Report No. 67

6.10. to 6.14. Suggestion considered.-

In concrete terms and in detail, the suggestion made to us was as follows:-

(a) A letter of cover etc. should be excluded from the definition of "policy of insurance", by an express provision amending that definition. The reasons have been given already in the above discussion. In brief, a policy and a letter of cover are different from each other.

(b) The general exemption to Article 47, as at present worded, then becomes redundant and can be omitted.

(c) A provision to the effect that if, at the time of its execution, a letter of cover or engagement to issue a policy of insurance bears the stamp required by the Act for such policy, then, it shall not be necessary to stamp the policy again, should be inserted. The reasonableness of such a provision is obvious.

(d) Under Article 5 (agreement), an exemption in respect of letter of cover etc. should be inserted. The intention is that such letters should be totally exempt from stamp duty under any article of the Act.

(e) These amendments would lead to no loss of revenue in the present circumstances.

We have, however, after carefully considering the suggestion, come to the conclusion that the matter may be left as it is, the provisions having stood for a long time.

6.15. to 6.18. The above discussion was concerned with a suggestion made during our discussions. We have not received any suggestion from the public for amendment1 of the definition in response to our Questionnaire.

1. Q. 11 of the Questionnaire.

6.19. Section 2(19A)-"Policy of group insurance".-

"Policy of group insurance is" defined in section 2(19A) as meaning any instrument covering not less than fifty or such smaller number as the Central Government may approve, either generally or with reference to any particular case by which an insurer, in consideration of a premium paid by an employer or by an employer and his employee jointly, engages to cover, with or without medical examination and for the sole benefit of persons other than the employer, the lives of all the employees or of any class of them, determined by conditions pertaining to the employment, for amounts of insurance based upon a plan which precludes individual selection.

It needs no change.

6.20. Policy of sea insurance.-

Under section 2(20), a policy of sea insurance or sea policy-

(a) means any insurance made upon any ship or vessel (whether for marine or inland navigation), or upon the machinery, tackle or furniture of any ship or vessel, or upon any goods, merchandise or property of any description whatever on board of any ship or vessel, or upon the freight of, or any other interest which may be lawfully insured in, or relating to, any ship or vessel; and

(b) includes any insurance of goods, merchandise or property for any transit which includes, not only a sea risk within the meaning of clause (a), but also any other risk incidental to the transit insured from the commencement of the transit to the ultimate destination covered by the insurance;

Where any person, in consideration of any sum of money to be paid for additional freight or otherwise, agrees to take upon himself any risk attending goods, merchandise, or property of any description whatever while on board of any ship or vessel, or engages to indemnify the owner of any such goods, merchandise or property from any risk, loss or damage, such agreement or engagement shall be deemed to be a contract for sea-insurance.

6.21. Stamp duty under Article 47.-

The stamp duty on such policies is chargeable under Article 47. Questions exclusively concerning the rates of stamp duty will be dealt with under that article1. But, at this stage, it should be noted that the subject of marine insurance has been dealt with by legislation-The Marine Insurance Act, 1963. Its important provisions will be noticed in due course.

1. See Article 47, infra.

6.21A. Marine insurance in England.-

In England, from 1605, legislative measures were passed from time to time relating to particular aspects of marine insurance. We need not mention all of them here, but it should be noted that since 1795, it has been obligatory in England to record the contract of marine insurance in a policy which is duly stamped. The effect of non-compliance with such a provision has been differently expressed from time to time, but, in substance, the position-so far as the statute law since 1795 is concerned-has always been that if there is no written policy duly stamped, the contract cannot be admitted in evidence, and until 1959, the contract was not valid also.1

1. Dover A Handbook to Marine Insurance, (1957), p. 2.

6.22. It was mainly due to the efforts of a Birmingham County Court Judge, (Sir) M.D. Chalmers, in collaboration with practising underwriter, (Sir) Douglas Owen, that in 1894, a Bill entitled the "Marine Insurance Codification Bill" was introduced by Lord Herschell in the House of Lords. Judge Chalmers had for a considerable time given his attention to marine cases in the Courts, and had interpreted the law, as it then was, in a careful and lucid manner. He drafted the Bill. He took the view that no code could provide for every case that might arise or always use absolutely accurate language. He accepted that the cases coming before lawyers were those in which a code was defective. Eventually, the measure was placed on the statute Book in 1906. The Act of 1906 does not set out to remodel the law relating to marine insurance, but merely to codify previous decisions and customary practice.

6.23. History of protection against marine perils.-

The concept of protection against loss by maritime perils has been traced back to 215 B.C., when the Roman Government was required, by the suppliers of military stores, to accept "all the risk of loss, arising from the attacks of enemies or from storms," to the supplies which the supplier placed in the ships. Round about 50 AD. Emperor Claudius issued guarantees to importers in respect of losses arising from storms. The practice of issuing bottomry bonds (on the security of a vessel) is supposed to have commenced even much earlier. Professor Trenerry1 has traced its origin as early as 2250 B.C.

1. C.F. Trenerry Researches into the Origins of Marine Insurance, cited by Dover A Handbook to Marine Insurance, (1957), p. 3.

6.24. Rhodian law and Codex justinian.-

The "Rhodian" law has a lucid statement of the principle of "general average", which is one of the most important principles of marine insurance. In fact, the earliest enunciation of the principle of general average is itself known as the Rhodian Law, and is so designated in the Sententiae of Paulus, 200 A.D, the salient points of which state1: "Let that which has been jettisoned on behalf of all, be restored by the contribution of all."

"A collection of the contributions for jettison shall be made when the ship is saved."

The principle of "general average" received further sanction in the Codex Justinian. The first relevant principle of this Codex is as follows:

"The Rhodian Law decrees that, if goods are thrown overboard to lighten the ship, all shall make good by contribution that which has been given for all."

1. Dover A Handbook to Marine Insurance, (1957), p. 4.

6.25. Lloyds in England, and 1906 Act.-

Marine insurance was well known to traders in Venice, Genoa and Florence, and the history of marine insurance in Lombardy has become familiar to all those who have to deal with the subject in the West. The House of Lloyds in London, which, for about two centuries, has been associated with marine insurance, has contributed greatly to the development of the law on the subject. In England, the Marine Insurance Act, 1906, is the principal statute on the subject, but the principles were laid down long before that Act was passed. Continental codifications-official and others-are much earlier.

6.26. Meaning of "Policy".-

The word 'policy' is, in modern times, used to indicate the formal instrument incorporating a contract of insurance. The word is derived1 from Latin "pollicitatio", (a promise), through Italian "polizza" or French "police". Oddly enough, in an English policy of insurance, the promise to pay in case of loss is implied, not expressed. Continental policies, however, contain an express promise to pay, within so many days after notice of loss.

1. Chalmers Marine Insurance Act (1966), p. 1.

6.27. Marine insurance is, in its essence, a protection against the risks of marine adventure, though the concept can be extended to certain non-marine adventures also.

6.28. The contract of marine insurance is a contract of indemnity; and this brings in the doctrine of subrogation described as a doctrine in which lies the romance of marine insurance.

6.29. Position before 1963.-

Before 1963, Indian courts usually followed principles of the English law as laid down in judicial decisions on the subject.

6.30. Sections 3 & 24, Marine Insurance Act, 1963.-

In 1963, the Marine Insurance Act was passed in India. Section 3 of the Act1 reads-

"3. A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the losses incidental to marine adventure."

Section 24 of the Act2 provides as follows:

"A contract of marine insurance shall not be admitted in evidence unless it is embodied in a marine policy in accordance with this Act. This policy may be executed and issued either at the time when the contract is concluded, or afterwards."

1. Section 3, Marine Insurance Act, 1963.

2. Section 24, Marine Insurance Act, 1963.