(Delivered by Veeraswami, C.J)
These petitions have been grouped and heard together as the facts in each are of a common pattern raising the identical question as to the validity of demands made on the petitioners by the Chief Enforcement officer, Emergency Risks Insurance Scheme, Madras, to make payments of premium towards alleged under insurance against war risks in respect of factories and goods pertaining to certain quarters between January and December 1963 and September 1965 to March 1968. It will, therefore suffice to notice the facts in one of them, in W.P 1071 of 1970 the petitioner is a private limited company which during the relevant period, carried on the business of a spinning mill it Dindigal. As required by the Emargency Risks (Factories) Insuranced Act, 1962 it had taken out policies of insurance against Emergency Risks issued in accordance with the Emergency Risks (Factories) Insurance Scheme, which covered the quarters during the period mentioned above. It appears that Dindigul Enforcement officer conducted a survey and verification of insurable values of the assets owned by the petitioner after 10th January, 1968, After following the proceduer prescribed by the scheme, and considering the petitioner's representations, the Chief Enforcement Officer, by his order dated 24th March, 1970, found that the petitioner had, for the four quarters in 1963, the last two quarters of 1965, and the first quarter of 1966, to take out cover for the full insurable value of its buildings, machinery and stores etc. He determined the difference of the amount payable on account of the under insurance and called upon the petitioner to pay a total sum of Rs. 24,717 within the specified time. In doing so, the Chief Enforcement Officer purported to act in exercise of his powers under S. 11(1) of the Act. He intimated that in default on the part of the petitioner, action would be taken to recover the said sum as arrears of land revenue. He also made it clear that the demand made was without prejudice to the Government's right to prosecute the petitioner under S. 5(4) for having contravened the provisions of S. 5(1) of the Act. The petitioner wants this order to be quashed on the ground that the Chief Enforcement Officer, after revocation of the proclamation of the Emergency, has no longer the power of jurisdiction to make the demand. In some of the other petitions, the proceedings of this officer are at the stages of notice asking the relative petitioner to show cause against determination of the insurable values at certain sums. These petitioner have asked for prohibition of further proceeding.
Generally speaking, under-writers exclude the War Risk from the scope of cover under property insurance. Apparently following the example of the United kingdom to mitigate the hardship arising from the reluctance of the Insurance companies to insure property against war risks, the Indian Parliament enacted the Emergency Risks (Factories) Insurance Act, 1962 in the wake of the Chinese attack on our country. In view of the invasion, the President of India declared Emergency with effect from 26th October, 1962. The Act became law from 19th December, 1962. Its object was to make provision for insurance of certain property in India against damage by enemy action during the period of emergency. By S. 1(3), it should remain in force during the period of operation of the Proclamation of Emergency. The Central Government was empowered by S. 3(1) to put into operation by notification in the Official Gazette, a scheme to be called the Emergency Risks (Factories) Insurance Scheme, whereby the Central Government undertook in relation to factories the liability of insuring property insurable under the Act against emergency risks, to the extent provided by or under the Act. The main provisions in the Scheme are indicated by sub-S. (3) of the section. They are to secure inter alia, that the liability of the Central Government as insurer should not extend to more than 80 per cent of the insurable value of the property, sad that the liability of the Central Government as insurer under the scheme should be determined by a policy of insurance issued in the form and in respect of a period not exceeding the period specified in the scheme, by a person acting on behalf of the Central Government. S. 5(1) makes it obligatory for the owner of a factory to insure against emergency risks. It says that while the scheme was in operation, every owner of a factory “shall…… take out a policy of insurance against emergency risks issued in accordance with the Scheme……for a sum not less than the insure able value of such property.” Contravention of the obligation under S. 5(1), and failure to pay the premium on a policy which was subsequently due were made offences by S. 5(4), punishable with fine which may extend to two thousand rupees and with a further fine which might extend to one thousand rupees for every day of continued contravention, or failure. Such punishment would be without prejudice to say other penalty or liability incurred in consequence of such failure. This is followed up by S. 11 relating to recovery of premium unpaid, which is:
“1. Without prejudice to the provisions of sub-S. (4) of S. 5, where any person has failed to insure as, or to the full amount, required by this Act, and has thereby evaded the payment by way of premium of any money which he would have had to pay but for such failure, in, officer authorised in this behalf by the Central Government may determine the amount payment of which has been so evaded and the amount so determined shell be payable by such person and shall be recoverable from him as provided in sub-S. (2).
2. Any instalment of premium due on a policy of insurance issued under the Scheme, and any amount determined as payable under sab-S. (1), shall be recoverable as an arrear of land revenue and shall be a first charge on the property in respect of which the default was made.
3. A person against whom a determination is made under sub-S. (1) may, within the period specified in the scheme, appeal against such determination to the Central Government whose decision thereon shall be final”.
Ss. 12 and 13 provide for limitation on prosecutions, that is to say, prosecutions are to be launched only with the consent of the Central Government, and for composition of offences. The Emergency Risks (Factories) Insurance Scheme contemplated under S. 3(1) was to put into operation with effect from 1st January 1963. It has a definition in the section for ‘policy’ which among other things means a policy of insurance issued under the Scheme and included say supplementary policy. Defining the scope and effect of the scheme, S. 3 provided that the Central Government under the Scheme undertook in relation to factories, the liability of insuring them against emergency risks to the extent provided by the Act. The Scheme provided by S. 6 that an application for insurance should be made in the form set out in part A or part B of the First Schedule according to the application was for an original or a supplementary policy and it should be made to the Government agent or to such officer of the Government agent as might be authorised by that agent in that behalf. Each application should be accompanied by a treasury chalan evidencing payment of the requisite premium into a Government treasury. For the purpose of the Act, as stated by S. 7 of the Scheme, the insurable value of property should be the actual value in the case of completed works, and the estimated value of the works which were in the course of construction, and in both the cases at the prices prevailing on the relevant dates after making due allowance for any depreciation. The rate of premium should be 25 paise for every Rs. 100 or any part thereof of the sum insured. On a prope application and remittance of the premium the Government agent should issue a policy of insurancc as soon as possible. The insurance was to cover every quarter. If the chalan accompanying an application was for an amount which fell short of the premium due on the insurable value of the property “a policy for such proportion of the insurable value of the amount paid under the chalan bears to the premium due shall be issued, and the applicant shall be asked to make a further application in respect of the balance of the insurable value of the property which may remain uncovered”. S. 13 of the Scheme relates to failure to pay premium and evasion, and we set out below the section in full.
1. “Where any person has failed to pay any premium due from him or to insure as, or to the full amount, required by the Act and has thereby evaded the payment by way of premium of any money which he would have had to pay but for such failure, the amount evaded shall be determined in accordance with the Third Schedule.
2. Every person against whom a determination has been made in pursuance of sub-paragraph (1) may, within the period laid down in the Third Schedule appeal to the Central Government whose decision shall be final.
3. Where the amount determined under the previsions of sub-paragraph (1) or sub-paragraph (2) is fully recovered the Government agent shall, as soon as possible after such recovery, send the requisite application forms to the defaulter for completion and return, and a policy or supplementary policy in respect of the property concerned according as the recovery in respect of non-insurance or under insurance shall be issued by the Government agent on receipt of the application correctly filed in the said policy being made out so as to take effect from the date the amount was fully recovered.”
Matters like loss of policy, overlapping policies, cancellation and refund; share of risk to be borne by the insured person, viz., twenty per cent of the loss or damage, the mode of settlement or claims, statement of claims, verification of claims and payment, safeguarding of property insurable under the scheme and certain other matters also find a place in the scheme. S. 22 therein under the “Interpretation” says that, if any doubt arises in regard to the interpretation of any provisions of the Scheme, the mater should be referred to the Central Government whose decision thereon should be final. The First Schedule to the scheme contains forms or applications for a policy or supplementary policy. One of the columns to be filled in an application for a policy is the insurable value, that is to say, the value after making allowance for the depreciation on the date of application, of the buildings as well as the plant, Machinery and Materials. Where the application in for a supplementary insurance policy, one of the particulars to be filled is as to the additional amount for which insurance was required to be effected as to the Buildings, Plant, Machinery and Materlate, Reasons for making such an application should also be given. The Second schedule gives a model form of the policy to be issued. It has to mention the period of insurance, and the operative part of it is to read:
“Now this policy witnesseth that in consideration of the insued paying to the President the said premium the President agrees……that if during the period of Insurance………the property insured or any part of such property shall suffer any less or damage, being loss or damage, caused by any act comprised in the expression ‘Emergency Risks’ as defined………The President will indemnify the Insured against diminution in value caused by that less or damage to the extent provided by or under the Act.”
One of the conditions attached to the policy is the liability of the President and the liability under the policy should not exceed in the aggregate eighty per cent of the sum there by insured. The Third Schedule to the Scheme contains the procedure for assessment of the premium evaded by a defaulter, either by failure to insure as, or to the full amount, required by the Act or the scheme, or failure to pay the premium due on a policy, the Officer concerned should serve a notice on the owner or occupier, to show cause of the where fore of the failure and produce before the Officer evidence is support of his cause. The Officer shall after giving the defaulter an opportunity of being heard ‘assess the insurable value of the property and shall determine on the basis of such assessment the amount of premium, if any, payment of which has been evaded by the defaulter” When the sum has been so determined, a copy of the assessment and a notice of demand specifying the amount payable by him within the specified date should be served on the defaulter. If he was aggrieved by the order, he could appeal to the Central Government within thirty days of the date of receipt of the notice of demand. The appellate authority should then consider whether the facts on which the notice of demand was based have been established, and whether the sum, determined as payable is excessive, adequate or inadequate.
The provisions of the Act under the Scheme bring out that insurance under the Act to the full insurable value is compulsory, and failure to insure for the full value of the property is an offence punishable with fine, and that, is case of such failure, or under-insurance besides the punishment therefor as an offence, provisions are made for recovery of the relative premia, and to effectuate this purpose, for the procedure of determination of the insurable value and of the premium evaded from payment. These features are peculiar to “Emergency Risks insurance under the Act and the Scheme laid down thereunder. In ordinary cases, insurance is voluntary, and it is left to the choice of the Insured to mention the value of the property sought to be insured. There is no compulsion in voluntary insurance that the cover should be made for the entire insurable value of the property. The premium collected in voluntary insurance is related to the quantum of risk undertaken in the light of the insurable value suggested by the assured. But for these differences, by and large, the principles of insurance in other respects do not appear to be uncommon between ordinary insurance in the light of statutory provisions, if any, and insurance under the Emergency Risks (Factories) Insurance Act, 1962. In the case of ordinary insurance, the terms and conditions in the policy constitute the contract, while insurance under the Act, being contractual the terms of which appear in the policy to be issued, the contract is also controlled by the provisions of the Act, especially the obligatory character of the insurance to the full value of the property and the liability of the Central Government as an insurer limited to 80 per cent of the insurable value of the property covered. But even in insurance under the Act, the premium is related to the risk, and as in private insurance, so in insurance under the Act, the premium is paid in consideration of the cover provided, and it implies that if there is no risk, no premium can be collected. In other words, premium is paid or compulsorily collected, which will be in consideration of the Union Government, as the insurer, undertaking to indemnify the insured against loss or damage on account of the emergency risks as defined in the Act. So then, so long as the emergency lasts and war risks continue, the provisions of the Act have to be complied with under the penalty of prosecution and fine, besides recovery of the premia evaded. When a prosecution is launched under S. 5(4), the court naturally determined whether there had been any contravention of S. 5(1) and whether there had been any failure to pay any premium as required by the Act. Where under-insurance is found by the court in proceedings under S. 5(4), the corresponding premium relating to the under-insurance can, of course, be recovered under provisions of S. 11. But even then the Central Government may still determine the amount, payment of which has been evaded. It may be that the Officer authorised in this behalf by the Central Government may accept the finding of the Criminal Court as to the extent of under-insurance found by the criminal court as a jurisdictional fact. But it seems to us that there is nothing in the language of S. 11(1) to prevent the Officer authorised by the Central Government from determining the amount, the payment of which has been evaded. It has been suggested that S. 11(1) can be invoked only after a conviction under S. 3(4), and that it is dealing with something different from S. 13 of the Scheme. We are unable to accept this view. We are inclined to think that S. 11 in the Act and S. 13 in the Scheme as well as the Third Schedule thereto, are complementory to each other, and should be read together. In our opinion, all the three deal with the same subject matter. S. 11(1) convers failure to issue as, or to the fall amount, required by the Act. S. 11(1) leaves the determination of the amount, payment of which has been evaded, to the Officer authorised in that behalf by the Central Government. But the procedure for such determination is laid down by S. 13 of the Scheme read with the Third Schedule thereto Sub-S. (1) of S. 13 says that the amount shall be determined in accordance with the Third Schedule. That Schedule while providing for the procedure therefore, for enabling the officer concerned to determine the insurable value of the property, and the amount of premium payable on that basis, but the payment of which has been evaded, as defaulter, also provides for serving of notice of demand on the defaulter to pay the amount determined. S. 11(3) of the Act, givens the defaulter a right of appeal to the Central Government; but the appeal should be filed within the period specified in the Schedule. Clause (5) of the Third Schedule to the Scheme fixes as limitation for filing an appeal, thirty days from the date of receipt of notice of demand. The Third Schedule further lays down, the procedure as to how the appeal should be disposed of by the Central Government. It is clear, therefore, that S. 11(1) in the Act is no independent by itself, but the determination has to be made in accordance with S. 13 of the Scheme and also the Third Schedule. That being the case, one important feature that emerges is, that when in respect of under-insurance the corresponding premia are recovered, the Government agent should send the requisite application form to the defaulter for completion and return, and a supplementary policy in respect of the under insurance found should be issued by him so that it should take effect from the date the amount was fully recovered. That is what is contemplated by S. 13(3) of the Scheme. The necessary implication of this provision is, that the war Risks should still be there when the supplementary policy is issued to cover it is respect of the property insured.
Now, the Act being a temporary one, and as it is expressly stated in S. 1(3) that it should remain in force dalring the period of Proclamation of Emergency, it naturally expired with the end of the emergency on and from 10th January, 1968. In that event, S. 1(3) provides “……but its expiry shall not affect anything done or omitted to be done before such expiry and S. 6 of the General Clauses Act, 1897, shall apply upon the expiry of this Act as if it had been repealed by a Central Act.” The proceedings in these cases in respect of alleged under-insurance and to recover evaded premium determined on that basis have been started subsequent to the revocation of the Proclamation of Emergency and the expiry of the Act. The question is, whether such proceedings are permissible. In our opinion, the answer will depend upon the scope of the saving under S. 1(3).
During the period of Emergency, the Act was not open to attack on the ground of violation of Art. 19 of the Constitution. But when the Proclamation was revoked, the Act to the extent of the inconsistency with Art. 19 would cease to have effect, ex ept as respects things done or omitted to be done before the Act so ceased to have effect. This is apparently what is contemplated by the first part of the saving provision in S. 1(3) of the Emergency Risks (Factories) Insurance Act. But that provision goes further and says that S. 6 of the General Clauses Act, 1897 should apply upon the expiry of the Act as if it had been repealed by a Central Act. Clauses (c), (d) and (e) of S. 6 of the General Clauses Act are those relevant in the present context. Clause (e) is to the effect that the repeal shall not affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed. So far as criminal liability is concerned, clause (d) provide that the repeal shall not affect any penalty, forfeiture or punishment incurred in respect of any offence, committed against any enactment repealed, and as for remedies. Clause (e) says that the repeal shall not affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid.” Whether a right has been acquired, or liability incurred under the enactment repealed would depend on its language and the circumstances. If the Act had provided that in certain circumstances a person shall be liable to a sum of money either by way of debt, or to a fine or imprisonment, such liability incurred will survive the repeal. In that event, it may be open to the court to investigate and determine the liability after the repeal. But if the incurring of the liability is contingent upon determination of facts, and no such determination has been made before the Act was repealed, no liability has obviously been incurred prior to the repeal, and therefore, there will be no saving of such liability after the repeal.
In these cases, as we read S. 11 of the Act and 13 of the Scheme read with the Third Schedule, until a determination is made of the extent of the under-insurance and the premium is fixed on that basis, the payment of which has been evaded, there is neither a right acqurred by the Government, nor a liability incurred by the defaulter. The liability to pay the premium evaded arises only on its determination and a demand being made on the defaulter. It cannot, therefore, be said that the deemed repeal contemplated by S. 1(3) of the Act saves the impugned proceedings. The phraseology that the expiry of the Act shall not affect any thing done or omitted to be done before such expiry also will not help the respondents. That phraseology will be apposite to things completed either by a positive Act, or by an omission before the expiry of the Act. That view is supported by the Supreme Court in Rayala Corporation (P) Ltd. v. Director of Enforcement,(1). In that case rule (2) of the Defence of India (Amendment) Rules, 1962, stated that in the Defence of India Rules, 1962, Rule 132-A shall be omitted except as respects things done or omitted to be done under that rule. With reference to the amended rule, the argument before the Supreme Court was, that even if there was a contravention of Rule 132-A(2) by the accused there when that Rule was in force, the act of the contravention could not be done under that Rule, so that, after that rule had been omitted, no prosecution in respect of that contravention could be instituted. The possibility was conceded that, if a prosecution had already been launched, that prosecution could be continued. But it was said that once the rule was omitted altogether, no new proceeding by way of prosecution could be initiated even though it might be in respect of an offence committed earlier during the period that the rule was in force. Dealing with this argument, the Supreme Court held:
“We are inclined to agree with the submission of Mr. Sen that the language contained in clause 2 of the Defence of India (Amenment) Rules 1965 can only afford protection to action already taken while the rule was in force, but cannot justify initiation of a new proceeding which will not be a thing done or omitted to be done under the Rule but a new act of initiating a proceeding after the rule had ceased to exist. On this interpretation, the complaint made for the offence under rule 132-A(4) of the Defence of India Rules after 1st April, 1965 when the rule was omitted, has to be held invalid.”
This view of ours is in line with the general principle enunciated by the Court in the case of S. Krishnan v. State of Madras,(2) relating to temporary enactments, on the following words:
‘The general rule in regard to a temporary statute is that, in the absence of special provision to the contrary, proceedings which are being taken against a person under it will ipso facto terminate as soon as the statute expires.’
“Mention may also be made to a decision of a learned single Judge of the Allahabad High Court in Seth Jugmendardas v. State, where a similar view was taken when considering the effect of the repeal of the Defence of India Act, 1939, and the Ordinance No. XII of 1946 which had amended S. (4) of that Act.”
The impugned proceedings, started in these cases, after 10th January, 1968, when the Emergency was revoked and the Act ceased to operate, cannot, in our opinion, be regarded as anything done or omitted to be done before the expiry of the Act; nor could these proceedings be regarded as any right acquired, or liability incurred, before that date.
“There is also another important reason why the validity of these proceedings cannot be sustained. As we have already pointed out, the Act and the Scheme read with the Third Schedule themselves make it clear that, when in respect of the under-insurance, the premium is collected, a policy in respect of the under-insurance should be issued, so that it could take effect from the date the amount was fully-recovered. This is impossible of application now. The respondents cannot, after the expiry of Act, issue any such supplementary policy. For this reason as well, it appears to us that the validity of the impugned proceedings cannot be upheld.”
The petitions are allowed and the impugned orders and proceedings are quashed. No costs.
V.C.S