& Baking Industry P. Ltd Vs. M/S. New India Assurance Co. Ltd. & And.
 INSC 1896 (7 November 2008)
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.7515 OF 2001 M/s KRISHNA
FOOD & BAKING INDUSTRY P. LTD. ... Appellants Versus M/S NEW INDIA
LTD. & ANR. ...
Respondents WITHCIVIL APPEAL NO.8495 OF 2001 RAJENDRA KUMAR SAWHNEY ...
Appellant Versus M/S NEW INDIA ASSURANCE CO. LTD. & ANR. ... Respondents
WITH CIVIL APPEAL NO.8496 OF 2001 M/s KRISHNA FOOD & BAKING INDUSTRY P.
LTD. ... Appellant Versus M/S NEW INDIA ASSURANCE CO. LTD. & ORS. ...
CIVIL APPEAL NO.3393 OF 2002 2 M/S NEW INDIA ASSURANCE CO. LTD. ... APPELLANT VERSUSM/s
KRISHNA FOOD & BAKING WITHCIVIL APPEAL NO.4024 OF 2002 M/S NEW INDIA
ASSURANCE CO. LTD. ... APPELLANT VERSUS WITHCIVIL APPEAL NO.8000 OF 2002 CANARA
BANK ... APPELLANT VERSUS M/s KRISHNA FOOD & BAKING WITH CIVIL APPEAL
NO.8002 OF 2002 CANARA BANK ... APPELLANT VERSUS M/s KRISHNA FOOD & BAKING
3 C.K. THAKKER, J.
these appeals have been filed against a common judgment and order dated June
01, 2001 passed by the National Consumer Disputes Redressal Commission
(`National Commission' for short) in Original Petition No. 194 of 1994 and
companion matters. These appeals are filed under Section 23 of the Consumer
Protection Act, 1986 (hereinafter referred to as `the Act').
appreciate the controversy raised in the present appeals, few relevant facts
may be stated.
Krishna Flour and Oil Mills (`Mill' for short) is a partnership firm while M/s
Krishna Food and Baking Industry Pvt. Ltd. (`Company' for short) is a company
registered under the Companies Act, 1956 as applicable to the State of Jammu
& Kashmir. Both the units were located in Nawab Bazar, Srinagar, in the
State of Jammu & Kashmir. Both were sister 4 concerns. Rajendra Kumar
Sawhney was Chairman of the Company as also main partner of the Mill. The
Company was dealing in manufacturing bread, biscuits, cakes and other bakery
It is the case of the
complainants that during the period of disturbances caused by militancy in
early nineties of the last century, Mr. Praneet Sawhney, only son of Rajendra
Kumar Sawhney was shot dead by the terrorists on March 27, 1990 in his office.
Immediately thereafter, operations of both the units were suspended and the
complainants had to migrate to Delhi. It was stated that there was `watch and
ward staff' as also some other personnel who looked after the premises and
stocks and raw materials lying in the units. It was also stated in the
complaints that the complainants were able to transfer records from Srinagar to
to the complainants, they had obtained three separate insurance policies from
M/s New India Assurance Co. Ltd. (`Insurance Company' for short), the details
of which are as under;
S No. Policy No. Sum
Case No. Items covered Assured
1. 112119000249 Rs.40
194/94 Stock of Wheat, Wheat Lakh Products and Packing material and Goods of
like nature of Krishna Flour & Oil Mills
2. 113119000312 Rs.25
210/94 Stocks of Raw Material Lakh like Flour, Maida, Ghee, chemicals etc. in
godowns belonging to Krishna Food & Baking Industries
3. 113119000313 Rs.53
209/94 Plant & Machinery Lakhs installed in Krishna Food & Baking
(a) Factory Building
Rs.21 lakhs (b) Electric fittings Rs.4 lakhs (c) Plant & Machinery Rs.28
was the say of the complainants that in the morning of November 12, 1991,
certain terrorists attacked the Company as well as the Mill and set them on
fire. Substantial damage had been caused to building, plant, machinery and
electricity fittings; the raw materials lying in the units were destroyed
stocks which were in both the units were also either destroyed or substantially
damaged. In 6 view of the insurance coverage, a demand was made by the
complainants to the Insurance Company to get the survey done and to pay the
amount of loss sustained by the complainants.
Company, however, did not do anything in the matter for quite long time.
The complainants got
the survey done through their surveyors and demanded the amount to which they
were entitled to. The Insurance Company, however, did not make payment which
constrained the complainants to approach National Commission by filing three
complaints being Complaint Nos. 194, 209 and 210 of 1994.
prayer made in the complaints and the demand in respect of policies and sums
may be summarized thus;
S No. Policy No. Sum
Complaint Items covered Assured No.
Rs.40 194/94 Stock of Wheat, Wheat Lacs Products and Packing material and Goods
of like nature of the Mills.
Rs.25 210/94 Stocks of Raw Material Lakhs like Flour, Maida, Ghee, chemicals
etc. in godown belonging to Baking Industry.
Rs.53 209/94 Plant & Machinery Lakhs installed in Baking Industry.
(`Plant Policy') (a)
Factory Building Rs.21 lakhs (b) Electric fittings Rs.4 lakhs (c) Plant &
Machinery Rs.28 lakhs
Insurance Company repudiated the claim of the complainants. At a belated stage,
survey had been carried out by the Insurance Company through its Surveyors
wherein it was observed that substantial damage had not been caused to
building, plant, machinery and electricity fittings and the complainants were not
entitled to the amount demanded by them under the said head. The Insurance
Company also assessed the damage to the building, plant, machinery and
electricity fittings to the extent of Rs.31,373/- and nothing more.
regard to raw-materials and stocks, the amount was substantially curtailed by
the Insurance Company inter alia on the grounds that the stocks were perishable
in 8 nature and had become unfit for human consumption and the same had been
badly affected by bacterial growth. It had become worthless at the time of
mishap in 1991. It was also contended that in absence of proper `watch and ward
staff', there was pilferage of stocks and raw materials by intruders as well as
by staff members of the complainants' Company and Mill. It was, therefore,
submitted that the complainants were not entitled to the amount claimed in the
National Commission went into the merits of the matter and held that the
complainants were entitled to certain reliefs.
With regard to stocks
kept in the godown of the Mill, it observed that it was covered by policy No.
1131190000249. The policy was for an amount of Rs. forty lakhs and premium of
Rs.5,814/- was paid. The claim put forward by the complainants was for
Rs.37,78,618/-. According to the complainants, the stocks which were lying in
the units were as under;
9 Commodity Quantity
Rate Amount (Rs.) Wheat 2138.48 Qtls. Rs.400/Qtl. 8,55,392 Maida 4676 Bags (90
Kg.) Rs.450/bag 21,04,200 Krishna 271 Bags (80 Kg.) Rs.400/bag 1,08,400 Bhog
Atta Super 5952 Bags (10 Kg) Rs.55/bag 3,27,360 Fine Atta Bran 2090 Bag (10 Kg)
Rs.100/bag 2,09,000 Bardana (Total value as per 1,74,267 (Packing Books)
Material) Total 37,78,619
National Commission held that surveyors of the complainants had prepared a
report and submitted to the Insurance Company, but the claim was repudiated on
the ground that there were no stock worth its while as there was pilferage
since the units remained closed for about twenty months. It was also contended
by the Insurance Company that the stock was not fit for human consumption. The
final survey report at the instance of the Insurance Company recommended to
settle the claim of the complainants at Rs.5,18,619/-. The figure was
communicated by the Insurance Company to the complainants.
National Commission noted that respondent No. 2 Grindlays Bank supported the
10 case of the complainants and prayed that the amount claimed by the
complainants be given to them as the complainants executed mortgage documents
in the favour of the Bank.
National Commission considered the evidence of Mr. Ghulam Rasool Wani, the only
witness examined on behalf of the complainants who was an illiterate staff
member. On behalf of the Insurance Company, two surveyors, Mr. Andrasabi and
Mr. A.K. Gupta were examined. The Insurance Company also examined Mr. V.K.
Malik and Mr. M.R. Grover. The National Commission considered the relevant
documentary and oral evidence and observed that the risk was covered by the
terms and conditions of the insurance policy. It also held that the units could
not work in view of militancy in the area and the units were required to be
closed down. It believed the case of the complainants that there was terrorist
attack on both the units on November 12, 1991 and the militants set on fire the
units. It further recorded a finding that 11 there was no evidence whatsoever
to conclude that there was pilferage either by the intruders or by the staff
members of any of the units. It, however, held that stocks were worthless, and
as such, the complainants were not entitled to the amount claimed. According to
the National Commission, an amount of Rs.5,18,619/- as recommended by the
surveyors of the Insurance Company was a reasonable figure and ought to have
been accepted by the Insurance Company. Accordingly, it held that the
complainants were entitled to the said amount.
regard to the raw material, it was covered by policy No.1131190000312 and the
coverage was for Rs. 25 lakhs. Premium of Rs.4,821/- was paid and the policy
break up given for such claim was as under;
Raw Materials Rs.
11,52,248-00 Packing Materials Rs. 05,40,079-00 Interest @ 18% Rs.
08,66,471-00 12 ------------ TOTAL Rs. 25,58,798-00 ------------
according to the complainants, total loss in respect of raw materials and
allied perils was to the extent of Rs. 25,58,798/-. On the said claim, the
Insurance Company appointed three investigators, i.e. Mr. Hamdani, Andrasabi
and Adarsh Associates. The surveyors, in their report, narrated the facts and
circumstances of the case and left the amount of valuation of raw materials to
the opposite party. In a subsequent report, however, they gave a figure of
Rs.4,33,122/- for settlement of the claim and asked the complainants whether
they were ready to accept the amount. Upon the query by the complainants,
however, the Insurance Company, instead of giving response to the query,
repudiated the claim vide letter dated April 19, 1995 on the ground that there
was pilferage and hence, the Insurance Company was not liable. Moreover, 13
though there was destruction of raw material due to fire in the units, since
the raw materials were unfit for human consumption, the complainants' claim was
not well-founded. It was, therefore, held that the complainants were not
entitled to the claim.
National Commission considered the question and observed that there was no
pilferage and taking into account the weather condition in Srinagar, it could
not be held that the raw materials had become worthless or unfit for human
consumption. Considering the reports, it was held by the National Commission
that as per the Surveyors Report at the instance of the Insurance Company, the
claimants were entitled to Rs.4,53,122/-.
respect of building, plant, machinery and electricity fittings, the claim was
covered by policy No.1131190000313. It was for Rs. 53 lakhs. The break-up was
14 i) Factory
Building Rs. 21,00,000 ii) Electric fittings including Rs. 4,00,000 Transformer
iii) Machinery of all
kinds used for Rs. 28,00,000 Manufacture of Biscuits, Bread etc.
Insurance company, on the other hand, stated that the complainants were
entitled only to Rs.31,373/- and nothing more.
National Commission considered the question and observed that the complaint
relating to the said policy was required to be allowed in part. The Insurance
Company was directed to make payment of Rs.31,373/- towards damage to building
with interest at the rate of 12 per cent and the complaints were accordingly
aggrieved by the order passed by the National Commission, three appeals have
been filed by the complainants. The grievance of the complainants is that
though the complainants were entitled to the amount which had been claimed by
them, based on evidence and 15 Surveyors' Reports, the National Commission
committed an error of fact and of law in not granting the prayer and in not
allowing the complaints in their entirety. It was, therefore, submitted that
the appeals deserve to be allowed by directing the Insurance Company to pay
full amount with interest at the rate of 18 per cent from November 12, 1991 and
costs. The prayer was also made to pay appropriate amount towards harassment
caused to the complainants.
appeals are filed by the Insurance Company. In the appeals, it was contended by
the Insurance Company that the National Commission was in error in granting
relief in favour of the complainants. The complainants were not entitled to any
relief since in absence of the Managing Director and other responsible persons,
there was pilferage by intruders and staff members themselves for which the
Insurance Company cannot be held liable nor it can be directed to make payment.
materials and stocks had become unfit for human consumption and the
complainants were not entitled to the amount claimed by the complainants from
the Insurance Company. The amount which was offered by the Insurance Company
was adequate and sufficient.
The amount on account
of poor quality of goods and materials had been rightly deducted. The order
passed by the National Commission, therefore, deserves interference by allowing
the appeals of the Insurance Company.
Bank has not challenged the order passed by the National Commission. Canara
Bank, however, has filed two appeals by obtaining special leave from this Court
against orders passed in Original Petition Nos. 209 of 1994 and 210 of 1994. It
has supported the case of the complainants. According to the Canara Bank, the
claim put forward by the complainants was well-founded and ought to have been
allowed in toto by directing the Insurance Company to pay full amount towards
loss and damage claimed 17 by the complainants. It, however, submitted that
the entire amount to which the complainants were entitled ought to have been
ordered to be paid to the Bank in view of the fact that the Insurance Policies
had been assigned in favour of the Bank. In law, such an assignment amounts to
transfer of actionable claim in favour of the Bank. The Insurance Company is,
therefore, bound to pay the amount to Canara Bank. Reliance in this connection
was placed on behalf of the Bank on Section 38 of the Insurance Act, 1938;
Sections 130 and 135 of the Transfer of Property Act, 1882 and a decision of
this Court in Chief Executive Officer & Vice Chairman, Gujarat Maritime
Board v. Haji Daud Haji Harun Abu & Ors., (1996) 11 SCC 23. It was,
therefore, submitted that appeals filed by the complainants should be allowed
but the entire amount in relation to two policies be ordered to be paid to
have heard the learned counsel for the parties. Learned counsel for the
complainants contended that the National Commission committed an error of fact
and of law in not allowing the complaints and the claims put forward by the
complainants in their entirety. It was submitted that the National Commission
recorded a finding that the claims were covered by policies which were
Claims were lodged by
the complainants on the basis of damage sustained by them. In support of such
claims, survey was made and Surveyors' Reports were duly forwarded to the
Insurance Company. The defence of the Insurance Company that there was
pilferage by the intruders as well as by staff members of the complainants was
not believed. Regarding adverse affect on raw materials and stocks, the
National Commission observed that keeping in view the climatic conditions of
Srinagar, it could not be said that the entire stock and raw material was unfit
for human consumption. It, therefore, 19 allowed part of the claim of the
According to them,
however, the National Commission was not right in deducting the claim of the
complainants. Apart from favourable climatic conditions in Jammu & Kashmir,
the National Commission ought to have appreciated the fact that the
complainants could not carry on their business activities of preparing
biscuits, breads, cakes and other items not because of inaction on their part,
but because of terrorist activities and militancy in the area. It was,
therefore, not a case of voluntary omission to carry on trade, but it was
compulsion that they could not produce goods. It was contended that terrorism
was one of the terms covered by the Insurance Policy and since the business could
not be carried on because of terrorism, the complainants had to suspend
operations of both the units. The complainants cannot be held even partly
responsible for such suspension of operation of units and stoppage of business.
The National 20 Commission ought to have appreciated these facts and ought to
have allowed the claim of the complainants.
was also submitted that in spite of continuous requests by the complainants to
the Insurance Company to get the survey done, no action was taken by the Insurance
Company for a pretty long time. Moreover, even after the survey was got done by
the Insurance Company through its own Surveyors and as per their reports,
certain amounts were required to be paid, the said amount was also not paid by
the Insurance Company. Regarding certain items, there was no response
whatsoever by the Insurance Company. The National Commission also took into
account those facts, but allowed the claim of the complainants only in part.
The order of the
National Commission to that extent, therefore, requires to be modified by
granting full claim of the complainants.
was submitted that in the facts and circumstances and entitlement of the 21
complainants for full claim, appeals filed by the Insurance Company are liable
to be dismissed.
to appeals filed by Canara Bank, it was submitted that the appeals are not
maintainable. The National Commission was, therefore, wholly right in not
directing the Insurance Company to pay the claim amount to the Bank. It was
also submitted that such claim lodged by the Canara bank was even otherwise not
tenable. It was urged that under Section 3 of the Jammu & Kashmir Migrants
(Stay of Proceedings) Act, 1997, no such claim could have been lodged by the
Bank against the complainants by approaching a Civil Court by filing a suit and
no order could have been made or a decree could have been passed by a competent
Court in view of the provisions of the said Act. Since no such claim is
maintainable in the light of statutory provisions, the Bank cannot by this
indirect method, obtain a decree and get it executed 22 which it could not
have otherwise got in view of the suspension of such claims. It was, therefore,
submitted that both the appeals filed by the Canara Bank are also liable to be
learned counsel for the respondent Insurance Company contended that the
National Commission was not right in partly allowing the claims of the
complainants. It was stated that the Insurance Company got the survey done
through its surveyors and the amount to which the complainants were found
entitled was offered to them. But the complainants wanted more amount and
approached the National Commission. It was also submitted that from the Survey
Reports, it was clearly proved that stocks and raw materials had become unfit
for human consumption. The National Commission was, therefore, right in
reducing the claim to that extent. According to the counsel, however, the
National Commission was not right in observing and recording a finding that
there was no 23 pilferage. It was stated that it was not in dispute that after
Praneet Sawhney was shot dead by the terrorists, the operation in both the
units stood suspended and Managing Director of the Company (Rajendra Kumar
Sawhney) left Srinagar and went to Delhi and only employees were there. It was,
therefore, obvious that in absence of any responsible officer belonging to
Sawhney family, there was pilferage as stated by the Insurance Company and the
National Commission could not have recorded a finding to the contrary. To that
extent, therefore, their appeals deserve to be allowed.
learned counsel for the Canara Bank, on the one hand, supported the claim of
the complainants and submitted that once the operation of the units became
impossible due to terrorist activities which was covered by a clause in
Insurance Policy and the complainants could not carry on business, the National
Commission was not justified in rejecting any part of the claim of the
complainants. On the 24 basis of survey reports substantial loss to the
building, plant, machinery and electricity fittings had been proved and the
complainants were entitled to the entire amount. Similarly, with regard to raw
materials and stocks, nothing could have been deducted by the National
Commission as it was impossible for the complainants to carry on production.
The only reason why the units could not operate was militancy activities in the
area. If it were so, the National Commission was not justified in taking into
account the fact as to suspension of business for reduction of claim and
consideration of the aspect that certain items were unfit for human consumption
and the amount was liable to be reduced.
was, however, submitted that indisputably substantial advance was made to the
complainants by the Bank and it was having charge over the property of the
Company and of the Mill. It had also a right of lien. It was, therefore
incumbent on the National Commission 25 to uphold the claim of the Bank by
directing the Insurance Company to pay the amount to the Bank directly and not
to the complainants. The counsel submitted that the provisions of Section 38 of
the Insurance Act, 1938 and Sections 130 and 135 of the Transfer of Property
Act are clear on the point. The point is also covered by a decision of this
Commission was, therefore, wrong in rejecting the prayer of the Bank and both
the appeals of the Bank should be allowed.
the provisions of 1997 Act, it was submitted that the contention of the
complainants is ill-founded. This is not a case wherein the Bank becomes a
plaintiff and in that capacity, it files a suit against the
complainants-defendants for recovery of amount.
Once there is an
`actionable claim' and the Bank is having charge over the property of the
complainants, it ipso facto entitles the Bank to recover such amount directly
from the debtor, i.e. Insurance Company. The 1997 Act 26 has no application to
such cases. It was asserted that as on date, the amount to which the Bank is
entitled and the complainants are liable to pay, exceeds Rs. five crores. The
Bank, therefore, has right to get the entire amount to which the complainants
are held entitled to. It was, hence, submitted that the appeals filed by the
Bank deserve to be allowed.
heard the learned counsel for the parties and having gone through the records
and proceedings as also the judgment of the National Commission, it is clear
that the complainants were able to establish the claims put forward by them. It
is not in dispute by and between the parties that the Insurance Policy covered
several acts including terrorism and fire. It has come in evidence and has been
believed by National Commission that the son of the Managing Director was
killed in March, 1990 by terrorist attack. It is in the light of the said
incident that the Managing Director had to 27 leave Srinagar and to return to
Delhi. It was because of the said incident that the operation of both the units
was suspended. Thus, it was not a case wherein the complainants did not
undertake the activities which were required to be undertaken by them, but they
could not operate the units and carry on business. No fault, therefore, can be
found against the complainants for suspending the operation of both the units.
The complainants obviously cannot suffer because of non-production in the Mill
as well as in the Company. The National Commission was, therefore, not right in
reducing any amount on the ground that certain stocks and raw materials were
unfit for human consumption. It was not intentional or deliberate act on the
part of the complainants in stopping production and allowing the stocks and raw
materials to get spoiled or damaged and by making them unfit for human
consumption. It was because of the militant activities and 28 terrorism that the
Company and the Mill could not do business and produce goods. Reduction of
amount by the National Commission on that count was, therefore, unjustified and
in our opinion, that part of the order requires interference by this Court.
regards pilferage by intruders and staff members, except ipse dixit on the part
of the Insurance Company, no material whatsoever has been placed on record in
support of such allegation. The National Commission, in our opinion, was
justified in not accepting such bare assertion without any evidence or concrete
material in support of such plea. In fact, a finding has been recorded by the
National Commission that the godowns were `full' when they were set on fire.
`Watch and ward staff' were protecting the Mill and the Company. There was also
a `Police post' nearby both the units.
Further, the report
submitted by Mr. Andrasabi as to pilferage was not reliable. In Shyam Sunder
Narang v. United India Insurance Co., 29 (1997) 111 CPJ 599, an adverse comment
had been made by the National Commission against the report submitted by Mr.
Andrasabi. Hence, in our opinion, the National Commission was right in not
believing `pilferage theory' advanced by the Insurance Company.
matter, however, did not end there. Even before us, nothing has been shown from
which such an inference could be drawn by a reasonable and prudent man as to
pilferage by intruders or staff members. The National Commission, in our
judgment, was wholly right in negativing the contention of the Insurance
Company that substantial part of stocks and raw materials had been taken away
by intruders or staff members. No reduction, therefore, could be allowed on
National Commission was also right in observing that no payment was made by the
Insurance Company even as per the survey conducted by the Surveyor appointed by
the Insurance Company. Taking into consideration 30 the entire facts and
circumstances, in our opinion, the complainants are entitled to claim
compensation towards building, plant, machinery and electricity fittings, raw
materials and stocks.
the complainants are held to be entitled to the following;
Policy No. Amount
entitled to be awarded in favour of the appellant-insured 113119000249 Rs.
37,78,619/- 113119000312 Rs. 23,79,195/- 113119000313 Rs. 25,81,600/-
view of the fact that the appeals filed by the complainants are allowed, the
appeals filed by the Insurance Company must necessarily fail. Accordingly, the
appeals filed by the Insurance Company are dismissed.
respect of Policy No. 113119000249, no appeal has been filed by the Grindlays
It was observed by
the National Commission in the impugned judgment that the matter appears to
have been settled between the parties. In any case, there is no appeal by a financial
31 institution so far as the said policy is concerned.
as far as the appeals by Canara Bank are concerned, in our opinion, the claim
put forward by the Bank is well founded.
Section 38 of the
Insurance Act reads thus;
Section 38 - Assignment
and transfer of insurance policies (1) A transfer or assignment of a policy of
life insurance, whether with or without consideration may be made only by an
endorsement upon the policy itself or by a separate instrument, signed in
either case by the transferor or by the assignor his duly authorised agent and
attested by at least one witness, specifically setting forth the fact of
transfer or assignment.
(2) The transfer or
assignment shall be complete and effectual upon the execution of such
endorsement or instrument duly attested but except where the transfer or
assignment is in favour of the insurer shall not be operative as against an
insurer and shall not confer upon the transferee or assignee, or his legal
representative, and right to sue for the amount of such policy or the moneys
secured thereby until a notice in writing of the transfer or 32 assignment and
either the said endorsement or instrument itself or a copy thereof certified to
be correct by both transferor and transferee or their duly authorised agents
have been delivered to the insurer:
Provided that where
the insurer maintains one or more places of business in India, such notice
shall be delivered only at the place in [India] mentioned in the policy for the
purpose or at his principal place of business in India.
(3) The date on which
the notice referred to in sub-section (2) is delivered to the insurer shall
regulate the priority of all claims under a transfer or assignment as between
persons interested in the policy; and where there is more than one instrument
of transfer or assignment the priority of the claims under such instruments
shall be governed by the order in which the notices referred to in sub-section
(2) are delivered.
(4) Upon the receipt
of the notice referred to in sub-section (2), the insurer shall record the fact
of such transfer or assignment together with the date thereof and the name of
the transferee or the assignee and shall, on the request of the person by whom
the notice was given, or of the transferee or assignee, on payment of a fee not
exceeding one rupee, grant a written acknowledgement of the receipt of such
notice; and any such 33 acknowledgement shall be conclusive evidence against
the insurer that he has duly received the notice to which such acknowledgement
(5) Subject to the
terms and conditions of the transfer or assignment, the insurer shall, from the
date of receipt of the notice referred to in sub-section (2)], recognise the
transferee or assignee named in the notice as the only person entitled to
benefit under the policy, and such person shall be subject to all liabilities
and equities to which the transferor or assignor was subject at the date of the
transfer or assignment and may institute any proceedings in relation to the
policy without obtaining the consent of the transferor or assignor or making
him a party to such proceedings.
(6) Any rights and
remedies of an assignee or transferee of a policy of life insurance under an
assignment or transfer effected prior to the commencement of this Act shall not
be affected by the provisions of this section.
any law or custom having the force of law to the contrary, an assignment in
favour of a person made with the condition that it shall be inoperative or that
the interest shall pass to some other person on the happening of a specified
event during the lifetime of the person whose life is insured, and an
assignment in favour of the survivor 34 or survivors of a number of persons,
shall be valid.
both the sections, i.e. Sections 130 and 135 of the Transfer of Property Act,
1882 are explicitly clear and they read as under;
Section 130 -
Transfer of actionable claim (1) The transfer of an actionable claim whether
with or without consideration shall be effected only by the execution of an
instrument in writing signed by the transferor or his duly authorized agent,
shall be complete and effectual upon the execution of such instrument, and
thereupon all the rights and remedies of the transferor, whether by way of
damages or otherwise, shall vest in the transferee, whether such notice of the
transfer as is hereinafter provided be given or not:
Provided that every
dealing with the debt or other actionable claim by the debtor or other person
from or against whom the transfer would, but for such instrument of transfer as
aforesaid, have been entitled to recover or enforce such debt or other
actionable claim, shall (save where the debtor or other person is a party to
the transfer or has received express notice thereof as hereinafter provided) be
valid as against such transfer.
35 (2) The
transferee of an actionable claim may, upon the execution of such instrument of
transfer as aforesaid, sue or institute proceedings for the same in his own
name without obtaining the transferor's consent to such suit or proceedings and
without making him a part thereto.
this section applies to the transfer of a marine or fire policy of insurance or
affects the provisions of section 38 of the Insurance Act, 1938.
Section 135 -
Assignment of rights under policy of insurance against fire Every assignee by
endorsement or other writing, of a policy of insurance against fire, in whom
the property in the subject insured shall be absolutely vested at the date of
the assignment, shall have transferred and vested in him all rights of suit as
if the contract contained in the policy had been made with himself.
our opinion, therefore, the submission of the learned counsel for the Bank that
as soon as a decree is passed or order is made in favour of the complainants,
the Bank is entitled to the said amount is well founded.
For such a relief, it
is not necessary for the Bank to become a plaintiff by filing a suit in 36 a
competent Court of law and obtain a decree in its favour. It is true that had
it been the position, the provisions of 1997 Act would get attracted and such
suit would be stayed and no decree could have been passed by a competent Court
in favour of the creditor. But in the light of the statutory provisions in the
Insurance Act and in the Transfer of Property Act, the Bank is entitled to the
amount directly from the Insurance Company.
our opinion, the learned counsel for the Bank is also right in relying upon the
decision in Gujarat Maritime Board. In that case, a similar question came up
for consideration before this Court. There one B was financed by A for purchase
of vessel. The vessel so purchased was mortgaged in favour of A. As per the
Finance Agreement between the parties, B was required to take out a comprehensive
risk insurance policy and assign it in favour of Director of Ports representing
Government of Gujarat. The insurance also 37 contained an endorsement in terms
of the agreement. The vessel on its voyage sunk in the sea. B filed a complaint
before the National Commission claiming the insurance amount from the Insurance
Company. A brought to the notice of the Commission that it had an interest in
the vessel as a mortgagee. The Commission, however, directed the Insurance
Company to pay entire amount to B. A approached this Court. This Court held
that the directions of the National Commission that the entire insurance amount
be paid to B was unsustainable in law. Accordingly, the appeal filed by the
Maritime Board was allowed and the order passed by the National Commission was
our opinion, the point is directly concluded by the above decision of this
Court in Gujarat Maritime Board and the National Commission was not right in
rejecting the claim of the Bank. The appeals of the Bank are, therefore,
required to be allowed.
the foregoing reasons, the appeals filed by the Insurance Company are ordered
to be dismissed. The appeals filed by the complainants are required to be
allowed to the extent indicated above with interest at the rate of 9 per cent
per annum from the date of filing of complaints before the National Commission,
i.e. from the date of payment. So far as Appeal concerning Policy No.
11319000249 relating to stocks is concerned, the complainants are entitled to
get the entire amount of Rs.37,78,619/- since there is no appeal in respect of
the said policy. Canara Bank is not concerned with the said policy.
Grindlays Bank has
not approached this Court and had supported the complainants before the
National Commission. The two appeals of Canara Bank are in regard to two
policies, 113190000312 and 113190000313, raw materials policy and plant policy.
Both the appeals of Canara Bank are allowed and the Insurance Company is
directed to make payment to Canara 39 Bank and not to the complainants in
respect of the amount to be paid to the complainants.
appeals are disposed of accordingly with no order as to costs.