Report No. 67
44.61. Duty on renewal.-
The next point to be considered relates to stamp duty on renewal. The existing provision (it is stated) is not specific on the point and the suggestion1 is that it should be clarified by inserting a specific provision, as in the case of fire insurance.
1. Para. 5, supra.
44.62. Now, in theory1, renewal is a fresh contract, at least where the policy expressly stipulates that it is not to continue beyond the period of insurance unless renewed by mutual consent. But, in practice, a fresh proposal for renewal is not -used in accident insurance2, and the original proposal is treated as repeated.3 It seems, that the usual practice in England is to get an accident insurance policy for one year",4-5with a provision for renewal.
1. See Halsbury's, 3rd Edn., Vol. 22, pp. 248, 249.
2. Stokell v. Heywood, (1897) 1 Ch 459.
3. Halsbury's, 3rd Edn., Vol. 22, p. 249, para. 484.
4. See Stone & Cox Accident Insurance Year Book, (1963), Form of Policy at p. 66.
5. Halsbury's, 3rd Edn., Vol. 22, p. 206, Footnote (h).
44.63. In this connection, we may refer to the observations of Sir James Westland while presenting the Report of the Select Committee on 21st March, 18981-
"A difficult question arises in connection with insurance policies. It arises from the fact that the system of transaction of business in Bombay is different from the system of transaction of business in Calcutta. The duty upon insurance is by law levied upon the issue of the original policy. We levy no duty upon renewals. The consequence is, when an insurance policy is renewed, that is to say, if the original insurance policy is extended, then it bears no new duty, but if a person cancels his policy, and takes another policy in the same terms from another Company, he has to pay the additional duty."
He stated, that in Calcutta, the insurer transacted their business directly with the offices, so that the policy was renewed year by year with the same Company and bore no duty. But, in Bombay, the business was done through brokers, who might take policies with a new Company, so that it was a new policy.
1. Donogh's Indian Stamp Law, Edited by Rustomji, (1935), pp. 17 and 19.
44.64. It should, further be noted, that stamp duty under Article 47 is chargeable only if there is a "policy"1. A "receipt" for renewal premium cannot, as such, be charged as "policy"2, in case of insurance accident3. It is necessary to consider whether it is chargeable as a "receipt"4.
1. Indian Stamp Act, 1899, Article 47, speaks of "Policy of Insurance"
2. As to the meaning of "policy", see paras. 26-28, supra.
3. Contrast Indian Stamp Act, 1899, Article 47, Division "B", which mentions both an "original policy" and a "receipt" for renewal.
4. Indian Stamp Act, 1899, Article 53, "Receipt".
44.65. As regards stamp duty on renewal, therefore, the correct position (under the existing law) is uncertain.1Perhaps, it can be stated that if a policy is issued, it would be chargeable with full duty.2If a receipt only is issued, Article 47 does not apply"3-4 The position needs clarification. We recommend, that in respect of each receipt for any payment of a premium or renewal of an accident policy, one half of the duty chargeable on the original should be chargeable, (in addition to the duty, if any chargeable, under Article 53). This is on the analogy5 of Article 47, Division B (Fire Insurance). This will clarify the position. It will also make receipts chargeable under Article 47; and to that extent, it is a new burden. But a policy, at present, appears to be chargeable with the full rate, and to that extent, the proposed change will reduce the burden.
1. See supra.
2. See supra.
3. See para. 52, supra.
4. Article 53, Indian Stamp Act, 1899, may apply if a receipt is issued.
5. As to Article 47, Division B, see para. 4, supra.
44.66. Article 47-Division CC-Employers liability.-
Article 47, Division CC, inserted1 in 1925 deals with stamp duty on "insurance by way of indemnity against liability to pay damages on account of accidents to workmen employed by or under the insured or against liability to pay compensation under the Workmen's Compensation Act, 1923."
1. See Act 15 of 1925.
44.67. Two kinds of liability covered.-
Article 47, Division CC thus, deals with insurance against two kinds of liability, namely:-
(a) liability to pay damages on account of accident, to workmen, and
(b) liability to pay compensation under the Workmen's Compensation Act, 1923.
Liability under the first head would be mainly at common law1. This ordinarily depends on the proof of negligence. It may be either due to the employer's personal fault (for example, a dangerous machine), or to the fault of a fellow-workmen2.
(The liability may even be under statute,-e.g., under factories legislation,-and may be absolute liability in some cases).
Liability under the second head is statutory. In both cases, the insurance is by way of "indemnity".
In both cases again the rate of stamp duty is Ten naye paise for every Rs. 100 or part thereof payable as premium.
1. As to liability at common law, see Halsbury's, 3rd Edn., Vol. 22, pp. 344-345, paras. 104-105.
2. Munkman Employers' Liability, (1952), p. 1.
44.68. Recommendation regarding Article 47CC.-
Although the suggestion1 which we are considering mentions Article 47, Division CC, it does not suggest any change in that article, except that the position regarding renewal may be clarified. We recommend2 that in Article 47, Division CC, so far as renewal is concerned, a provision similar to that which we have recommended3 for renewal under Article 47, Division C, may be inserted.
1. Para. 5, supra.
2. See Appendix 1, Article 47, Division CC.
3. Para. 53, supra.
44.69. In the light of the above discussion, we recommend the following re-draft of the relevant portions of Article 47. We may add that the suggested amendments were included in our Questionnaire1 and have been generally favoured by the replies on this particular question.
1. Q. 97 to 99.
Re-draft of Article 47, Division C
"C. Accident and Sickness Insurance
(1) In respect of an original Policy
(a) against accident on any conveyance valid for a single Ten paise journey or voyage only, when the maximum amount which may become payable under the policy exceeds Rs. 5,000, if the policy is issued to any passenger travelling on such conveyance.
When issued to a passenger travelling by the second' class in any railway.
|(b) against accident valid for more than a single journey or voyage or against sickness, where the maximum amount which may become payable under the policy in the case of any single accident or sickness does not exceed Rs. 5,000.||Ten naye paise for every Rs. 1,000 or part maximum amount|
|(c) against accident valid for more than a single journey or voyage or against sickness, where the maximum amount which may become payable under the policy in the case of any single accident or sickness exceeds Rs. 5,000.||One rupee.|
|(2) in respect of each receipt for any payment of a premium on any renewal of an original policy.||One half of the duty payble in respect of the original policy, in addition to the amount if any, chargable under No. 53.|
Revised Article 47, Division CC
"CC. Insurance By Way of Indemnity.-against liability to pay damages on account of accidents to workmen employed by or under the insurer or against liability to pay compensation under the Workmen's Compensation Act, 1923.
|(1) In respect of an original policy.||Ten naye paise|
|for every Rs. 100 or part thereof payable as premium.|
|(2) in respect of each receipt for any payment of a premium on any renewal of an original policy.||One half of the duty payable in rspect of the original policy, in addition to the amount if any, chargable under No. 53"|
The changes recommended are summarised below.
(i) for original policy.
|(a) in respect of insurance against accidents on any conveyance, including air craft, complete exemption upto Rs. 5,000 (for single journey policies).|
|(b) in other cases|
|(i) where the maximum amount payable does not exceed Rs. 1,000;||Duty reduced from 15 naye paise to 10 naye paise.|
|(ii) where the maximum amount exceeds Rs. 1,000 but does ot exceed Rs. 5,000;||Duty reduced from 15 naye poise per 1,000. Rupees to 10 naye poise per 1,000 Rupees.|
|(iii) where.the maximum amount exceed Rs. 5,000;||Duty reduced from 15 naye paise per 1,000 Rupees to fixed 1 Ruppee (irrespective of the amount).|
(2) In respect of the duty on renewal the position is clarified.
Position as to duty on renewal is clarified. Duty reduced from 15 naye poise per 1,000 Rupees to fixed 1 Rupee (irrespective of the amount).