date of suit till realization. This decree is now challenged by the defendant in this appeal.

4. The arguments in the appeal before us were mainly directed against the adverse finding given against the defendant Company that the insurance policy drawn by the insurance company was not proved to have been delivered to the plaintiff No. 1 and that condition No. 11 in the policy did not bind the plaintiffs. it was also contended that if it was proved that condition No. 11 in the policy was binding on the plaintiffs, then the claim of the plaintiffs claim having been repudiated on 2.1.1961 by Ex. 28 or even earlier on 5.10.1960 as stated in Ex. 6, which is a notice sent by the Solicitors of the plaintiff to the defendant Company, the suit filed in July, 1961 was liable to be dismissed as not having been filed within three months from the date of repudiation. The third contention raised was that the plaintiffs had failed to prove that they had made payments as evidenced by Ex. 121 and 126; and since the claim in suit is made as one for reimbursement of the expenses already incurred, the plaintiffs were not entitled to any decree against the defendant. We shall take up these contentions in the same order.

5. It is contended by Mr. Manohar appearing on behalf of the defendant Company that the trail Court was in error in rejecting the evidence of Dhomaney (D.W. 1) who had stated that he had handed over the policy to plaintiff No. 1 Radheshyam and that it was also in error in drawing an adverse inference for the failure of the defendant Company to produce the despatch register or the outward register maintained by the Bombay Office of the Company which, according to the trail Court, would have shown whether the policy which was drawn on 7.12.1959 was really sent to Dhomaney at Gondia. According to Mr. Manohar, there are certain circumstance in the case which clearly show that the policy had reached Dhomaney, Inspector of the defendant Company at Gondia and that it was seen by Sarman (P.W 2), the Surveyor. According to the learned counsel, the plaintiff No. 1 himself has referred to the policy number in Ex. 118 which shows that the policy was in his possession. so far as the handing over of the policy to the plaintiff No. 1 is concerned, the only direct evidence is that of Dhomaney. Dhomaney has stated that the original policy had come to him from the Bombay Head Office and he delivered it to Radheshyam Khandelwal on 24.12.1959 on which day he had received it. He no doubt has stated that he did not take any signature by way of an acknowledgment of having received the policy from the plaintiff No. 1 and that he did not remember who was present when he gave the policy to the plaintiff No.1 personally in the mill, but in view of other circumstances on the record this statement is not of much assistance to the plaintiffs. At this stage we may refer to the evidence of Sarman (P.W. ) Sarman has deposed that he had seen the policy before his final report which is Ex. 17 dated 26.12.1956. he further stated that he could not tell when he saw it and from whom or where; but according to him, most probably he saw it at Gondia. How, it is not the case of any party that Sarman had gone at any time to Bombay where the policy was made out. it also does not appear to be the case of the plaintiffs that the policy which was taken out through the agent Dhomaney at Gondia was required to be sent to Nagpur. In any case, Sarman does not say that he saw the policy in the Nagpur office of the defendant Company. The policy could have been only at any one of these three places, namely, Bombay, Nagpur or Gondia. if it is not the case of any party that Sarman had occasion to see the policy at the Head Office of the Company at Bombay where he did not go at all or that he had occasion to see it at Nagpur because he does not say that he went to the Nagpur Office of the Company, then the only place where he could have seen the policy would be Gondia. This conclusion is further supported by Ex. 17 which is his survey report, in which he has specifically referred to the machinery policy No. 1567. Prior to this there is an important document which is Ex. 118 dated 25.12.1959 which is made out on the letter-ahead of Messrs. Allibhai Rice Mill, Gondia. Event his document refers to the Machinery Policy No. 1566. This is a letter which is primarily addressed by the plaintiff No. 1 to the defendant Company's Branch Office at Nagpur stating that the plaintiff No. 1 had discussed his claim with the Surveyor who had assessed it at Rs. 13,479/- and that the plaintiffs agreed and accepted this amount in full and final settlement of the claim, so that they could arrange for 'the necessary repairs and renewals' of the machinery. This letter contains an endorsement by Sarman, the Surveyor and Assessor, to the effect 'Agreed subject to ploy conditions and the Insurer's company Rules'. There is no attempt on the part of the plaintiff No.1 to explain how a reference to the Machinery Policy No. 1567 was made by him in Ex. 118 dated 25.12.1959. It may be sated that when Sarman made his first report (Ex. 19) dated 17.12.1959, he had no occasion to see the policy because while referring to the subject-matter of the correspondence, he has stated the subject to be 'Accident of 14.12.59 to Ruston Engine of Alibhai Rice Mills Contractor Radheshyam Khandelwal, of Gondia covered under your Machinery Insurance (Policy to be received)'. Therefore, comparing the two reports. Exs. 17 and 19, it appears that while Sarman was not in a position to see the policy on 17.12.1959, he must have seen the policy on 25.12.1959 when he made the endorsement on Ex. 118 and that is how he mentions the policy number in Ex. 17 on 26.12.1959.

6. We may also refer to the fact that in Ex. 6 dated 27.12.1960 which is a notice sent on behalf of the plaintiffs by their Solicitors Vrajlal 7 Company, the Solicitors have made an express reference in Policy No. 1567. While quoting the subject-matter of the notice, it is stated:

'Re: - Claim No. 1516 arising under policy No. 1567 issued in favour of Alibhai Rice Mills, Gokhale Rd. Gondia, and Shri Radheshyam Khandelwal as their contractor for their respective right and interest for the period 29th November, 1959 to 29th November, 1960'. (sic)

Now, Ex. 101 dated 30.11.1959, the premium receipt, does not mention the period 29.11.1959 to 29.11.1960. If the plaintiff No. 1's evidence that he did not receive the policy from Dhomaney is accepted, then the only document which would have been in his possession would be Ex. 101. The other correspondence which passed between the plaintiff No. 1 and the defendant Company did not make any reference to the period covered by the insurance policy and the only place where the period covered by the plaintiffs policy is to be found is the schedule (Ex. 8-A) to the standing Machinery Insurance Policy (Ex. 8) which is on record. We must legitimately presume that when the Solicitors were making a claim on the basis of a policy the details of which were stated by them in Ex. 6, they could not have done so except after going throughout he insurance policy itself. It is no donut true that the defendant company has not produced its outward register or despatch register which would have shown whether the policy was sent to Dhomaney at Gondia, and if so, when it was sent, But having regard to the material to which we have earlier made a reference, we do not think that the trial Court was justified in drawing an adverse inference against the defendant Company for its failure to produce the despatch register. That was not the only document on which the defendant Company was relying for proving the fact of the policy begin delivered to the plaintiff No. 1 The substantive evidence of the handing over of the policy to the plaintiff no. 1 was that of Dhomaney (D.W. 1) and not the despatch register. In view of these circumstances, we are not inclined to accept the statement of the plaintiff No. 1 that he had not received the policy from Dhomaney (D.W. 1). We must, therefore, hold that a machinery insurance policy of which Ex. 8 is a copy along with the schedule (Ex. 8-A) was handed over to the plaintiff No. 1 as despised to by Dhomaney on 24.12.1959. The schedule to the policy shows that it was issued at Bombay on 7th December, 1959; the period of insurance was from 29th November, 1960; the total sum insured was Rs. 60,000/- and the annual premium was Rs.890/-. The inventory of the property insured in the schedule is the same as was supplied by the plaintiff No. 1 while making the declaration in Ex. 102.

7. That brings us to the next question as to the binding nature of condition No. 11 in the policy. it is not disputed that the receipt (Ex. 101) did not contain any statement that the proposal for insurance made by the plaintiff no. 1 on behalf of allibhai Rice Mills, Gondia, was accepted subject to the conditions in the policy that would be issued to the plaintiffs or the plaintiff No. 1. What is contended on behalf of the plaintiffs by Mr. Padhye is that the failure to mention in the receipt (Ex. 101) that the proposal was accepted subject to the normal conditions in the policy meant that there was an unconditional acceptance of the proposal (Ex. 102) and, therefore, the defendant company was not entitled to unilaterally enforce a condition which was never the subject-matter of the contract of insurance between the parties and on which the parties cannot be said to be adidem. The question which, therefore, requires to be decided is whether in a case in which in the receipt evidencing the acceptance of the premium and thereby the acceptance of the proposal made by the insured no reference is made to the standard terms an donations of an insurance policy which the insurer normally issues in respect of particular class of the risk which is the subject-matter of the proposal by the insured, the conditions in the standard insurance policy bind the insured though he had had no occasion to see or go through those conditions before and though those conditions had never been brought to his notice before the actual policy was handed over to him. Mac-Gillivray in his book on Insurance law, 5th Edition, Volume 1, paragraph 642, page 641, has stated the law thus:

'Implied incorporation of policy conditions. if there is no express stipulation in an interim receipt that it is issued subject to the conditions in the insurers' policies the insurance is subject to the conditions usually inserted in policies relating to the particular clause of risk in question, but not to any special conditions in the insurers' policies of which the assured has no knowledge. IN an American case, where the only evidence of the contract of insurance was an entry intheinsurers' books containing particulars such as would be given in a slip, it was held that the insurance was subject tot the conditions contained in the insurers' books containing particulars such as would be given in a slip, it was held that the insurance was subject to the conditions contained in the insurer's policies, and this was approved in a Canadian case, where Prod foot V.C. said : 'It would be unreasonable to hold that by giving an interim receipt the company meant to insure a larger liability than they were subject to on a policy : they must be understood as contraction for an insurance of the ordinary kind. The plaintiff asks for the completion of the contract by the issuing of a policy, and he does not pretend that he is entitled to any other than the ordinary policy; he cannot, therefore, be in any better condition than if he had the policy in his possession'. It may, however, be questioned whether, if a company's policies contain some altogether unusual condition, the assured would be bound by such condition in the absence of an express stipulation in the interim receipt that it is issued subject to the conditions in the company's polices'.

(the underlining is ours)

The learned author further points out that there must be an agreement on all the essential term . he observes in paragraph 656 at page 655:

'The first essential to a binding contract is that the parties must be agreed upon every material term. The material term are the definition of the risk, the duration of the risk, the premium, and the amount of insurance. As to all these there must be a consensus ad item, that is to say, there must either be an express agreement or the circumstance must be such as to admit of reasonable inference that the parties were tacitly agreed'. Then dealing with non-essential details of an insurance contract the learned author points out in paragraph 663, at page 663, as follows:

'Non-essential details. If, however, the essentials of the contract are defined, an agreement to insurance may be binding although it does not express the whole terms and conditions of the insurance. To those unfamiliar with the business of insuring, or of insuring the particular risk in question, the agreement may on the face of its appear to be far from complete or precise, but to those familiar with the business the things left unexpressed may be a matter of necessary implication from the words which are used'.

In paragraph 671, at page 670, it is further pointed out:

'An acceptance must be unconditional, for otherwise it is not an acceptance but a counter-offer, but a mere verbal variation form the offer, or the expression of a term which if not expressed would have been implied, does not constitute a departure from the terms of the offer, and therefore the delivery of a policy containing conditions not previously referred to between the parties may constitute a complete acceptance of the offer, if the policy contains nothing but the company's ordinary terms with reference to which proposal must be deemed to have been made'.

8. Dealing with the terms and conditions of a contemplated police, it is observed in 44 Corpus Juries Secundum page 953, as follows:

'Where the contract to insure or issue a policy of fire insurance does not specify the terms and conditions of the policy, it is a general rule that the parties will be presumed to have contemplated a form of policy containing such conditions and limitations as are usual in such cases'.

9. In General Assurance Society v. Chandmull Jain, : [1966]3SCR500 the Supreme Court was dealing with a condition in an insurance policy giving mutual rights to parties to terminate the insurance at any time and it was observed that such a condition was common in policies and must be accepted as reasonable. Dealing with the four essentials of a contract of insurance, the Supreme Court held that even if no terms were specified, the terms contained in the policy customarily issued would apply to a given case and the passage from Corpus Juries Secundum reproduce above was quoted with approval.. in paragraph 12 the Supreme Court observed;

'The four essentials of a contract of insurance are, (i) the definition of the risk, (ii) the duration of the risk, (iii) the premium, and (iv) the amount of insurance. See Macgillivray on Insurance Law (5th Edn). Vol. 1, para, 656, page 316. But the policy which is issued contains more than these essentials because it lays down and measures the rights of the parties and each side has obligations which are also defined. In a policy against fire the purpose is not so much to insure the property but to insure the owner of the property against loss. The policy not only defines the risk and its duration but also lays down the special terms and conditions under which the policy may be enforced on either side. Even if the letter of acceptance went beyond the cover notes in the matter of duration, the terms and conditions of the proposed policy would govern the case because when a contract of insuring property is complete, it is immaterial whether the policy is actually delivered after the loss and for the same reason the right of the parties are governed by the policy to be, between acceptance and delivery of the policy. Even if no terms are specified the terms contained in a policy customarily issued in such cases, would apply. There is ample authority for the proposition. In Corpus Juries Secundum (Vol. 44 p. 953) the following occurs:

'Where the contract to insurer or issue a policy of fire insurance does not specify the terms and conditions of the policy, it is a general rule that the parties will be presumed to have contemplated a form of policy containing such conditions and limitations as are usual in such cases...............'

See also Richard's on Insurance (5th Edn.), Vol. 3 p. 1296, para 390'.

The Supreme Court also quoted with approval a passage from the decisions in Eames v. Home Insurance Co., (1876) 24 Law Ed 298 decided by the Supreme Court of the United States. The passage is as follows:

'If no preliminary contract would be valid unless it specified minutely the terms to be contained in the policy to be issued, no such contract could ever be made or would even be of any use. The very reason for sustaining such contracts is, that the parties may have the benefit of them during that incipient period when the papers are being perfected any transmitted. it is sufficient if one party proposes to be insured, and the other party agrees to insure, and the subject, the period, the amount and the rate of insurance is ascertained or understood, and the premium paid if demanded. it will be presumed that they contemplate such form of police containing such conditions and limitations as are usual in such cases, or have been used before between the parties This is the sense and reason of the thing. and any contrary requirement should be expressly notified to the party to be affected by it'.

(the underling is ours).

The Supreme Court also quoted with approval the decision in General Accident Insurance Corporation v. Cronk. (1901) 17 TLR 233 in which it was held that a person making a proposal must be taken to have applied for the ordinary form of policy issued by the company.

10. It is thus clear that when a proposal is made by the insured, he must be presumed to have applied for a policy which is normally issued in respect of the risk which the prosper wants to be covered by the policy of insurance. If it is shown that there has been an agreement on the essential terms of a contract of insurance or as terms of a contract of insurance or as Halsbury calls it 'the fundamentals of the insurance proposed'. namely, the subject-matter of the insurance, the amount of the insurance, the nature of the risk insured against, the period for which the insurance is to last, and the rate of premium to be charge, then the proposal must be deemed to have been accepted by the insurance company on a policy which it normally issued in respect of the kind of the risk that is sought to be covered by the agreement.

11. We may point out that under the Insurance Act of 1938, it is obligatory on an insurer to furnish to the Controller of Insurance the standard policy form before he obtains a certificate or registration for a particular kind of insurance business. Section 3(1) of the insurance Cat provides:

'No person shall, after the commencement of this Act, begin to carry on any class of insurance business in India and no insurer carrying on any class of insurance business sin India shall, after the expiry of three months from the commencement of this Act, continued to carry on any such business, unless he has obtained from the Controller a certificate of registration for the particular class of insurance business.

The proviso to sub-section (1) is not material for our purpose. sub-section 92 (f) of Section 3 provides as follows:

'(2) Every application for registration shall be accompanied by -

(f) a certified copy of the published prospectus, if any, and of the standard policy forms of the insurer and statement of the assure rates, advantages, terms and conditions to be offered in connection with insurance policies together with a certificate in connection with life insurance business by an actuary that such rates, advantages, terms and conditions are workable and sound :

Provided that in the case of marine accident and miscellaneous insurance business other than workmen's compensation and motor car insurance the above requirements shall be complied with only in so far as the prospectus forms and statements may be available.'

The insurance for machine risk forms part of the general insurance as defined in Section 2(6-B) which defines 'general insurance business' as fire, marine or miscellaneous insurance business, whether carried on singly or in combination with one or more of them. An insurance policy is a unilateral undertaking by the happening of a specified event and it is unless and until rectified, the exclusive record of the contract. It is a term applied by those carrying on the business of insurance to the formal document in which they set out the terms of their obligation in consideration of the stipulated premiums and it is in this sense that the word is still normally used; See Halsbury's Laws of England. Third Edition, Volume 22, page 209. The insurer, therefore, is under an obligation to issue a policy though in order to give immediate protection pending the issuance of the policy, an interim receipt or a cover note is normally issued by the insurer. An interim receipt or cover note expresses the terms of the contract between the parties up to the date when a policy is issued the contract expressed in the interim receipt or cover note as to the future but not as to the past : See Mac Gillivray on Insurance Law, Volume 1. Paragraph 545. It is thus clear that in every case of a contract of insurance there is an obligation on the insurer to issue an insurance policy. The policies are drawn out in standard forms which an insurer is under an obligation to forward to the Controller of Insurance. The almost perfected stage which the insurance business has reached and the statutory requirements of the Insurance Act clearly point out that an insurer has in his business standard policy are to be incorporated either at the instance of the insurer or the insured, normally the insurance policy will be taken out in the standard form. Ex. 8 is a standard form of the machinery insurance policy issued by the New India Assurance Company Limited. A large number of reported decisions show that a condition like condition No. 11 is to be found generally in contracts of insurance. We may refer to a decision of this Court in Baroda Spinning and Weaving Co. v. Satyanarayan Marine and Fire Insurance Co. AIR 1914 Bom 225 in which a question arose before the Division Bench as to whether the condition in a policy of fire insurance which provided that if the claim be made and rejected and an action or suit not commenced within three months after such rejection, all benefits under the policy shall be forfeited, was void as violating the provisions of Section 28 of the Contract Act. Section 28 of the Contract Act provides :

'Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent.

Exception : This section shall not render illegal a contract by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the disputes so referred.

When such a contract has been made, a suit may be brought for its specific performance, and if a suit, other than for such specific performance, or for the recovery of the amount so awarded, is brought by one party to such contract against any other such party in respect of any subject which they have so agreed to refer, the existence of such contract shall be a bar to the suit.

Exception 2. Nor shall this section render illegal any contract in writing by which two or more persons agree to refer to arbitration any question between them which has already arisen or affect any provision of any law in force for the time being as to references to arbitration.'

The Division Bench held that the condition of forfeiture was not within the scope of Section 28. and hence a suit commenced more than three months after the rejection of the claim under the policy was not maintainable. The report does not refer to the date of the policy but the rejection of the claim in that case was made sometime in 1911.

12. In Girdharilal v. E.S. & B.D. Insurance C. : AIR1924Cal186 a similar condition in the insurance policy providing that if the claim be made and rejected and an action or suit be not commenced within three months after such rejection, all benefits under the policy shall be forfeited, was held to be good. That was a case of fire insurance.

13. As far back as in 1907 in Home Insurance Co. of New York v. Victoria-Montreal Fire Insurance Co., 1907 AC 59, the Privy Council pointed out that a clause prescribing legal proceedings after a limited period is a reasonable provision in a policy of insurance against direct loss to specific property. (See also decisions referred to in Mulla's Indian Contract and Specific Relief Acts, ninth Edition, page 295, under the heading 'Limitation of time to enforce rights under a contract'). In our view, therefore, condition No. 11 in the policy of insurance was one of the usual terms on which the insurance company accepted the proposal of insurance and notwithstanding the fact that this condition was not expressly brought to his notice at the time when the plaintiff No. 1 signed the proposal form and that neither the proposal form nor the receipt (Ex. 101) expressly mentions that the contract was subject to the normal terms and conditions in the policy, condition No. 11 was binding on the plaintiffs.

14-16. We may also point out that if the plaintiff No. 1 wanted to treat the policy issued to him as a counter offer containing condition no. 11 which the plaintiff No. 1 was at liberty to accept or reject, the conduct of the plaintiff no. 1 shows that by keeping the policy with him and making a claim under the policy he must be even deemed to have accepted this counter offer. On the finding which we have reached earlier the policy was delivered to the plaintiff No. 1 on 24.12.1959. We have also pointed out that when the Solicitors' notice (ex. 6) was issued on 27.12.1960, that is, after about a year after the delivery of the insurance policy to the plaintiff No. 1 the plaintiff No. 1 has taken no steps to intimate to the defendant company that he did not accept the counter offer which is contained in Ex. 8, which is a copy of the policy which was handed over to him. On the date on which the repudiation of the liability under the contract of insurance took place, i.e., on 2.1.1961, according to the defendant, the plaintiff No. 1 was in possession of the policy of insurance and he must be deemed to have knowledge of the terms and conditions in the insurance policy on that date. The plaintiffs are basing their very claim in the suit on the contract of insurance because it will be only on the basis of Ex. 8 which is the only record of the contract of insurance that the plaintiffs can make their claim for reimbursement of the expenses which they say they have incurred. While making a claim under the contract of insurance contained in Ex. 8 they cannot disclaim a part of the same contract. in Baker v. Yorkshire Fire and Life Assurance Co. 1892 1 QB 144 an action was brought upon a fire insurance policy issued by the defendant s to recover the value of goods etc. destroyed by fire. The policy contained a clause that any difference arising between the company and any claimant under the policy should be referred to arbitration. They policy was not signed by both the parties, and having regard to section 27 of the Arbitration Act, 1889, which defined 'submission' as being a 'written agreement' to submit present or future difference to arbitration, and a 'written agreement' within that section must mean an agreement reduced to writing and signed by both the parties, it was contended on behalf of the plaintiff that he had no agreed in writing for a reference to arbitration and that the requirement of section 27 of the Arbitration Act were not satisfied. Lord Coleridge, C.J., negating this contention observed:

'The plaintiff sues on the policy, and by so suing affirms it to be his contract. He cannot disaffirm a part of the very contract on which he is suing'.

It is clear, there, that the plaintiffs who are making a claim for reimbursement under the contract of insurance of which Ex. 8 alone is the record, cannot now disaffirm a part of the contract, especially when they have not chosen to do so for a long period when the policy was in their possession and there is, therefore, no substance in the contention that condition No. 11 in Ex. 8, the insurance policy, did not bind them.

** ** ** ** ** **

17. It is then contended that the Company could not have communicated the fact of repudiation to the Solicitor, especially then the Company wants the starting point of limitation for the suit to be fixed with reference to the date on which repudiation was a made by Ex. 28. When Ex. 6 was issued by the Solicitor, it is important to note that the Solicitor states that he was acting under instructions from his client. One of the instructions was that the amount should be paid either to the clients i.e. the plaintiffs or to the solicitors. If the defendant Company would have paid to the solicitor any amount towards the suit liability referred to in the notice (Ex. 6), that would have been done in pursuance of the express instructions as contained in the notice (Ex. 6). If the amount was directed to be paid to the attorneys or the Solicitor the reply to the notice could also have been sent to him properly. Indeed, the Solicitor's notice having been received, the proper person to whom the reply could be addressed and should have be addressed was the Solicitor himself and the defendant Company could not be guilty of any impropriety if it had declined to deal with the plaintiffs directly. The failure of the defendant to send the letter of repudiation to the plaintiffs or the plaintiffs No. 1, or a copy of Ex. 28 to the plaintiff No. 1, did not arrest the running of the limitation under conditions no. 11 of the Insurance policy.

18. Apart from the fact that according to the defendant the repudiation took place on 2.1.1961, there is an admission of the fact of repudiation having been known to the plaintiffs in Ex. 6 it self. The defendant Company has stated in Ex. 28: 'As already explained to your client the claim stand repudiated'. This has obvious reference to the meeting between the plaintiff No. 1 and Prabhubhai Patel on 5.10.1960. A reference to this meeting between the plaintiff No. 1 and Prabhubhai Patel is made in Ex. 6. It is stated in Ex.6 in the last but one paragraph :

'Accordingly our clients attended your office on 4th November, 1960 to discuss further into the said matter. At that time your Mr. Patel arbitrarily rejected our clients' claim although your Inspector as well as your Mr. Patel incepted the damage that had occurred to our client' machinery and your said inspector Mr. W.T. Dhomaney took possession of the salvage for and on your behalf and assessed our client's claim of damage at Rs. 13,479/-'.

It is not disputed by Mr. Padhye on behalf of the plaintiffs-respondents that the reference to 4th November, 1960 is erroneous and that he meeting really took place on 5th October, 1960. Ex. 6, therefore, unequivocally states that the claim of the plaintiffs had been rejected by Mr. Patel though the rejections termed as arbitrary rejections. This took place on 5.10.60. In any case, therefore, so far as the repudiation is concerned, there is an admission on behalf of the plaintiffs that the repudiation took place on 5.10.60 which no doubt was oral. Whether the repudiation is concerned, there is an admission on behalf of the plaintiffs that the repudiation took place on 5.10.60 which no doubt was oral. Whether the repudiation was oral or in writing, that fact did not affect the operation condition No. 11. We are, therefore, of the view that even assuming that the plaintiff No. 1 was right in contending that Ex. 28 was not received by the Solicitors and did not have the effect of communication the fact of repudiation, the earlier repudiation on 5.10.60 has been abundantly proved and that repudiation being earlier in point of time, the suit filed in July, 1961 will still be barred as having been filed beyond the period stipulated in condition No. 11. We have already pointed out above that the trial Court did not apply its mind to the question as to whether the repudiation was proved because it had taken the view that condition No. 11 did not bind the plaintiffs at all. The trial Court was, therefore, in error in holding that the plaintiffs' suit was maintainable even though it was filed in July, 1961 which was more than three months both from 5.10.60 and 2.1.61.

19. Appeal allowed.