Chagla, C.J:—
A rather interesting question relating to fire insurance arises on this appeal. The plaintiff insured colours and chemicals which were stored in a godown in Bombay with the defendant company. The goods were destroyed by fire on the evening of June 16, 1951, and the plaintiff filed the suit claiming the amount for which the goods were insured. The learned Judge of the City Civil Court, Mr. R.B Mehta, in a careful and well-considered judgment dealt with the various contentions raised by the parties and passed a decree in favour of the plaintiff. The insurance company has now come in appeal.
The facts briefly are that the plaintiff came to Bombay on June 4, 1951 and he was in Bombay till June 9, and his evidence is that he told Natvarlal, who is his son-in-law, to insure the goods which were stored in the godown in Bombay. Natvarlal's evidence is that he asked one Bakshi to get the insurance effected as he had to leave Bombay for Ahmedabad on June 12, and he left a note with this Bakshi to the effect that the goods should be insured promptly. Bakshi is another son-in-law of the plaintiff and he does insurance business. Bakshi got this note of Natvarlal on June 14, and he got in touch with one Gordhanbhai Shah who was acting as a sub-agent of the defendant company, and he made a note at the back of the letter written by Natvarlal asking Gordhandas to effect the insurance of the goods either from the 14th or the 15th. Gordhandas in his turn placed the proposal with Lalji & Co. who were the head insurers of the defendant company, and the cover note was issued on June 18, 1951. The cover note states that the goods were insured from June 15, 1951, for the sum mentioned in that cover note. As already stated, the goods were destroyed by fire on the evening of June 16, 1951.
Now, in arguing this appeal Mr. Seervai has accepted the various findings of fact arrived at by the Court below. The most important finding is that neither the plaintiff nor the insurance company knew on June 18, that the goods had been destroyed on June 16 by fire. The contention urged by Mr. Seervai before us is that looking to the cover note and looking to the general principles of fire insurance law, the insurance that was effected on June 18, was a prospective insurance and not a retrospective insurance. In other words, Mr. Seervai's contention is that the risk attached from June 18, and not from a point of time antecedent to June 18. Now, apart from authorities and apart from principles of law, it seems rather difficult for us to understand how, if an insurance company issues a cover note on June 18, and solemnly states in that cover note that the insurance is effected from June 15, the risk should not attach from June 15, but only from June 18. It is difficult to understand what could possibly have been the purpose of the insurance company in charging premium from June 15, 1951, and stating in the cover note that insurance was effected from June 15, 1951, if the goods were not covered by the policy from June 15. Mr. Seervai says that there is a vital difference between the principles that apply to marine insurance and the principles that apply to fire insurance. Mr. Seervai says that for historical reasons it is quite common in marine insurance to have policies which are described as policies of “loss” or “no loss” and that retrospective insurance is ordinarily effected under marine insurance, but, says Mr. Seervai, the position is different when we deal with fire insurance.
Turning to the principles of Fire Insurance, we have the statement of the law clearly set out in the recognized text book on fire Insurance by Welford & Otter-Barry. In the fourth edition at p. 26 it is stated:
“Where the assured seeks, in the event of loss by Are, to recover from the insurers the sum payable under his contract, it is essential for him to show that at the time of the loss he had an insurable interest in the object destroyed. This is the crucial date; for if he had then no interest, he can have suffered no loss, and is, therefore, entitled to no indemnity.”
Therefore, according to this learned author, the crucial date as far as insurable interest is concerned is the date of the loss, and it is not disputed in this case that the assured had an insurable interest in the goods on the evening of June 16. It is correct that the learned author in the same paragraph goes on to say this:
“The view, however, has been expressed that in the case of fire insurance, the assured must have an insurable interest at the date of effecting the insurance, and that otherwise he cannot recover.”
Mr. Seervai points out that at the date of effecting the insurance, viz. June 18, the assured had no insurable interest as the goods had been destroyed. Now, the learned author does not accept this view as correct because later on at p. 27 he points out;
“Although the subject-matter may, in fact, have been destroyed by fire at the date of effecting the insurance, the contract may, nevertheless, in some cases be valid, and operate to indemnify the assured notwithstanding such destruction; for there is no objection, on principle, to a retrospective insurance, provided that the assured had, in fact, at the date of the loss, an insurable interest.”
Further on at p. 28:
“To render a contract of this kind valid, it is necessary to establish the following facts, namely:—
(1) That both the assured and the insurers should be ignorant of the loss at the time of making the contract; and (2) That they should both intend the contract to apply to such a loss.”
Now, dealing with the two conditions laid down by the learned author, as far as the first condition is concerned, as already pointed out, it has been found as a fact, which finding has not been challenged by Mr. Seervai, that in this case both the assured and the insurer were ignorant of the loss at the time of making the contract. The only point that survives for our consideration is whether both of them intended that the contract should apply to such a loss. In order to decide whether a contract of insurance should apply to a loss which had already taken place, or, in other words, that the contract of insurance should be retrospective, or, again to use different language, that the risk should be a past risk and not only a future risk, we must try and gather the intention of the parties, and it is clear that primarily the intention should be gathered from the document itself which is the repository of the terms of the contract. When we look at the cover note itself, as already pointed out, it is clear that the insurance company intended that the risk should attach not from the date of the making of the contract but from an earlier date, viz. June 15, 1951. It is equally clear that the assured intended that the risk should attach from June 14, or 15, although the cover note was issued on June 18, as the evidence of Bakshi clearly points out. Mr. Seervai has drawn our attention to the surrounding circumstances in this case and he emphasises the fact that neither the plaintiff nor his son-in-law Natwarlal were in any hurry to get these goods insured and therefore it could not be said that they wanted a retrospective insurance; on the contrary their conduct and their evidence clearly show that they wanted the insurance to take effect in future. Now, Mr. Seervai is right when he draws our attention to the evidence of the plaintiff and points out that although he was in Bombay from June 4, to June 9, he did not get the goods insured but left it to be done by Natwarlal. It is equally true that Natwarlal wanted the goods to be insured after June 12. On June 12, undoubtedly, Natwarlal's intention was that the insurance should be effected prospectively, but it is equally pertinent to note that on June 12, Natwarlal's intention was that the insurance should be effected promptly; in other words, his intention was that the risk should attach as soon after June 12, as was possible. When we come to Bakshi, he makes general it clear in his note to Gordhandas that the risk should attach from June 14, or 15. When he entertained this intention, undoubtedly his intention was that the insurance should be prospective, but his intention was equally clear that it should attach as from a particular date, and when we come to the material date, the 18th of June, all parties were agreed that the risk should attach as from June 15, and not from a later date. Therefore, whether we turn to the document itself or to the surrounding circumstances, one salient fact emerges about which there can be no doubt or dispute that all the parties were agreed on one point, viz., that the risk should attach as from a particular specified date, viz. June 15.
Mr. Seervai has very strongly relied on a judgment of the Calcutta High Court reported in Ram Singh v. Century Insurance Co. Ltd.(2) The facts of that case were very striking, and whatever was decided by the learned Chief Justice Rankin and Mr. Justice Ghosh must be appreciated in the light of the striking facts which the Court was dealing with. There was an insurance policy in that case which expired on November 3, 1928, and the building which was insured was destroyed by fire on November 20, 1928. The assured sent the premium on November 18, 1928, and the insurance company received it on November 26, and issued the renewal receipt. On November 22, the assured had knowledge that the building had been destroyed by fire, but the insurance company had no knowledge of it when it issued the renewal receipt on November 26. On these facts the Calcutta High Court held that the original policy had expired on November 3, 1928, but it was renewed on November 26, and that although it was renewed on November 26, the renewal did not operate as a retrospective insurance but was prospective from the date when it was renewed, and Mr. Seervai points out that although the result of the renewal was that the policy must be deemed to be continued from November 3, 1928, still the Calcutta High Court did not allow the risk to attach on November 20 when the building was destoryed. In the judgment the learned Chief Justice points out that it is not usual when stipulating for fire insurance to stipulate with reference to the past and that the risk to be guarded against is the risk in the future. The learned Chief Justice does not say that a stipulation with regard to past risk is void or illegal. He merely considers it to be out of the ordinary. Then the learned Chief Justice is at pains to construe the clause in the original policy and he points out that the clause in the original policy was intended clearly for future risk and not for past risk, and therefore when the policy was renewed subsequently, he imports into that renewal the same intention that was there when the original policy was effected, and he comes to the conclusion that at the time of the renewal the parties did not intend and could not have intended to cover a past risk. It is true that in that case also the company intended to charge the premium from November 3, and not from a subsequent date and Mr. Seervai says that in this case also the defendant company intended to charge the premium from June 15, and not from 18, and it is pointed out that the mere fact that the company wants to charge premium from an earlier date is not sufficient to warrant the conclusion that the company wanted to insure retrospectively and not only prospectively. Now, in the Calcutta case it was because of the peculiar facts to which attention has been drawn that the Court refused to attach importance to the fact that the policy was renewed as from November 3. There was already a policy which had expired and the acceptance of the premium resulted in a renewal of that policy. In the case before us, we are dealing with a new contract and there is no background to it which has got to be considered in order to decide what the intention of the parties was. Therefore, in our opinion, the decision of the Calcutta High Court does not lay down that when you have a cover note which expressly attaches risk from a date earlier than the date on which the insurance was effected, the intention of the parties is not to effect the insurance retrospectively.
Mr. Seervai says that the question is of considerable importance to the insurance companies in Bombay and they would like to know what is their position in law. We find it difficult to understand what difficulties should be experienced by insurance companies in this matter. If an insurance company issues a cover note and advisedly and deliberately it agrees that risk should attach from an earlier date, we do not understand what grievance there can possibly be if the insurance company is made liable if the loss has occurred during the period for which the cover note is issued, when both the assured and the insurance company itself were ignorant that in fact the goods had been destroyed. If the insurance company wants to guard itself against effecting an insurance retrospectively and undertaking a past risk, the simplest and the easiest thing for it to do is not to issue cover notes for a period antecedent to the date when the insurance is effected.
Mr. Seervai also relied on s. 20 of the Contract Act. That section provides that where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. If, as we have held, it was the intention of the parties to effect a retrospective insurance, it is difficult to understand as to what was the mistake as to a matter of fact under which both the parties were. This section would only have application if on June 18, when the goods were insured the policy had been made prospective and it was found that the goods had already been destroyed. Then s. 20 would have given effect to the well known principle of insurance law that you cannot insure goods prospectively when you have no insurable interest at the date of the insurance. But if the parties intended that risk should attach in the past, and if the parties were ignorant whether the goods were in existence or destroyed, no question of a mistake arises which would attract the application of s. 20 of the Contract Act.
It may also be pointed out, as has been explained by the authorities, that it is not necessary expressly to state in a fire insurance policy that the goods are insured, loss or no loss, or whether they are in existence or not in existence. Even in the absence of such words, if the Court comes to the conclusion that the parties clearly intended that the insurance should be retrospective and that risk was to attach prior to the date of the insurance, the Court would hold the insurance company liable notwithstanding the absence of the words to which reference has just been made.
The result therefore is that the appeal fails and must be dismissed with costs.
Appeal No. 393 of 1952 will also be dismissed with costs for the reason given by us in this appeal.
Liberty to the respondent's attorneys to withdraw the sums deposited by the insurance company in Court.
Appeals dismissed.
K.B.S