Kasim Ali Bulbul v. New India Assurance Co.

AIR 1968 J & K 39

Facts

The plaintiff, Kasim Ali Bulbul, carries on business in wood carving and paper machine under the name and style
of K.A. Bulbul in Lambert Lane, Residency Road, Srinagar.

 On 8th June 60 he got his stock-in-trade consisting of wood carving, paper machine, business furniture
and two pieces of carpet contained in the shop insured with the defendant company for one year from
8th June 60 to 8th June 61 for a sum of Rs. 30,000. A policy No. 155860356 was issued in his favour by the
defendant company.

 The plaintiff’s shop caught fire on the night between 4/5th February 1961 while he was asleep in Zadaibal.
Next morning he came on the scene and found that the shop had been taken possession by the local
officials of the defendant company and the police. It was sealed.

 The plaintiff gave tentative information of this fire to the defendant company. The plaintiff’s books were
seized by the police.

 The police inquired into the matter and declared the fire accidental. Later on a Surveyor was deputed by
the defendant company who made a report. The loss that he sustained on this account was Rs. 27340.31

2. The shop remained in possession of the defendant company when on the night of 3rd November 61 another fire
broke out which destroyed the remaining articles in the shop.

There were some un-insured goods of the value of Rs. 564.50. The total claim of the plaintiff thus comes to Rs.
27,904.81.

3. According to the plaintiff, on the basis of the insurance effected on his goods, the defendant company was liable
to make good the loss to him, but did not do so. As the keys of the shop remained with the defendant upto 3rd
November 61, the defendant was further liable for the loss of uninsured goods valuing Rs. 564.50. The plaintiff
therefore claimed a decree for the above-mentioned amount, i.e., Rs. 27,904.81.

Contentions of the defendant company

4. In defence the defendant company has taken a number of pleas. They are that the defendant has not been
properly sued; the plaint is not properly verified and the suit is timebarred.

All the benefits under the policy and the suit stand forfeited because (1) the claim is fraudulent; (2) A false
declaration has been made in support of the claim; (3) the loss or damage was occasioned by the wilful act and
connivance of the plaintiff; (4) the plaintiff has not complied with the terms and conditions of the policy; (5) the
plaintiff is not entitled to any relief as the suit was not commenced within three months after the rejection of his
claim by the defendant company; and (6) the plaintiff did not comply with condition 11 of the policy and did not
submit any claim within the period of 15 days from the date of the alleged loss. Condition 11 is quoted in extenso
in the written statement. The plaintiff was notified by letter dated 25-2-61 that as the claim was not submitted in
accordance with this condition, his claim could not be entertained.

5. On facts the defendant did not deny the insurance of the articles of the plaintiff with the defendant company as
alleged by the plaintiff.
But the defendant alleged that this contract was entered into by the defendant on the basis of false
representation and suppression of material facts by the plaintiff which vitiated the whole contract.

It was admitted that the plaintiff informed the defendant company at Srinagar on 5.2.61 that his shop had been
gutted on the night between 4/5th February 61.

On 5.2.61 the plaintiff was asked to submit his claim, account books, pass books and submit his claim form. He was
reminded by another letter dated 16.2.61. But the plaintiff did not do anything.

It is admitted that the defendant company locked the shop but the plaintiff’s lock also was there.

On 25.2.61, the defendant rejected the claim of the plaintiff. The plaintiff did not submit his account books, nor
submit his claim in writing.

The plaintiff replied the letter of the defendant of 25.2.61 that he could not ascertain the damages as the account
books and other documents were lying with the police.

By letter dated 28.2.61 the plaintiff was again referred to the letter of the defendant dated 25.2.61. On 27.6.61 the
Chief Regional Manager of the defendant company New Delhi notified the plaintiff that he had forfeited all
benefits under the policy and his claim stood rejected. The conclusion of the police that the fire was accidental was
not correct. Mr. Sarin of Messrs. V.N. Sarin and Co. was appointed as the Surveyor. The survey report was also
against the plaintiff. There was further correspondence between the parties.

On 9-5-61 the plaintiff submitted a list of goods destroyed by fire but that was beyond time.

The plaintiff had been guilty of suppression of facts in the proposal form while replying questions 8(a) and (b) in
the proposal form. He had formerly insured the same goods in the year 1957 with the Ruby General Insurance
Co. Ltd. and the shop was gutted in that year and the plaintiff’s claim which was a huge amount was settled by
that company at Rs. 14860/-. The plaintiff had not complied with conditions 11 and 13 of the policy. Therefore he
was not entitled to any amount. The presence of the uninsured goods in the shop was also denied. Even if there
were any such goods the defendant was not liable for the loss alleged to have been caused to the plaintiff by the
fire of 5.11.61.

Issues

6. On these pleadings my learned predecessor-in-office framed the following issues in the case:
(1) Is the suit properly stamped? OPP
(2) Is the plaint properly verified? OPP
(3) What was the value of the goods lying in the shop of the plaintiff at the time of the fire on the night of 4/5th
February 1961 and what was the value of the goods damaged or destroyed by the fire?
(4) Is the plaintiff’s right to claim extinguished by lapse of time?
(5) Is the plaintiff’s suit not within time?
(6) Has the plaintiff been guilty of suppression of material facts and false representation at the time of obtaining
the policy from the defendant and as such is the policy of insurance void and unenforceable and not binding on the
defendant?
(7) Has the plaintiff not filed claim within the time stipulated in the policy and as such he has forfeited all rights
and claims under the policy?
(8) Is the claim of the plaintiff fraudulent?
(9) Was the fire occasioned by the connivance or wilful act of the plaintiff?
(10) Has the plaintiff’s goods of the value of Rs. 500/- been damaged or destroyed in the fire of November 1962 in
the same premises and if so, is he entitled to get the sum of Rs. 500 from the defendant?
(11) Is the plaintiff not entitled to any relief as he has not filed the suit within 3 months of the rejection of his
claim by the defendant as provided in the policy?
(12) To what relief is the plaintiff entitled?
7. One additional issue was framed by order of this court dated 4.10.62 which is to the following effect: (13) Is the
declaration made in support of the suit claim made by the plaintiff true and correct and if not has he forfeited all
the benefits under the policy?

Two issues are more relevant:

(1) Limitation period under the term of the policy and the extinction of the
right under the policy

(2) Non disclosure of material facts by the plaintiff that entitles the insurer to
repudiate the contract]

Limitation period under the policy

 But there is the second part of this matter which is covered by condition 13 of the policy. This condition
runs as under: “If the claim be in any respect fraudulent or if any false declaration be made or used by the
insured or anyone acting on his behalf to obtain any benefit under this policy, or if the loss or damage be
occasioned by the wilful act or with the connivance of the insured, or if the claim be made and rejected
and an action or suit be not commenced within three months of such rejection, or in case of an arbitration
taking place in pursuance of the 18th condition of this policy within three months after the arbitrator or
arbitrators or umpire shall have made their award, all benefits under this policy shall be forfeited.”

17. In this case we have it in the evidence of Mr. Jaipal Bahadur D.W. 2 Chief Regional Manager of the defendant
company Northern India that the claim of the plaintiff was rejected by means of a letter of the company dated
25.2.61.

18. The suit was instituted on 1-2-62 which is clearly about a year after the rejection of the claim of the plaintiff by
the defendant. Therefore in terms of this policy the right of the plaintiff to recover the suit amount is extinguished.
In the proposal form Ex. D.W. 4/1 the condition is that the declaration made in this form shall be the basis of the
contract between the parties. The insurance company agrees to compensate the insured only subject to the
conditions mentioned in the policy which appear on the back of the policy.

 19. An argument has been advanced that the condition of instituting legal proceedings within three
months of the rejection of the claim of the insured by the insurance company is against section 23 and 28
of the Contract Act. Section 28 reads as under: “Every agreement, 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, is void to that
extent.” 22. Section 28 makes all agreements in restraint of legal proceedings void
 20. Section 23 of the Contract Act makes the following agreements as unlawful: If they are forbidden by
law or are of such a nature that if permitted would defeat the provisions of any law, or are fraudulent, or
involve or imply injury to the person or property of another, or if the court regards them as immoral or
opposed to public policy. A list of illustrations is appended to this section.

23. It is argued that such an agreement is immoral and opposed to public policy and further it curtails the
ordinary period of limitation. I need not consider these sections in detail because the matter is completely
covered by authority. ……..

28. In this case even if the plaintiff was entitled to any relief he had forfeited all rights under the policy when he
failed to bring his suit within three months of 25th February 61 when his claim was rejected by the insurance
company. The claim was not rejected only once, but the basic stand taken by the company in its letter of 25.2.61
was repeated in a number of letters, for instance, D.W. 5/2 dated 28.2.61, D.W. 5/3 dated 27.12.61, D.W. 5/4
dated 21.11.61 and D.W. 2/1 dated 27.6.61. The plaintiff had no justification to wait till 1.2.62 to file the suit. By
that time his right had been completely extinguished.

29. In this way issues 4, 5, 7 and 11 are decided against the plaintiff. His suit is clearly time-barred.

Suppression of material facts

30. The second group of issues that can be conveniently taken up together is Nos. 6, 8, and 13. The case of the
defendant is that the plaintiff has been guilty of suppression of material facts and has made a false representation
at the time of obtaining the policy from the defendant.

His claim cannot therefore be entertained. Emphasis on this aspect of the case is laid on the reply of the plaintiff to
question 8(a) and 8(b) of the proposal Ex. D.W. 4/1 which is as under:

8 (a) Has the property been insured in the past or at the present time? If so, give full particulars.

8(b) Have you sustained loss. Give full particulars. To both these queries the plaintiff has said ‘No.’

31. The contention of the learned counsel for the defendant is that the plaintiff had insured the goods of his shop
with another insurance company in the year 1957 namely, the Ruby General Insurance Co. During that year also his
shop was gutted by fire. He made a claim for Rupees 25,000/- from the Insurance Company, but his claim was
settled at Rs. 14807/-. According to the Manager of the Ruby General Insurance Co., Mr. D.N. Chopra, the
settlement was arrived at on 24.2.58. The shop of the plaintiff had caught fire on 24.4.57 and the policy of
insurance with that company had come into force for one year from 9.10.56 to 9.10.57.

The plaintiff and his son admitted this previous insurance, but their case was that the plaintiff is an illiterate person
who does not know English. He only know how to sign ‘K.A. Bulbul’ and at the time of entering into the present
contract he was not explained the terms of the proposal form or of the insurance policy. ………

 In view of the statement of Abdul Ahad Sheikh and reading in between the lines the statement of the
plaintiff himself, it is difficult to hold that the plaintiff was not put a specific question whether he had
not insured this property with another insurance company earlier.

 I feel that the plaintiff purposely withheld this information from the insurance agent because when
previously he had insured the goods of the shop with the Ruby G. Insurance Co. and his shop had caught
fire he had claimed Rs. 25000 but was given only Rs. 14000 and odd. Feeling somewhat apprehensive
about the state of affairs then, he wilfully suppressed this fact from the defendant insurance company. So
on facts it is proved that the plaintiff has made a false statement in reply to question No. 8.

Legal effect of this false statement

Now we have to see what is the legal effect of this false statement. The law on this point is so well settled both in
England and India that it does not require any elaborate discussion. Anyhow the following authorities may be
mentioned.

 The effect of non-disclosure or misrepresentation is that the insurers have the right to repudiate, that is
to say, to avoid contract.

 Where, however, insurers answer a claim by repudiating the policy on the ground of fraud,
misrepresentation or non-disclosure, they are not bound to offer a return of premium
39. The matter has again been fully discussed in AIR 1962 SC 814 (Mithoolal Nayak vs LIC) where a policy holder
who had been treated a few months before he submitted his proposal for the insurance of his life with the
insurance company by a physician of repute for certain serious ailments as anaemia, shortness of breath and
asthma, not only failed to disclose in his answers to the questions put to him by the insurance company that he
suffered from these ailments but he made a false statement to the effect that he had not been treated by any
doctor of any such serious ailment, it was held that judged by the standards laid down in section 17 Contract Act,
the policy holder was guilty of a fraudulent suppression of material facts when he made his statements, which he
must have known were deliberately false and hence the policy issued to him relying on those statements was
vitiated.

40. In view of all these authorities, it is clear that the plaintiff simply on the ground that he gave a false reply to
questions 8(a) and (b) in the proposal form cannot claim any compensation for fire having been caught by the
goods in his shop. In this case the question was very material and withholding of the real information from the
insurance company would automatically absolve the insurance company from any liability under the contract.
As already remarked, the Privy Council has gone to the length of holding that the answers to a question being
material or immaterial, would not make any difference. The plaintiff's suit would therefore fail on this account
alone.

43. The plaintiff claims Rs. 564.50 as the value of uninsured goods which caught fire on November 3, 1961
because according to him the keys of the shop were still with the defendant company. In the first place the plea
of the plaintiff that the shop remained under the possession and lock and key of the defendant up to 3rd
November 61 is not established. Apart from that fact unless it is shown that the destruction by fire of this
uninsured goods was the result of the negligence of the defendant, no responsibility can be fastened upon the
defendant. If the plaintiff's case were that he was present on the scene of occurrence on November 3, 1961 to
salvage his merchandize, but for the fact that the shop was locked by the defendant, there was some case for the
plaintiff. But there is no such suggestion on the part of the plaintiff. Even if the shop was under the lock and key of
the defendant and it caught fire which was accidental the defendant would not by the mere fact of the destruction
of the goods therein be liable for the damage. Therefore, in my opinion, the plaintiff cannot even claim this
amount.

44. From the finding on the issues recorded above, the plaintiff's suit has to be dismissed and is hereby dismissed.

Limitation period: National Insurance Co. Ltd vs Sujir Ganesh Nayak & Co. & Anr on 21 March, 1997

 Legal position that emerges is that an agreement which in effect seeks to curtail the period of limitation
and prescribes a shorter period than that prescribed by law would be void as offending section 28 of the
Contract Act. That is because such a an agreement would seek to restrict the party from enforcing his
right in Court after the period prescribed under the agreement expires even though the period prescribed
by law for the enforcement of his right has yet not expired.

 But there could be agreements which do not seek to curtail the time for enforcement of the right but
which provides for the forfeiture or waiver of the right itself if no action is commenced with in the
period stipulated by the agreement.

 Such a clause in the agreement would not fall within the mischief of section 28 of the Contract Act. To
put it differently, curtailment of the period of limitation is not permissible in view of Section 28 but
extinction of the right itself unless exercised within a specified time is permissible and ca be enforced. If
the policy of insurance provides that if a claim is made and rejected and no action is commenced within
the time stated in the policy, the benefits flowing from the policy shall stand extinguished and any
subsequent action would be time barred. Such a clause would fall outside the scope of Section 28 of the
Contract Act. This, in Brief, seems to be the settled legal position.

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