Delhi District Court
National Tafakul Insurance vs Iffco Tokio General Insurance Company on 28 July, 2023
IN THE COURT OF MS. PURVA SAREEN ADDITIONAL
DISTRICT JUDGE-01, SOUTH DISTRICT, DISTRICT
COURTS, SAKET, NEW DELHI
CS No. 374/2017
ID No.DLST01-002901-2017.
In the matter of:
National Tafakul Insurance, Kuwait,
Having its Registered office at
Al Tajaria Tower, Soor Street, Kuvait City, Kuwait.
Through its Power of Attorney,
Protection Insurance Service WLL,
Having its Registered Office at Suite 206,
Car Park Building, Government Avenue,
PO Box 33133, Manama, Kingdom of Bahrain. ..... Plaintiff.
VERSUS
IFFCO Tokio General Insurance Company,
IFFCO Sadan,
C-1, District Centre, Saket, New Delhi-17.
Also at:
4th Floor, IFFCO Tower,
Plot No.8, Sector-29,
Gurgaon-122001, India. ....Defendant.
Date of institution : 18.04.2017.
Final arguments heard on : 15.04.2023.
Date of pronouncement of judgment : 28.07.2023.
JUDGMENT
Suit for recovery of USD32651.62 (INR 21,79,169.34) alongwith pendentelite and future interest.
1. Plaintiff has filed the present suit initially under Order National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 1/30 XXXVII of the Code of Civil Procedure, 1908 for Recovery of USD32651.62 (INR 21,79,169.34) alongwith pendentelite and future interest against the defendant. The court vide its order dated 04.07.2017 opined that the suit was prima facie based on e- mail communications between the parties which could not be termed as a written contract and hence the suit was not maintainable under Order XXXVII CPC and the same was directed to be treated as an ordinary suit.
2. Brief facts as stated in the plaint are that the plaintiff is an insurance company established in Kuwait in 2003 and underwrites all classes of insurances. Over the years the plaintiff has established an excellent reputation for working closely with the clients ensuring that every service is successfully and professionally delivered to meet the customer's satisfaction.
3. It is further stated that the present suit is filed through its constituted attorney, Protection Insurance Services WLL ("PIS"), authorized by way of a Power of Attorney dated 08.06.2016 executed in its favour. PIS is professional reinsurance brokerage firm with a considerable business presence in the Middle-Eastern and Asian markets and is headquartered in kingdom of Behrain. All the acts performed by PIS as specified hereinafter have been performed for and on behalf of the plaintiff with the consent of the plaintiff. PIS acts as a reinsurance broker and negotiates contracts of reinsurance between a re-insured entity (also called "the Cedant") and the re-insurer. A contract of National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 2/30 re-insurance is a contract wherein an insurance company (re- insurer) like the defendant herein for a consideration (called the "premium" to be agreed between the parties, agrees to indemnify the re-insured entity/Cendant, like the plaintiff against all or part of the loss which the Cendant may sustain on account of settling claims of its customers as per the re-insurance policy issued to it by the re-insurer.
4. It is further stated that generally the business of insurance is conducted through a reinsurance broker who acts as the connecting link between the Cedants and the re-insurers. Under this process, the contracts of reinsurance and its renewal are negotiated by the re-insurance brokers. Upon execution of a contract, both the Cedant and the reinsurer transact through the reinsurance broker without directly involving the other party. It is for this reason the reinsurance broker plays a great role in case of any default from the re-insurer.
5. The present suit filed by the plaintiff on following grounds:
a) A contract of re-insurance was originally negotiated by PIS between the Cedant/plaintiff and the defendant wherein the facultative reinsurance participation of the defendant was 10% risk of the total cover for the Tug by the name of 'Fahad-I' and Barge NTBA whose name was not provided at that point in time hence it was called NTBA (to be advised) respectively for the owners Al Mulla Marine Ltd. The Barge was later named Gulf-3.
National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 3/30 The tug and barge were valued at USD 14,00,000 each. The original reinsurance policy bearing no.01/2102/120/11/2 came into existence with effect from 16.03.2009 and was scheduled to expire on 21.03.2011.
b) The vessel Barge NTBA was later re-named as Barge 'Gulf-3' after the change in ownership of the vessels.
c) However, before the lapse of the aforesaid original policy on 21.03.2011, PIS for and on behalf of the plaintiff vide its email of 12.02.2011 commenced renewal negotiations with the defendant for extension of the policy on expiring terms and conditions for a further period of 12 months w.e.f. 22.03.2011. Vide the said mail, PIS also called upon the defendant to provisionally confirm its existing share of 10% at the earliest.
d) The defendant vide its e-mail dated 16.02.2011 responded to the said mail and requested for the updated RI slip (reinsurance slip) from PIS alongwith the loss details.
e) The defendant confirmed vide its email of 25.02.2011 that there was no known or reported loss i.e. 'NKORL' in respect of both the vessels namely Tug-Fahad-I and Barge-Gulf-3. Pursuant to this the defendant confirmed its provisional support of 5% share subject to certain following conditions:
i Expiry terms and conditions.
ii NKORL under current policy.
iii Every claim would be intimated within 30 days of
occurrence.
iv Exclusion of sabotage, Terrorism, War, Civil war and
Political risk.
National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 4/30
f) PIS confirmed the 5% line on the specified terms and conditions on behalf of the plaintiff Cedant vide its email of 08.03.2011 and bound the defendant for its share of 5% of the total claim and the said mail was acknowledged by the defendant on 08.03.2011 itself.
g) In these circumstances, re-insurance policy number 01/2102/120/11/2 was renewed and the policy was a combined policy for Tug 'Fahad-I' and Barge-Gulf-3. The police was valid from 22.03.2011 to 21.03.2012.
h) Thereafter, a premium closing credit note was raised by PIS where by both the vessels (the tug and the barge) were insured for a total amount of USD 28,00,000 @ USD 14,00,000 each. The defendant was bound for 5% of the total of USD 28,00,000. The total original premium required to be paid by the plaintiff towards the total value of USD 28,00,000 was USD 16,100 and the share to be paid to the defendant was USD 805 (i.e. 5% of USD 16,100). The aforesaid premium amount was towards the payment for both vessels i.e. Fahad-I and Gulf-3.
i) The plaintiff/Cendant was accordingly liable to pay an amount of USD 805 less 10.3% reinsurance commission of USD 82.92. The percentage of re-insurance commission was 10.3% as per the re-insurance slip forming the basis of the re-insurance contract. Hence, the total premium paid by the plaintiff to the defendant through PIS was USD 722.09 on 29.09.2011 which was processed in the favour of the defendant on 02.10.2011 via telex transfer.
j) Although the aforesaid premium paid by PIS to the defendant National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 5/30 for and on behalf of the plaintiff on 29.09.2011 was after the expiry of 90 day premium payment warranty (PPW) but keeping in view the prevailing and common practice, the same was accepted by the defendant without any protest and/or demur. In the instant case, 90 day PPW was mentioned by the defendant vide their email of 16.03.2009 when the contract of reinsurance was first negotiated with the defendant. Moreover, in matter of standard practice, PPW contains specific clauses which address on the mode of payment of premium and the re-percussions in failure to do so. In the instant case, such specific condition was neither mentioned by the defendant in the original contract nor in the renewed contract. Therefore, in the absence of auto- cancellation of re-insurance contract or notice of cancellation and/or refund of belated premium amount, the defendant bound itself as per the terms and conditions of the reinsurance contract.
k) Subsequently, the Barge and Gulf-3 encountered heavy weather which resulted in parting of its towline at Das Zirku Island on 18.03.2012. Claim intimation for the same was received by PIS from the plaintiff on 27.03.2012 and it was forwarded to the defendant on the same day i.e. within the prescribed period of 30 days.
l) On 28.03.2012 the defendant requested for a reference number for claim from PIS which was duly provided to it on 29.03.2012.
m) Therefore, on 09.05.2012, a claim update for Gulf-3 was sent to the defendant by PIS whereby the defendant was informed that the lawyers of the plaintiff had negotiated the salvage remuneration with the salvers IRSHAD towards the loss of Gulf-
National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 6/30
3. PIS further intimated the defendant that an amount of AED 146,161.10 was paid towards the professional fee disbursements for the period up to 24.04.2012. PIS further informed the defendant that relevant documents in this regard would be forwarded to it in order to procure timely payment towards dues from it.
n) Thereafter, on 10.05.2012 the defendant requested PIS for the date of remittance of premium and on the same day PIS replied informing them that the premium had been remitted to them on 02.10.2011.
o) On 22.05.2012 PIS sent a claim debit note to the defendant for a amount of AED7,308.06 towards its 5% share of the total of AED 146,161.10 (equivalent to USD 1989.25) which was paid towards professional fee for negotiating the salvage remuneration. The said claim was based on the liability of the reinsurer to bear all expenses related to the claims recovery.
p) On 22.05.2012 PIS raised another claim debit note on the defendant for an amount of USD 18,750 towrds its 5% share of total USD 375,000 which was paid towards salvage remuneration. The said note was duly circulated to the defendant on 24.05.2012. Salvage remuneration is a concept in maritime law which states that a person who recovers another person's ship or cargo after peril or loss at sea is entitled to a reward commensurate with the value of the property so saved. In the instant case, an amount of USD 375,000 was charged by the salvagers (IRSHAD) from the plaintiff towards the recovery of Gulf-3 therefore the plaintiff claimed an amount of USD 18,750 National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 7/30 (5% of salvage remuneration) from the defendant vide claim debit note dated 22.05.2012. The same was in consonance with the reinsurance policy.
q) On 11.06.2012 PIS raised a claim debit note to the defendant for an amount of AED 6409,635 (equivalent to 1744.70) towards its 5% share of total AED128192.7 which was paid towards professional and dibursement fees. The same was circulated to the defendant by an email dated 12.06.2012.
r) On 09.04.2013 the defendant requested PIS to provide a copy of the discharge voucher. The proof of payments were provided to the defendant vide e-mail dated 09.04.2013.
s) On 10.04.2013 defendant requested for a clarification in the discrepancy of the claim amount in two debit notes which was sent by PIS to the defendant. Defendant also requested for respective documents of the correct claim loss advice in its mail dated 10.04.2013.
t) Thereafter, on 16.04.2013 defendant again requested for the Survey Report to which PIS responded to defendant informing that the claim settlement was done in respect of Salvage remuneration claimed by Salvors for USD 375,000. Hence, the settlement agreement was between the Assured/Insured and Salvors. The discharge voucher from Assured/Insured had already been sent. Since there was no damage involved, the plaintiff had not appointed a Surveyor.
u) Thereafter, PIS sent reminders dated 29.04.2013, 02.05.2013 and 21.05.2013 to the defendant to which no response was received.
National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 8/30
v) On 01.10.2013 on the request of the defendant, PIS provided the list of claims pending alongwith remarks to the defendant. PIS followed up the claim status with the defendant but to no avail.
w) PIS sent repeated reminders uptill 21.05.2014 to defendant with request to update it regarding the status of claim payment regarding Barge, Gulf-3.
x) The defendant by its email of 26.08.2014 intimated PIS that its claim with respect to Barge, Gulf-3 had been approved by its claims team.
y) Vide email dated 26.08.2014 the defendant requested for discharge receipt from plaintiff and the same was provide to it by PIS.
6. Defendant informed the PIS that the claim with respect to Barge and Gulf-3 was under the process of payment but despite several email between PIS and the defendant for making the payment, the same was not paid despite the claim having been approved by the defendant. Thereafter, PIS was left with no choice but to issue the legal notice dated 10.03.2016 enumerating all the claims but despite that defendant failed to make the payment. Hence, the present suit.
7. Written Statement: Defendant filed written statement admitting the fact of contract of reinsurance between the plaintiff and defendant and both parties agreed to the terms and conditions of the contract dated 16.03.2009. Defendant took preliminary National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 9/30 objections stating that the policy was renewed for a further period of 12 months incepting from 22.03.2011 on the same terms and conditions but as per the premium payment warranty, the premium was to be remitted by 20.06.2011 but the plaintiff admittedly failed to remit the premium by the said date and made payments towards the same only on or about 29.09.2011 which was delayed more than 100 days. The plaintiff had never brought the said default to the notice of the defendant and never sought any accommodation for the admitted delay. It is evident that the action of the plaintiff lacs bonafide and the plaintiff, by its conduct has sought to derive undue benefits. It is further submitted that in the light of the admitted delay of 102 days by the plaintiff in making the payment of premium, no agreement ever came into existence between the parties with binding obligations on the defendant.
8. It is further stated that the suit is bared by limitation as the date of occurrence of loss was on 18.03.2012 and no subsequent cause of action had arisen neither has there been any acknowledgement of debts and the suit was instituted on 04.07.2017 which is barred by limitation.
9. It is further stated that the suit is not instituted in the proper form and plaintiff has not disclosed the underlying board of resolution authorising the Power of Attorney in favour of Mr. Zagarah Mankoj Varghese and the board of resolution authorising the Power of Attorney have not been duly notorized National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 10/30 or apostilled.
10. In parawise reply defendant has denied each and every allegation or averment on contention made by the plaintiff. It is stated that by way of its email dated 25.02.2011, the defendant had provisionally accepted 5% of the risk with respect to the vessels namely Fahd-1 and Gulf-3. The said understanding was in continuation of the initial agreement entered between the parties by way of email dated 16.03.2009 when the reinsurance terms were first negotiated. It is also an understanding between the parties that the premium had to be paid promptly and not later than 90 days from the date of coverage. It is denied that the defendant was found by email dated 08.03.2011 and the defendant was also found for 5% of the total USD of 28,000,000 as alleged by the plaintiff. It is further denied that there is any prevailing practice wherein insurance premium is paid beyond 90 days or that as a matter of standard practice PPW contains specific clauses which address the mode of payment and the repercussions on failure to do so. It is further denied that in the absence of auto cancellation of reinsurance contract or notice of cancellation or refund the admittedly belated premium amount, the defendant has bound itself as per the terms and conditions of the reinsurance contract as alleged. It is submitted that PPW clause is a warranty clause, the fulfillment of which precedes the entering of any agreement or understanding between the parties. It is further denied that reinsurer was bound to bear the expenses related to the claims pertaining to salvage as alleged or at all. It is National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 11/30 again denied that debit note dated 22.05.2012 was in consonance with the reinsurance policy.
11. It is submitted that on the occurrence of any claim incident, it was incumbent upon the insurance company as a matter of standard practice to appoint the surveyor to rule out any foul play or negligence of the insured so as to ascertain if any claim is payable by the insurer/reinsurer at all. In the instant case, the plaintiff had failed to discharge its obligation to appoint a duly certified insurance surveyor to ascertain the cause giving rise to the purported claim. As such the defendant, even if it is assumed that there was a subsisting obligation on its part, had no basis for evaluating whether any claims are actually due and payable by the defendant or the plaintiff for that matter. By failing to have a surveyor's report prepared, the plaintiff had denied a valuable right to the reinsurer in making an independent assessment of the claims.
12. It is submitted that email dated 26.08.2014 was an in- principle approval and not a final approval and was in no manner final and binding on the defendant. It is further stated that with respect to email dated 08.09.2014, the defendant had at no point of time admitted liability with regard to processing the same with respect to Barge Gulf-3 and the said email was only intimation of the fact that the claim was being processed which would, needless to state, be subject to the warranties and conditions agreed upon between the parties.
National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 12/30
13. It was further denied that plaintiff or ts broker PIS met the defendant on numerous occasions between 2014 and 2016 or that any assurance was given with regard to payment being released. It is also denied that the defendant is liable to or has failed to make payments towards various other policies as alleged. It is submitted that plaintiff had defaulted in compliance with the payment and other obligations on account of which policy payment could not be processed. It is stated that the plaintiff is in the habit of breaching reinsurance policy terms and denied that the credibility or reputation of PIS/plaintiff has been affected in any manner. It is also denied that plaintiff is entitled to demand any interest as alleged. It is further denied that any amounts are due and payable, as alleged or at all or that such amounts had been admitted by the defendant in its email. It is denied that any cause of action had arisen on 26.08.2014 or subsequently. It is also denied that the essential ingredients of the provision of Order XXXVII CPC had been satisfied or that plaintiff is entitled to any reliefs as prayed and the suit should be dismissed with cost.
14. Plaintiff filed replication to the written statement of defendant controverting the stand taken by it in its written statement and reiterated the facts of the plaint.
15. On the pleadings of the parties, following issues were framed:
National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 13/30
1. Whether the plaintiff violated the condition precedent and warranty to the understanding between the parties? OPD.
2. Whether the suit is barred by limitation? OPD.
3. Whether the suit has been signed, verified and instituted through duly authorized person? OPP.
4. Whether the plaintiff is entitled to recover any amount from the defendant? If so, what amount plaintiff is entitled to recover? OPP.
5. If answer to issue no.4 is in affirmative, whether the plaintiff is entitled to claim interest from the defendant? If so, for which period and at what rate? OPP.
6. Relief.
16. Thereafter, the parties to the suit were directed to lead evidence in support of their pleadings. Local Commissioner was appointed for recording evidence of the parties.
17. Plaintiff's Evidence: Plaintiff examined Sh. Zagariah Manoj Varghese, Director, Reinsurance of Protection Reinsurance WLL in support of its case as PW-1. He tendered his affidavit in evidence as Ex.PW1/A and relied upon documents :
1. Ex.P-1 is Facultative Reinsurance Policy.
2. Ex.P-2 (colly) are various emails of different dates.
3. Ex.P-3 is Premium Closing Credit Note.
4. Ex.P-3A (colly) are various emails of different dates, office copies of claim debit notes of different dates, copy of discharge voucher/receipts, National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 14/30
5. Ex.P-4 is copy of email dated 16.08.2013.
6. Ex.P-5 are various emails of different dates (with attachment).
7. Ex.P-6 is copy of email dated 26.09.2014.
8. Ex.P-7 (colly) are various emails of different dates.
9. Ex.P-8 (colly) is Legal notice dated 10.03.2016 with postal receipts.
10. Ex.P-9 is copy of email dated 27.06.2015.
11. Ex.P-10 is copy of Board Resolution and Power of attorney dated 08.06.2016.
18. PW-1 was duly cross-examined by counsel for defendant and thereafter plaintiffs evidence was closed.
19. Defendant's Evidence: Defendant also examined only one witness Sh. Hemant Bhatia, Deputy General Manager of the defendant in support of its case. He tendered his affidavit in evidence as Ex.DW1/A and relied upon documents :
1. Ex.DW1/1 is letter of Authority.
2. Mark RW-1 is photocopy of Attorney.
3. Mark RW-2 is Power of Attorney dated 03.07.2014 in favour of Sh. Pankaj Dhingra.
4. Mark RW-3 is email dated 26.05.2014.
20. DW-1 was duly cross-examined by counsel for plaintiff and thereafter defendant's evidence was closed.
21. I have heard ld. counsels for both the parties and have National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 15/30 gone through the records carefully.
My Issuewise findings are as follows:
Issue no. 1. Whether the plaintiff violated the condition precedent and warranty to the understanding between the parties? OPD.
22. Onus to prove this issue was on the defendant. The plaintiff has alleged that both the plaintiff and the defendant began negotiating a re-insurance contract pursuant to which a contract of re-insurance was negotiated by PIS between the plaintiff and defendant for reinsurance for cover of tug by the Fahad I and Barge Gulf-III where under the defendant gave its consent for binding itself for 5% risk in the vessel subject to certain conditions hereunder:
• No known or reported loss i.e. "NKORL" in respect of the risk covered.
• Premium payment warranty i.e. PPW of 90 days. • Total reinsurance deduction of 10.3%.
• Every claim to be intimated within 30 days of occurrence. • Exclusion of sabotage, terrorism, war, civil war and political risk.
• The underline reinsurance policy was up for renewal.
23. The underline insurance policy was up for renewal on 23.03.2011. The plaintiff accordingly approached the defendant for renewal of the reinsurance cover which had earlier been provided. This was agreed to by the defendant subject to risk National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 16/30 being reduced to 5% from 10% and incorporation of earlier terms and conditions.
24. As per the understanding between the parties, the plaintiff was to remit payment of premium within 90 days, however in breach of the same, there was admitted delay of 100 days and this was ultimately remitted on 20.06.2011.
25. The main argument of counsel for the plaintiff is that the payment of PPW beyond the period of 90 days is not a material breach and cannot be considered a ground for non- payment of the claim amount. It is submitted that the perusal of email dated 13.10.2010 confirms that it is nowhere stated that the repercussions of delay in payment of PPW amount beyond 90 days would result in cancellation of the insurance contract. Plaintiff's counsel further argued that the defendant never cancelled or rejected the claim on any ground and leave alone cancellation, the company received premium in terms of the contract. Further, PPW amount was never refunded to the plaintiff which goes to show that the reinsurance contract was never cancelled on account of delay in payment of PPW.
26. Plaintiff' counsel further argued that three years after intimation of loss, the defendant could not refuse to make the payment of claim when its own conduct of accepting the amount and not raising any dispute or cancelling the reinsurance contract showed that it had waived the delay in making the premium National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 17/30 payment. Hence, as per the plaintiff, the delay is consequential and cannot be treated as ground for rejection of the plaint. Moreover, the defendant even asked the plaintiff vide its email dated 27.11.2011 for claimed documents in order to process the claim which was shared by PIS on 02.10.2011. Thereafter, the defendant asked for discharge voucher from the plaintiff. The conduct of the defendant further shows that the defendant had no objection for processing the claim and they had sought a discharge voucher from the plaintiff. It was only after 3 years of the loss that the defendant repudiated the claim on account of breach of PPW conditions. If the defendant had any objection or it was aggrieved by delay, it should have been immediately repudiated the claim in May, 2011 itself and not 3 years later. Thus, it is argued that by conduct the defendant had waived the delay in intimation and payment and was bound by the contract.
27. In order to substantiate his argument, plaintiff has relied upon the judgment of Hon'ble Madras High Court in P Abdul Azeez v. New India Assurance Company Ltd., AIR 1954 Mad 520, (1953) 2 MLJ 714, wherein it is held that "As soon as the contract is signed, the assured becomes liable to pay the premium, but his failure to pay it does not in itself absolve the insurers from the liability which they in turn have undertaken under the contract. In the event of a loss, therefore happening before payment, they must pay the amount due under the contract, unless the contract otherwise provides. In practice, prepayment of the premium is usually made a condition precedent to liability, in the case not only of the first National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 18/30 premium, but also of the renewal premiums. The assured is then precluded from recovering for a loss which happens before the premium is paid. Any such condition, however, may be waived." In Porter on the Law of Insurance the position is thus stated:
"But where it is a condition in the policy that the policy shall not be binding until the premium, is paid, it is competent for insurers to waive the condition, and the court will readily infer a waiver. The law therefore is well settled that a contract of insurance, like other contracts, is concluded by offer and acceptance. If there is a stipulation that the liability will attach itself under the contract only if the premium is paid that will be a condition precedent to the policy taking effect. But that is a condition inserted for the benefit of the insurer and that can be waived. On this statement of the law we have no doubt that the learned Judge has come to the correct conclusion on the facts that there has been a waiver of the condition. It was the defendant who offered to take the policies. When repeated demands were made on him for payment of premia, he did not repudiate his liability to pay them. On the other hand, he expressly agreed in Ex. P. 6 to pay them. He also renewed those very policies. These facts lead to the irresistible conclusion that the condition had been waived and that there was a concluded contract of insurance between the parties".
28. Plaintiff has also referred to the judgment of the Hon'ble Supreme Court of India titled as Om Prakash v. Reliance General Insurance and Ors., Civil Appeal No. 15611 of 2017, decided on 4th October, 2017, wherein it is held that "It is common knowledge that a person who lost his vehicle may not straightaway go to the Insurance Company to claim compensation. At first, he will make efforts to trace the vehicle. It is true that the owner has to intimate the insurer immediately after the theft of the vehicle. However, this condition should not National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 19/30 bar settlement of genuine claims particularly when the delay in intimation or submission of documents is due to unavoidable circumstances. The decision of the insurer to reject the claim has to be based on valid grounds. Rejection of the claims on purely technical grounds in a mechanical manner will result in loss of confidence of policy-holders in the insurance industry. If the reason for delay in making a claim is satisfactorily explained, such a claim cannot be rejected on the ground of delay. It is also necessary to state here that it would not be fair and reasonable to reject genuine claims which had already been verified and found to be correct by the Investigator. The condition regarding the delay shall not be a shelter to repudiate the insurance claims which have been otherwise proved to be genuine. It needs no emphasis that the Consumer Protection Act aims at providing better protection of the interest of consumers. It is a beneficial legislation that deserves liberal construction. This laudable object should not be forgotten while considering the claims made under the Act".
29. The defendant on the other hand argued that PIS had placed over 3000 reinsurance contracts with the defendant and defendant was totally unaware of the breach of warranty precondition in some of these accounts.
30. On 18.03.2012 Gulf-III had to be towed as Das Zirku Island due to the heavy weather. Although there was no loss to the vessel but salvage remuneration was paid by the plaintiff and professional fees had to be paid to the lawyers who had done the negotiation for salvage renumeration by the plaintiff. When the defendant requested for a survey report, it was informed that no survey was conducted as there was no damage to the vessel.
National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 20/30 Moreover, at no point PIS or the plaintiff intimated the defendant regarding the breach of PPW. The defendant clarified that the claims were processed only subject to the approval and to terms and conditions of the agreement. Defendant continuously maintained a stand that it could not indemnify the plaintiff in case of PPW breach.
31. Ld. Counsel for defendant has referred to several judgments of the Hon'ble Supreme Court as well as of the Hon'ble Delhi High Court and as per all the judgments, the contract of insurance and the terms of agreement in an insurance policy have to be strictly construed to determine the extent of liability of the insurer. It is argued that in interpreting document relating to insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties, because it is not for the court to make a new contract, however, reasonable if the parties have not made it themselves. The said proposition has been laid down in the landmark case of General Insurance Society v. Chandumall Jain, AIR 1966 SC 1644.
32. Similar position was enumerated in United India Insurance Co. Ltd. v. M/S.Harchand Rai Chandan Lal, decided on 24 September, 2004 wherein it is held that "It is possible that an insurer may sustain loss in technical terms of the criminal law, but no relief can be given to him unless his case is covered by the terms of the policy. It is not open to interpret the National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 21/30 expression appearing in policy in terms of common law; but it has to give meaning to the expression as defined in the policy. The act that causes the loss must fall within the definition in the policy and it cannot take the cover and contents of the definition as laid down in the criminal law. Therefore, when the definition of the word 'burglary' has been defined in the policy then the cause should fall within that definition. Once a party has agreed to a particular definition, he is bound by it and the definition of criminal law will be of no avail. In this connection, the decision of the National Consumer Disputes Redressal Commission in the case of National Insurance Company Ltd. v. Public Type College which has taken the colour and content of the definition given in the criminal law does not lay down the correct proposition of law. It is settled law that terms of the policy shall govern the contract between the parties, they have to abide by the definition given therein and all those expressions appearing in the policy should be interpreted with reference to the terms of policy and not with reference to the definition given in other laws. It is a matter of contract and in terms of the contract the relation of the parties shall abide and it is presumed that when the parties have entered into a contract of insurance with their eyes wide open, they cannot rely on definition given in other enactment. Similarly, in the case of Oriental Insurance Co.Ltd. Vs. Sony Cheriyan reported in (1999) 6 SCC 451 an insurance was taken out under the Motor Vehicles Act, 1988 in which their Lordships' observed :
National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 22/30 "The insurance policy between the insurer and the insured represents a contract between the parties. Since the insurer undertakes to compensate the loss suffered by the insured on account of risks covered by the insurance policy, the terms of the agreement have to be strictly construed to determine the extent of liability of the insurer. The insured cannot claim anything more than what is covered by the insurance policy." Similarly in the case of General Assurance Society Ltd. Vs. Chandumull Jain and Anr. reported in (1966) 3 SCR 500 the Constitution Bench has observed that the policy document being a contract and it has to be read strictly. It was observed, " In interpreting documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties, because it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves. Looking at the proposal, the letter of acceptance and the cover notes, it is clear that a contract of insurance under the standard policy for fire and extended to cover flood, cyclone etc. had come into being."
Therefore, it is settled law that the terms of the contract has to be strictly read and natural meaning be given to it. No outside aid should be sought unless the meaning is ambiguous".
33. In the landmark judgment of Polymat India Pvt. Ltd. v. National Insurance Company, (2005) 9 SCC 174 the Hon'ble Supreme Court held that "the terms of the contract had to be construed strictly without altering the nature of contract as it may affect the interests of the parties adversely".
34. In Vikram Greentech India Ltd. v. New India Assurance Company (2009) 5 SCC 599, it is held that "An National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 23/30 insurance contract, is a species of commercial transactions and must be construed like any other contract to its own terms and by itself. In a contract of insurance, there is requirement of uberimma fides i.e. good faith on the part of the insured. Except that, in other respects, there is no difference between a contract of insurance and any other contract. 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. Since upon issuance of insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of risks covered by the insurance policy, its terms have to be strictly construed to determine the extent of liability of the insurer. The endeavour of the court must always be to interpret the words in which the contract is expressed by the parties. The court while construing the terms of policy is not expected to venture into extra liberalism that may result in re-writing the contract or substituting the terms which were not intended by the parties. The insured cannot claim anything more than what is covered by the insurance policy. [General Assurance Society Ltd. Vs. Chandumull Jain and another 1, Oriental Insurance Co. Ltd. Vs. Sony Cheriyan2 and United India Insurance Co. Ltd. Vs. Harchand Rai Chandan Lal3]".
35. Ld. Counsel for defendant has referred to the judgment of Gamma Investments v. National Insurance Company Ltd., (2009) 157 DLT, wherein it is held that "Law of Insurance makes a distinction between warranty clauses and conditions for payment of a claim. Warranty clauses are those stipulations National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 24/30 which are the most fundamental term of the Policy and constitute the essential promise made to the insurer by the insured. Warranty in insurance contracts is opposite and invert of warranty as understood in contracts for sale of goods etc. Good faith, existence of subject matter of insurance, identification of subject matter in the Policy and insurable interest of the insured are normally regarded as implied warranty clauses. Insurance contract can also incorporate express warranty clauses to protect interest of the insurer. Warranty clause CS(OS) NO.1445/2002 Page No.18 can relate to a condition precedent to the contract of insurance, promissory conditions to be performed in future and conditions to be performed after the event/loss. In case of violation of condition precedent, subject to statutory provision to the contrary, (see section 45 of the Insurance Act, 1938), the contract of insurance is void abinito. Breach of a future promissory condition, in absence of any statutory provision, makes the contract of insurance void at the instance of the insurer from the date of the breach but not for the prior period".
36. It is submitted that plaintiff by not complying with PPW warranty terms has acted in breach of future promissory condition and has rendered contract void abinitio.
37. In Balkrislina Khirwal v. The New India Assurance Co. {1958) SCC Online Pat 79}, the Hon'ble court observed that 'if any of the statements in the proposal form or the declaration form accompanying the proposal form made by the assured and National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 25/30 which had been made the basis of contract are found to be untrue, the contract of insurance would be void and unenforcible in law, irrespective of the question whether the statement concerned is of a material nature or not'. The effect of the warranty therefore is to bind the assured to a strict compliance to its terms.
38. The court is therefore of the view that the plaintiff by not complying with the PPW terms has been in breach of the condition and has rendered the contract void.
39. As far as the argument of the plaintiff that the defendant waived off its right is concerned, it is a settled law that waiver cannot be inferred merely from a failure of the party to take the objection. Ld. Counsel preferred to the case of Vasu P Shetty v. M/s. Hotel Vandana Palace and Ors. Wherein it is held that "waiver cannot always and in every case be inferred merely from the failure of the party to take the objection. Waiver can be inferred only if and after it is shown that the party knew about the relevant facts and was aware of his right to take the objection in question."
38. Thus, in a given case if a party knows the material facts and is conscious of his legal rights in that matter, but fails to take the plea of bias at the earlier stage of the proceedings, it creates an effective bar of waiver against him. In such facts and circumstances, it would be clear that the party wanted to take a chance to secure a favourable order from the official/court and when he found that he was confronted with an unfavourable order, he adopted the device of raising the issue of bias. The issue of bias must be raised by the party at the earliest. (See National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 26/30 Pannalal Binjraj v. Union of India and P.D. Dinakaran (1) v. Judges Enquiry Committee.)
39. In Power Control Appliances v. Sumeet Machines (P) Ltd. this Court held as under: (SCC p. 457, para 26) "26. Acquiescence is sitting by, when another is invading the rights.... It is a course of conduct inconsistent with the claim.... It implies positive acts; not merely silence or inaction such as involved in laches. ... The acquiescence must be such as to lead to the inference of a licence sufficient to create a new right in the defendant...."
40. Inaction in every case does not lead to an inference of implied consent or acquiescence as has been held by this Court in P. John Chandy & Co. (P) Ltd. v. John P. Thomas. Thus, the Court has to examine the facts and circumstances in an individual case. In Municipal Corpn. of Greater Bombay v. Dr Hakimwadi Tenants' Association. The court considered the issue of waiver/acquiescence by the non-parties to the proceedings and held: (SCC p. 65, paras 14-15) "14. In order to constitute waiver, there must be voluntary and intentional relinquishment of a right. The essence of a waiver is an estoppel and where there is no estoppel, there is no waiver. Estoppel and waiver are questions of conduct and must necessarily be determined on the facts of each case".
40. In view of the above, it is clear that the plaintiff violated the condition of PPW in the contract. On account of such breach, the contract of reinsurance has become void abinitio hence the plaintiff is not entitled to recover any money from the defendant. Therefore, the present issue no.1 is decided in favour of defendant and against the plaintiff.
Issue No.2. Whether the suit is barred by limitation?OPD.
41. The plaintiff through PIS has sent various emails dated National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 27/30 24.09.2014, 25.09.2014, 29.09.2014, 10.11.2014, 25.11.2014, 10.12.2014, 15.12.2014, 23.12.2014 and 12.01.2015 to the defendant to which regular replies in the form of emails were sent by the defendant. The defendant promised to settle the claim in the third week of April, 2015 vide an email dated 30.03.2015. The cause of action again arose on 27.06.2016 when PIS sent the last reminder to the defendant. This email correspondence between the plaintiff and the defendant was with regard to the claim for the loss suffered by the insured Barge Gulf-III.
42. It is also submitted that vide email dated 26.08.2014 the defendant admitted liability in respect of the claim and and vide email dated 08.09.2014 the defendant admitted that 'the claim is under process of payment'. This is treated as an acknowledgement of liability under Section 18 of the Limitation Act, 1963. The email correspondence between the plaintiff and the defendant has been admitted by the defendant and it was only vide email dated 30.03.2015 when the defendant offered to look into the claim of the plaintiff and revert in the third week of April, 2015. The suit was filed on 18.04.2017 thus the suit is filed within 3 years from the date of accural of cause of action and is, therefore within limitation. Resultantly, the present issue is decided in the favour of plaintiff and against the defendant.
Issue No.3. Whether the suit has been signed, verified and instituted through duly authorized person? OPP.
43. Onus to prove this issue was on the plaintiff. The National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 28/30 present suit has been filed for and on behalf of the plaintiff by its constituted attorney, Protection Insurance Services WLL (PIS) authorized by way of a power of attorney dated 08.06.2016 duly executed in its favour by the plaintiff. In this regard, the plaintiff has filed the power of attorney dated 08.06.2016 of Mr. Zagariah Manoj Varghese (Director Re-insurance) to act as attorney of the cedent company i.e. National Tafakul Insurance and has also filed Board Resolution dated 26.05.2016 authorising the abovenamed to sign and accept power of attorney from the plaintiff insurance company. The said documents have been filed in original with the plaint and the defendant has denied these documents being 3rd party documents but said documents i.e. the power of attorney Ex.P-10 as well as board meeting is accompanied by Apostille and this court sees no reason that the present suit has not been signed, verified and instituted through a duly authorized person. Therefore, this issue is decided in favour of the plaintiff and against the defendant.
Issue no.4: Whether the plaintiff is entitled to recover any amount from the defendant? If so, what amount plaintiff is entitled to recover? OPP.
Issue No.5. If answer to issue no.4 is in affirmative, whether the plaintiff is entitled to claim interest from the defendant? If so, for which period and at what rate? OPP.
44. Both the issues are taken up together being interconnected. Onus to prove these two issues was on the plaintiff. Since the relief claimed by the plaintiff is dependent National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 29/30 substantially on the decision on Issue no. 1 and the same has been decided against the plaintiff and in favour of defendant, therefore, issues nos.4 and 5 are also decided against the plaintiff and in favour of the defendant as the plaintiff is not entitled to any recovery henceforth it is not entitled to recover any interest.
Relief:
45. In view of findings on the abovementioned issues, the present suit is dismissed. However, defendant has admitted the receipt of the premium and is still lying with it both in its pleadings and evidence and therefore, relying on Section 65 of the Indian Contract Act, since there was no concluded contract between the parties, the defendant is bound to restore the benefit i.e. the premium of USD 722.09 to the plaintiff alongwith interest @ 9% per annum for the period from the date of deposit till the payment is made to the defendant. Decree sheet be prepared accordingly. File be consigned to record room after Digitally due compliance. signed by Announced in the open Court Purva Purva Sareen Date:
On 28th July, 2023 Sareen 2023.08.01
16:16:59
+0530
(Purva Sareen)
Additional District Judge-01,
(South) Saket District Courts,
New Delhi.
National Tafakul Insurance, Kuwait v. IFFCO Tokio General Insurance Company CS No.374/2017 Page No. 30/30