Report No. 67
6.41. Likely consequences of being referred to the Marine Insurance Act-Informal notes in insurance business.-
It was suggested to us, that, in view of the fact that marine insurance is now the subject-matter of legislation in India, it is appropriate that the definition in the Stamp Act should make a reference to that Act.
6.42. This suggestion raises the question whether, by referring to the substance of the definition in the Marine Insurance Act, any documents which are liable to stamp duty under the present definition in the Stamp Act, will escape duty. The question can be discussed in two aspects.
6.43. In the first place, there are informal documents, such as, slips, and cover notes, usually handed over to marine insurance business pending the execution of a formal policy. The informal note or memorandum which is drawn when the contract is entered into, is called the slip or covering note.1
It would appear that while such a slip is clearly a "contract for marine insurance", it is equally clearly not a 'policy for the purposes of the marine insurance law. If the policy is duly stamped, then reference may be made to the cover note for certain evidentiary purposes.2
1. See Maignen & Co. v. National Benefit Assurance Co, (1922) 38 Times Law Reports 257.
2. Section 88, Marine Insurance Act, 1963.
6.44. Position as to slip.-
It was pointed out that though on the question whether a slip is a policy for the purposes of the Stamp Law, there is a controversy,1 this controversy is not important in the context of marine insurance. Sections 24 to 26 of the Marine Insurance Act, 1963, now lay down detailed provisions governing the form of the policy of marine insurance, and if these provisions are not complied with, the policy is unenfoiteable. Therefore, there is not much likelihood of duty escaping, whether or not a slip is regarded as a policy. If the assured does not care to obtain a formal policy, then the specific provisions in the Marine Insurance Act will render the slip inadmissible.
1. See discussion as to policy of insurance.
6.45 Position in England.-
It is now well established in England that no action can be maintained in the United Kingdom upon the implied promise to grant a policy when the slip is initiated.1 If the insurers go into liquidation, the liquidator cannot issue policies on outstanding slips.2 It is otherwise in countries where revenue or other laws do not interpost.3 But the statutory provision4 will apply to policies issued abroad which are sued upon in England.5
1. Fisher v. Liverpool Mar. Ins. Co., 1874 LR 9 QB 418 Ex Ch; Genforsikrings & Co. v. Da Costa, (1911) 1 KB 137 (open covers of re-insurance).
2. Clyde Mar. Ins. Co. (in re:), (1924) 17 Li LR 20: 1924 SC 113; City Equitable Fire Ins. Co. (in re:), (1930) 2 Ch 293.
3. Bhugwandass v. Netherlands Sea Ins. Co., (1888) 14 App Cas 83 PC (Rangoon Foreign Policy).
4. Section 22, Marine Insurance Act, 1906 (English).
5. Royal Exchange Assee. Corp. v. Vega, (1901) 2 KR 567: (1902) 2 KB 384 (CA).
6.46. Imperfect obligation.-
This is often described as a curious and important instance of an imperfect obligation, arising out of special conditions imposed on the formation of a complete contract found. In practice, the agreement is concluded between the parties by a memorandum called a slip, containing the terms of the proposed insurance and initialled by the underwriters.1 It is the practice of some insurers always to date the policy as of the date of slip.2 At common law, the slip would constitute a binding contract. This, however, is not allowed in case of marine insurance.3
1. For the form of this, see LR 8 QB 471: LR 9 (QB).
2. See LR 8 Exch 199.
3. As to fire insurance, a policy is not compulsory, Thompson v. Adam, (1899) 23 QBD 361.
6.47. Moreover, in India, after the nationalisation of general insurance business, it is unlikely that those who carry on general insurance business will dispense with the practice of issuing policies in order to escape stamp duty. Thus, the fact that informal or temporary documents do not fall within 'policy" in the Marine Insurance Act should not matter.