Kerala High Court
Marikar Motors Ltd. vs The Chief Enforcement Officer, ... on 27 July, 1972
Equivalent citations: AIR 1973 KERALA 2, ILR (1972) 2 KER 492
JUDGMENT Sadasivan, J.
1. M/s. Mankar (Motors) Limited, Main Road, Trivandrum is the petitioner in this O.P. under Article 226 of the Constitution.
2. The petitioner is a public limited company with its registered office at Tri-vandrum. The petitioner deals in motor cars, trucks etc. Under the Emergency Risks (Goods) Insurance Act, 1962 (shortly stated the Act), the Central Government made it compulsory to have emergency risk insurance taken for goods comprising of motor vehicles, spares and accessories etc. Accordingly from 1st October, 1963, the petitioner had paid premium declaring the value of stock to respondents 1 and 2 (The Chief Enforcement Officer, Emergency Risks Insurance Scheme, Madras and the Enforcement Officer, Emergency Risks Insurance Scheme, Ernakulam). The petitioners had been insuring goods and paying premium also from time to time. On 30-12-68, the 2nd respondent issued an order calling upon the petitioner to remit an additional sum of Rs. 10,279/- towards premium. In fact, no amount is due towards premium for the insurance taken by the petitioner under thg Act. The petitioner, therefore, filed objections stating that during the years the goods were only in transit and were, therefore, not liable for additional premium claimed. Ext. P-l is the objection. Under Section 6 of the Emergency Risks (Goods) Insurance Scheme (shortly stated the Scheme) the consignor alone is liable to take insurance for the goods in transit. Since the petitioner is only a consignee he is not liable to take the insurance or pay the premium. However, as the respondents insisted that the petitioner should remit the additional sum of Rs. 10,279, the petition was filed on 17-2-69 before the 2nd respondent; copy of the petition is Ext. P-2. Goods have been insured for the proper value and the policy was issued on the basis of such valuation. The respondents would now suggest that the insurable value was higher and. therefore, the petitioner should make good the difference in the premium. The policy having been operative only for the value for which the goods were insured and the period of policy having expired the petitioner's case is that the demand made for the additional premium is not sustainable. Even if the petitioner is found liable for the additional premium it has to be noticed that he did not obtain any corresponding benefit for the insurance to a higher value and that being the case the demand for additional premium is illegal as that would result in his deprivation of property without return and hence unconstitutional. Even if it is assumed that the premium based upon difference in insurable value is recoverable, the quantum mentioned in the statement is incorrect. The petitioner, therefore, requested the 2nd respondent to deduct the value of the goods in transit from the figures adopted by him. Without doing that the 1st respondent issued notice to the petitioner calling upon him to pay Rs. 10,279/-towards premium and Rs. 4,773/- towards compounding fee. The petitioner has not agreed for composition. Under Section 14 of the Scheme, the amount evaded is to be determined in accordance with the 3rd Schedule. The period of the policy having expired it is not proper to demand any additional premium on the assumption that the insurable value was higher. In the circumstances, the petitioner prays for the quashing of Ext. P-3 demand notice and for declaring Section 14 of the Scheme unconstitutional.
3. The respondents in their counter have stated that the petitioner has not correctly declared the value of the stock of insurable goods in their application for insurance. The amount of premium payable was also not correct. The 2nd respondent verified the figures given by the petitioner with their books of account and found that their valuation was far less than the real value of the goods (the relevant figures have been quoted in para 3). The averment in the petition that the petitioner had been insuring the goods from time to time giving correct valuation is denied. In fact, proper premium has not been paid. The letter dated 30-12-68 referred to in the petition was not the order demanding payment of the amount. It was only intimation showing the amount due as per calculation made by the 2nd respondent. The petitioner should have shown cause against it. The 2nd respondent has no power to recover any amount unless the figure is accepted by the party. In the event of a dispute the matter is to be referred to the 1st respondent. The survey report giving figures was given to the secretary of the petitioner-company on 30-12-1968. No objection was taken against that. So the 2nd respondent prepared a chalan and handed it over to the secretary who acknowledged the same by signing on the survey report. No objection was taken against that also and the figures were accepted by accepting the chalan. It is not correct to say that Ext. P-l was given in answer to the intimation dated 30-12-68. It was sent by post and received by the 2nd respondent only on 27-1-69, long after the chalan was accepted by the petitioner's secretary. In the objection the only point taken was that much of the goods were in transit and the petitioner believed that the insurance would be paid by the consignee (Hindustan Motors, Calcutta). They offered to give the correct figures on hearing from their principals. It was in the further letter dated 17-2-69 that the petitioner disclaimed liability to pay the amount as the period of insurance was over. They gave a list of certain goods in transit and offered to give a complete list shortly. The 2nd respondent visited the shop on 24-2-69 and 26-2-69; but no further information was given. It is not correct to say that the petitioners are not liable for the premium on goods in transit. The property in the goods would pass to the consignee, the moment the goods left the premises of the Hindustan Motors. There was no intermediary carrier in this case. The petitioners themselves took custody of the goods at Calcutta. The liability, therefore, is on the petitioners themselves and not on the Hindustan Motors. The sale was complete at Calcutta and the delivery was taken from there. The petitioners themselves are liable for the premium under Section 4 of the Act even if he is only an agent of the Hindustan Motors. The Act and the Scheme had made it obligatory for every person carrying on business in India as a seller or supplier of goods with a stock exceeding Rs. 30,000/- in value to take out insurance against emergency risks. The insurance to be taken was for a sum not less than the value of the insurable goods in terms of Section 7 (1) of the Act. The contravention of the provisions of the said section attracts penalties provided under Section 7 (2) of the Act. The petitioner having violated the provisions of Section 7 (1) by giving a gross undervaluation cannot be heard to say in these proceedings that he is not bound to pay the premium on the correct value of the goods. The liability of the petitioner is clear from Section 1 (3) of the Act. The demand to pay the correct premium is not violative of Article 19 (1) (f) of the Constitution. Para 14 (3) of the Scheme does not apply in this case where the evasion was found out after the period was over. There is no basis for saying that para 14 of the Scheme is unconstitutional or void. The petitioner is, therefore, not entitled to any relief.
4. The main point on which arguments were concentrated was that the emergency having ceased, the Act is of no application and no action is possible for any contravention of the Act committed during the pendency of the Act To appreciate the point, the implications of the Act and the Scheme have clearly to be borne in mind.
5. It was on the eve of the invasion of the northern frontier of India by the Chinese Military Forces that the proclamation under Article 352 (1) of the Constitution was promulgated by the President of India, on 26th October, 1962, declaring that a grave emergency existed threatening the security of India, The emergency continued until revoked under Art. 352 (2) on the 10th of January, 1968. In order to provide for the insurance of goods in India against damage by enemy action during the period of emergency Parliament enacted the Act. The material provisions may be noticed. Under Section 1 (3) the Act was to remain in force during the period of emergency, with the provision that its expiry shall not affect anything done or omitted to be done before such expiry and Section 6 of the General Clauses Act, 1897 shall apply upon the expiry of this Act as if it had been repealed by Central Act. Section 3 deals with goods insurable under the Act. Section 5 empowers the Central Government to put into operation a scheme whereby the Central Government would undertake the liability of insurance against emergency risks. Section 7 prohibits a person from carrying on a business in India while the Scheme is in operation as a seller or supplier of goods, unless in respect of any insurable goods owned by him in the course of that business, there is in force a policy of insurance against emergency risks issued in accordance with the scheme. The prohibition does not extend to persons whose insurable goods do not exceed Rs. 30,000/- in value. The contravention of the prohibition is punishable with fine. Section 8 provides:--
"(I) Without prejudice to the provisions of Sub-section (2) of Section 7, where any person has failed to insure as, or to the full amount, required by this Act, and has thereby evaded the payment by way of premium of any money which he would have had to pay but for such failure, an officer authorised in this behalf by the Central Government may determine the amount payment of which has been so evaded and the amount so determined shall be payable by such person and shall be recoverable from him as an arrear of land revenue and shall be a first charge on the goods in respect of which the default was made.
(2) A person against whom a determination is made under Sub-section (1), may within the period specified in the Scheme, appeal against such determination to the Central Government whose decision thereon shall be final."
Section 11 confers power upon the Central Government to obtain information ascertaining whether or not the requirements of the Act have been complied with. We are not very much concerned with the rest of the provisions.
6. The Scheme was put into operation by the Central Government with effect from 1st January, 1963. By para 3 of the Scheme the Central Government undertook in relation to persons carrying on business in India as sellers or suppliers of goods, the liability of insurance of such persons against emergency risks in respect of goods insurable under the Act Under para 4, "every person carrying on business in India as a seller or supplier of goods which have not been exempted under Sub-section (2) of Section 3 shall take out a policy of insurance against emergency risks, if the insurable value of the said goods in any one and the same presidency town or district exceeds rupees Thirty thousand". Para 8 provides, that every application for insurance under this Scheme shall be in accordance with the form set out in the first schedule and would be accompanied by a treasury chalan evidencing payment of the requisite premium. Para 9 provides that the insurable value of goods for the purposes of this scheme shall be arrived at on the basis of the prices prevailing at the time that the policy of insurance covering the goods takes effect or is intended to take effect. Para 10 prescribes the rate of premium. Para 14 is important. It reads:
"(1) Where any person has failed to pay the premium due from him or to insure as, or to the full amount, required by the Act and has thereby evaded the payment of any money which he would have had to pay but for such failure, the amount evaded shall be determined in accordance with the third Schedule.
(2) Every person against whom a determination has been made in pursuance of sub-paragraph (1) may, within the period laid down in the Third Schedule, appeal to the Central Government, whose decision shall be final.
(3) Where the amount determined in accordance with the provisions of sub-paragraph (1) or sub-paragraph (2) is fully recovered, the Government agent shall, as soon as possible after such recovery, send the requisite application forms to the defaulter for completion and return, and a policy or supplementary policy of insurance, according as the recovery is in respect of non-insurance or under-insurance, shall be issued by the Government agent on the receipt of the applications correctly filled in, the said policy or supplementary policy being made out so as to take effect from the date on which the amount was fully recovered."
7. From the above analysis of the Act and the Scheme it follows that it is compulsory on the part of a seller or supplier of goods in India to take out insurance against emergency risk in respect of goods the value of which exceeded Rs. 30,000/-. Pursuant to this obligation, the person concerned should apply for the policy on deposit of the requisite premium. Policy will be issued by the Government on compliance with the above requirements. In consideration of the insured paying the premium, the President of India agrees that if during the period of insurance mentioned in the policy the goods suffer any loss or damage caused by emergency risks as defined in the Act, to indemnify the insured against diminution in value caused by that loss or damage. Thus a contract comes into existence between the Government and the insured. There is a statutory obligation on the person to take insurance and in pursuance of that obligation he enters into a contract with the Government under which he pays the premium and the Government issues the insurance policy undertaking to indemnify him against loss or damage.
8. In the present case, action was initiated by the Chief Enforcement Officer against the petitioner under Section 8 of the Act. The petitioner's main contention, as already indicated, is that inasmuch as the Act expired with the revocation of the proclamation of emergency, no action under the Act can so be initiated. Law is settled that unless a temporary Act contains some provisions to the contrary, after the expiry of a temporary Act, it in its entirety ceases to have any further effect and no pending proceedings can be continued nor fresh proceedings can be initiated upon such an expired Act. In other words, offence committed against temporary Act must be prosecuted and punished before the Act expired. As soon as the temporary Act expires, any prosecution taken also would ipso facto terminate and no fresh prosecution is possible upon the expiry of the Act. But it is important to remember that the expiry of the Act does not make that statute dead or non-existent for all purposes. Whether any right or obligation under the Act would endure and survive in spite of the expiry of the Act would depend upon the construction to be put on the temporary Act, particularly with reference to the obligations arising out of the provisions and their nature and character. In considering the effect of the expiry of a temporary Act the fact to be noticed is whether the temporary Act contains within itself a saving provision on the lines of Section 6 of the General Clauses Act. In that case the saving provision of the General Clauses Act will have to be given effect to. The difference between the effect of the expiration of a temporary Act and the repeal of a permanent Act is pointed out by Parke B. in Steavenson v. Oliver, (1841) 8 M & W 234 at pp. 240 and 241 in the following words:--
"There is a difference between temporary statutes and statutes which are repealed, the latter (except so far as they relate to transactions already completed under them) become as if they had never existed, but with respect to the former the extent of the restrictions imposed, and the duration of the provisions are matters of construction." The argument is that the pending proceedings under the expired Act can be continued or fresh proceedings taken out in regard to the rights or obligations arising during the subsistence of the Act. In this view, resort need not be had to Section 6 of the General Clauses Act. If the pending proceedings are saved without the assistance of Section 6 of the General Clauses Act, then one may ask as to why the fresh proceedings relating to offences committed during the subsistence of the Act or to rights and obligations which arose then cannot be initiated after the expiry of the Act. According to Hidayatulla, C. J. (as he then was) in State of M. P. v. Hiralal, AIR 1959 Madh Pra 93, when the law continues in spite of its expiry for pending cases, why should it not continue even in regard to the initiation of fresh proceedings in regard to acts done or omitted to be done before its expiry. According to him the entire Act which expired continues even in regard to prosecution to be commenced after its expiry. The Supreme Court in Rayala Corporation v. Director of Enforcement, New Delhi. AIR 1970 SC 494 at p. 503 observed: "On the other hand, Mr. Desai on behalf of the respondent relied on a decision of the Privy Council in Wicks v. Director of Public Prosecution, 1947 AC 362. In that case, the appellant, whose case came Up before the Privy Council, was convicted for contravention of Regulation 2-A of the Defence (General^ Regulations framed under the Emergency Powers (Defence) Act, 1939 as applied to British subjects abroad by Section 3 (1) (b) of the said Act. It was held that, at the date when the acts which were the subject-matter of the charge, were committed, the regulation in question was in force, so that, if the appellant had been prosecuted immediately afterwards, the validity of his conviction could not be open to any challenge at all. But the Act of 1939 was a temporary Act, and after various extensions it expired on February 24, 1946. The trial of the accused took place only in May, 1946; and he was convicted and sentenced to four years' penal servitude on May 28. In these circumstances, the question raised in the appeal was: "Is a man entitled to be acquitted when he is proved to have broken a Defence Regulation at a time when that regulation was in operation, because his trial and conviction take place after the regulation has expired?" The Privy Council took notice of Sub-section (3) of Section 11 of the Emergency Powers (Defence) Act, 1939 which laid down that "the expiry of this Act shall not affect the operation thereof as respects things previously done or omitted to be done." It was argued before the Privy Council that the phrase "things previously done" does not cover offences previously committed. This argument was rejected by Viscount Simon on behali of the Privy Council and it was held that the appellant in that case could be convicted in respect of the offence which he had committed when the regulation was in force, That case, however, is distinguishable from the case before us inasmuch as, in that case, the saving provision laid down that the operation of that Act itself was not to be affected by the expiry as respects things previously done or omitted to be done. The Act could, therefore, be held to be in operation in respect of acts already committed, so that the conviction could be validly made even after the expiry of the Act in respect of an offence committed before the expiry...
In the case before us Section 6 of the General Clauses Act cannot obviously apply on the omission of Rule 132-A of the D. I. Rs. for the two obvious reasons that Section 6 only applies to repeals and not to omissions, and applies when the repeal is of a Central Act or Regulation and not of a Rule. If Section 6 of the General Clauses Act had been applied, no doubt this complaint against the two accused for the offence punishable under Rule 132-A of the D. I. Rs. could have been instituted even after the repeal of that Rule."
9. In the case before us, Section 1 (3) of the Act clearly provides that the expiry of the Act shall not affect anything done or omitted to be done before such expiry and Section 6 of the General Clauses Act, 1897 shall apply upon the expiry of this Act, as if it had been repealed by a Central Act. The Act must, therefore, be deemed to have been in operation when the contravention or refraction took place. On the application of Section 6 of the General Clauses Act the Supreme Court in AIR 1970 SC 494 (cited supra) would observe:--
"In that case, the prosecution had been started before the Defence of India Act ceased to be in force and, secondly the language introduced in the amended Sub-section (4) of Section 1 of the Act had the effect of making applicable the principles laid down in Section 6 of the General Clauses Act, so that a legal proceeding could be instituted even after the repeal of the Act in respect of an offence committed during the time when the Act was in force. As we have indicated earlier, the notification of the Ministry of Home Affairs omitting Rule 132-A of the D. I. Rs. did not make any such provision similar to that contained in Section 6 of the General Clauses Act."
It is thus clear that in view of Section 6 of the General Clauses Act made specifically applicable to contraventions of the provisions of the Act, an action could well be initiated against such contraventions committed during the pendency of the Act. This view is seen held by a Division Bench of the Patna High Court in Civil Writ Jur. Cases Nos. 1149 of 1969, 671 and 1652 of 1970 (Since reported in AIR 1972 Pat 314) (Eastern Bihar Divl. Chamber of Com-
merce, Bhagalpur v. Chief Enforcement Officer). A Division Bench of the Allahabad High Court in Writ Petns. 2262, 2996, 2997, 2998 and 3075 of 1970 (Raja Ram Om Pra-kash v. Union of India both not reported); and Union of India v. Thammana Sita-ramanjaneyulu, AIR 1971 Andh Pra 145. The Madras High Court, however, has taken a different view in Stoneware Pipes, Madras v. Union of India, AIR 1971 Mad 442, wherein Veeraswami, C. J., observed:--'The liability to pay premium evaded arises only on its determination and a demand being made on the defaulter. Where, therefore, proceedings for determination of premium evaded and for its recovery have been taken under Section 11 of the Act after expiry of Act, those cannot be saved under Section 1 (3) as those are not in respect of liability incurred or right accrued prior to repeal contemplated by Section 6 of General Clauses Act. The phraseology that expiry of Act shall not affect anything done or omitted to be done is also not help ful to save the proceedings as that phraseology will be apposite to things completed either by a positive act or by an omission before expiry of the Act."
We are in respectful disagreement with tha learned Chief Justice. The reasons stated by him do not persuade us to accept his line of thinking. The opposite view reflected in the judgments of the High Courts of Patna, Allahabad and Andhra Pradesh, referred to above, according to us reflects the correct view and we hold that the liability under the temporary Act would continue to subsist upon its expiry and proceedings could be commenced to give effect to that liability. The action taken against the petitioner is valid also from the stand point of Art. 358 of the Constitution, which provides that:--
"While a proclamation of Emergency js in operation, nothing in Article 19 shall restrict the power of the State as defined in Part III to make any law or to take any executive action which the State would but for the provisions contained in that part be competent to make or to take, but any law so made shall, to the extent of the incom-petency, cease to have effect as soon as the Proclamation ceases to operate, except as respects things done or omitted to be done before the law so ceases to have effect."
Therefore, the Enforcement Officer is justified in starting proceedings for realisation of the evaded premium and the compounding fee, which the petitioner is bound to pay. The complaint of the petitioner that the action initiated is violative of Article 19 (1) (f) of the Constitution has also no force in the above circumstances.
10. We see, however, from the proceedings that para 14 of the Scheme, which makes detailed provision for the procedure to be followed, has not been complied with. This point was conceded before us by the respondents and it was stated that the letter dated 30-12-1968 is not an order demanding payment of the money. It was only an intimation showing the amount due as per calculation made by them. The respondents will, therefore, proceed from that stage and comply with all the requirements of procedure before steps are finally taken to realise the amount. Subject to the above direction, the O. P. is dismissed. No order as to costs.