S. Shivraj Reddy (Died) thr his Lrs. And Another v. S. Raghuraj Reddy and Others
- 2024 SCC OnLine SC 963.
National Insurance Company Limited v. Yellamma And Another - (2008) 7
Supreme Court Cases 526.
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(Paragraph Nos. 11, 12, 14 and 15) and Seema Malhotra5
(Paragraph No. 18).
21. In sharp contrast, Mr. Ashutosh Marathe, Learned Advocate
on behalf of the Society would submit that there is nothing perverse in
the National Commission Order, inasmuch as the objectives of the
Consumer Protection Act, 1986 have been appropriately addressed by
the National Commission. He would submit that New India did not
even bother to challenge the State Commission's Order, even while
participating in the appellate proceedings filed by the Thane Bank and
the Society. Even while resisting these appeals, the issue of limitation
was never pressed by New India before the National Commission, which
led to the point of limitation not being framed for determination, in the
absence of either an appeal, or an objection in resisting others' appeals,
by New India. Therefore, it is late in the day for New India to raise the
issue of limitation at this stage, in a Writ Petition, having given up any
grievance it may have had with the State Commission's Order, in
particular on the facet of limitation since even in the others' appeals,
New India did not table its objection to the finding by the State
Commission that the Society's claim was not barred by limitation.
National Insurance Company Limited v. Seema Malhotra - (2001) 3 SCC 151.
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22. As regards Section 64 VB of The Insurance Act, 1938, Mr.
Marathe would submit that quite clearly, the cheque for policy premium
had been issued by the Society well in advance of the scheduled expiry
of the earlier policy. The amount had been paid under cover of the letter
dated July 17, 2005, which was not only accepted by New India but also
led to New India issuing the renewed Insurance Policy on July 22, 2005.
The premium cheque ought to have been deposited by New India
promptly, but it was New India's own failure to present the cheque well
after the renewed policy commenced its coverage - the cheque had been
presented only on July 30, 2005 after the floods of July 26, 2005. Such
delay is what has led to the purported cancellation of the policy on
August 4, 2005. Yet, that there was no cancellation is seen from the fact
that New India had been following up with its Surveyor, and that apart,
indeed, it is a matter of record that the Society had more than sufficient
funds in its bank account. New India made another mistake by wrongly
claiming that the cheque had been dishonoured owing to insufficient
funds - a fact it has failed to prove in two rounds of litigation.
23. The Thane Bank has explained that State Bank of India, New
India's bank, had been requested to present the cheque afresh and yet
there is no explanation as to why this action had not been taken. In the
result, Mr. Marathe would submit that there is abject failure on the part
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of New India all along, which is an clear deficiency of service and
operational negligence, for which the Society, as a consumer of
insurance services, ought not to suffer.
24. In the result, Mr.Marathe would contend that the
extraordinary writ jurisdiction of this Court ought not to be exercised to
disturb what is an eminently reasonable exercise of jurisdiction by the
National Commission.
Analysis and Findings:
25. Having heard Learned Advocates for the parties and having
examined the record with their assistance, it is apparent that the
Insurance Policy was not a brand new policy but was a pre-existing
policy with the Society having been insured right from July 25, 2004.
Ground of Bar of Limitation:
26. The primary ground of challenge is that the Society's claim is
barred by limitation, mooring the accrual of the cause of action to
August 4, 2005.
27. Indeed, the torrential rains in Mumbai that took place on July
26, 2005 led to the filing of a claim in the sum of Rs.37.33 Lakhs. This
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claim was filed on August 7, 2005. Since New India claims that on
August 4, 2005 it had already cancelled the Insurance Policy on account
of the premium cheque having been dishonoured owing to insufficient
funds, there ought to have been some contemporaneous and collateral
evidence to indicate this position in New India's conduct. In sharp
contrast, the material on record points to the contrary - on January 31,
2006 i.e. five months later, New India was following up with its
Surveyor on the survey report and was even threatening to report him to
the IRDA. All of this leads to a reasonable preponderance of probability
that New India's claim of repudiation having taken place on August 4,
2005 does not inspire confidence.
28. Limitation is a mixed question of fact and law. Two
concurrent forums have analysed the attendant conduct of New India at
the relevant time and have returned reasonable findings on the basis of
the evidence in the form of the letter dated January 31, 2006. There is
nothing unreasonable or arbitrary in the finding on the mixed question
of fact and law. Section 24A of the Consumer Protection Act, 1986
provides for a two-year time limit for filing a complaint and a proviso
for condonation of delay. One would need to seek condonation of delay
if there had been delay. The Society had followed up throughout 2005
with New India, which did not lead to any rebuttal from New India,
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leave alone a firm one. Worse, there is evidence as of January 31, 2006
that New India was processing the insurance claim.
29. It is not disputed that there is no response to the Society's
letter dated August 7, 2005, expressing surprise that the Society could
even raise such a claim. That apart, even if one treats the Society's letter
issued through September 2005 and January 2006 as communication
that would not led to unilateral extension of the limitation period, it is
apparent from the letter dated January 31, 2006 issued by New India to
its Surveyor, Mr. Suratkar asking him to urgently submit the Survey
Report, that far from New India having been of the view that the
Insurance Policy stood repudiated, it was in fact following up and
processing the Society's claim since it wanted its surveyor to submit the
Survey Report.
30. Therefore, I see no reasonable basis to interfere with the
National Commission Order, which does not contain any infirmity on
the ground of arbitrariness or perversity in its finding that as of January
31, 2006, New India had not repudiated the insurance policy. It is
wholly unfair and inappropriate for New India to seek to base its Writ
Petition on the premise of limitation and that too when it did not raise
this issue before the National Commission, even while defending the
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Society's claim. Worse, it is totally unfair to expect the National
Commission to frame an issue on which there is no controversy
presented by the conflict between the positions of the parties before the
forum.
31. There ought to have been some indicia that this issue was at
the fore, even if it was not squarely raised. I find that the National
Commission Order indeed returns findings on the implications of the
January 31, 2006 letter of New India, which is indeed copied to the
Society. It is not right to claim that the letter was not addressed to the
Society, because although it was addressed to the Surveyor, it was
copied to the Society. Implicit in this analysis is the fact that the
National Commission indeed found that as of January 31, 2006, New
India could not have been found to have repudiated the claim.
32. The complaint by the Society before the State Commission has
been verified and filed on August 31, 2007. If one takes the date of
January 31, 2006 as the date of accrual of the cause of action, at which
time, New India is seen as having acted in a manner that the claim was
not repudiated (and it was in fact following up on the claim), the
complaint to the State Commission was filed well within limitation. The
State Commission's findings of a mixed question of fact in law that the
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claim was not barred by Section 24-A of the Consumer Protection Act,
1986 cannot be faulted as being arbitrary or unreasonable.
33. I am not persuaded by Mr. Vidyarthi's best efforts to contend
that the date of accrual of the cause of action was August 4, 2005, for
the reasons analysed above. It is quite evident that New India never
asserted this position throughout 2005 and even as late as January
2006, when New India was threatening its own Surveyor with
regulatory action before the IRDA if the Survey Report was not
forwarded. The National Commission too has noticed this facet and
reasonably held that the claim of repudiation as of August 4, 2005 does
not lend itself to acceptance. Implicit in this finding is an assessment
that the Society's claim was not barred by limitation.
Kandimalla and Hindustan Safety Glass:
34. In my opinion, the reliance on Kandimalla Raghavaiah is
wholly inappropriate in the facts of this case. Mr. Marathe's reliance on
two decisions of the Supreme Court that noticed Kandimalla
Raghavaiah and differentiated it, bear strong resonance in the instant
case. Paragraph Nos. 16, 17 and 18 in Hindustan Safety Glass Works
Limited6 are worthy of extraction - they too reflect a case of floods and
National Insurance Company Limited v. Hindustan Safety Glass Works Limited -
(2017) 5 Supreme Court Cases 776.
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differentiate the facts from Kandimalla Raghavaiah in the following
terms:
16. Similarly, reliance on Kandimalla Raghavaiah & Co. v.
National Insurance Co. is misplaced. In this case, a fire broke out
in the premises of the insured on 23-3-1988 and the appellant
therein sought a claim from the insurance company on 6-11-1992
while the complaint was filed with the National Commission on 24-
10-1997. Under these circumstances, it was held that the complaint
was barred by limitation.
17. Strictly speaking, the event that caused the loss or
damage to the insured occurred on 6-8-1992 when due to heavy
incessant rain in Calcutta, the raw materials, stocks and goods,
furniture etc. of the insured were damaged. On the very next day, the
insured lodged a claim with National Insurance. In response,
National Insurance first appointed N.T. Kothari & Co. to assess the
loss suffered by the insured and a report was given by this surveyor
after more than one year. Thereafter, for reasons that are not at all
clear, National Insurance appointed a second surveyor which also
took about one year to submit its report and eventually gave an
addendum to that report thereby crossing one year in completion of
its report along with the addendum. In other words, National
Insurance itself took more than two years in surveying or causing a
survey of the loss or damage suffered by the insured. Surely, this
entire delay is attributable to National Insurance and cannot
prejudice the claim of the insured, more particularly when the
insured had lodged a claim well within time. To make matters
worse, National Insurance actually repudiated the claim of the
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insured only on 22-5-2001 which is well after the complaint was
filed with the National Commission.
18. In our opinion, in a dispute concerning a consumer, it is
necessary for the courts to take a pragmatic view of the rights of
the consumer principally since it is the consumer who is placed at a
disadvantage vis-à-vis the supplier of services or goods. It is to
overcome this disadvantage that a beneficent legislation in the form
of the Consumer Protection Act, 1986 was enacted by Parliament.
The provision of limitation in the Act cannot be strictly construed to
disadvantage a consumer in a case where a supplier of goods or
services itself is instrumental in causing a delay in the settlement of
the consumer's claim. That being so, we have no hesitation in
coming to the conclusion that the National Commission was quite
right in rejecting the contention of National Insurance in this regard.
[Emphasis Supplied]
35. In the matter at hand too, the Society made its claim on
August 7, 2005, within two weeks of the floods of July 26, 2005. There
was no repudiatory response throughout the rest of 2005 when the
Society was following up. There is a follow up on the survey in January
2006. By no stretch could the analysis of the provocative facts of
Kandimalla Raghavaiah become routinely available to support New
India's case in such a factual matrix.
36. Likewise, the reliance on R. Nagaraj to submit that where the
pleadings are silent it is the duty of the Court to ascertain from the
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evidence and overall facts to render a finding on limitation, where the
question of limitation is treated as a question of law, is also misplaced,
which is already analysed above.
37. Indeed a question of law can be raised at any time. However,
when a question has in fact been raised and has been answered and that
answer is neither challenged nor questioned in the appellate challenge,
it cannot be expected that the Court should imagine a grievance that
may be raised at a later stage and proceed to answer it on its own.
Instead, as stated above, the declaration of the position in law in
Hindustan Safety Glass Works Limited is most appropriate, based on
which, in my opinion, the facts of the matter in hand do not lend
themselves to any interference with the Impugned Order.
38. Likewise, the following extracts from the decision of the
Supreme Court in Hareshwar Enterprises (P) Ltd. and Others7 are also
noteworthy:
6. Having noted the contention, on the provision as contained, there
is no ambiguity whatsoever. However, what is required to be taken
note is that the provision indicates that the complaint is required to
be filed within two years from the date on which the 'cause of
action' has arisen. In that context, another decision relied on by the
National Insurance Company Ltd. v. M/s. Hareshwar Enterprises (P) Ltd. and
Others - 2021 0 Supreme (SC) 461.
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learned counsel for the appellant in the case, Kandimalla Raghavaiah
and Company vs. National Insurance Company and Another (2009) 7
SCC 768 with specific reference to para 18 would indicate that the
term 'cause of action' though not defined in the Act, but it is of wide
import and it would have different meaning in different context
while considering limitation. It has been held therein that pithily
stated 'cause of action' means, cause of action for which the suit is
brought and which gives occasion for and forms the foundation of
the suit. Reliance is placed on this case by the learned counsel since
in the said case, which was also in respect of a fire incident it was
held that the date of accrual of cause of action has to be a date on
which the fire breaks out. However, what cannot be lost sight is that,
such conclusion was reached in the cited case since the fire in
tobacco godown took place 22/23.03.1988 and the bank in whose
favour the stocks had been hypothecated was informed about it by the
appellant on 23.03.1988 itself, but insofar as the claim, the matter
had rested there till 06.11.1992 when for the first time the appellant
addressed the letter to the insurance company and sought for claim
form. The facts therein, if noted would indicate the reason for which
this court had indicated that the date on which the fire broke out is
the date of accrual of cause of action since it did not move forward in
any other manner. It has not been laid in strait jacket. The cause of
action will remain flexible to be gathered from the bundle of facts
arising in each case.
7. In contradistinction, in the instant case as noted the fire
incident had occurred on 06.11.1999. The appellant had informed
the insurer on 07.11.1999, where after the joint surveyors were
appointed and on verification had submitted their final report on
13.03.2001. Despite said report, the insurer through their letter
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dated 22.06.2001 had appointed an investigator but did not proceed
to either accept the claim or repudiate the same. In that
background, a perusal of the complaint filed by the respondent No.1
before the NCDRC would indicate that the cause of action has been
mentioned in para 21 as follows:-
"21. CAUSE OF ACTION
The cause of Action arose for the first time when
property belonging to the Complainant was destroyed in
the fire on 6.11.1999. Then it continued from time to
time when the survey was complete and the Complainant
was not paid the claim amount. It arose when the legal
notice on behalf of Complaint was issued and same was
replied by advocate on behalf of the Opponent No. 1.
Hence the present Original Petition is in limitation. The
Advocate for the complainant issued legal notice on
5.1.2003 demanding money from opposite party No. The
copy of the said letter is annexed hereto and marked as
Annexure P/13."
Further, in the reply filed on behalf of the insurer before the
NCDRC reference is contained that correspondence was exchanged
between the investigator appointed by the insurer and the
respondent No.1 through the letters dated 07.03.2002, 05.04.2002,
03.05.2002, 03.06.2002 and 13.07.2002.
8. If in the above context the fact situation herein is
noticed, though the fire incident occurred on 06.11.1999, the same
merely provided the cause of action for the first time to make the
claim but the same did not remain static at that point. On the other
hand, the process of joint survey though had concluded with its
final report on 13.03.2001, the letter dated 22.06.2001 addressed by
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the insurer to the respondent No.1 regarding appointment of the
investigator had created a fresh cause of action and kept the matter
oscillating. Thereafter, the matter did not rest at that but there was
repeated action being taken by the investigators seeking for details.
When the same did not conclude in an appropriate manner, the
respondent No.1 (Insured) got issued a legal notice dated
05.01.2003 to which reply was issued, when in fact the repudiation
was gathered and the complaint was filed. Even if the date on
which the process of intimation of appointment of the investigator
through the letter dated 22.06.2001, received by the respondent
No.1 is taken into consideration, from that date also the complaint
filed on 26.03.2003 is within time. There was no need for the
NCDRC to pass any separate order at the outset to hold the claim to
be within limitation and then proceed when it is clear on the fact of
it. As such the consideration of the complaint on merits by the
NCDRC was justified. The contention therefore urged by Mr. Vishnu
Mehra, learned counsel on that ground is accordingly rejected.
[Emphasis Supplied]
39. The aforesaid analysis would squarely apply to the instant
case too.
Purported Failure of Consideration of Insurance Premium:
40. The Insurance Policy was schedule to expire on July 24, 2005
and in engagement with the Insurance Agent, the renewal premium had
been paid by cheque as early as July 17, 2005, which even led to New
India issuing the renewed policy on July 22, 2005 to take effect on July
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25, 2005. It is inexplicable that a party that claims that insurance
premium has to be received in advance of the insurance cover taking
effect, would bank the cheque nearly a week after the insurance cover
took effect. The ground on which the cheque was said to have been
dishonoured is also hotly contested and in my opinion, there is an
evident deficiency of service by both New India and the Thane Bank, for
which the Society ought not to suffer.
41. The provisions of Section 64VB of the Insurance Act, 1938 are
extracted below:-
"64VB. No risk to be assumed unless premium is received in
advance - (1) No insurer shall assume any risk in India in
respect of any insurance business on which premium is not
ordinarily payable outside India unless and until the premium
payable is received by him or is guaranteed to be paid by such
person in such manner and within such time as may be
prescribed or unless and until deposit of such amount as may
be prescribed, is made in advance in the prescribed manner.
(2) For the purposes of this section, in the case of risks for
which premium can be ascertained in advance, the risk may be
assumed not earlier than the date on which the premium has
been paid in cash or by cheque to the insurer.
Explanation. - Where the premium is tendered by postal money
order or cheque sent by post, the risk may be assumed on the
date on which the money order is booked or the cheque is posted,
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as the case may be."
[Emphasis Supplied]
42. A plain reading of the foregoing would show that the import of
the advance receipt of funds before assuming the risk in the context of
payment by cheque is that the cheque must have been received before
assuming the risk. In this case, it was indeed received. New India had
time between July 17, 2005 and July 24, 2005 to bank the cheque.
However, it had no reason to believe that the princely sum of just about
Rs. 18,000 would not be honoured. New India, in compliance with
Section 64VB assumed the risk with effect from July 25, 2005 and
issued the policy on July 22, 2005.
43. It is its case that the cheque was dishonoured and the cause of
the dishonour was hotly disputed with collateral evidence from the
Thane Bank that the dishonour was not due to insufficiency of funds but
due to technical problems in the aftermath of the very same floods. The
National Commission has returned plausible findings on an assessment
of evidence that New India failed to prove its case on the real cause for
dishonour of the cheque and its own failure to present the cheque afresh
particularly when evidence was led by the Thane Bank that cheque was
asked to be presented afresh. This was not challenged and confronted,
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and the findings returned are reasonable. If an insurer's manner of
handling the premium cheque is negligent, it would be self-serving for
the insurer to seek to exploit the same to repudiate the claim.
44. Therefore, reliance on Section 64VB of the of The Insurance
Act, 1938 claiming non-receipt of insurance premium is also of no
assistance to New India. Indeed, receipt of amount by cheque is subject
to realization but if the realization was delayed owing to New India's
own deficiency in its own operational conduct, the consequence of the
same cannot be visited upon the innocent Society which had in fact
received the Insurance Policy and even made a claim, which claim was
processed by New India as explained above. The attempt to rely upon
the letter dated August 4, 2005 purporting to have cancelled a Policy is
an afterthought which is evidently a stratagem to raise the issue of
limitation at a belated stage with a view to pick holes in the Impugned
Order passed by the National Commission.
45. At the least, New India ought to have had a back-up to
demonstrate dishonour of a cheque owing to insufficiency of funds.
New India ought to have been able to explain why the cheque had not
been deposited afresh. If New India truly believed in its contentions
being made today, at the least, it ought to have challenged the State
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Commission Order - in contrast, it neither filed an appeal nor raised an
objection on limitation before the National Commission. In my opinion,
such conduct does not lend itself to endorsement by way of interference
with the National Commission Order in exercise of the extraordinary
and equitable writ jurisdiction of this Court.
46. Mr. Vidyarthi would rely on Yellamma, and in particular, the
following extracts:
11. A contract of insurance like any other contract, is a
contract between the insured and the insurer. The amount of
premium is required to be paid as a consideration for arriving at a
concluded contract. If the insurer insists that a cheque should be
issued only by the insured and not by a third party, no exception
thereto can be taken. The fact remains that the cheque was not
encashed. Concededly, the insured did not make any payment.
14. In today's world payment by cheque is ordinarily
accepted as valid tender but the same would be subject to its
encashment. A distinction, however, exists between the statutory
liability of the insurance company vis-a-vis the third party in terms of
Sections 147 and 149 of the Motor Vehicles Act and its liability in
other cases but it is clear that if the contract of insurance had been
cancelled and all concerned had been intimated thereabout, the
insurance company would not be liable to satisfy the claim.
18. Thus, when the insured fails to pay the premium promised,
or when the cheque issued by him towards the premium is returned
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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.
[Emphasis Supplied]
47. In the analysis set out above before the aforesaid extraction, it
is clear that the cause of the dishonour and New India's role in the
handling of the purported dishonour lies at the heart of the controversy
in the assessment of deficiency of service by New India. As explained
above, New India has failed on a reasonable assessment to prove its case
of a dishonour on the ground of insufficiency of funds. The timing of
New India's own deposit of the cheque and its inability to deal with
evidence that its banker had been asked to present the cheque afresh,
was assessed and adjudicated. Therefore, the aforesaid discussion in
Yellamma cannot be applied as if it were a provision of a legislation,
with no regard to the adjudication and assessment of evidence in the
facts of the case.
Conclusion and Order:
48. For the aforesaid reasons, in my opinion, no case for
intervention in exercise of the writ jurisdiction has been made out on
any of the grounds pressed into service on behalf of New India. Neither
is there any arbitrariness on account of limitation nor is there a failure
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of consideration as claimed on behalf of New India. On the contrary, it
is New India's deficiency of service and operational negligence that led
to the situation on hand. Since despite appointment of a surveyor, New
India refrained from providing the survey report, the National
Commission has adopted a reasonable approach to assessing the
compensation that may be granted.
49. The Consumer Protection Act, 1986 is devised precisely to
provide a quasi-judicial approach to award of compensation. The
National Commission has applied its mind to the evidence and
examined the report filed by a Court-empanelled valuer and discounted
it by what it felt was reasonable. This was not an arbitrary approach but
was a reasonable method of dealing with complete denial of objective
information by New India, which was found to have had a string of
untenable actions right from the time of issuance of the insurance
policy.
50. The very objective of the Consumer Protection Act, 1986 is to
protect consumers from such conduct. Insurance companies are
institutions in the financial sector, which, by design are meant to hold
out a higher intensity of promise in their obligations to their
constituents, and this is what backs the doctrine of utmost good faith
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being owed to the insurance companies by the rest of society. When the
law protects insurers by expecting utmost good faith, the corollary is
that the insurance companies are expected to conform to highest
standards of transparency, propriety and diligence in their interaction
with its stakeholders and policyholders.
51. In these circumstances, the Petition is dismissed. Rule is
discharged in the aforesaid terms.
52. Considering the further time spent in this round of litigation,
costs in a token sum of Rs.25,000 payable to the Society within a period
of one week of the expiry of four weeks from today, would meet the ends
of justice.
53. All actions required to be taken pursuant to this order shall be
taken upon receipt of a downloaded copy as available on this Court's
website.
[SOMASEKHAR SUNDARESAN, J.]
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