Case: Deokar Exports Pvt. Ltd Vs. New India Assurance Company Ltd

Sub-sections (1) and (2) of the said section, relevant for our purpose, are extracted below: "64-VB. No risk to be assumed unless premium is received in advance - (1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner.(2) For the purposes of this section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the inusrer.Explanation - Where the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money order is booked or the cheque is posted, as the case may be." (Emphasis supplied) Two things emerge from the said section. The first is that the insurer cannot assume risk unless and until premium is received or guaranteed or deposited. The second is that a policy issued can assume the risk from a retrospective date provided such date is not earlier than the date on which premium had been paid in cash or by cheque to the insurer. 9. In this case, the proposal sent by the appellant was received by the insurer on 16.6.1989. It required that the period of insurance cover should be for the period 12.3.1988 to 12.9.1989. The reason why the respondent wanted the insurance cover retrospectively from 12.3.1988 is obvious. The initial insurance policy expired on 12.3.1988. Under the terms of finance between MSFC and the appellant, apparently it was necessary to have an uninterrupted and continuous insurance cover during the period the machine was secured in favour of MSFC. Therefore, the appellant wanted the insurance cover to be continued by way of renewal for the period 12.3.1988 to 12.9.1989. But the premium amount for one year was received by the insurer only on 26.8.1988. Having regard to the bar contained in Section 64-VB of the Act, the insurer could not accept the request of the appellant to grant insurance cover with retrospective effect from a date prior to 26.8.1988 when it received the premium. Therefore, the insurer adopted the standard, logical and obvious course of issuing the insurance policy with effect from the date on which it received the premium amount by cheque that is with effect from 26.8.1988. As the premium paid was for one year and the standard term of fire policy was one year, the policy was issued assuming risk for the period 26.8.1988 to 25.8.1989. Non-issue of the policy for the period commencing from 12.3.1988 required by the appellant, was for a good and valid reason. There was also nothing illogical or arbitrary about the insurance of a policy specifying the period of insurance cover as one year effective from the date of receipt of the premium, that is from 26.8.1988 to 25.8.1989. If the appellant wanted insurance cover prospectively it should have so specified in the proposal. Having failed to do so and having sought retrospective cover, the appellant cannot make a grievance when the insurance cover is issued retrospectively from the date of receipt of the premium.10. Another aspect which requires to be noticed is that when the policy was sent by the insurer to MSFC, there was no protest or objection from MSFC that the policy was issued for a wrong period. Nor did it return the policy to the insurer with a request to make it prospective from the date of the policy. The appellant did not choose to examine the policy or cross-check with MSFC about the currency of the insurance policy or about the need to further renewal of the policy. In fact, it would appear from the record that MSFC had written on 31.7.1989 to the appellant that the insurance policy was due to expire in August, 1989. It is, thus, clear that both the appellant and MSFC were aware of the fact that the insurance cover under the policy was for the period 26.8.1988 to 25.8.1989 but neither of them objected to it. Nor was any premium paid for further renewal of the policy beyond 25.8.1989. Obviously, therefore, the insurer cannot be made liable for the loss which occurred on account of a fire accident on 10.2.1990.11. A policy of insurance is a contract based on an offer (proposal) and an acceptance. The appellant made a proposal. The respondent accepted the proposal with a modification. Therefore, it was a counter proposal. The appellant had three choices. The first was to refuse to accept the counter-proposal, in which event there would have been no contract. The second was to accept either expressly or impliedly, the counter-proposal of the respondent (that is respondents acceptance with modification), which would result in, a concluded contract in terms of the counter proposal. The third was to make a counter proposal to the counter-proposal of the respondent in which event there would have been no concluded contract unless the respondent agreed to such counter-counter-proposal. But the appellant definitely did not have the fourth choice of propounding a concluded contract with a modification neither proposed nor agreed to by either party. If the appellant did not agree to the policy covering the period 26.8.1988 to 25.8.1989 instead of the period 12.3.1988 to 12.9.1989, the result would never create an insurance contract effective from 30.6.1989 or any other date.12. The contention of the learned counsel for the appellant that an equitable view must be taken is untenable. In a contract of insurance, rights and obligations are strictly governed by the policy of insurance. No exception or relaxation can be made on the ground of equity. 13.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In this case, the proposal sent by the appellant was received by the insurer on 16.6.1989. It required that the period of insurance cover should be for the period 12.3.1988 to 12.9.1989. The reason why the respondent wanted the insurance cover retrospectively from 12.3.1988 is obvious. The initial insurance policy expired on 12.3.1988. Under the terms of finance between MSFC and the appellant, apparently it was necessary to have an uninterrupted and continuous insurance cover during the period the machine was secured in favour of MSFC. Therefore, the appellant wanted the insurance cover to be continued by way of renewal for the period 12.3.1988 to 12.9.1989. But the premium amount for one year was received by the insurer only on 26.8.1988. Having regard to the bar contained in Section 64-VB of the Act, the insurer could not accept the request of the appellant to grant insurance cover with retrospective effect from a date prior to 26.8.1988 when it received the premium. Therefore, the insurer adopted the standard, logical and obvious course of issuing the insurance policy with effect from the date on which it received the premium amount by cheque that is with effect from 26.8.1988. As the premium paid was for one year and the standard term of fire policy was one year, the policy was issued assuming risk for the period 26.8.1988 to 25.8.1989. Non-issue of the policy for the period commencing from 12.3.1988 required by the appellant, was for a good and valid reason. There was also nothing illogical or arbitrary about the insurance of a policy specifying the period of insurance cover as one year effective from the date of receipt of the premium, that is from 26.8.1988 to 25.8.1989. If the appellant wanted insurance cover prospectively it should have so specified in the proposal. Having failed to do so and having sought retrospective cover, the appellant cannot make a grievance when the insurance cover is issued retrospectively from the date of receipt of the premium.10. Another aspect which requires to be noticed is that when the policy was sent by the insurer to MSFC, there was no protest or objection from MSFC that the policy was issued for a wrong period. Nor did it return the policy to the insurer with a request to make it prospective from the date of the policy. The appellant did not choose to examine the policy or cross-check with MSFC about the currency of the insurance policy or about the need to further renewal of the policy. In fact, it would appear from the record that MSFC had written on 31.7.1989 to the appellant that the insurance policy was due to expire in August, 1989. It is, thus, clear that both the appellant and MSFC were aware of the fact that the insurance cover under the policy was for the period 26.8.1988 to 25.8.1989 but neither of them objected to it. Nor was any premium paid for further renewal of the policy beyond 25.8.1989. Obviously, therefore, the insurer cannot be made liable for the loss which occurred on account of a fire accident on 10.2.1990.11. A policy of insurance is a contract based on an offer (proposal) and an acceptance. The appellant made a proposal. The respondent accepted the proposal with a modification. Therefore, it was a counter proposal. The appellant had three choices. The first was to refuse to accept the counter-proposal, in which event there would have been no contract. The second was to accept either expressly or impliedly, the counter-proposal of the respondent (that is respondents acceptance with modification), which would result in, a concluded contract in terms of the counter proposal. The third was to make a counter proposal to the counter-proposal of the respondent in which event there would have been no concluded contract unless the respondent agreed to such counter-counter-proposal. But the appellant definitely did not have the fourth choice of propounding a concluded contract with a modification neither proposed nor agreed to by either party. If the appellant did not agree to the policy covering the period 26.8.1988 to 25.8.1989 instead of the period 12.3.1988 to 12.9.1989, the result would never create an insurance contract effective from 30.6.1989 or any other date.12. The contention of the learned counsel for the appellant that an equitable view must be taken is untenable. In a contract of insurance, rights and obligations are strictly governed by the policy of insurance. No exception or relaxation can be made on the ground of equity.