Calcutta High Court: In an appeal against the order of single judge of this Court allowing the insurance claim, a division bench comprising of Surya Prakash Kesarwani* and Rajarshi Bharadwaj, JJ., held that adherence to the terms of the insurance policy is crucial, but the appellant could not reject the claim on the ground of non-compliance with Section 64-VB of the Insurance Act, 1938 after accepting the premium in instalments. The Court dismissed the appeal and upheld the impugned order which allowed the insurance claim.
Factual Matrix
The instant matter revolves around a dispute between the appellant, an insurance company, and the respondents, regarding the rejection of an insurance claim. The respondents had taken a Multi-buyer Exposure Policy from the appellant, covering the period from 28.12.2011 to 27.12.2012. The dispute arose when a shipment made by the respondents on 27.07.2012 was not received by the consignee, and the insurance claim was rejected by the appellant on grounds of non-payment of the third instalment of the premium on time and a delay in submitting the default report.
The respondents-writ petitioners took a Multi-buyer Exposure Policy issued by appellants on 16-01-2012, covering the period from 28-12-2011 to 27-12-2012, with an aggregate loss limit of Rs. 5 crore. The premium was Rs. 9,10,000/-, payable in four equal quarterly instalments. The third instalment, due on 28-06-2012, was not paid on time. A shipment made on 27-07-2012 faced non-receipt by the consignee and non-payment. Respondents sought permission for re-import of the shipment, granted subject to policy terms. The third instalment was belatedly paid on 03-12-2012, and the last instalment on 06-12-2012.
The dispute arose when a shipment made by the respondents on 27-07-2012 was not received by the consignee, and the insurance claim lodged on 25-04-2013 was rejected by the appellant on grounds of non-payment of the third instalment of the premium on time, non-compliance with Section 64-VB of the Insurance Act, 1938 and a delay in submitting the default report. The respondents appealed, submitting representations, all of which were rejected. Subsequently, they filed a writ petition, which was allowed on 27-01-2017. Aggrieved by the impugned order dated 27-01-2017, the appellants preferred the present appeal challenging the same.
Moot Point
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Whether there was valid insurance cover during the period from 28-06-2012 to 03-12-2012 to cover the shipment made on 27-07-2012, considering the delayed payment of the third installment?
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Whether the writ court lawfully allowed the insurance claim of the writ petitioners considering the provisions of Section 64-VB of the Insurance Act, 1938?
Parties’ Contentions
The appellant contended that the policy required quarterly premium payments, and the failure to pay the third instalment invalidated coverage for the period in question. It was asserted that the rejection of the claim was justified under Section 64-VB of the Insurance Act, 1938, which was not complied with. It was contended that the delayed payment constituted a breach of contract, justifying the rejection of the claim.
The respondents contended that the entire premium was paid before claim lodging, complying with policy conditions. It was contended that the non-payment of one instalment should not invalidate the policy, especially considering it was a yearly contract. It was further contended that the appellant had accepted the premium and granted permission for re-import, indicating acknowledgment of the policy’s validity and waiver of premium payment condition
Court’s Observation
Insurance Policy is a contract
The Court examined the policy terms, including clauses regarding the period of cover and payment of premiums. The Court stated that the insurance contracts are governed by their terms and that parties are bound by their actions within the framework of the contract. The Court noted that the respondents had paid the entire premium for the policy period before lodging the claim and the appellants had accepted the delayed payment of the third installment without objection, which constituted a contractual agreement. The Court concluded that the appellant’s acceptance of the premium and failure to cancel or terminate the policy despite the delayed payment of the third instalment constituted a waiver of the requirement under Section 64-VB of the Insurance Act, 1938. The Court emphasised that the insurance policy is a contract, and both parties are bound by its terms, therefore, the appellant’s rejection of the claim based on delayed payment was not justified.
Waiver
The Court noted that Section 63 of the Contract Act, 1872 allows a promisee to waive, wholly or partly, the performance of a promise made to them, or accept any alternative satisfaction they deem appropriate, and the Indian Law stipulates that neither consideration nor an agreement is necessary to constitute waiver. The Court held that the appellant’s waiver of the provision mandating payment of insurance premiums is valid.
While normally, under Section 64-VB of the Insurance Act, 1938, liability under an insurance contract arises only upon the payment of premiums, the insurer can waive such a condition if it’s intended for their benefit. In the present case, the insurer waived the requirement of immediate premium payment, allowing for payment in installments, thus effectively deferring the condition precedent to the policy taking effect. The Court held that the appellant’s waiver of the provision mandating payment of insurance premiums is valid as it is for the benefit of the insurer, and no public interest is involved.
Relying on Commissioner of Customs, Mumbai v. Virgo Steels, (2002) 4 SCC 316; Krishna Bahadur v. Purna Theatre, (2004) 8 SCC 229 and All India Power Engineer Federation v. Sasan Power Ltd., (2017) 1 SCC 487 and principles of waiver and contractual obligations, the Court held that “the appellants having waived the requirement of Section 64 VB under the Insurance Policy resulting in a contract and also having accepted the deferred payment of Insurance Premium, cannot be permitted to approbate and reprobate, to reject the claim on the ground of Section 64VB.”
Court’s Decision
The Court dismissed the appeal filed by the appellant and upheld the impugned order of the Single Judge. The Court directed the appellant to pay or disperse the insurance claim to the respondents, stating that there was no manifest error of law in the impugned judgment.
[ECGC Ltd. v. Mittal Technopack (P) Ltd., 2024 SCC OnLine Cal 1291, order dated 08-02-2024]
*Judgment by Justice Surya Prakash Kesarwani
Advocates who appeared in this case :
Mr. Dhruha Gshoh, Sr, Adv., Mr. Soumajit Ghosh, Mr. Amitava Mitra, Ms. Antara Choudhury, Counsel for the Appellant
Mr. Soumya Majumder, Mr. Debraj Sahu, Ms. Susrea Mitra, Mr, Avik Kundu, Counsel for the Respondents
