THE HON'BLE MR JUSTICE A.GOPAL REDDY and THE HON'BLE MR JUSTICE B. CHANDRA KUMAR A.S.No.928 of 1995 BETWEEN: 1. The Oriental Insurance Company Ltd., rep. By its Divisional Manager, Divisional Officer, Guntur and another. And 1. M/s. Sakala Veerabhadraiah & Company, rep. By its Managing Partner, Sakala Veerabhadriaha, Nalgulapadu, Ponnur D M C., and another. Counsel for the appellant: Sri S. Ravi Counsel for respondents: Sri P.R. Prasad The Court made the following judgment: JUDGMENT: (per Hon’ble Sri Justice A. Gopal Reddy) This appeal by the defendants is directed against the judgment dated 27.04.1995 passed by the Subordinate Judge, Guntur, in O.S.No.537 of 1989, decreeing the suit of the plaintiffs for recovery of Rs.74,92,751/- with costs. For the sake of convenience, the parties, hereinafter, shall be referred to as they were arrayed in the suit. The brief facts are that the respondents/plaintiffs instituted the above suit. The first plaintiff, which is a partnership firm registered under the Indian Partnership Act, is carrying business in cotton and cotton seeds with a ginning and oil mill at Nagulapadu, Pedanandipadu Mandal, Bapatla. For the purpose of its business it has been availing various limits with the second plaintiff, which is its banker. The amounts due and payable to the first plaintiff are credited to its account maintained with the second plaintiff-Bank at its branches either at Pedanandipadu or at Guntur. One of the conditions for availing the limits with the second plaintiff-Bank is to take out insurance of its stocks and its business premises or other building and machinery in the joint names of both the first plaintiff and its banker. As per the said condition, the first plaintiff has taken insurance policies from defendants 1 and 2 and obtained cover notes as well as policies from time to time in the joint names of both the first plaintiff and the second plaintiff-banker. The amounts due under the policies were payable to the first plaintiff or to the credit of its account maintained with second plaintiff-Bank. Therefore, both the plaintiffs instituted the above suit for recovery of amount contending that a fire accident occurred in the premises of the first plaintiff on 15.08.1984. For the years 1983-84, the plaintiffs obtained necessary insurance cover for its ginning mill and its stocks under seven different policies issued by the defendants for the period 23.12.1983 to 21.07.1984 for a total value of Rs.1,13,50,000/-. Apart from the same, a policy for Rs.3,50,000/- was taken on 21.07.1984 in respect of the ginning mill and machinery. The plaintiffs also sought for transfer of policies as well as the additional policies for further amounts. In respect of other policies also, vide policy Nos.F/1898/83/28-12-83 for Rs.15,00,000/- and F/152/84/10-1- 84 for Rs.10,00,000/-, such transfer has been sought for by the plaintiffs through letters of request given to the defendants’ Inspector as usual, and they were treated to be effective accordingly. On completion of construction of oil mill, it has come into production. Since the second plaintiff required the first plaintiff to cover all the properties including the building, machinery and stocks under adequate insurance coverage, the first plaintiff sought for another policy of Rs.15,00,000/- in respect of the stocks and further policy of Rs.50,00,000/- to cover buildings and machinery of its oil mill. The defendant’s inspectors stationed at Pedanandipadu, on due appraisal, informed the plaintiffs of the premiums required for such coverage, upon which, the first plaintiff issued cheques for necessary amounts on 14.08.1984, which were duly accepted by the defendants’ Inspector, and issued two separate cover notes. At paragraph 5 of the plaint, the particulars of the insurance coverage subsisting during August, 1984 covering all buildings and machinery and various stocks of the first plaintiff either under insurance policies or under cover notes duly issued by the defendants for Rs.1,78,50,000/-, have been given. Thereafter, the first plaintiff requested the defendants through letter dated 14.08.1984 for retransfer of insurance coverage of policy Nos.F/1898/83 for Rs.9,00,000/-; and F/152/84 for Rs.3,00,000/-, out of the respective total values covered by such policies of Rs.15,00,000/- and Rs.10,00,000/- and they were treated to be effective accordingly. Such letters having been received by the defendants through their inspectors (development officers) on 14.08.1984 itself, and such transfers and the consequent coverage of insurance as per the said letters became operative and effective forthwith in accordance with the usual practice, convention and custom. While so, a fire accident has taken place in the premises of the first plaintiff on 15.08.1984 resulting in huge loss of various stocks of cotton as well as buildings and machinery of ginning mill and also cotton seed oil mill. All such stocks, buildings and machinery etc., as well as loss arising out of such fire accident and other risks were covered both under the policies and cover notes issued by the defendants in favour of the plaintiffs. Such stocks were under the hypothecation in favour of the second plaintiff. By the time of the fire accident, the total coverage for stocks under insurance with the defendants was to the tune of Rs.1,25,00,000/-, while such coverage for buildings and machinery was to a tune of Rs.53,50,000/-. All risks of fire, riot, strike and malicious damage are thus adequately covered to such extents under the different policies and cover notes which were all in force on 15.08.1984. The fire accident was immediately reported to the police and also to the defendants on the same day. The defendants appointed its surveyors Sri Purnachandrarao in the first instance, and later, Mehta and Padmase, Surveyors Pvt. Ltd., Madras to survey and assess the loss of the plaintiffs. The surveyors assessed the value of damage to the buildings and machinery of cotton seed oil mill at Rs.22,96,655/-, to the buildings and machinery of ginning mill at Rs.1,46,875/-, and to the stocks of the plaintiffs at Rs.1,19,92,396-15 ps. Accordingly, a joint memo of assessment of loss was also signed on 6.04.1985. In spite of the same, the defendants company has not settled the claims, instead, delayed such settlement unreasonably for a long time. Therefore, the plaintiffs were constrained to file W.P.No.6513 of 1986. This Court by order dated 30.06.1986 disposed of the above writ petition directing the defendants to complete their enquiries whatever they may be and settle the claim of the plaintiffs within a period of two months from the date of receipt of a copy of the said order, which was marked as Ex.A.45. On such direction being issued by this Court, the defendants gave a cheque on 12.08.1986 for a sum of Rs.90,29,784/- in favour of the second plaintiff to the credit of the first plaintiff’s account and subsequently paid a further sum of Rs.6,86,110/- on 10.03.1987. The plaintiffs received both the cheques under protest. For such delayed payments made by the defendants to the plaintiffs, the defendants have become liable for payment of interest at minimum rate of 18% on such amounts till the date of suit and ultimate payments. The above suit was instituted, claiming the said amounts under three heads, namely, - 1) Principal amounts paid by defendants to plaintiff in partial settlement of the claim on 12.08.1986 Rs.90,29,784/-:- a) Amount of interest at 18% now claimed by plaintiff of the afore said amount from the date when the claim should have been settled and paid of 1.01.1985 till the date of payment 12.08.1986 Rs.26,23,152.00 Further interest on the afore said amount Till Date of suit on 8.08.1989. Rs.14,11,258.00 Total Rs.40,34,410.00 B) Principal amount paid by defendants to Plaintiff on 10.03.1987 in partial settlement of claims Rs.6,86,110.00 Interest now claimed at 18% from the date of When claim should have been settled i.e. From 1.01.1985 till date of payment 10.03.1987 Rs.2,70,670.00 Further interest thereon till date of suit Rs.1,17,471.00 Total Rs.3,88,141.00 Total (a) + Total (b) Rs.44,22,551.00 Total of (a) + (b) constituting claim No.1 Rs.44,22,551.00 2. Value of relief No.2 Principal amounts of under payments under policies F/1898/83 and F/152/84 Rs.12,00,000.00 Interest thereon at 18% from 1.01.1985 till date of suit on 8.08.1989. Rs. 9,94,200.00 Total Rs.21,94,200.00 3. Value of relief No.3 Principal amount of sales tax paid because of fire accident. Rs.4,80,000.00 Interest thereon from 1.01.1985 till the date of suit 8.08.1989 Rs.3,96,000.00 Total Rs.8,76,000.00 Grand total of all reliefs 1, 2 and 3. Rs.74,92,751.00 -------------------- The defendants filed a written statement opposing the claim of the plaintiffs contending that Kotha Hanumantha Rao, local Insurance Inspector is related to Sakala Veerabhadraiah, the Managing Partner of the first plaintiff, and they colluded to defraud the defendants for their illegal advantage, and fraudulently brought into existence antedated false documents dated 14.08.1984. The said documents were deliberately prepared after the accident. The defendants kept the said Hanumantha Rao under suspension pending further proceedings and also reported the matter to CBI to investigate and launch necessary criminal proceedings. The whole game is mala fide, unfair, illegal, fraudulent, and the plaintiffs cannot seek any relief or advantage on the basis of such spurious policies obtained. While the fire accident was on 15.08.1984 antedated documents were prepared putting the date 14.08.1984. Both 15.08.1984 and 16.8.1984 happen to be the public holidays, there are no transactions, and the alleged cover notes and cheques have seen the light of the day only on 17.08.1984, i.e., two days after the alleged accident. There was no insurance coverage as pleaded, and there was no issuance of policies in respect of the two cover notes C.Nos.91009 and 91062 (B & N) mentioned at para 5 of the plaint. Therefore, the claims were duly rejected and reasons were furnished to the plaintiffs. The payments made by the defendants in respect of the relative claims of the policies mentioned in para-5 of the plaint are made in full quittance in each case, after making legal and correct calculations with mathematical precision and the native and details of the calculations made were admittedly communicated to the plaintiffs in writing. The request of the retransfer of alleged insurance coverage under Policy Nos.F/1898/83 and F/152/84 is neither true nor accepted. The alleged letters of requests are obviously part of the manipulated series. The averment that such letters if any became operative and effective is false, and untenable. The defendants company paid by way of settlement Rs.90,29,784.00 and Rs.6,86,110.00 in full satisfaction of the respective claims and the same has been accepted by the plaintiffs and that there can be no further claim for the plaintiffs or further liability for the defendants. There is neither short payment nor any agreement or liability of interest for any of the alleged delayed payment. The interest payable by way of additional or further compensation is wholly untenable, since there is no time stipulation for settlement of claims. In the absence of an agreed date, there can be no claim for interest or interest by way of damages or compensation or additional damages or additional compensation and prayed for dismissal of the suit. On the above rival pleas, the following issues are settled for trial. 1. Whether the payment made by the defendants are in full satisfaction of the respective claims of the first plaintiff? 2. Whether there is any valid payment and the plaintiffs are entitled to claim interest? 3. Whether the defendants are liable to pay or reimburse Sales Tax? 4. Whether the defendants are liable to pay Rs.21,94,200/- towards under payments under the policies? 5. To what relief? In order to substantiate their claim, on behalf of the plaintiffs, the Managing Partner of the first plaintiff firm was examined as PW.1 and marked Exs.A.1 to A.47. On behalf of the defendants, the Divisional Manager of the Insurance Company was examined as DW.1 and marked Exs.B.1 to B.5. The learned Additional Subordinate Judge, Guntur, by the impugned judgment, decreed the suit of the plaintiffs for the amounts claimed by them with subsequent interest @ 18% p.a., on Rs.16,80,000/- from the date of suit i.e. from 11.08.1989 till the date of realization. Sri S. Ravi, learned counsel for the appellant contended that in the absence of any contract or payment of interest under the policies and in the absence of any custom or usage pleaded, the plaintiffs are not entitled to claim interest, and interest on interest as claimed under Claim No.1. There is no time specified for settling of such claims. In view of the same, the plaintiffs cannot calculate the interest from the date convenient to it in the absence of any stipulated percentage of interest payable for such delayed settlement of period for which the claim is not justified. Further, there is no evidence or prevailing bank interest charged for the amounts borrowed by the plaintiffs, since the second plaintiff has not entered into witness box to prove the interest that was claimed, for recovery of the same from the defendants. Therefore, the plaintiffs are not entitled to claim interest from 1.01.1985 to 12.08.1986 and further interest till the date of suit as claimed. Similarly, the claim under two policies for Rs.12,00,000/- and Rs.9,94,000/- the said claim is inter parte in A.S.No.908 of 1995 where this Court allowed the appeal filed by the Insurance company setting aside the decree granted in favour of the plaintiffs for the compensation payable under cover note Nos.91009/84 and 91062 /84, which was the subject matter of O.S.No.414 of 1987 as stated in para-8 of the plaint. The same reasoning also applies to claim No.2. He further contended that with regard to the third claim of sales tax, the Insurance Company is liable to compensate the loss of goods as on the date of damage in the fire accident. Under the policies, it is specifically mentioned that the value of the property at the time of happening of its destruction or the amount of such damage or at its option reinstate or replace such property or any part thereof. Since the liability of the sales tax under Exs.A.37 to A.40 arises after the accident, and the insurance company has no intimation to cover the said loss, the plaintiffs are not entitled to any of the claims and the suit is liable to be dismissed. Sri Danduri Nageswara Rao, learned counsel representing Sri P. Suresh, learned counsel for the respondents/plaintiffs fairly conceded that under the policies, the insurance company has not undertaken to reimburse the firm’s liability to the Bank. He also contended that under all the 9 policies where the surveyor estimated the loss of value of the stock at Rs.1,19,92,396.15 ps., and out of which only Rs.90,29,784/- has been paid on 12.08.1986 and another sum of Rs.6,86,110/- on 10.03.1987. Since there is a delay in payment of amounts due, the plaintiffs are entitled to interest for the late payment, as the bank charged interest at 18% p.a. on the amounts borrowed by the first plaintiff-firm, which is evident from Exs.A.46 & A.47-letters addressed by the Bank. Therefore, the lower Court rightly accepted the claim of the plaintiffs under Claim No.1 towards interest for late payment of the amounts. He also contended that under two policies there were under payments to the tune of Rs.12,00,000/- and Rs.9,94,000/- as against the policy amount of Rs.15,00,000/- and Rs.10,00,000/-. The insurance company is liable to pay the interest as the goods are gutted under fire accident. The plaintiffs are liable to pay the sales tax to the value of the goods for the transaction undertaken for which the Insurance Company is liable to pay the same. In support of his claim for interest on the amounts under Claim No.1, he placed reliance upon the judgment of the Apex Court in Chengalrayan Coop. Sugar Mills v. Oriental Insurance Co. Ltd.,[1]. In view of the above rival submissions, the points that arise for consideration in this appeal are 1. Whether the defendants-Insurance Company is liable to pay interest on the delayed payments for the amounts covered by the policies? 2. Whether the plaintiffs are entitled to the claim of under payment for Rs.12,00,000/- with interest? 3. Whether the Insurance company is liable to indemnify the liability of sales tax payable by the first plaintiff. The defendants at paragraph-5 of the written statement specifically denied about the two cover notes in C.Nos.91009 and 91062 (B&N) mentioned in para-5 of the plaint, and also for retransfer of alleged insurance coverage under Policy Nos.F/1898/83 and F/152/84 under which claim No.2 arises. It is an admitted fact that the fire accident was occurred on 15.08.1984 and the policies were covered under claim No.2. The insurance coverage of Rs.9,00,000/- under Policy No.F/1898/83 and Rs.3,00,000/- under policy No.F/152/84 out of the respective total values covered by such policies of Rs.15,00,000/- and Rs.10,00,000 were received by the defendants- Insurance company only on 17.08.1984. In the insurance policies issued by the defendants-insurance company under Exs.A.2 to A.8, it has undertaken to indemnify the insured the value of the property at the time of happening of its destruction or the amount of such damage or at its option reinstate or replace such property or any part thereof. The policy also provides that the liability of the Company shall, in no case, exceed in respect of each item the sum assured in the said schedule to be insured thereon or in the whole the total sum insured hereby, or such other sum or sums as may be substituted therefore, by memorandum hereon or attached hereto signed by or on behalf of the company. But no time was prescribed for settlement of claims in the event of occurrence of fire accident, nor the Insurance Company has undertaken to pay interest on the amounts due under the policy, if the same is not settled out of a specified period. The learned counsel for the plaintiff has not brought to our notice about any statutory liability on the part of the Insurance Company to pay interest for the delayed payments, if any. It is also to be noticed that for the amounts covered under the two cover notes i.e., C.No.91009 and C.No.91062 (B & N), which were taken one day earlier to the accident, a suit was filed in O.S.No.414 of 1987 on the file of the Additional Subordinate Judge, Guntur, and the same was decreed on 30.03.1995 for Rs.54,39,207/-. But on appeal filed by the Insurance company in A.S.No.908 of 1995, this Court set aside the decree with a finding that the cover notes were not at all in existence at the time the premium was received by the defendants company, and the acceptance of premium by the defendants company would not bind them in a policy which is a result of collusion and fraud between the plaintiffs and the Inspector K. Hanumanth Rao, who issued the cover notes, and who had distant relationship with Mrs. S. Veerabhadraiah’s sister, who is relative of the Managing Partner. The said judgment has become final as admitted by the defendants, and the Special Leave Petition filed against the same was also dismissed. I n Chengalrayan Cooperative Sugar Mills case (Supra), where the entire stock lying in the premises of the appellant was destroyed in a major fire accident, and though the policy had not till then been issued by the respondents, the claim raised by the insured was not repudiated and the policy was also issued after the fire accident occurred. Though the Insurance Company and the insured mutually settled the claim so far as other items were concerned, but they did not agree on the quantum of compensation for the stock of gunny bags, and consequently, the appellant approached the National Commission for payment of claims recommended by the surveyor. The National Commission instead of granting total claim, fixed the liability of the insurer less than the amounts recommended by the surveyor. On appeal to the Supreme Court, the Supreme Court observed that the National Commission was justified in not placing any reliance on the surveyor’s report, and endorsed the view of the National Commission holding that the interest ought to have been awarded from the date on which the claim was filed before the National Commission, and while maintaining the order of National Commission for payment of Rs.11,69,994/-, which is the value of the gunny bags, it had directed the Insurance Company to pay the said amount with interest @ 18% p.a. from the date of filing of claim before the National Commission till the date of actual payment. In view of the above, it has to be seen whether the claim of the plaintiffs for interest under Claim No.1 is justified or not? As already adverted to, the insurance company has not undertaken to pay the amount within the time frame nor it undertook to pay interest if there is any delayed payment. The first plaintiff in its letters under Exs.A.19 and A.20 dated 12.08.1986 and 12.03.1987 acknowledged the receipt of Rs.90,29,784/- and Rs.6,86,110/- respectively, under various fire policies along with the form of discharge for fire loss relating to the said claims under the policies mentioned in the letters addressed to the Bank, in which they mentioned that they signed the discharge voucher and received the amount under protest without prejudice to their rights and interests relating to the said fire policies. But for the first time, under Ex.A.23- notice, dated 17.07.1989, the plaintiffs have mentioned nine policies and receipt of cheques on 12.08.1986 for Rs.90,29,784/- and on 10.03.1987 for Rs.6,86,110/- stating that they have received the amounts under protest as part payment relating to balance of claim and for interest. But in spite of the demands, balance amount and interest on the delayed payment at the rate of 18% p.a. were not paid. Apart from two cover notes covered by Claim No.2, which are the subject matter of O.S.No.414 of 1987, and the remaining seven policies and the claims made thereunder, the plaintiffs have not even paid the principal amounts in respect of policy Nos.F/1898/83 and F/152/84 but they demanded the defendants for payment of respective amounts of Rs.9,00,000/- and Rs.3,00,000/-, which have been paid to them and also interest on the said amounts @ 18% p.a. followed by letters under Exs.A.24 to A.36. In the absence of any contract nor any statutory liability to pay the interest on the delayed payments, the plaintiffs are not entitled to claim interest as calculated at Rs.26,23,152/-, from 1.01.1985 to till the date of payment of above said amounts of Rs.90,29,784/- on 28.8.1986 and Rs.6,86,110/- on 10.03.1987. Once the said amounts have already been paid on the said dates, further payment of interest on the same amounts does not arise. In view of the above, Claim No.1, with regard to claim of interest by the plaintiffs is wholly misconceived since for the first time they have indicated the payment of interest only in the notice under Ex.23 on 17.07.1989 by that date the entire amount has already been paid. Therefore, point No.1 is answered in favour of the defendants and against the plaintiffs. Coming to Claim No.2, with regard to under payments in two policies, namely, policy No.F/1898/83 and policy No.F/152/84, the plaintiffs requested on 14.08.1984 for retransfer of insurance coverage under the above policies for the respective total values. Unless the request of the plaintiffs is acceded to, and the transfer has been accepted and communicated, the same will not comes into operation on the said date of request. Admittedly, when 15th and 16th of August of 1984 are public holidays and the next working day is only 17th August, the letter of the plaintiffs dated 14.08.1984 will be received by the defendants only on 17.08.1984. Therefore, the transfer, if any, comes into operation only on the said date, which view was also supported by the judgment of the Supreme Court in National Insurance Company Ltd., v. Sobina Iakai[2] wherein it has been held that the insurance policy would start from the time and date specifically incorporated in the policy and not from an earlier point of time. The letter under Ex.B.1 addressed by the plaintiff-company to the Branch Manager, Oriental Insurance Company Limited, Guntur, which is the original of Ex.A.18, and Ex.B.2, which is original of Ex.A.17 and Exs.B.3 and B.4, which