PARAS TEXTILE vs NEW INDIA ASSURANCE CO. LTD.

THE present Appellant M/s. Paras Textile had filed a complaint before the Consumer Disputes Redressal Commission, Gujarat State, Ahmedabad under the Consumer Protection Act, 1986. The said complaint was registered by that Commission as Original Complaint No. 276 of 1991. The present Respondent, the New India Assurance Company Ltd. (for short the Company), was the Opposite Party in the complaint. The State Commission dismissed that complaint vide order dated 14th February, 1992. Not satisfied with that order the Complainant has filed the present appeal.

THE facts as appear from the order of the State Commission, memorandum of appeal and the reply filed by the Company to the memorandum of appeal are that the Appellant had taken Accident Insurance Policy from the Company in respect of their processing house for the period commencing from May 13, 1986 to May 12, 1987 for recovering risk up to Rs. 5,00,000/-. The policy also covered the risk of theft. Allegedly a theft took place in the factory of the Appellant on February 3, 1987. According to the Appellant sixty bundles of silk handloom cloth of different colours having different lengths were found missing. The Appellant made complaint to the Police and also informed the Company about the alleged loss. Vide letter dated 25th August 1988, the Company repudiated its liability. On 23rd August, 1991 i.e. two days prior to the expiry of three years the Appellant filed the complaint before the State Commission requiring the Company to make payment of the loss suffered by them which was assessed at Rs. 1,16,280/-. Interest at the rate of 18% from 4th February, 1987 till recovery of the money was also prayed for by the Appellant. The Company denied its liability and raised preliminary contention that the complaint was barred as the suit was not filed within 12 months from the date of disclaimer i.e. 25th August, 1988 and therefore, the Complainant will be deemed to have abandoned their claim. For the preliminary contention reliance was placed upon the latter portion of Clause 12 of the insurance policy which reads as follows: "It is also hereby further expressly agreed and declared that if the Company shall disclaim liability to the insured for any claim hereunder and such claim shall not within 12 calendar months from the date of such disclaimer have been made the subject matter of a suit in a Court of law, then claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder".

Thus according to the Company nothing is recoverable from it.

ON consideration of the various decisions cited before it, the State Commission came to the conclusion that the last portion of Clause 12 of the policy reproduced above, was not void under Section of 28 of the Contract Act and in view of that Clause the Complainant-Appellant will be deemed to have abandoned their rights under the insurance policy and as the right did not exist the complaint did not lie. The complaint was accordingly dismissed with no order as to costs.

AFTER hearing the parties we are of the opinion that the findings arrived at by the State Commission are correct. We need not refer to the various rulings upon which the State Commission has placed reliance while arriving at the findings noticed above. We may however, refer to two rulings which find a reference in the decision of Supreme Court in Vulcan Insurance Co. Ltd. v. Maharay Singh & Anr., 1976- 287 as the facts of those cases have not been narrated either in the Supreme Court case or the State Commission. We may first refer to Dawood Tar Mahomed Bros, and Others v. Queensland Insurance Co. Ltd., 1949 Calcutta 390. In that case Clause 19 of the Policy read as follows: "In no case whatever shall the company be liable for any loss or damage after the expiration of twelve months from the happening of the loss or damage unless the claim is the subject of pending action or arbitration."

It was urged in that case that the said Clause was void because it operates so as to defeat the provisions of the law of limitation. It was remarked (para 31): "Mr. Dey for the plaintiff argues that this Clause is void because it operates so as to defeat the provisions of the law of limitation. This identical clause was the subject matter of a decision in the Rangoon High Court, A.N. Ghosh v. Reliance Insurance Co., 11 Rang, 475: (A.I.R. (21) 1934 Rang. 15) where a similar argument was put forward and rejected. "It is not a case,, said Leach J.,

"Of the clause stating that the insured shall not have the right to sue after 12 months. If it did that it would in my opinion be void, but it is a case where the parties have agreed that in certain circumstances the Insurance Company should be under no liability under its policy."

With respect that is a view with which I entirely agree. The plaintiff is not limited as to the time within which he may bring a suit; the restriction is on the time during which the company will accept liability for loss.

In Ruby General Insurance Co. Ltd. v. The Bharat Bank Ltd. and Ors., 1950Punjab 352 also the Insurance Co. relied on Clause 19 of the conditions of insurance as defence to the suit brought by the insured. That clause was absolutely similar to the one in Dawood''s case (Supra). The Subordinate Court had allowed the application filed under Section 20 of the Arbitration Act by the insured holding that the parties could not by agreement curtail the period of limitation and therefore Clause 19 of the conditions of arbitration agreement (Le. insurance policy) was void. The Insurance Co. went in appeal and it was urged that Clause 19 of the conditions of insurance was not void as it neither contravened the Law of Limitation nor the Law of Contract. It was held in that case (para 41) that the limitation placed by the terms of a policy during which a claim can be made or after which excepting in certain contingencies the liability of the insurer will cease is not a condition which is void under the Contract Act or under the Limitation Act. Accordingly, the appeal filed by the Insurance Company was allowed.

IN Vulcan Insurance Co. 9s (Supra) Clauses 13 and 19 of insurance policy which were in dispute read as follows: "13. If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devices are used by the insured or any one acting on his behalf to obtain any benefit under this Policy; or, if the loss or damage be occasioned by the willful act, or with the connivance of the insured; or, if the claim be made and rejected and an action or suit be not commenced within three months after such rejection, or (in case of an arbitration taking place in pursuance of the 18th condition of this Policy) within three months after the Arbitrator or Arbitrators or Umpire shall have made their award, all benefit under this Policy shall be forfeited."

" 19. In no case whatever shall the company be liable for any loss or damage after the expiration of twelve months from the happening of the loss or damage unless the claim is subject of pending action or arbitration.,''

About Clause 13 the Court remarked as follows: "As per Clause 13 on rejection of the claim by the company an action or suit, meaning thereby a legal proceeding which almost invariably in India will be in the nature of a suit, has got to be commenced within three months from the date of such rejection; otherwise, all benefits under the policy stand forfeited. The rejection of the claim may be for the reasons indicated in the first part of Clause 13, such as, false declaration, fraud or wilful neglect of the claimant or on any other ground disclosed or undisclosed. But as soon as there is a rejection of the claim and not the raising of a dispute as to the amount of any loss or damage, the only remedy open to the claimant is to commence a legal proceeding, namely, a suit for establishment of the company''s liability."

About the Clause 19 it was remarked:" "It has been repeatedly held that such a clause is not hit by Section 28 of the Contract Act and is valid.,,

IN view of the aforesaid decisions and the decisions relied upon by the State Commission we hold that Clause 19 of the policy is not void either under the Law of Limitation or Law of Contract and the Appellant having abandoned their right by not filing a suit or taking any action within 12 months from the date of the repudiation of their claim by the insured, the Company is not under any liability to pay the claim to the insurer under the policy. For the foregoing reasons we do not find any force in the present appeal and dismiss the same with costs which we assess at Rs. 2,000/-.