Andhra HC (Pre-Telangana)
C. Pattabhirama Rao vs New India Assurance Co. Ltd. And Anr. on 26 October, 2005
Equivalent citations: AIR2006AP173, 2006(2)ALT242, AIR 2006 ANDHRA PRADESH 173, 2006 (3) AKAR (NOC) 375 (AP) (2006) 2 ANDH LT 242, (2006) 2 ANDH LT 242
JUDGMENT P.S. Narayana, J.
1. Introductory facts: C. Pattabhirama Rao, the unsuccessful plaintiff in O.S.No. 434/88 on the file of II Additional Subordinate Judge, Visakhapatnam preferred this Appeal aggrieved by the dismissal of the suit. The said Pattabhirama Rao, appellant/plaintiff filed the aforesaid suit for recovery of a sum of Rs. 2,66,000/- together with subsequent interest and costs of the suit. The respondents herein, the New India Assurance Company Limited and the Syndicate Bank are shown as defendants 1 and 2 in the said suit. The relief of recovery was prayed for as against the 1st respondent herein/1st defendant in the suit. The learned Judge on appreciation of evidence of P.W.1, P.W.2, D.W.1, Exs.A-1 to A-19 and Exs.B-1 to B-4 and Ex.X-1 recorded findings that even on the strength of the Surveyor's report the relief cannot be granted and even otherwise Ex.A-1 Insurance policy is only a Fire policy and not Fire-A policy and hence the New India Assurance Company Limited cannot be fastened with liability inasmuch as such risk is not covered by the policy Ex.A-1. Hence the Appeal.
2. Pleadings of the parties: The plaintiff averred in the plaint as hereunder:
The plaintiff as a sole proprietor started a concern under the name and style of Ravi Food Products. The plaintiff wanted to construct a biscuit factory and carry on business of manufacture and sale of biscuits and started a small scale industry. The District Industrial Officer, Visakhapatnam granted a licence for the said small scale industry under Unit No. 01-20-2865 on 7-7-1982. After obtaining licence the plaintiff approached the 2nd defendant for the purpose of financial aid. The 2nd defendant granted the said financial assistance after due hypothecation of the movable property consisting of machinery, furniture and stock in trade and in addition as per the loan agreement between the parties i.e., between the plaintiff and the 2nd defendant. The said industrial unit should be comprehensively insured for ail risks as envisaged under Fire-A Policy covering all risks as detailed in the standard policy which includes 9 risks as detailed in Fire-A policy. It was also agreed between the plaintiff and the 2nd defendant that the 2nd defendant as bankers who gave financial assistance should themselves pay the premium to the concerned Insurance Company and receive the policy. The plaintiff's unit including building, machinery and stock-in-trade was insured by the 2nd defendant on behalf of the plaintiff with the 1st defendant for a total sum of Rs. 3,10,000/- and a Policy No. 12564-005053 was issued by the 1st defendant company to the plaintiff. The 1st defendant company issued the policy for the period commencing from 26-1-1986 to 25-1-1987. The 2nd defendant also collected from the 1st defendant company a sum of Rs. 592/- for the total insured sum of Rs. 3,10,000/-. The policy was issued and kept in the files of the 2nd defendant and all were under the impression that it was issued under Fire-A policy. Unfortunately due to heavy rains and floods during the first week of October 1986 the entire building where the biscuit factory of the plaintiff was situate collapsed on 6-10-1986. Consequently, the machinery situate inside the building for manufacture of biscuits was also badly damaged. The collapse of the building and the damage of machinery was all of a sudden on account of heavy rains and uncontrollable flood water. The plaintiff immediately informed the said incident on 7-10-1986 itself to both the defendants. The 1st defendant deputed a Surveyor to assess the damage both to the building and the machinery. The plaintiff is given to understand that the said Surveyor had recommended payment of compensation to a tune of Rs. 2,00,000/- after due and proper inspection and survey. The 2nd defendant who are the bankers of the plaintiff who are also interested for the said settlement of claim have addressed many letters to the 1st defendant and also to the Divisional Office and Branch Office of the 1st defendant. Peculiarly the plaintiff was informed by the 1st defendant that the policy under which the building and the machinery were insured, did not cover the risks of subsidence, cyclone, flood and inundation and as such the plaintiff is not entitled for compensation. The premium that was collected under the present policy is far excess. In fact even if the Fire-A policy for an amount of Rs. 3,10,000/- the premium will be Rs. 310/- and after deduction of commission it comes to Rs. 294/-. Peculiarly the 1st defendant company collected an amount of Rs. 592/- towards the premium. Hence the policy issued and contracted between the parties is a Fire-A Policy and not an ordinary Fire policy. Hence the 1st defendant is liable to pay a sum of Rs. 2,00,000/- towards compensation to the plaintiff. The plaintiff got issued a registered lawyer's notice dated 28-12-1987 to the 1st defendant. The 1st defendant received the said notice but did not issue any reply. As far as the 2nd defendant is concerned, the negligence on the part of the 2nd defendant is not immediately returning the ordinary Fire policy and getting a Fire-A policy. Hence the 2nd defendant is a necessary party to the suit and the plaintiff reserves his right to proceed against the 2nd defendant at a later stage if he is not compensated by the 1st defendant. The filling up of the forms for issuance of a policy is an offer. Payment of the premium is also an offer. When once the premium is accepted and encashed, the contract of insurance comes into existence as the amount of premium that is paid at Rs. 592/- being the premium for Fire-A policy and as the said amount had been accepted by the 1st defendant Insurance Company, the contract of insurance of Fire-A policy is sprung into existence which binds both the parties. The insurance of formal printed policy is only a subsequent event in confirmation of the original contract of insurance. As the suit transaction is a commercial transaction, the plaintiff is entitled to claim interest as claimed by him i.e., at the rate of 18% per annum from 6-10-1986. Hence the suit to recover a sum of Rs. 2,66,00/- from the 1st defendant together with costs and subsequent interest.
The 1st defendant filed written statement denying material allegations and also pleading as hereunder:
The 1st defendant Insurance Company had collected Rs. 592/- and had issued a policy. The policy issued was only Fire policy and not Fire-A policy. The plaintiff had been trying to interpret the nature of the contract and gain unlawfully by way of misrepresentation. The contract that was entered into between the plaintiff and the 1st defendant is clearly a Fire policy and not Fire-A policy as claimed by the plaintiff. The allegations that the biscuit factory of the plaintiff collapsed on 6-10-1986 are not known to the 1st defendant. The allegations that the machinery situate inside the building was damaged and that there was heavy rain and uncontrolled flood water are all not known to the 1st defendant. It is true that the Surveyor was appointed by the 1st defendant and it is only in the usual course of business that the 1st defendant had appointed the said Surveyor. Even the recommendations of the said Surveyor clearly establishes that it was only due to the structural weakness that the building collapsed but not due to cyclone or flood. Even if the loss was to be attributed to the flood or cyclone, the policy issued by the 1st defendant did not cover the said risk. The allegation that the surveyor had recommended payment of Rs. 2,00,000/- as compensation is an utter falsehood invented by the plaintiff. The Surveyor is not the authority to decide the payment. The policy did not cover the risk of cyclone or flood and as such the 1st defendant rightly repudiated the claim of the plaintiff. The 1st defendant issued a reply notice to the notice issued by the plaintiff. The contention of the plaintiff that Fire-A policy sprung into existence ad that it is binding on the 1st defendant are all vague and are untenable. The policy No. 12564-00538 was a standard Fire policy issued by the 1st defendant covering the building and machinery against fire, RSD and MD risks for a period of one year from 25-1-1985 to 25-1-1986 and the policy never covered the risks of damage due to flood or cyclone. As such the suit is not maintainable under law and prayed to dismiss the suit with costs.
The 2nd defendant/Syndicate Bank filed written statement denying the allegations as specified hereunder:
The suit against the 2nd defendant as framed is not legally maintainable and in fact no prayer had been asked for passing a decree against the 2nd defendant and as such the 2nd defendant is not a necessary party and is unnecessarily added. It is true that the plaintiff availed the ban facilities from the 2nd defendant as a small scale industry and the 2nd defendant required the plaintiff for insurance with all comprehensive benefits and risks including Fire policy. The plaintiff got the policy covering all the risks as required by the 2nd defendant and insured the same with the 1st defendant. The plaintiff in order to cover the insurance risk asked the 2nd defendant to pay the premium sums of behalf of the plaintiff and the amount as required by the 1st defendant for the comprehensive risk policy was paid. The 2nd defendant also was made to understand that all the nine risks under the standard policy of Fire-A policy was covered and the premium for the comprehensive policy was paid by the 2nd defendant on behalf of the plaintiff. After issuing the policy the subsequent premium for high amount covering all the risks was paid and the policy was in vogue and is in subsistence when the machinery etc., caused lot of damage due to heavy rains and floods. Hence the coverage of risk has to be answered by the 1st defendant as per the assessment of the Surveyors of the 1st defendant and the damage caused consequent of floods and heavy rains has got to be compensated properly by the 1st defendant to the plaintiff. The privity of contract is primarily between the plaintiff and the 1st defendant and the 2nd defendant being a Banker wanted to cover all the risks by Insurance Policy taken for the 1st defendant. The 1st defendant, therefore, in any event, is liable to pay the loan amount taken by the plaintiff to the 2nd defendant. The 2nd defendant cannot be called upon to compensate the plaintiff in the event of non-compliance by the 1st defendant. On that ground the 2nd defendant denies all responsibility or liability arising under the Fire policy and it is a matter exclusively to be decided interse between the plaintiff and the 1st defendant. The 2nd defendant therefore pleaded that under no circumstances the plaintiff can be given option to proceed against the 2nd defendant at a later stage. There is no cause of action for the plaintiff against the 2nd defendant and prayed to dismiss the suit against the 2nd defendant with costs.
3. Issues settled by the trial Court: The following Issues were settled by the trial Court on the respective pleadings of the parties:
(1) Whether the policy issued by the 1st defendant to the plaintiff is only 'fire policy' and not 'Fire-A' policy?
(2) Whether the Surveyor of the 1st defendant has recommended for the compensation of Rs. 2,00,000/- to the plaintiff?
(3) Whether the plaintiff is not entitled to claim the compensation of Rs. 2,00,000/-from the 1st defendant?
(4) Whether the plaintiff is entitled to claim interest from the 1st defendant?
(5) If so, to what relief?
4. Evidence available on record:
Oral evidence:
For plaintiff: For defendants:
P.W.1 Charge P. Rama Rao D.W.1 K. Kameswara Rao
P.W.2 Pattabhi Ramaiah
Documentary evidence:
Ex.A-1 Insurance policy
Ex.A-2 Certificate
Ex.A-3 News item in Andhra Bhoomi Daily dt. 7-10-1986.
Ex.A-4 Copy of letter dated 15-10-1986.
Ex.A-5 Office copy of letter dated 10-1-1987.
Ex.A-6 Reply from 1st defendant dated 30-1-1987
Ex.A-7 Letter received from 2nd defendant dt. 18-2-1987.
Ex.A-8 Copy of letter addressed to the 1st defendant dt. 2-3-1987.
Ex.A-9 Copy of letter addressed to the 1st defendant dt. 28-4-1987.
Ex.A-10 Letter received from 1st defendant dated 15-7-1987.
Ex.A-11 Letter addressed by 1st defendant dated 18-7-1987.
Ex.A-12 Copy of letter addressed by 1st defendant to 2nd defendant
dated 31-7-1987.
Ex.A-13 Copy of letter dated 18-8-1987.
Ex.A-14 Letter received from grievance cell dt. 21-8-1987.
Ex.A-15 Letter received from 1st defendant dated 25-8-1987.
Ex.A-16 Letter received from 1st defendant dated 21-8-1987.
Ex.A-17 Letter received from 1st defendant dated 31 -8-1987.
Ex. A-18 Office copy of notice to 1st defendant by plaintiff dated 28-12-1987.
Ex.A-19 Reply notice issued by 1st defendant to plaintiff dt. 13-6-1988.
For defendants:
Ex.B-1 Copy of policy.
Ex.B-2 Report of the Surveyor dated 2-12-1986.
Ex.B-3 Extract of General Tariff issued by Tariff Advisory Committee.
Ex.B-4 Relevant entry in Ex.B-3 (Risk Code No. 192).
Exhibits marked by 3rd party:
Ex.X-1 Circular dated 6-4-1985.
5. Findings recorded by the trial Court: The learned Judge discussed Issue No. 1 commencing from paras 22 to 26 and ultimately arrived at a conclusion that in view of the evidence let in by both the parties and after considering the documents filed by both the parties the Policy under Ex.A-1 issued by the 1st defendant is only Fire policy and not Fire-A policy. The learned Judge also recorded further findings while answering Issues 2 to 4 at para 27 against the plaintiff and in favour of the 1st defendant and ultimately at para 28 while answering Issue No. 5 dismissed the suit, but however without costs.
6. Contentions of Sri A, Subhash Chandra Bose: Sri Bose, the learned Counsel representing the appellant/plaintiff had taken this Court through the respective pleadings of the parties and the evidence available on record and would maintain that the fact that this is a Small Scale Industry is not in controversy and the fact that in view of the instructions of the circular Ex.X-1 in such cases Fire-A policy alone may have to be issued and not Fire policy, also cannot be in serious dispute. The Counsel would maintain that in such a case taking advantage of the mistake committed by the Insurance Company in issuing Fire policy in stead of Fire-A policy definitely cannot be sustained. The learned Counsel also had further explained that in the light of Section 64-UB and Section 64-UC of the Insurance Act, 1938, the Regulations made by the Tariff Committee to be followed by the Insurance Companies and even in this view also the appellant/plaintiff is entitled to the relief prayed for. The learned Counsel also pointed out to the correspondence between the Insurance Company and the plaintiff and also would maintain that at no point of time the liability was denied and in fact the Surveyor had estimated the losses and the conduct of the Insurance Company also may have to be taken into consideration while deciding the liability.
7. Contentions of Sri Kota Subba Rao: Sri Kota Subba Rao, the learned Counsel representing the 1st respondent/1st defendant, the New Assurance Company had initially explained the difference between the simple Fire policy and Fire-A policy. The learned Counsel also would maintain that a duty or obligation is cast upon the insured to see what is the nature of policy that is being secured by the insured and the blame cannot be thrown on the Insurance Company. The learned Counsel also would maintain that in the light of the finding recorded by the learned Judge that Ex.A-1 is only a Fire policy simpliciter and not Fire-A policy, the other questions may fall into insignificance and the Insurance Company cannot be fastened with liability at all. In the alternative, the learned Counsel would maintain that even if Ex.A-1 is looked into, there is nothing which makes it mandatory on the part of the Insurance Company to issue Fire-A policy only. Even otherwise the learned Counsel would maintain that these facts are to be established and the applicability or otherwise of the conditions specified in Ex.X-1 had not been properly connected to the present case by adducing acceptable evidence and hence by production of Ex.X-1 the Insurance Company cannot be made liable. The learned Counsel while further making his submissions on facts would contend that even otherwise the report of the Surveyor would go to show that the damage was not caused due to the alleged risk as pleaded by the plaintiff and hence even on facts the Insurance Company cannot be made liable. The learned Counsel also would contend that even if the Surveyor was not examined since the report of the Surveyor is not in serious dispute, the contents can be looked into. The learned Counsel also placed reliance on certain decisions in this regard. The learned Counsel while placing reliance on a decision of the National Commission would contend that though the said decision may not be a binding precedent as far as this Court is concerned, in view of the fact that the National Commission had followed the decision of the Apex Court the same can be looked into.
8. Heard the Counsel on record. Perused oral and documentary evidence available on record and the findings recorded by the learned Judge.
9. Points for consideration: In the light of the respective pleadings of the parties, Issues settled, the findings recorded by the learned Judge, contentions advanced by both the Counsel in this Appeal, the following Points arise for consideration:
1. Whether the findings recorded by the trial Court in relation to the Policy Ex.A-1 to the effect that the same is Fire policy simpliciter and not Fire-A policy to be disturbed?
2. If so, whether the appellant/plaintiff is entitled to the relief which had been prayed for on the strength of such policy?
3. Whether the 1st respondent/1st defendant Insurance Company can be fastened with liability in the light of the circular Ex.X-1?
4. Whether the appellant/plaintiff would be entitled to any relief whatsoever in the light of the report of the Surveyor and the contents thereof?
5. If so, to what relief the parties would be entitled to?
10. Points 1 to 4: These Points being inter-linked, for the purpose of convenience, can be dealt with together. A contract of Insurance is a contract of utmost good faith. Section 64-UM of the Insurance Act, 1938 deals with Licensing of Surveyors and Loss Assessors. Strong reliance was placed on Sub-section (2) of the said provision which reads as hereunder:
No claim in respect of a loss which has occurred in India and requiring to be paid or settled in India equal to or exceeding twenty thousand rupees in value on any policy of insurance, arising or intimated to an insurer at any time after the expiry of a period of one year from the commencement of the Insurance (Amendment) Act, 1968, shall, unless otherwise directed by the Controller, be admitted for payment or settled by the insurer unless he has obtained a report, on the loss that has occurred, from a person who holds a licence issued under this section to act as a surveyor or loss assessor (hereafter referred to as "approved surveyor or loss assessor"):
Provided that nothing in this sub-section shall be deemed to take away or abridge the right of the insurer to pay or settle any claim at any amount different from the amount assessed by the approved surveyor or loss assessor.
11. On behalf of the appellant/plaintiff the plaintiff examined himself as P.W.1 and also examined the then Manager of United India Insurance Company as P.W.2, Exs.A-1 to A-19 were marked and Ex.X-1 was marked through P.W.2. On behalf of the 1st respondent/1st defendant Insurance Company, K. Kameswar Rao, Assistant Administrative Officer was examined as D.W.1 and Exs.B-1 to B-4 were marked. P.W.1 deposed that for the construction of factory they applied for a loan from the 2nd defendant/Syndicate Bank and hypothecated their machinery, furniture and stock-in-trade etc. and as per the Bank rules and terms and conditions of the loan transaction, the 2nd defendant insured with the 1st defendant the hypothecated goods on their behalf and collected premium therefrom. This witness also deposed that the Industrial Small Scale units are insured under Fire policy-A and their unit is a small scale unit. The 2nd defendant had taken an ordinary Fire policy in respect of hypothecated goods and the machinery. This witness P.W.1 also deposed about certain details relating to Fire-A policy and the nine risks covered by the said policy. P.W.1 also deposed that on 6-10-1986 the factory building collapsed due to cyclone and the machinery and the building collapsed due to cyclone and the machinery and the building were damaged and they informed the 1st defendant and 1st defendant's Surveyor inspected the premises and submitted report. The damage was assessed at Rs. 2,00,000/- for the machinery and Rs. 60,000/- for the building and they informed the same to the 1st defendant. P.W.1 also deposed that after the accident he verified the policy with the 2nd defendant and found that the 2nd defendant obtained only Fire policy. They intimated to the 1st defendant that the Fire policy was issued instead of Fire-A policy and requested them to issue Fire-A policy and settle the claim. The 1st defendant sent a reply stating that the matter is under consideration. Ex.A-1 is the copy of the Insurance policy.Ex.A-2 is the Registration certificate of the unit. Ex.A-3 is the news item in Andhra Bhoomi daily dated 7-10-1986. Ex.A-4 is the copy of the letter addressed to the 1st defendant dated 15-10-1986. Ex.A-5 is the office copy of the letter dt. 10-1-1987. Ex.A-6 is the reply received from the 1st defendant dated 30-1-1987. Ex.A-7 is the letter dated 8-2-1987 received from the 2nd defendant. Ex.A-8 and A-9 are the copies of the letters addressed to the 1st defendant on 2-3-1987 and 28-4-1987. Ex.A-10 is the letter dated 15-10-1987 received from the 1st defendant. Ex.A-11 is the copy of the letter addressed to the Chairman of the 1st defendant Company dated 18-8-1987. Ex.A-14 is the letter received from Grievance cell of the 1st defendant dated 21-8-1987. Exs.A-15 and A-16 are the letters received from the 2nd defendant dated 25-8-1987 and 21-8-1987. Ex.A-17 is the letter received from the 1st defendant on 31-8-1987. In Ex.A-17 the 1st defendant intimated P.W.1 that his claim is not covered by the policy. Hence lawyer's notice was issued. Ex.A-18 is the office copy of the notice and Ex.A-19 is the reply received from the 1st defendant. This witness also explained about the other damages which had been caused and the assessment made by the Surveyor. In cross-examination this witness deposed that after the accident he came into possession of Ex.A-1 and he did not issue any instructions in writing to the 2nd defendant to obtain a particular kind of policy and they have not filed any accounts showing that Small Scale Industry shall be covered only under Fire-A policy and this witness also deposed that the damage by cyclone is not covered by Ex.A-1 policy and the other suggestions were denied by P.W.1.
12. P.W.2 no doubt explained the meaning of Tiny sector and also explained Small Scale Industry. This witness deposed that Ex.X-1 is the Tariff Advisory Committee circular, TAC Bombay, No. FT 10-A/85 dated 18-4-1985. P.W.2 further deposed that under this Tiny Sector a person is eligible to insure his building, machinery upto Rs. 5 lakhs covering the risk of fire, ryot, melosis damages, explosion damage, air cap damage and other damages noted in Ex.X-1. The Insurance Company collected Re.1A per Rs. 1,000/-per year as a premium for that risk. In the present case Fire policy was issued instead of Fire-A policy. The tiny sector comes under Fire-A policy. These Rules are applicable to all Insurance Companies. The circular came into force from 1-6-1985 and this circular Ex.X-1 was in force as far as his knowledge is concerned. This witness was cross-examined. This witness deposed that he worked as Manager of United India Insurance Company Limited and as the Manager there was no scope for him to settle any dispute arising out of the contract of insurance. The terms and conditions will be printed for every contract of insurance. P.W.2 also deposed that he had gone through the terms and conditions of the contract in dispute and it is Fire policy and not Fire-A policy. This witness further deposed that the difference between Fire and Fire-A policy is that in the latter a wider coverage will be there than in the former case. Since it is a restricted coverage in Fire policy the risk due to cyclone and storm are not covered. P.W.2 no doubt denied certain suggestions.
13. As against this evidence adduced on behalf of the appellant/plaintiff, on behalf of the 1st defendant, D.W.1 K. Kameswara Rao was examined who deposed that he has been working as Assistant Administrative Officer in the 1st defendant's Corporation since 1989 and he is giving evidence with reference to records. This witness also deposed that the plaintiff has taken Fire insurance policy in respect of the Biscuits factory. The policy covers fire, lightning, explosion of boiler or gas cylinder used for domestic purpose. So the policy of the plaintiff is Fire policy and not Fire-A policy. This witness further explained about Fire-A policy in detail. D.W.1 also deposed that a Surveyor was appointed by the 1st defendant to survey, assess the cause of damage and also to assess the loss. As per the Surveyor's report the building collapsed due to oozing of water as the building is situate by the side of hill but not due to cyclonic effect. This witness further deposed that they repudiated the claim of the plaintiff as the policy did not cover the claim. By the time of issuing the policy to the plaintiff there was no Fire-A policy issued by the 1st defendant to any party. Ex.B-1 is the copy of the policy issued to the plaintiff along with clauses and conditions dated 11-2-1986. Ex.B-2 is the report dated 2-12-1986 of the Surveyor. Ex.B-3 is extract of general tariff issued by the Tariff Advisory Committee showing the rates of premium to be collected for issuance of the Fire policy. This witness also deposed that premium of Rs. 592/- had been collected from the plaintiff as per condition No. 192 of Ex.B-3. The relevant entry in Ex. B-3reIating to Bakeries and Biscuit factories under risk code No. 192 was marked as Ex.B-4. This witness D.W.1 was cross-examined. In the cross-examination of the 2nd defendant this witness D.W.1 specifically deposed that it is not true to suggest that the Bank paid the insurance premium as per the tariff covering all the risks and it is not true to suggest that the Insurance Company is solely responsible if any compensation is going to be paid but not the 2nd defendant. In cross-examination of the plaintiff D.W.1 deposed that all Insurance Companies follow the tariff guidelines issued by the Tariff Advisory Committee and no Insurance Company violates the guidelines issued by the Tariff Advisory Committee. This witness also deposed that they had not inspected the premises of the industry before it was insured. Ex.B-3 tariff is valid from 1-1-1979 to 30-6-1987. There are no guidelines issued by the Tariff Advisory Committee in respect of item No. 192. Ex.X-1 has nothing to do with the Biscuit factory. This witness further deposed that it is not true to suggest that as per Ex.X-1, the Tariff Advisory Committee guidelines, the Insurance Company has to give only Fire-A policy and the other suggestions in relation to Ex.X-1 also had been specifically denied.
14. On a careful scrutiny of the oral and documentary evidence available on record the principal contention which had been advanced on behalf of the appellant/plaintiff that in view of Ex.X-1, the 1st respondent/1st defendant should be fastened with liability since in case of Small Scale Industries of this nature Fire-A policy alone has to be issued, is to be examined. The evidence of D.W.1, especially the answers elicited in cross-examination are clearly clarificatory in nature relating to the applicability or otherwise of Ex.X-1. Even otherwise on a careful scrutiny of the evidence of P.W.1 and P.W.2 it cannot be said that there is any acceptable evidence to connect Ex.X-1 to the present claim made by the appellant/plaintiff. Strong reliance was placed on Sections 64-UB and 64-UC of the Insurance Act 1938. Section 64-UB of the said Act had been specifically pointed out.
This aspect need not detain this Court any longer for the reason that even for the applicability or otherwise of the conditions specified in Ex.X-1 several aspects may have to be satisfied and in the absence of acceptable evidence it cannot be said that by virtue of Ex.X-1 the Insurance Company is bound to issue Fire-A policy only and instead by mistake issued only Fire policy and hence the 1st respondent/Insurance Company is bound to pay the amount. In the light of the evidence available on record this contention of the appellant/plaintiff is liable to be rejected and accordingly the same is hereby rejected.
15. Even as per the admissions made by P.W.1 and P.W.2 there is no controversy at all that what had been issued by the 1st respondent Insurance Company is only Fire policy simpliciter and not Fire-A policy. There is no clear evidence with regard to what transpired between 2nd respondent/ Syndicate Bank and the 1st respondent/ Insurance Company, but however the fact remains that in cross-examination of P.W.1, he admitted that he had not instructed the financier, the Banking Institution/Syndicate Bank to take a particular type of policy. Apart from this aspect of the matter, though it is the case of the appellant/plaintiff that the financier/ Banking lnstitution/2nd respondent-Syndicate Bank had secured the policy, the appellant/plaintiff is under an obligation to verify to check up the same and hence it cannot be contended that the 1st respondent/ Insurance Company alone should be held responsible on the ground that mistake had been committed by the Insurance Company. In such a case, it cannot be said that the Insurance Company is taking advantage of its own wrong. The learned Counsel representing the 1st respondent placed strong reliance on a decision of the Apex Court in Pradeep Kumar Jain v. City Bank 1999 (5) ALT 14 (SC). It is true that the said matter was decided in the context of the Motor Vehicles Act, 1988 i.e., Sections 146 and 196 of the said Act and the Apex Court observed at paras 5 and 6 as hereunder:
Under Section 146 of the Act there is an obligation on the owner of a vehicle to take out a insurance policy as provided under Chapter XI of the Act. If any vehicle is driven without obtaining such an insurance policy it is punishable under Section 196 of the Act. The policy may be comprehensive or only covering third parties or liability may be limited. Thus, when the obligation was upon the appellant to obtain such a policy, merely by passing of a cheque to be sent to the Insurance Company would not obviate his liability to obtain such policy. It is not clear on the record as to the nature of the policy that had been obtained by the appellant earlier when he purchased the vehicle and which was to be renewed from time to time. It is also not clear whether even in the case of renewal, a fresh application has to be made by the appellant or on the old policy itself an endorsement would have been made. In the absence of such material on record, and the nature of the insurance policy or any anxiety shown by the appellant in obtaining the policy as he could not ply such vehicle without such an insurance policy being obtained, he cannot claim that merely because he had passed on the cheques, the entire liability to pay all damages arising would be upon the first respondent.
In the case of life insurance policy certain sum agreed to be paid by the insurance company in the event of the death of the insured or a contingency arising as indicated in the policy. The obligation is then on the insured to pay the premiums periodically. There is no other obligation upon him. In the case of a motor vehicle, the risk to be covered is not only in respect of a vehicle but also towards the injury to others or damage caused to the property arising out of an accident. In such an event, when the policy is renewed or a fresh policy is applied for, an application has to be given and it is to be indicated whether any claim had been made in the previous year or not and to furnish appropriate material as regards the valuation of the vehicle. It can also be made clear as to the nature and extent of the risk covered whether it is only third party or comprehensive or otherwise. The obligation under the Act is only at least to cover third party risk. Thus mere payment of premium could not result in an automatic renewal of the policy. In the circumstances, we find that the appellant also had certain duties to discharge in the matter of obtaining insurance policy and cannot merely put the blame on the first respondent.
Reliance also was placed on National Insurance Co. Ltd. v. Seema Malhotra where the Apex Court at paras 16 to 19 observed as hereunder:
Section 54 of the Contract Act is to be read in that background. It is extracted below:
When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non-performance of the contract.
In a contract of insurance when an insured gives a cheque towards payment of premium or part of the premium, such a contract consists of reciprocal promise. The drawer of the cheque promises the insurer that the cheque, on presentation, would yield the amount in cash. It cannot be forgotten that a cheque is a Bill of Exchange drawn on a specified banker. A Bill of Exchange is an instrument in writing containing an unconditional order directing a certain person to pay a certain sum of money to a certain person. It involves a promise that such money would be paid.
Thus, when the insured fails to pay the premium promised, or when the cheque issued by him towards the premium is returned dishonoured by the bank concerned the insurer need not perform his part of the promise. The corollary is that the insured cannot claim performance from the insurer in such a situation.
Under Section 25 of the Contract Act an agreement made without consideration is void. Section 65 of the Contract Act says that when a contract becomes void any person who has received any advantage under such contract is bound to restore it to the person from whom he received it. So, even if the insurer has disbursed the amount covered by the policy to the insured before the cheque was returned dishonoured, insurer is entitled to get the money back.
Reliance was placed on the above decision in the context of explaining the ambit and the operation of the applicability of Section 64-VB of the Insurance Act, 1938, Reliance also was placed on T. Venkatachalapathi Lorry Service v. The N.I.A. Co. Ltd. 1998 Accident and Compensation Cases 102 (D.B.) and also Economic Roadways Corporation Hyderabad v. National Insurance Co., Hyderabad2002 (1) An.W.R. 661 = 2002 (1) LS. 128 (D.B.) for the proposition that the non-examination of the Surveyor would be of no consequence and the report of the Surveyor can be relied upon. Reliance also was placed on a decision of the National Commission in National Insurance Co. Ltd. v. Winner Chorates Pvt. Ltd. 2003 (5) ALT 29 (NC) (CPA) wherein at paras 7 and 8 the National Commission observed :
A mere perusal of this, sets up the perspective. We find lot of substances in the argument of learned Counsel for the Appellants that while the State Commission has only not considered the report of Surveyor who is a Chemical Engineer by qualification - what we would call the only expert view/opinion in this case-but has placed reliance on the testimony of State Fire Officer who could not even say, whether the smoke was white or black in colour. It has a deep significance in view of the testimony of the Surveyor that release of ammonia gas results in white fumes settling over the smoke. From the complainant side only its M.D. was examined who reached the spot after one and a half hour of the incident. Fire Officer states that fire extinguished in the tank itself, which was caused by chemical reaction. Another flaw we see in the analysis of the case by the State Government is that they 'presumed' it to be case of fire. We agree that origin of 'fire' is immaterial but 'case' of fire has to be proved which in our view the complainant has failed to prove, yet benefit was given to him. This appeared because whole material on record was not considered by the State Commission. After perusal of the material on record, we are prone to agree with the hypothesis that in fact there was no fire as commonly understood. No flame or smoke was seen. In fact, the Fire Brigade went back without doing anything as the so-called 'fire extinguished itself in the tank'. What happened inside the tank was a chemical reaction caused by wrong mixing of chemicals and ammonia gas coming out which is white in colour as per the Surveyor who is a Chemical Engineer. It is these fumes, which were read/seen as fire.
The report of the Surveyor is an important document, which should have been gone into/assessed by the State Commission. As held by the Hon'ble Supreme Court, non-consideration of the Surveyor's Report did indeed result in miscarriage of justice in the instant case leading to wrong conclusion on the part of the State Commission.
It is no doubt true that this is a decision delivered by the National Consumers Disputes Redressal Commission, New Delhi and this may not be a binding decision on this Court. But however, the learned Counsel had referred to the fact that the said decision was delivered by the National Commission in the light of the decision of the Apex Court in United India Insurance Co. Limited v. Roshanlal Oil Mills Limited in Appeal Nos. 414/93 and 2458/97. Even otherwise in the light of the binding decision of the Division Bench of this Court following the decision of the Division Bench of Madras High Court referred to supra, the importance of the report of the Surveyor cannot be totally ignored. Even if the contents of report of the Surveyor if carefully examined, this Court is of the considered opinion that the appellant/plaintiff is bound to fail. Viewed from any angle, the appellant/plaintiff cannot get any relief whatsoever at the hands of this Court. Hence the findings recorded by the learned Judge are hereby confirmed.
16. Point No. 5: In the light of the foregoing discussion, in view of the fact that the findings of the learned Judge are hereby confirmed, it is needless to say that the Appeal is devoid of merit and accordingly the same shall stand dismissed. But however in the peculiar facts and circumstances of the case, the parties to bear their own costs.