Real Lamintes Pvt. Ltd. v. The New India Assurance Co. Ltd. .

D.P Wadhwa (President):— Appellant is aggrieved by the order of the Gujarat State Commission dismissing his complaint on the ground that it had not filed the complaint within 12 calendar months of the repudiation of its insurance claim by the respondent-Insurance Co. and also that his complaint was barred by limitation. That the complaint was barred by limitation was not a ground taken by the Insurance Co. It was considered suo moto by the State Commission with reference to Section 24 of the Consumer Protection Act, 1986 (for short the Act) which Section was introduced by amendment of the Act w.e.f 18.6.1993 State Commission overlooked that portion of the provision contained in Section 24A under which delay could be condoned. Appellant should have been heard before applying provision of Section 24A of he Act. In fact, in the arguments before us bar of limitation had not been challenged by the respondent-Insurance Co. and in our opinion rightly so inasmuch as repudiation of the claim by the Insurance Co. was made only on January 18, 1993 and the complaint filed on July 11, 1994. The only issue that had been raised before us is, if the State Commission was right in upholding the clause in the insurance policy which extinguished the right of the appellant to make a claim after expiry of certain period. There is no dispute that the appellant was holder of two insurance policies issued by the respondent under which various properties of the appellant had been insured. The insurance was for an amount of Rs. 50.00 lakhs During the validity period of the insurance there was damage suffered by the appellant amounting to over Rs. 16 lakhs. On July 31, 1991 rain water had entered the factory premises of the appellant resulting in damage to the stock. Insurance Co. was informed of the damage by letter dated August 1, 1991. A receiver was appointed by the Insurance Co. There was exchange of correspondence between the appellant and the receiver. By letter dated January 18, 1993 respondent-Insurance Co. informed the complainant that the stock lying in the godown which was damaged due to inundation was not covered by the insurance policy and the claim made by the appellant could not be entertained. There was further correspondence between the complainant and the respondent. Nothing transpired which led the appellant to file complaint before the State Commission.

Respondent-Insurance Co. raised the bar of condition No. 4(iii) of the insurance policy which reads as under:

“In no case whatsoever shall the Company be liable for any loss of damage after the expiration of 12 months from the happening of the loss or dmage unless the claim is the subject of pending action or arbitration; it being expressly agreed and declared that if the Company shall disclaim liability for any claim hereunder and such claim shall not within 12 calendar months from the date of the disclaimer have been made the subject matter of a suit in a court of law then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder”.

In support of the judgment of the State Commission, learned counsel for the insurance Company had referred to a decision of the Supreme Court in National Insurance Co. Ltd. v. Sujir Ganesh Nayak & Co. - (1997) 4 SCC 366. In this case there was a condition in the insurance policy which provided:

“Condition 19 - In no case whatever shall the company be liable for any loss or damage after the expiration of 12 months from the happening of loss or the damage unless the claim is the subject of pending action or arbitration”

The question before the Supreme Court was that if this condition was hit by Section 28 of the Contract Act, 1872 as existed prior to its amendment which came into force on January 8, 1997. Supreme Court held that the condition was not hit by Section 28 of the Contract Act and it upheld the stand of the appellant-National Insurance Co. Ltd. that the suit was barred by the aforesaid condition of the policy.

As noticed above, Section 28 of the Contract Act, was amended by the Indian Contract (Amendment) Act, 1996 as under;

“Amendment of Section 28:— In Section 28 of the Indian Contract Act, 1972 (9 of 1872) for the portion beginning with the words “Every agreement” and ending with the words “is void to that extent”, the following shall be substituted namely:—

“Every agreement-

(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or

(b) which extinguishes the rights of any party thereto, or discharges any party thereto from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to that extent”.

It is submitted by Mr. Seth, learned counsel for the Respondent that the decision of the Supreme Court in the case of National Insurance Co. v. Sujir Ganesh Nayak and Co. was rendered on March 21, 1997 by which date the amendment to Section 28 of the Contract Act had already come into force and yet the Supreme Court held that Condition 19 of the Insurance Co. with which it was dealing bar the suit against the Insurance Co. It was submitted that this Commission was bound by the aforesaid judgement of the Supreme Court and cannot take a different view in spite of amendment to Section 28 of the Contract Act. It is not disputed that if the amended Section 28 of the Contract Act applies, complaint before the State Commission should be maintainable. The question thus arises for consideration is that if the judgment of the Supreme Court in the case of National Insurance Co. Ltd. v. Sujir Ganesh Nayak and Co. - declares a law under Article 141 of the Constitution with reference to amended Section 28 of the Indian Contract Act. The amendment came into force on 8.1.97 Aforesaid judgment of the supreme court was delivered on 31.3.97 It proceeded on the basis of Section 28 of the Indian Contract Act as it existed before its amendment by the amending Act of 1996 which, as stated above, came into force on 8.1.97 This judgment of the Supreme Court was noticed by the National Commission in the case of Himachal Pradesh State Forest Corporation Ltd. v. United India Insurance Co. Ltd. However, the Commission did not express any opinion, rather opined that the matter before it should be amicably settled between the parties. In view of amendment to Section 28, condition 4(iii) aforesaid of the insurance policy is void.

It is difficult to appreciate the argument of Mr. Seth. It is not very material if Section 28 had already come into force when Supreme Court rendered its judgment in the case of National Insurance co. Ltd. v. Sujir Ganesh Nayak and Co. Supreme Court interpreted Condition 19 of the policy before it with reference to Section 28 of the Contract Act before its amendment. That would be the law under Article 141 of the Constitution which is binding on all Courts and on this Commission as well. Supreme Court however, did not interpret the effect of the amendment of Section 28 of the Contract Act. There is no need to bring in the principle of per incuriem as suggested by learned counsel for the appellant. As noted above, there is no dispute after the amenwdment of Section 28 of the Contract Act, clause 4(iii) has no validity. We therefore allow the appeal and set aside the order of the State Commission.

State Commission had dismissed the complaint on the ground of bar of limitation and did not go into the merits of the case. Accordingly this matter will go back to the State Commission for its decision on merit. First Appeal is disposed of as above. In the circumstances we leave the parties to bear their own costs.