Madras High Court
Sankaralingam Pillai(Died) vs The National Insurance Company Limited on 29 November, 2023
S.A.No.1202of 2004
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 29.11.2023
CORAM
THE HONOURABLE MRS.JUSTICE R. KALAIMATHI
S.A.No.1202 of 2004
1.Sankaralingam Pillai(Died) ...Appellants/ 1st Respondent/
Plaintiff
2.Kannammal
3.K.Radha
4.A.Ranji
5.K.Kailasam
6.K.Chitra
7.K.Radha
(Appellants 2 to 7 are brought on record
as the LRs of the deceased sole
appellant vide Court order dated
03.01.2017 in C.M.PNo.4900/05)
-Vs-
1.The National Insurance Company Limited,
through its Registered Office,
No.1, Midland Street,
Calcutta.
2.The Divisional Manager,
National Insurance Company Limited,
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S.A.No.1202of 2004
Tuticorin.
3.The Branch Manager,
National Insurance Company Limited,
Tuticorin. ...Respondents
PRAYER: Second Appeal is filed under Section 100 of the Civil
Procedure Code, against the judgment and decree, dated
15.04.2002 passed in A.S.No.206 of 2001 by the Principal District
Judge, Tuticorin, in reversing the judgment and decree, dated
22.09.2000 passed in O.S.No.166 of 1999 by the Principal District
Munsif, Tuticorin,.
For Appellants : Mr.R.Rajaraman
For Respondents : No appearance
:
JUDGMENT
Being aggrieved by the judgment and decree, dated
15/04/2002 passed in A.S.No.26 of 2001 by the Principal District
Court, Thoothukudi, the plaintiff has preferred the second appeal.
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2.Parties are indicated as per their litigative status and
ranking referred before the trial Court.
3.The appellant/plaintiff filed a suit in O.S.No.166 of 1999
before the Principal District Munsif Court, Tuticorin, for declaration to
declare that the Indemnity bond executed by him is not valid,
unlawful and illegal and for costs.
4.According to the plaintiff, he is carrying on business at
Tuticorin in exporting country drugs, such as Kandankathiri,
Kannupillai and other country drugs. He used to procure those
country drugs in and around Tuticorin and used to store them in the
godown at Tuticorin, in order to export the same. For the said
purpose, he has constructed a godown with asbestos sheets and
bamboo mats. The plaintiff had obtained insurance policy in respect
of the drugs against the loss of said drugs due to fire or other
contingencies from the Tuticorin National Insurance Company
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S.A.No.1202of 2004
Branch. The Policy Number is 501205/11/31/96/005. During the
subsistence of the Insurance Policy, the plaintiff suffered damages of
the goods, because of the mischief arose out of the communal clash
and fire at Tuticorin on 12.05.1996. Because of the communal clash
his goods viz., country drugs stored in his godown burnt and he
sustained loss to the tune of Rs.7,81,000/-. He gave an application to
the Branch Office at Tuticorin to indemnify his loss of Rs.7,81,000/-.
The Insurance Company assessed the loss at Rs.1,38,206/- only. He
was informed that he had to execute an indemnity bond. Because the
payment was delayed by the Insurance Company stating that the
said amount would not be paid unless he executed an indemnity
bond. Therefore, he executed the indemnity bond under coercion and
he received an amount of Rs.1,38,206/- only. He has studied upto 7th
standard. The plaintiff further states that he had applied to the Tamil
Nadu Government seeking for damages caused to the country drugs
kept in the godown during the communal riot. He never agreed to the
terms. He is not aware of any such terms found in the indemnity
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S.A.No.1202of 2004
bond that if he happened to receive compensation from the
Government, he has to repay the money paid by the Insurance
Company. Therefore, the said clause in the indemnity bond is against
law and illegal and it is not enforceable. Hence, this suit.
5.Counteracting to the plaint details, the third defendant/the
Insurance Company Branch Office would claim that besides
admitting the Insurance policy taken by the plaintiff and the fact that
the plaintiff suffered damages on account of the communal clashes
and his godown was set fire by the rioters. The goods were insured
for a sum of Rs.2,40,000/-. Rs.40,000/- for building and Rs.
2,00,000/- for the stock of drugs. After the receipt of the plaintiff's
claim, the plaintiff's loss was assessed by the surveyor and it was
quantified as Rs.1,38,206/-. In the meanwhile, the plaintiff had also
made a claim before the Commission of Enquiry, which was
appointed by the Government to enquire into the clashes and to
ascertain the damages sustained by the individuals. The plaintiff had
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claimed their entire amount of Rs.7,80,000/- and on the completion of
enquiry, the Commission recommended for the payment of
compensation to the plaintiff. It was further claimed by the third
defendant that the plaintiff can receive compensation for having
sustained loss only once. The plaintiff is not entitled to claim
damages from two sides, one from the Insurance Company and
another from the Government. That necessitated the defendants to
execute the indemnity bond, on 25.02.1998 and it was denied that
the plaintiff executed an indemnity bond out of coercion and fear. The
plaintiff signed the indemnity bond being fully aware of the contents.
The indemnity bond executed by the plaintiff is a valid one and the
plaintiff is bound by the said indemnity bond.
6.Based on the rival pleadings, the trial Court framed the
following issues:
(1)Whether the plaintiff is entitled for the relief of
declaration for the Policy No.501205/11/13/3100366
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indemnity bond obtained by the defendant is not valid.
(2)To what other relief the plaintiff is entitled.
7.At trial, the plaintiff has examined himself as P.W.1 and
indemnity bond obtained by the third defendant from the plaintiff,
dated 25.02.1998 is Ex.A1. On the defendants' side, Officer of the
third defendant, Insurance Company, has examined as
D.W1(Thiru.Nagarajan). Exs.B1 to B5 were marked.
8.The trial Court, after evaluating the evidence, observed
that for the insurance policy taken, the plaintiff had paid the premium
amount and as per the terms of contract, the defendants are bound
to indemnify the plaintiff, whereas, the Government has come
forward to pay the compensation under the flood, communal riots
and natural calamity. The trial Court ultimately concluded that based
on the terms of contract, the Insurance Company is bound to pay the
amount. Therefore, right to receive the insurance amount cannot be
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controlled by the suit bond and the defendants failed to prove that the
indemnity bond is a valid document and ultimately granted the relief
of declaration as prayed for by the plaintiff.
9.Aggrieved, the third defendant, National Insurance
Company, Tuticorin Branch, preferred an appeal through its Branch
Manager, before the Principal District Court, Tuticorin, in A.S.No.26
of 2001.
10.The first appellate Court, after evaluating the evidence,
observed that the Government is going to pay only for the loss
reported to have been sustained by the claimants as recommended
by the Commission. It was further observed that the State is bound to
pay the amount and the first appellate Court had concluded that the
plaintiff cannot be permitted to get undue enrichment by getting both
the amounts or by retaining the amount received from the Insurance
Company, even after getting the amount from the Government as
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compensation and the appeal was allowed.
11.On receipt of notice none of the respondents/defendants
neither appeared nor through their counsel.
12.The learned counsel Mr.R.Rajaraman, appearing for the
appellants/plaintiffs would vehemently contend that as per the terms
of the policy, as the plaintiff sustained loss because of the communal
riot, as the Insurance policy was in force, the plaintiff was paid an
amount of Rs.1,38,206/- as assessed by the Insurance Company. At
the time of making payment, the plaintiff was compelled to sign in the
indemnity bond to the effect that if the plaintiff receives compensation
from the Government, he has to repay the amount received from the
Insurance Company, which is not valid in law. It is his further
argument that the insurer is bound by the terms of the contract and
as such, as one of the contingency happened, based on the report of
the loss assessor, the plaintiff was indemnified to the tune of Rs.
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1,38,206/-. He would further contend that at the time of making
payment, the plaintiff was forced to sign the indemnity bond in order
to receive the insurance amount. Hence, the indemnity bond cannot
be held to be valid and tainted with coercion. He would also further
contend that the claim of the plaintiff was well received by the trial
Court and the suit was decreed as prayed for. The first appellate
Court has gone to the extent stating that when a natural calamity
occurred, the State is bound to make good the loss suffered by the
people and on that score, the person, who sustained loss, would get
compensation from the Government on the one side and if he has
taken insurance policy, he has also received the amount from the
Insurance Company, thereby he gets two payments, which is not
permitted in law and on the wrong indication allowed the appeal by
dismissing the suit.
13.To buttress his arguments, the following judgment was
referred to:
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The Oriental Insurance Company Ltd.-Vs- Captain Ram
Moorjani, reported in 1999(2)ALL MR 608, wherein the Bombay
High Court in a case where the defendant a Pilot for Air India
declared medically unfit due to coronoary artery disease, at the time
of settlement of insurance claim, the insurance company asked for
execution of indemnity bond to the effect that in case the defendant
regained his flying license he will repay the insurance amount and it
was held that such agreement had no statutory or contractual basis
and was held to be executed under undue influence.
14.Heard the argument of the learned counsel
Mr.R.Rajaraman, appearing for the appellant/plaintiff and perused the
materials available on record.
15.Succinctly stated the facts are: the plaintiff, who had paid
premium for the insurance policy taken from the third defendant/
Insurance Company and because of the communal riot, the country
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drugs, which were kept in the godown got burnt and the plaintiff
sustained huge loss to the tune of Rs.7,80,000/- and he applied to
the insurer to indemnify him. As a routine affair, the insurance
Company responded to the claim of the plaintiff based on the report
of loss assessor and paid an amount of Rs.1,38,206/- and the
amount insured is Rs.2,40,000/-.
16.Based on the aforesaid submission, the following
substantial questions of law arise for consideration:
(1)Whether the lower appellate Court is right in
law in constructing the concept of undue enrichment while
the plaintiff has received the compensation under the
Insurance Policy?
(2)Whether the lower appellate Court right in law
in thinking that Ex.A6, the alleged Indemnity Bond is a valid
document, binding on the appellant herein, in the absence
of any clause in the contract of insurance entitling the
respondents to the execution of an indemnity bond?
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17.The grievance of the plaintiff is that at the time of
honouring his claim, he being illiterate, he was forced to execute an
indemnity bond to the effect that if the Government pays
compensation to the plaintiff, he has to repay the insurance amount
received by him and the said indemnity bond is to be declared as
invalid as his illiteracy was misused and out of his ignorance, he was
forced to sign the indemnity bond which is not valid in the eye of law.
18.From the perusal of the pleadings as well as the
evidence of P.W.1, it appears that the Insurance amount of Rs.
1,38,206/- was paid to the plaintiff and besides Ex.A1/indemnity bond
was obtained by the Insurance Company. The stand of the Insurance
Company is that on the one side, for the loss sustained by him he
has received the insurance claim and on the other side, if at all the
Government pays compensation to him, he is not permitted to
receive dual payment and thereby, he was expected to return the
amount paid by him from the insurer.
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19.Such an indemnity bond/Ex.A1 is valid in law is the core
question. As regards the coercion, Section 16 of the Indian Contract
Act, deals with undue influence. In its application to contract the
transaction which are procured as stated in Section 16 of the Indian
Contract Act or to be treated as the contract is tainted by the exercise
of undue influence.
20.Section 16 of the Indian Contract Act, 1872, is extracted
hereunder:
Undue influence-. (1) A contract is said to be
induced by “undue influence” where the relations subsisting
between the parties are such that one of the parties is in a
position to dominate the will of the other and uses that
position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the
generality of the foregoing principle, a person is deemed to
be in a position to dominate the will of another—
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(a) where he holds a real or apparent authority
over the other, or where he stands in a fiduciary relation to
the other; or
(b) where he makes a contract with a person
whose mental capacity is temporarily or permanently
affected by reason of age, illness, or mental or bodily
distress.
(3) Where a person who is in a position to
dominate the will of another, enters into a contract with him,
and the transaction appears, on the face of it or on the
evidence adduced, to be unconscionable, the burden of
proving that such contract was not induced by undue
influence shall lie upon the person in a position to dominate
the will of the other.
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21.Originally, the doctrine of indue influence is a common
law principle, which was evolved by the Courts of England for the
purpose of granting protection against the transactions procured by
the exercise of insidious forms of influence. This doctrine applies to
acts of bounty and also to the other transactions in which, one party
exercising his possession of dominance, thereby obtained an unfair
advantage over the another.
22.The Sub-Section(1) of Section 16 of Indian Contract Act,
lays down the principle as to what amounts to undue influence. Sub-
Section(2) of Section 16, lays down under what circumstances
presumption arise is explained. The condition for raising a rebuttable
presumption that the transaction if it is procured by the exercise of
undue influence, if a person is in a position to dominate the will of
another based on the evidence adduced appears to be
unconscionable. The burden of proving that the transaction was not
induced by undue influence lies upon the person, who is in a position
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to dominate the will of other.
23.It is the evidence of P.W.1 that he was an illiterate and
he was informed that if he does not execute the indemnity bond in
question, he would not be paid the insurance amount and thereby, he
was coerced. Whereas D.W.1/Insurance Officer has not admitted the
contention of the plaintiff and it was his evidence that based on the
insurance policy, he was paid the amount of Rs.1,38,206/- if he is
paid compensation by the Government for the same loss in order to
prevent the same, it necessitated the Insurance Company to procure
the indemnity bond viz., Ex.A1, which is perfectly valid in the eye of
law, as any person is not entitled for undue enrichment.
24.No doubt, the Insurance is a form of contract, which is
governed by the terms of agreement. I am not convinced with the
argument of the learned counsel for the appellant to the effect that
Ex.A1 is procured under coercion from the plaintiff. Because if the
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stand taken by the plaintiff is accepted, then the contract entered into
between the literate and illiterate would face the same problem.
25.Admittedly, the plaintiff has suffered loss due to
communal riot that had taken place in Tuticorin where the country
drugs stored in the godown was burnt due to fire. Of course, as per
the liability clause, the plaintiff was paid an amount of Rs.1,38,206/-
and the policy was taken for an amount of Rs.2,40,000/-. Now the
question is, the indemnity bond procured by the third defendant from
the plaintiff is valid or not. As per the terms of the contract, the third
defendant/ Insurance Company, indemnified the plaintiff. Thereafter,
the third defendant/Insurance company without any basis has
obtained the indemnity bond. There is no consideration for the
contract. Of course, if the plaintiff receives compensation from the
Government based on its policy, admittedly, he would get payment
once again. At the best, there can be a procedure in such cases, the
Insurance Company may send a intimation to the Government on
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payment of Insurance claim. It is for the Government to take a call on
that to pay the compensation considering the fact that the plaintiff
has already received the amount. To put it otherwise, if the
Government comes to the conclusion that, over and above the
amount of insurance claim if the plaintiff has sustained loss
accordingly, the compensation amount may be calculated and paid to
him. Indemnity bond procured by the third defendant stating that he
needs to repay the amount received from the insurance company, if
he happens to receive the compensation from the Government is not
sustainable in the eye of law and baseless and ultimately, the first
appellate Court has given a wrong finding by holding that obtaining
indemnity bond by the third defendant/Insurance Company is valid.
26.Based on the aforesaid discussion, the substantial
questions of law are answered accordingly and the judgment and
decree passed by the Principal District Court, Thoothukudi, in
A.S.No.26 of 2001 are set aside. The suit in O.S.No.166 of 1999 is
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decreed. The second appeal stands allowed. No costs.
29.11.2023
NCC:Yes/No
Index:Yes/No
Internet::Yes/No
To
1.The Principal District Munsif,
Tuticorin.
2.The Principal District Judge,
Tuticorin.
3. The Section Officer,
VR Section,
Madurai Bench of Madras High Court,
Madurai.
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R. KALAIMATHI,J.
Ns
29.11.2023
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