M/S EUROSPIN INDUSTRIES LTD v A.SULOCHAN A, P.C.BAIJU, P.C.BEENA, M/S.ORIENTAL INSURANCE CO. LTD.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE K.M.JOSEPH & THE HONOURABLE MR. JUSTICE A.HARIPRASAD** **WEDNESDAY, THE 10TH DAY OF JULY 2013/19TH ASHADHA, 1935** ## **MFA.No. 24 of 2010 (D) -----------------------** **AGAINST THE ORDER/JUDGMENT IN WCC 264/1997 of W.C.C.,KOZHIKODE DATED 08-01-2009** **APPELLANT(S)/IST OPPOSITE PARTY:** **--------------------------------** **M/S.EUROSPIN INDUSTRIES LTD CHELEMBRA-673 634, MALAPPURAM DISTRICT.** **BY ADVS.SRI.J.JULIAN XAVIER SRI.FIROZ K.ROBIN.** ## **RESPONDENT(S)/APPLICANTS/2ND OPPOSITE PARTY:** **--------------------------------------------** **1. A.SULOCHANA, W/O LATE P.C.BHASKARAN, POTTAMMAL HOUSE, P.O.PALLIKKAL, MALAPPURAM DISTRICT.** **2. P.C.BAIJU, S/O.LATE P.C.BHASKARAN, POTTAMMAL HOUSE, P.O.PALLIKKAL, MALAPPURAM DISTRICT.** **3. P.C.BEENA, D/O.LATE P.C.BHASKARAN, POTTAMMAL HOUSE, P.O.PALLIKKAL, MALAPPURAM DISTRICT.** **4. M/S.ORIENTAL INSURANCE CO.LTD., KINGSWAY BUILDING, MAVOOR ROAD, CALICUT.** **R1 TO R3 BY ADVS. SRI.JACOB ABRAHAM,GEORGE CHERIAN THIRUVALLA SMT.KOCHUMOL KODUVATH R4 BY GEORGE CHERIAN THIRUVALLA.** **THIS MISC. FIRST APPEAL HAVING BEEN FINALLY HEARD ON 10-07-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **amk** **'CR'** **K.M.JOSEPH & A.HARIPRASAD, JJ. -----------------------------------------------M.F.A No.24 OF 2010** **------------------------------------------------Dated this the 10[th] day of July, 2013.** ## **J U D G M E N T** ## **K.M.Joseph, J.** The appellant is the first opposite party in a proceeding under Section 22 of the Workmen's Compensation Act, 1923 renamed as the Employee's Compensation Act, 1923 (hereinafter referred to as 'the Act'). The claim was filed by the legal representatives of one Sri.P.C.Baskaran. According to the claimants, on 9-5-1996, the workmen received a personal injury by accident arising out of and in the course of his employment resulting in his death on 9-5-1996. The cause of injury was 'Myocardial Infarction' due to work strain in the industry. 2. The Commissioner has awarded a sum of Rs.1,42,680/- with simple interest at 12% from the date of accident till the date of deposit. 3. We heard the learned counsel for the appellant and **M.F.A No.24 OF 2010 2** also the learned counsel for the respondents. 4. The appellant was not in a position to establish that the deceased workman did not suffer an injury which arose from the employment and from which he died on the same day, i.e., on 9.5.1996. According to the appellant the respondent insurer has insured 7 named workers of the appellant under the policy of insurance. The said policy commenced from 15-11-1995 and it was to hold good till 13-11-1996. 15 workers including the deceased workmen in this case were added. The process in this regard commenced a few days before the death of the workman in this case, i.e., on 9-5-1996. According to the appellant the premium in relation to the workmen sought to be added was paid by a cheque on 9-5-1996. It is the case of the appellant that the deceased workmen in this case suffered the heart attack while he was working in the second shift which was from 3.30 P.M till 12.00 A.M. According to the learned counsel he suffered the heart attack at 9.30 P.M and he died on 9-5-1996. According ## **M.F.A No.24 OF 2010 3** to him since the premium was paid under the cheque on 9-5-1996, the insurer will become liable in this regard, he drew our attention to Section 64 VB of the Insurance Act, 1938. Since the said provision is crucial for rendering a decision in this case we extract the same :- - _“_ _**64VB. No risk to be assumed unless premium is received in advance.** - (1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner._ - _(2) For the purpose of this section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer._ - _Explanation : Where the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money order is booked or the cheque is posted, as the case may be._ - _(3) Any refund of premium which may become due to an insured on account of the cancellation of a policy or alteration in its terms and conditions or otherwise shall be paid by the insurer directly to the insured by a crossed or order cheque or by postal money order and a proper receipt shall be obtained by the insurer from_ ## **M.F.A No.24 OF 2010 4** _the insured, and such refund shall in no case be credited to the account of the agent._ - _(4) Where an insurance agent collects a premium on a policy of insurance on behalf of an insurer, he shall deposit with, or despatch by post to, the insurer, the premium so collected in full without deduction of his commission within twenty-four hours of the collection excluding band and postal holidays._ - _(5) The Central Government may, by rules, relax the requirements of sub-section (1) in respect of particular categories in insurance policies._ - _(6) The Authority may, from time to time, specify, by the regulations made by it, the manner of receipt of premium by the insurer. ”_ In this said section, the learned counsel emphasised sub- section (2) and the Explanation which we have already extracted. According to him the said provision makes it clear that the insurer becomes liable on receipt of the cheque amount towards the premium. He also drew our attention to the decision of the apex court judgment in _**Pushpa and others v. National**_ _**Insurance Company Limited and Another, ((2010)15 S.C.C**_ _**140).**_ Since the said judgment is brief we extract the same :- “ This appeal arises from a motor accident claim. In this case, the premium cheque for the ## **M.F.A No.24 OF 2010 5** insurance policy was received by the appellant, the Insurance Company, on 7-5-1998 at 4.00 p.m and a cover note was issued at the same time. In Columns 3 and 4 of the cover note, however, it was stated that the insurance would commence from 8-5-1998 and expire on 7-5-1999. 2. The motor accident in regard to which the claim case was filed took place at 8-30 p.m on 7-5-1998. The Insurance Company sought to disown its liability on the plea that the accident took place before the commencement of the insurance as indicated in the cover note. But, both the Tribunal and the High Court, turned down in the plea and held the Insurance Company liable to pay the compensation amount. 3. When this appeal was taken up, the counsel for the Insurance Company very fairly stated that since the cheque for the premium amount was received by the Company at 4.00 p.m on 7-5-1998, the insurance must be deemed to have commenced from that time and four hours later when the vehicle met with the accident, the owner must be deemed to have been covered by the insurance policy. We appreciate the fairness shown by the counsel for the Insurance Company. 4. The appeal is dismissed but with no order as to costs. ” 5. Learned counsel for the claimant also would support the appellant and contend that the original policy itself was an open policy. According to him once the premium is received under this policy, the insurer became liable upon the receipt of the cheque. ## **M.F.A No.24 OF 2010 6** 6. Per contra, the learned counsel for the insurer would submit that reliance placed on Section 64VB cannot be accepted as it only operates against the insurer undertaking liability prior to the receipt of the premium. According to him the liability of the insurer must be determined with reference to the date which is specifically endorsed in the endorsement which is contained in Ext.R15. He point out that in Ext.R15 names of various employees are added including the deceased workman. But it is made clear that the liability will commence from 10-5-1996. In the teeth of this unambiguous endorsement, he would question the right of the appellant to contend that the liability was cast on the insurer from 9-5-1996 on the basis of the giving of the cheque for the premium. He would in fact contend that the policy is not an open policy. 7. Ext.R14 is the policy. The period of insurance is shown as 15-11-1995 to 14-11-1996. Ext.R15 dated 10-05-1996 purports to be a memorandum containing the following ## **M.F.A No.24 OF 2010 7** endorsement inter alia :- _Notwithstanding anything to the contrary contained herein it is hereby agreed and noted that the following persons are included in the within mentioned policy w.e.f 10-5-1996. No doubt it is stated that in consideration thereof an additional premium of Rs.1,571/- (including service tax Rs.75/-) is collected from the insured vide collection No.1367 dated 10-5-1996. It is also stated that subject to the terms, conditions, exceptions and limitations of the policy._ 8. No doubt, the case of the appellant is that the amount was given under a cheque which is dated 9-5-1996. We will proceed on the basis that the cheque was given on 9-5-1996 and examine the question whether that would render the respondent insurer liable. The sheet anchor of the appellants case appears to be sub-section (2) r/w the Explanation to Section 64VB of the Insurance Act. In our view the learned counsel for the appellant is not justified in contending that the said provisions must be interpreted as meaning that the moment the insurer receives the premium or the cheque the policy of an insurance would spring into being. It is necessary in this context to bear in mind that ## **M.F.A No.24 OF 2010 8** Section 64VB(1) contains the heading namely 'No risk is to be assumed unless premium is received in advance'. The body of sub-section (1) provides a commandment to the insurer that he shall not assume any risk in India in respect of any insurance business where the premium is not ordinarily payable outside India, unless and until the premium payable is received by him or is guaranteed to be paid by such person or unless and until deposit of the said amount may be prescribed, is made in advance in the manner prescribed. In our view, Section 64VB (1) interdicts any insurer in the matter of assuming liability unless or until the premium is received or guaranteed as mentioned or unless or until the deposit is made in advance. Does this mean that, the moment the premium is paid to the insurer or is guaranteed or is deposited, the insurer assumes liability or does it only mean that he cannot assume liability earlier in point of time when the deposit is made or the premium is received. In our view, Section 64VB only prohibits any ## **M.F.A No.24 OF 2010 9** insurer in India where the premium is not ordinarily payable outside India from undertaking liability prior to receipt of the premium. It does not mean that upon the receipt of the premium irrespective of the contract between the parties, the insurer will become liable without anything more. The time from which the insurer undertakes liability is a matter essentially for the parties to decide. The liability of the insurer springs from the contract. No doubt, the power of the parties to enter into a contract is always subject to any statutory conditions which may be laid down. We have already declared our understanding of subsection (1) to be that it prescribes that the insurer is restrained from undertaking liability before the receipt of the premium. 9. Then the question would arise as to what is the point of time from which the insurer has actually assumed liability. As already noted it is a matter of contract. Necessarily there must be a proposal which must be accepted. The actual point of time from which the insurer has assumed liability is to be discerned **M.F.A No.24 OF 2010 10** from any document if such term is in fact incorporated in the document. In this case we notice that the endorsement contained in Ext.R15 is unambiguous that as regards the 15 employees including the workman in question, the respondent insurer has agreed to cover them with effect from 10-5-1996. Once there is such a contract which is beyond the pale of dispute, it is inconceivable as to how the appellant can draw support from Section 64VB of the Insurance Act. The legislature has enabled the insurer to undertake the risk not earlier than the date on which the premium has been paid in cash or by cheque to the insurer. Sub-section (2) again does not mean that where the premium is paid in advance the contract of insurance is concluded on the day when the premium has been paid in cheque or by cash to the insurer. Like wise the Explanation also only enables the insurer to undertake the risk in a case where the premium is tendered by postal money order with reference to the date on which the money order is booked and in the case of the **M.F.A No.24 OF 2010 11** premium paid by cheque is sent by post with reference to the date on which the cheque is posted. The Explanation will not bear the appellant out to contend that where the premium is given by cheque send by post, the contract of insurance is concluded with reference to the date on which the cheque is so posted. As already noted these are all points of time indicated so that insurer cannot assume liability earlier than the aforesaid dates. It does not mean that with reference to the said dates, the court is obliged to hold the insurer liable, even where the contract of insurance indicates otherwise. 10. We may notice in this regard the judgment of the learned Single Judge's decision reported in _**Oriental Fire and General Insurance Co. Ltd. v. Panvel Industrial Co-operative Estates Ltd. (A.I.R 1992 Bombay 107).**_ Therein also the learned Single Judge referred to Section 64VB of the Insurance Act and took the view inter alia stated as follows :- " In my view, mere payment of premium ## **M.F.A No.24 OF 2010 12** amount and its acceptance by agent cannot amount to a concluded contract of insurance. The reliance of the learned Judge on Section 64-VB in that respect is not correct. The Section is as follows :- - _“_ _**64VB.** (1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner._ - _(2) For the purpose of this Section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer._ - _Explanation : Where the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money order is booked or the cheque is posted, as the case may be._ - _(3) Any refund of premium which may become due to an insured on account of the cancellation of a policy or alteration in its terms and conditions or otherwise shall be paid by the insurer directly to the insured by a crossed or order cheque or by postal money order and a proper receipt shall be obtained by the insurer from the insured, and such refund shall in no case be credited to the account of the agent._ - _(4) Where an insurance agent collects a premium on a policy of insurance on behalf of an insurer, he shall deposit with, or despatch by post to, the insurer, the premium so collected in full without deduction of his_ ## **M.F.A No.24 OF 2010 13** _commission within twenty-four hours of the collection excluding band and postal holidays._ - _(5) The Central Government may, by rules, relax the requirements of sub-section (1) in respect of particular categories of insurance policies."_ In my view, the object of the said section is to secure advance payment of premium by the insurance company before the assumption of risk. Section 64 VB(1) places a prohibition upon the insurer that unless and until it receives payment of premium by the same is guaranteed to be paid in a particular manner and within a particular time as may be prescribed in advance, there can be no assumption of risk on the part of the insurer. Sub-section (2) of the said section lays down that risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer in case of those risks for which premium can be ascertained in advance. The Explanation further makes it clear that the premium may be tendered by postal money order or by cheque sent through the post and the risk may be assumed on the date on which the said money order is booked or the cheque is posted. In my view, sub-section (2) is an enabling provision for the insurer. The contract between the ## **M.F.A No.24 OF 2010 14** insurer and the assured may be concluded later on. However, the insurer can assume the risk from the date when the money order is booked or the cheque is posted towards the premium. The phrase 'risk' may be assumed not earlier than in sub-section (2) and the phrase 'may be assumed' used in the Explanation thereof clearly indicates this. Neither Sub-section (2) nor the explanation means that the risk attaches immediately on payment of premium and the insurer undertakes the risk." 11. We may also refer to the judgment of the apex court reported in _**National Insurance Co. Ltd. v. Sobina Iakai and others ((2007) 7 S.C.C 786).**_ Therein the court no doubt was dealing with a case under the Motor Vehicles Act, 1988 and held as follows :- _“ In absence of any specific time mentioned in the policy, the contract would be operative from the midnight of the day by operation of the provisions of the General Clauses Act but in view of the special contract mentioned in the insurance policy, the effectiveness of the policy would start from the time and date indicated in the policy. It is the obligation of the court to look into the contract of insurance to discern whether any particular time has been specified for commencement or expiry of the policy. A very large number of cases have been brought to the attention of the court where insurance policies are taken_ ## **M.F.A No.24 OF 2010 15** _immediately after the accidents to get compensation in a clandestine manner. In order to curb this widespread mischief of getting insurance policies after the accidents, it is absolutely imperative to clearly hold that the effectiveness of the insurance policy would start from the time and date specifically incorporated in the policy and not from an earlier point of time.”_ 12. In the light of the above discussion, we are of the view that there is no merit in the contention of the appellant. We also would think that the decision of the apex court which was relied on by the appellant reported in _**Pushpa and others v. National Insurance Company Limited and Another, ((2010)15 S.C.C 140)**_ cannot assist the appellant. We notice that that was a case where the court essentially has recorded the submission of the learned counsel for the insurer. We would not think that that court has laid down a principle of law as such. On the other hand, we have already noted the view of the apex court in _**National Insurance Co. Ltd. v. Sobina Iakai and others ((2007) 7 S.C.C 786) (supra)**_ and we have already repelled the contention of the appellant based on Section 64VB. The **M.F.A No.24 OF 2010 16** endorsement contained in Ext.R15 with regard to the deceased workman shows that the risk was actually assumed only from 10-5-1996 which was prior to the date of the accident and also his death. The learned counsel for the appellant would in fact not dispute that the deceased workmen actually died at 11-30 P.M on 9-5-1996. It is clear that the insurer cannot be make liable and there is no merit in the appeal. Hence, it is dismissed. Sd/- **K.M.JOSEPH, JUDGE.** Sd/- **A.HARIPRASAD, JUDGE.** amk **//True Copy//** **P.A to Judge**