Case: SHREE AMBICA MEDICAL STORES Vs. THE SURAT PEOPLES CO-OPERATIVE BANK LTD

his commission within twenty-four hours of the collection excluding bank and postal holidays. (5) The Central Government may, by rules, relax the requirements of sub-section (1) in respect of particular categories in insurance policies. (6) The Authority may, from time to time, specify, by the regulations made by it, the manner of receipt of premium by the insurer. 23. The above provision states that no risk can be assumed by the insurer unless the premium payable is received in advance. Sub-Section (3) of Section 64 (VB) provides for refund of the premium amount to the insured in case of cancellation or alteration of the terms and conditions of the policy. In the present case, the premium of Rs 992 to cover STFI perils was refunded by the insurer to the bank and the amount was deposited in the insureds account. The proposal does not conclude the contract. A contract postulates an agreement between the parties. In the present case, the insurer while issuing the new policy at a fresh location specifically excluded STFI perils and refunded the premium. The insured at the time when the loss occurred was covered by a policy that excluded STFI perils. Therefore, the insurer cannot be held to be liable. To hold to the contrary would be rewriting the agreement between the parties and creating a fresh contract to which the parties had not agreed. 24. The bank in its written statement filed before the State Commission, specifically averred in paragraph 2 that: ..The real fact is that one copy of the Policy is given to the Complainant and from this the Complainant can know the fact. One copy of the said Policy was given to them. Moreover, the Premium Amount which was returned back was debited in their Account. They could have inquired from this that what this Premium Amount was returned by the Insurance Company. The appellants in their rejoinder did not specifically deny the averment that they were furnished with a copy of the policy. The appellants have also not denied the fact that the premium on account of STFI perils which was refunded by the insurer was credited to their account. This being the position, it is not open to the appellants to disavow knowledge of the exclusion of the STFI perils in the insurance cover of Rs 60 lakhs which was issued for 2005-06 and renewed for 2006-07. 25. The appellants have placed reliance on the decision of this Court in Biman Krishna Bose v United India Insurance Co Ltd (2001) 6 SCC 477 , where this court while dealing with a mediclaim policy, observed: 5. A renewal of an insurance policy means repetition of the original policy. When renewed, the policy is extended and the renewed policy in the identical terms from a different date of its expiration comes into force. In common parlance, by renewal, the old policy is revived and it is sort of a substitution of obligations under the old policy unless such policy provides otherwise. It may be that on renewal, a new contract comes into being, but the said contract is on the same terms and conditions as that of the original policy. Where an insurance company which has exclusive privilege to carry on insurance business has refused to renew the mediclaim policy of an insured on extraneous and irrelevant consideration, any disease which an insured had contacted during the period when the policy was not renewed, such decease cannot be covered under a fresh insurance policy in view of the exclusion clause. The exclusion clause provides that the pre-existing diseases would not be covered under the fresh insurance policy. If we take the view that the mediclaim policy cannot be renewed with retrospective effect, it would give handle to the insurance company to refuse the renewal of the policy on extraneous consideration thereby deprive the claim of insured for treatment of diseases which have appeared during the relevant time and further deprive the insured for all time to come to cover those diseases under an insurance policy by virtue of the exclusion clause. This being the disastrous effect of wrongful refusal of renewal of the insurance policy, the mischief and harm done to the insured must be remedied. We are, therefore, of the view that once it is found that the act of an insurance company was arbitrary in refusing to renew the policy, the policy is required to be renewed with effect from the date when it fell due for its renewal. (Emphasis supplied) 26. The above case, as the extract indicates, dealt with a situation where the act of the insurer in refusing to renew the mediclaim policy was held to be arbitrary. This Court noted the serious consequence flowing out of the arbitrary refusal to renew the contract since it would result in the exclusion of the cover and the rejection of the claim in respect of a disease which the insured had contracted during the period when the policy was not renewed. The situation in the present case is clearly distinguishable. The terms and conditions of the new policy specifically excluded STFI perils and evidently there was a change in the obligations of the insurer. There was no renewal but the issuance of a new policy. The change in the location of the premises in the present case led to the issuance of a new policy. It was open to the insurer to specifically exclude STFI perils as a commercial decision. The appellants had knowledge of the exclusion of the STFI perils as they were provided with a copy of the policy and also received the refund of the premium. Having lodged no protest with the insurer during 2005-06 or in the renewed term of 2006-07, the insured cannot lay a claim that they had no knowledge that the STFI cover was excluded from the insurance cover. Nothing prevented the appellants from either approaching the insurer or any other insurance company for obtaining a policy that covered STFI perils.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 0

Reasoning from the judgment:
0[ds]21. In the present case, the policy of insurance with a cover of Rs 60 lakhs for the period 2004-05 was issued for the location at B 205, Plot No 17-B, Village Karnaj. The insurance policy for 2005-06 was sought for different premises situated at 12/1123-1124, Basement, Meghdoot Apartment, Surat. The address mentioned in the policy for 2004-05 differs from that of 2005-06. The insurer proceeded on the basis that this was a fresh contract of insurance. Theinsurance policy for 1 August 2005 to 31 July 2006 was issued with the exclusion of STFI perils. This is clear from the use of words Warranted that STFI risk is excluded from the risk in the above insurance policy. The terms of the policy will govern the contract between the parties. The STFI risks were specifically excluded from the coverage of the policy. The extra premium of Rs 992 was refunded by the insurer to bank and the bank deposited the amount in the appellants account23. The above provision states that no risk can be assumed by the insurer unless the premium payable is received in advance. Sub-Section (3) of Section 64 (VB) provides for refund of the premium amount to the insured in case of cancellation or alteration of the terms and conditions of the policy. In the present case, the premium of Rs 992 to cover STFI perils was refunded by the insurer to the bank and the amount was deposited in the insureds account. The proposal does not conclude the contract. A contract postulates an agreement between the parties. In the present case, the insurer while issuing the new policy at a fresh location specifically excluded STFI perils and refunded the premium. The insured at the time when the loss occurred was covered by a policy that excluded STFI perils. Therefore, the insurer cannot be held to be liable. To hold to the contrary would be rewriting the agreement between the parties and creating a fresh contract to which the parties had not agreed25. The appellants have placed reliance on the decision of this Court in Biman Krishna Bose v United India Insurance Co Ltd (2001) 6 SCC 477 ,20. This Court, while interpreting the contract of insurance must interpret the words of the contract by giving effect to the meaning and intent which emerges from the terms of the agreementThe court through its interpretative process cannot rewrite or create a new contract between the parties. The court has to simply apply the terms and conditions of the agreement as agreed between the partiesThe appellants in their rejoinder did not specifically deny the averment that they were furnished with a copy of the policy. The appellants have also not denied the fact that the premium on account of STFI perils which was refunded by the insurer was credited to their account. This being the position, it is not open to the appellants to disavow knowledge of the exclusion of the STFI perils in the insurance cover of Rs 60 lakhs which was issued for 2005-06 and renewed for 2006-0726. The above case, as the extract indicates, dealt with a situation where the act of the insurer in refusing to renew the mediclaim policy was held to be arbitrary. This Court noted the serious consequence flowing out of the arbitrary refusal to renew the contract since it would result in the exclusion of the cover and the rejection of the claim in respect of a disease which the insured had contracted during the period when the policy was not renewed. The situation in the present case is clearly distinguishable. The terms and conditions of the new policy specifically excluded STFI perils and evidently there was a change in the obligations of the insurer. There was no renewal but the issuance of a new policy. The change in the location of the premises in the present case led to the issuance of a new policy. It was open to the insurer to specifically exclude STFI perils as a commercial decision. The appellants had knowledge of the exclusion of the STFI perils as they were provided with a copy of the policy and also received the refund of the premium. Having lodged no protest with the insurer during 2005-06 or in the renewed term of 2006-07, the insured cannot lay a claim that they had no knowledge that the STFI cover was excluded from the insurance cover. Nothing prevented the appellants from either approaching the insurer or any other insurance company for obtaining a policy that covered STFI perils.