P. Abdul Azeez And Co., And Others. v. The New India Assurance Company Ltd., Madras High Court, Judgment, Law, casemine.com

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Case Number

O.S.A No. 74 of 1949.

Attorney(S)

Mr. P.K Janakiram for Appt.
Mr. C.N.S Chengalvarayan for Respt.

Judges

Rajamannar, C.J
Venkatarama Ayyar, J.

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Smart Summary

Factual and Procedural Background

This is an appeal delivered by Yenkatarama Ayyar, J., against the judgment of Panchapagesa Sastri, J., which granted a decree in favour of the plaintiff in C.S. No. 804 of 1948. The defendant, P. Abdul Azeez and Co. (sole proprietor Abdul Azeez), is the appellant; the respondent is the New India Assurance Co., Ltd.

The plaintiff sued to recover Rs. 37,103-10-0 as premiums due on various policies; the dispute in this appeal concerned Rs. 13,233-15-0 claimed on account of fire policies issued for the years 1946 and 1947 (marked Exs. P.1, P.15, P.22, P.25, P.35, P.36, P.38, P.39, P.41 and P.45). The defendant contended that payment of premium in advance was a condition precedent to the policies taking effect and, since premia were not paid in advance, no enforceable contract existed and no suit lay.

The trial judge found on the facts that the practice between the parties had been to issue policies at the defendant's request before payment of premium (with premiums paid subsequently), that most of these policies had been renewed after their periods expired, and that the plaintiff had made repeated demands for payment. The defendant sent Ex. P.6 (dated 14 September 1948) promising to pay the entire outstanding amount on or before the 30th instant or by the first week of October. On these facts the trial judge held that the plaintiff had waived the prepayment condition and granted a decree; the defendant appealed.

Legal Issues Presented

Whether a stipulation in an insurance policy that liability shall not attach until the premium is paid in advance (a prepayment condition) prevents the existence of an enforceable contract when premium has not been paid.
Whether an insurer may be taken to have waived such a prepayment condition by conduct (renewals, repeated demands, and correspondence indicating acceptance or expectation of payment), and if so, whether the plaintiff insurer's claim for unpaid premia is maintainable.

Arguments of the Parties

Appellant's Arguments

Prepayment of the premium was a condition precedent to the contract of insurance coming into force; that condition had not been complied with in the present case.
Consequently, in law there was no contract in existence between the parties and no claim could be maintained to recover premiums on the basis of such a contract.
Reliance was placed on authorities, including Equitable Fire & Accident Office Ltd. v. Ching Wo Hong and The South British Insurance Company Ltd. v. J.R. Stenson, to support the submission that delivery of a policy or the making of demands is not necessarily a waiver of the prepayment condition.

Plaintiff / Respondent's Position (as evidenced in the record)

The respondent had issued the policies and repeatedly demanded payment of the premiums; the parties had a long-standing practice of issuing policies before payment and later collecting premiа.
The respondent relied on the conduct of the parties (renewals, repeated demands, and the defendant's written promise in Ex. P.6) to show that the prepayment condition had been waived and that a concluded contract of insurance existed.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Equitable Fire & Accident Office Ltd. v. Ching Wo Hong	Authority that the mere delivery of an executed policy to the insured, where the policy itself contains a clause that liability attaches only on payment of premium, is not in itself a waiver of that condition; the instrument handed over contains the clause and gives notice of it.	The Court accepted the principle but distinguished the case on the facts: in Equitable Fire the Western Company had repudiated and the parties treated the policy as non-existent; here the parties treated the contract as subsisting and the Court considered waiver possible on these facts.
The South British Insurance Company Ltd. v. J.R. Stenson	Holds that where a policy provides no insurance until premium is paid and demands were made, such facts may be insufficient to establish waiver of the prepayment stipulation (Patkar and Baker, JJ. so held in that case).	The Court noted this authority but observed that the terms of the policy in that case differed from the policies under consideration; it did not adopt Stenson as determinative here.
Ocean Accident & Guarantee Corporation Co. Ltd. v. D.K. Patkar	Statement that prepayment of premium is not in law a condition precedent to the existence of a contract generally, but where a policy stipulates that liability does not begin until premium is paid the court will not enforce the contract until payment; however, such a stipulation can be waived and the Court will readily infer waiver.	The Court relied on Rangnekar, J.'s exposition to support the proposition that although the prepayment clause may be a condition precedent it is for the benefit of the insurer and can be waived; the Court applied that principle to the present facts and inferred waiver.
Armstrong v. Turquant	Referenced in support of the proposition that waiver of prepayment may be inferred (as cited in Ocean Accident decision).	Mentioned by the Court as part of the body of authority supporting the inference of waiver; no detailed factual application in the opinion beyond its citation.
General Accident Insurance Corporation v. Crank	Referenced in the Ocean Accident decision as part of authorities concerning waiver of prepayment conditions.	Used as part of the jurisprudential background cited by the Court to show it is permissible to infer waiver from conduct; no separate factual application was made in the present opinion.
Halsbury's Laws of England (Hailsham Edition, Vol. 18, paras. 650-651)	Treatise statement: upon signature the assured becomes liable to pay premium, but failure to pay does not itself absolve insurers unless contract otherwise provides; prepayment is commonly made a condition precedent but any such condition may be waived.	The Court cited this statement as supporting the settled law that prepayment clauses can be waived and to frame the legal principle applied to the facts.
Porter on the Law of Insurance	Treatise statement: where a policy states it shall not be binding until premium is paid, insurers may waive that condition and the Court will readily infer waiver.	The Court relied on this statement as further support for the principle that waiver can be inferred from conduct and applied it to find waiver on the facts before it.

Court's Reasoning and Analysis

The Court began by stating the established legal framework: a contract of insurance, like any contract, is formed by offer and acceptance; a stipulation in a policy that liability will attach only upon payment of premium is a condition precedent to the policy taking effect and is inserted for the benefit of the insurer. The Court then explained the corollary that such a condition, being for the insurer's benefit, can be waived by the insurer and that the courts will readily infer waiver in appropriate circumstances.

The opinion reviewed authorities:

Equitable Fire & Accident Office Ltd. v. Ching Wo Hong: establishes that delivery of an executed policy containing a prepayment clause is not, by that fact alone, a waiver of the clause; the Court noted the importance of the factual context in Equitable Fire (including repudiation by another insurer and the parties treating the contract as non-existent) and distinguished it from the present case.
The South British case: shows that demands alone may be insufficient to prove waiver in some circumstances; the Court observed the policy language there differed from the policies under consideration.
Ocean Accident v. Patkar and the cited treatises (Halsbury and Porter): confirm that while prepayment stipulations can prevent liability until payment, a waiver is possible and often properly inferred from conduct.

Applying these principles to the facts found at trial, the Court emphasized the following factual points relied upon to infer waiver:

The parties had a long-standing commercial practice of issuing policies at the defendant's request before the premiums were paid, with premiums being paid subsequently.
The particular policies in dispute had been so issued (without prepayment) and most had been renewed after their periods expired.
The plaintiff had repeatedly demanded payment of the outstanding premiums.
The defendant responded by letter (Ex. P.6 dated 14 September 1948) promising to pay the entire amount by specific dates, and did not repudiate any liability; the defendant also effected renewals of the very policies in question.

On these facts the Court found it “irresistible” that the prepayment condition had been waived. The Court concluded that the trial judge correctly inferred waiver from the combined circumstances of practice, renewals, demands, and the defendant’s express promise to pay.

Holding and Implications

Holding: The appeal is dismissed. The Court affirmed the trial judge's conclusion that the prepayment condition had been waived on the facts found and therefore the plaintiff's claim for the unpaid premiums was maintainable; accordingly, the appeal fails and is dismissed with costs. DISMISSED WITH COSTS

Implications: The direct effect is that the decree granted in favour of the plaintiff in C.S. No. 804 of 1948 stands and the defendant's appeal is unsuccessful. The opinion applies settled principles (as summarized in the cited authorities and treatises) about the nature of prepayment clauses and the possibility of waiver; it does not purport to lay down a new principle of law beyond applying those principles to the facts of this case and does not discuss broader implications beyond the parties' dispute.

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P. Abdul Azeez And Co., And Others. v. The New India Assurance Company Ltd.

(Delivered by Yenkatarama Ayyar, J.)

This is an appeal against the judgment of Panchapagesa Sastri, J., granting a decree in favour of the plaintiff in C.S No. 804 of 1948. The defendant, P. Abdul Azeez and Co., is the appellant. Its sole proprietor is one Abdul Azeez. He was doing considerable business in Madras and had large properties, and he had been insuring his properties with the respondent, the New India Assurance Co., Ltd. The suit was to recover a sum of Rs. 37,103-10-0 due from the defendant on account of premia due on various policies issued by the plaintiff to him. The dispute in the suit related only to a sum of Rs. 13,233-15-0 claimed on account of lire policies issued for the years 1946 and 1947 to the defendant. These policies have been marked as Exs. P. 1, P. 15, P. 22. P. 25, P. 35, P. 36, P. 38, P. 39. P. 41 and P. 45. The defendant contested the suit on the ground that it was a condition precedent to the policy taking effect that premia should be paid thereon and as that had not been done no suit could be maintained to recover them. The policies are all of them in the same form, and the relevant clause therein is as follows:

“The company hereby agrees with the assured but subject to the conditions printed on the back which are to be taken as part of this policy, and to such other conditions as are herein expressed that if the property above described, or any part thereof, shall be destroyed or damaged by fire or lightning after payment of the premium and at any time between the first day of March 1947 and four o'clock (standard time) in the afternoon of the first day of March 1948 or before four o'clock (standard time) in the afternoon of the last day of any subsequent period in respect of which the assured shall pay to the company, and it shall accept the sum required for the renewal of this policy, the company will pay or make good all such loss or damage, to an amount not exceeding in respect of the sum set opposite thereto and not exceeding in the whole the sum above-mentioned.”

Now, the facts found are that the defendant had been doing insurance business with the plaintiff for a number of years and that the practice was that the policies were issued at his request even before the payment of premia, they being subsequently paid. The policies in question had been issued similarly, without pre-payment of premium. After the period for which the insurance was effected was over most of these policies were renewed for the subsequent year. The plaintiff had also been making demands all along for the payment of the premia. In answer to these demands the defendant sent the reply, Ex. P. 6, dated 14th September 1948. It runs as follows:

“Re. Premium outstandings in respect of Fire, Marine and Accident Policies issued in favour of our firm and in favour of Mr P. Abdul Azeez and Mr. Anwar Azeez.

With reference to your letters dated the 15th July, 4th and 7th ultimo in regard to the premia due to you as stated therein and also for policies issued by you the entire amount on or before the 30th instant, failing which on or before the end of the first week of October 1948—positively.”

It is common ground that the letters dated 15th July and 4th and 7th August referred to in Ex. P. 6 contain, ed demands for the payment of premia which are the subject-matter of this suit. The facts above-mentioned clearly show that notwithstanding the premia were not paid before the policies were issued, the parties throughout acted on the footing that there was a concluded contract of insurance subsisting between them. Panchapagesa Sastri J. who tried the suit held on these facts that the plaintiff must be taken to have waived the payment of the premia and that as all the parties treated the contract as concluded the claim was maintainable. He accordingly granted a decree. The defendant prefers this appeal and disputes the correctness of that decision.

M.P.K Janakiram, the learned Advocate for the appellant contends that as the prepayment of the premium was a condition precedent to the contract of insurance coming into force and as that condition had not been complied with, there was in law no contract in existence and no claim can be made for recovery of any amounts on the basis of that contract. He relied on the decisions in Equitable Firm and Accident Office Ltd. v. Ching Wo Hong(1), and The South British Insurance Company Limited…Plaintiffs; v. J.R Stenson…Defendant*(2), in support of his position. In Equitable Fire end Accident Office Ltd. v. Ching Wo Hong, the facts were that one Ching Wo Hong had taken a policy of fire insurance with the appellant company. One of the terms of the policy was that it would become null and void if the insured omitted to give notice of any additional insurance effected on the same goods with another company without the consent of the insurers. In an action to recover the amount mentioned in the policy the appellant company pleaded that the plaintiff had subsequently effected an insurance with the wastern company without their consent and that accordingly the policy issued had become null and void. This contention was rejected. It was found that in fact there was no subsisting policy with the western company in favour of the plaintiff because the premium had not been paid as provided in the policy. A contention was raised that as the policy had been delivered to the plaintiff it must be taken that the condition as to prepayment had been waived and that therefore the policy was effective. In rejecting this contention Lord Davey observed:

“Their Lordships cannot treat the fact of the executed policy having been handed to the respondents as a waiver of the condition or attach any importance to the circumstances. What was handed to the respondents was the instrument with this clause in it, and that was notice to them, and made it part of the contract that there would be no liability until the premium was paid.”

This clearly is an authority for the position that by the mere fact of the delivery of the policy the company cannot be held to have waived the condition that it should come into force only on payment of the premium. In that case it must be mentioned that the Western Company itself had repudiated its liability. It is this fact that distinguishes that case from the present. It might further be observed that there was a finding in that case that both the parties had treated the contract as non-existent. With reference to this Lord Devey observed:

“Whether under these circumstances the appellant company can resuscitate an instrument which the parties to it agree in treating as void for the purpose of avoiding its own liability, is open to question.”

This observation shows that where the parties themselves agree to treat the contract as effective different considerations might arise.

In The South British Insurance Company Limited…Plaintiffs; v. J.R Stenson…Defendant*, the suit was by the insurance company for recovering premium on a policy which provided that no insurance shall be held to be effected until the premium due thereon shall be paid and accepted in full. It was established that the policy had been issued and that demands were also made by the company for payment of premium. Patkar and Baker, JJ. held that these facts were insufficient to establish waiver, that the policy did not come into effect and that the suit was not maintainable. It may be mentioned that the terms of the policy in the above case are different from those of the policies with which we are concerned. There is a later judgment of the Bombay High Court reported in Ocean Accident & Guarantee Corporation Co. Ltd.…Plaintiff; v. D.K Patkar…Defendant.(3). There also the suit was by the Insurance Company for payment of premium. The defence was that there was no concluded contract between the parties and that was based on the fact that there had been no prepayment of the premium as provided in the policy. Rangnekar, J. states the law on the subject thus:

“A contract of insurance like any other contract is completed by an offer made by one party to the other and accepted by the latter, and secondly, prepayment of the premium is not in law a condition precedent to the contract of insurance. But it is also a common practice of all insurers, except marine, to stipulate that the contract shall not begin to take effect until the premium has been paid. It is well established that the Court will not enforce a contract of insurance where there is such a stipulation in the poiicy until the premium has been paid. This is clear from Equtiable Fire and Accident Offece Ltd. v. Ching Wo Hong. But even in cases where there is such a stipulation, it is competent for an insurer to waive the condition and the Court will readily infer such a waiver.”

Then the learned Judge refer to the cases reported in Armstrong v. Turquant and General Aecident Insurance Corporation v. Crank and finally comes to the conclusion on the facts that the condition had been waived and that the suit was maintainable.

The law on the subject is stated in Halsbury's Laws of England, Hail-sham Edition, Vol. 18, paragraphs 650 and 651 at page 449 thus:

“As soon as the contract is signed, the assured becomes liable to pay the premium, but his failure to pay it does not in itself absolve the insurers from the liability which they in turn have undertaken under the contract. In the event of a loss, therefore happening before payment, they must pay the amount due under the contract, unless the contract otherwise provides.

In practice, prepayment of the premium is usually made a condition precedent to liability, in the case not only of the first premium, but also of the renewal premiums. The assured is then precluded from recovering for a loss which happens before the premium is paid. Any such condition, however, may be waived.”

In Porter on the Law of Insurance the position is thus stated:

“But where it is a condition in the policy that the policy shall not be binding until the premium is paid, it is competent for insurers to waive the condition, and the Court will readily infer a waiver.”

The law therefore is well settled that a contract of insurance, like other contracts, is concluded by offer and acceptance. If there is a stipulation that the liability will attach itself under the contract only if the premium is paid that will be a condition precedent to the policy taking effect. But that is a condition inserted for the benefit of the insurer, and that can be waived. On this statement of the law we have no doubt that the learned Judge has come to the correct conclusion on the facts that there has been a waiver of the condition. It was the defendant who offered to take the policies. When repeated demands were made on him for payment of premia. he did not repudiate his liability to pay them. On the other hand, he expressly agreed in Ex. P-6 to pay them. He also renewed those very policies. These facts lead to the irresistible conclusion that the condition had been waived and that there was a concluded contract of insurance between the parties.

On this finding the appeal fails and is dismissed with costs.

V.C.S

P. Abdul Azeez And Co., And Others. v. The New India Assurance Company Ltd.

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Plaintiff / Respondent's Position (as evidenced in the record)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

P. Abdul Azeez And Co., And Others. v. The New India Assurance Company Ltd.

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