TMI Blog1990 (3) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... intiff with a view to reinsure its factory requested Shri Dilip Bhattacharjee, the Development Officer of Division No. II of the defendant, to visit and inspect the premises. Accordingly, Shri Dilip Bhattacharjee visited the factory of the plaintiff on May 31, 1982, and agreed to insure the factory building, goods and raw material against theft, fire, damages, etc. He further agreed to issue the cover note on the next day. According to the plaintiff, on June 1, 1982, Shri Dilip Bhattacharjee collected a cheque for Rs. 12,324 which included Rs. 6,364 towards fire insurance premium, Rs. 5,400 towards burglary and Rs. 516 towards traders' combined risk. It is alleged in the plaint that Shri Dilip Bhattacharjee signed the cover-note in the presence of Shri A.K. Jhajharia ; however, Shri Dilip Bhattacharjee said that he will issue the insurance policy very soon and took away the cover-note with him to do the needful in the matter. According to the plaintiff, Shri Bhattacharjee issued insurance cover-notes under cover-notes Nos. 614129 and 591291 on June 1, 1982, itself for an aggregate sum of Rs. 40,60,000. It is alleged that the plaintiff's proposal and the cheque were duly accepted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit, engage counsel and do all necessary acts for due prosecution of the case. It is alleged that the plaintiff company has not passed any resolution for filing the present suit or expressing its intention to file the suit. The suit thus being unauthorised is not maintainable. The defendant in its written statement further alleged that though the defendant insures the property through its officers and agents for various kinds of risks, the contract of insurance only matures when a proposal submitted by the insured is finally accepted by the company and documents evidencing the contract of insurance are issued by the company. It is alleged that a contract is not completed by mere tender of proposal for insurance or by tendering money. The defendant denied that the factory of the plaintiff was being insured since 1973 and it is alleged that the factory of the plaintiff was insured from 1978 till 29th December, 1981. This insurance was also arranged by the bankers of the plaintiff. The insurance expired on 29th December, 1981, and, thereafter, the plaintiff did not obtain any insurance in view of the dispute between the plaintiff and its bankers, namely, United Bank of India, Connau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eged premium of Rs. 12,324 does not represent the correct figure of the premium for the two alleged cover-notes stated to be prepared by the defendant-insurance company. It is stated that the cover-note No. 591291 does not even mention the sum assured. The defendant has alleged in the written statement that the two alleged cover-notes were got prepared in great haste after the fire in an attempt to get an ante-dated insurance from Shri Dilip Bhattacharjee, however, the insurance company saw through the game and did not accept the insurance. The defendant has stated in its written statement that the senior divisional manager was informed of the fire on June 4, 1982, though the letter bears the date June 3, 1982. It is further alleged that this letter did not mention the cover-note or the number of the certificate of insurance which shows that no such cover-note or certificate was issued prior to that date and an attempt was being made to ante-date the insurance cover. It is stated that the surveyor was appointed by the defendant without prejudice to the rights of the parties. The defendant has also denied that the loss assessed by the surveyor did not include the goods lying in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us denied the case of the defendant that no insurance was issued or that there was no completed contract between the parties. On the pleadings of the parties, the following issues were framed : 1.Was the factory of the plaintiff along with the goods and machinery therein insured with the defendant company on June 2, 1982 ? 2.Did a fire take place in the factory premises of the plaintiff onJune 2, 1982 ? If so, what damage was suffered by the plaintiff in the fire and of what value ? 3.In case issue No. 1 is proved, is the defendant company not liable to pay for the loss suffered by the plaintiff in that fire subject to the conditions of the insurance ? 4.Has the suit been instituted on behalf of the plaintiff company by an authorised person and the plaint signed and verified by a competent person ? 5.Relief. Only two witnesses were examined by the plaintiff. PW-1 is the bank official, a representative of the United Bank of India, and PW-2, Shri Ashok Jhajaria, director of the plaintiff company. Issue No. 4 : The plaint has been signed by Shri G. Jhajharia as principal officer of the plaintiff company. The plaintiff, however, did not examine Shri G. Jhajharia but e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorising Shri G. Jhajharia is a mere technicality which must be ignored. He relied on S.B. Naronah v. Prem Kumari Khanna, AIR 1980 SC 193 (para 6), and Bhagwan Swaroop v. Mool Chand, AIR 1983 SC 355, in support of this submission. Learned counsel further submitted that under Order 3, rule 1 of the Code of Civil Procedure the suit can be presented either by a party in person or by his recognised agent or by a pleader appearing, applying or acting, as the case may be, on his behalf. Thus, since the advocate had filed the suit in whose favour Shri G. Jhajharia has given the power of attorney, no further resolution was required. He relied on Mst. Barkate v. Feroz Khan [1944] PLR 96, 98, in support of this contention. On the other hand, it was submitted by learned counsel for the defendant that signing and verifying the suit is one thing whereas having the authority to institute the suit is another. There is nothing on record to show that the director, Shri G. Jhajaria, was authorised by the board of directors of the plaintiff company to file the suit. The plaintiff has failed to place on record any such resolution. Institution of a suit is different from filing of a suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to by learned counsel for the plaintiff only deal with the question of signing and verification of the plaint and are on totally different facts. It will be useful to reproduce the two provisions of the Code of Civil Procedure, namely, Order 3, rule 1 and Order 29, rule 1, on which the plaintiff relies. Order 3, rule 1 of the Code of Civil Procedure reads thus : "Any appearance, application or act in or to any court, required or authorised by law to be made or done by a party in such court, may except where otherwise expressly provided by any law for the time being in force, be made or done by the party in person, or by his recognized agent or by a pleader appearing, applying or acting, as the case may be, on his behalf : Provided that any such appearance shall, if the court so directs, be made by the party in person." Order 29, rule 1 of the Code of Civil Procedure reads thus : "In suits by or against a corporation, any pleading may be signed and verified on behalf of the corporation by the secretary or by any director or other principal officer of the corporation who is able to depose to the facts of the case." Order 3, rule 1 provides that any appearance, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the articles of association of the company or in the resolution of its board of directors. In the articles of association of several companies, provision is generally made authorising their managing directors and other officers to file and defend suits on their behalf. Similarly, the board of directors of a company can authorise the institution of a suit on behalf of the company by a resolution. In the case of some companies the articles empower the managing director or directors to appoint general attorneys and general managers and give them authority to institute suits on behalf of the company. But in the absence of any proof in regard to any such power having been conferred on Shri Ram Lal Chaudhary, it is not possible to accept his statement that he was authorised to file the suit as the principal officer of the plaintiff hotel. I, therefore, hold that although the plaint has been signed and verified by a person duly authorised to do so on behalf of the plaintiff company, it has not been proved that the suit has been instituted by any such person. The issue is consequently decided against the plaintiff." Similarly, in South India Insurance Co. Ltd. (Suit No. 68 of 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Swaroop, AIR 1983 SC 355, and Mst. Barkate [1944] PLR 96, deal with the question of signing and verification of the plaint and not institution of the plaint. In Mercantile Bank Ltd. (Suit No. 11 of 1967 10-8-1973), the learned single judge of this court was dealing with the question whether the person who had signed the pleadings was a principal officer and constituted attorney of the plaintiff. The learned judge held that Mr. Carey was the principal officer of the plaintiff company wHo was able to depose to the facts of the case and thus under Order 29, rule 1 of the Code of Civil Procedure could validly sign, verify and file the plaint. The question whether the company is required to specifically pass a resolution empowering Mr. Carey to institute the suit was not for the consideration of the court. The issue that was raised in the suit was : "Is the plaint signed and verified by a duly authorised person ?" Since the court found that, Mr. Carey was the principal officer, it was observed that under Order 29, rule 1, he could sign, verify and file the plaint. Learned single judge while deciding Mercantile Bank's case (Suit No. 11 of 1967 10-8-1973) had relied on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit is specifically conferred on a particular director, he has no authority to institute a suit on behalf of the company. Needless to say such a power can be conferred by the board of directors only by passing a resolution in that regard. Chapter IV of the Delhi High Court (Original Side) Rules deals with the question of presentation of suits. Under this rule, a suit can be presented by a duly authorised agent or by an advocate duly appointed by him for the purpose. This authorisation, in my view, in the case of a company can be given only after a decision to institute a suit is taken by the board of directors of the company. The board of directors may in turn authorise a particular director, principal officer or the secretary to institute a suit. The plaintiff has not placed on record any resolution passed by the company authorising Shri G. Jhajharia to institute the suit. Shri G. Jhajha-ria did not come forward to make a statement that he was in a position to depose to the facts of the case. In the plaint signed by him, he claims to be a principal officer and director, but there is no evidence on record to indicate that he had the authority to institute the suit. The memoran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this damage did not cover the loss suffered by the plaintiff because of the damage caused to the goods lying at the customs bonded warehouse. The plaintiff has relied on the correspondence entered into between the plaintiff and the defendant for getting the loss in the customs bonded warehouse also surveyed. It is not disputed by the defendant that after Mr. M.P. Bakshi had surveyed the loss, no further survey was ever conducted by the defendant. The plaintiff, therefore, got the loss surveyed by their own surveyor. The plaintiff's surveyor, Shri Darshan Indar Singh Kohli, gave his report on June 28, 1983, exhibit PW-2/20. The loss suffered according to this surveyor's report is Rs. 3,55,174.05. The defendant has not challenged this report of the surveyor. Therefore, the damage suffered by the plaintiff in the fire would have to be taken as per the two surveyors' reports, i.e., Rs. 2,72,458.71 and Rs. 3,55,174.05. Issues Nos. 1 and 3 : The whole case of the plaintiff is that on May 31, 1982, Shri Dilip Bhattacharjee, the Development Officer of the defendant, visited the factory of the plaintiff and agreed to insure the factory against theft, damage, fire, etc. The plaintiff ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igger fraud. Learned counsel submitted that the Bakshi Committee Report is also not placed on record by the defendant and, therefore, it must be inferred that the proposal was accepted by Shri Dilip Battacharjee. Learned counsel further submitted that the moment a cover-note is issued by the insurance company, the contract of insurance is complete and the insurance company is bound to make the payment for the loss suffered though the regular policy may not have been issued. Learned counsel relied on the judgment of the Supreme Court in General Assurance Society Ltd. v. Chandmull Jain [1966] 36 Comp. Cas. 468 ; AIR 1966 SC 1644, and submitted that the legal status of a cover-note is that it is an interim insurance policy. Learned counsel submitted that since the defendant failed to produce the cover-notes in their possession, an adverse inference is to be drawn against the defendant. Learned counsel submitted that if a party fails to produce the best evidence in its possession, an adverse inference should be drawn. Learned counsel relied on Bawa Singh v. Jagdish Chand [1960-61] 18 FJR 428 ; AIR 1960 Punj 573, Ram Murty Gupta v. Suresh Chandra Agrawal, AIR 1973 All 582, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporates the policy in this manner, it does not have to recite the terms and conditions, but merely to refer to a particular standard policy. If the proposal is for a standard policy and the cover note refers to it, the assured is taken to have accepted the terms of that policy. The reference to the policy and its terms and conditions may be expressed in the proposal or the cover note or even in the letter of acceptance including the cover-note. The incorporation of the terms and conditions of the policy may also arise from a combination of references in two or more documents parsing between the parties. Documents like the proposal, cover-note and the policy are commercial documents and to interpret them commercial habits and practice cannot altogether be ignored. During the time the cover-note operates, the relations of the parties are governed by its terms and conditions, if any, but more usually by the terms and conditions of the policy bargained for and to be issued. When this happens the terms of the policy are incipient but after the period of temporary cover, the relations are governed only by the terms and conditions of the policy unless insurance is declined in the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XLIV, page 986, wherein it has been stated as : 'The mere receipt and retention of premiums until after the death of the applicant does not give rise to a contract, although the circumstances may be such that approval could be inferred from retention of the premium. The mere execution of the policy is not an acceptance ; an acceptance, to be complete, must be communicated to the offeror, either directly, or by some definite act, such as placing the contract in the mail. The test is not intention alone. When the application so requires, the acceptance must be evidenced by the signature of one of the company's executive officers.' Though in certain human relationships silence to a proposal might convey acceptance, in the case of an insurance proposal, silence does not denote consent and no binding contract arises until the person to whom an offer is made says or does something to signify his acceptance. Mere delay in giving an answer cannot be construed as an acceptance, as, prima facie, acceptance must be communicated to the offeror. The general rule is that the contract of insurance will be concluded only when the party to whom an offer has been made accepts it unconditionally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dant. The short question, therefore, to be determined is whether Shri Dilip Bhattacharjee issued cover-notes and whether the same were received by the plaintiff on June 1, 1982, as alleged. Admittedly, the case of the plaintiff is that Shri Dilip Bhattacharjee took away the cover-notes on June 1, 1982, itself. Rather, PW-2, Shri Ashok Kumar Jhajharia, in his statement has stated that Shri Dilip Bhattacharjee handed over the cover- notes to him on June 1, 1982, and there were in his possession for 10 minutes and Shri Dilip Bhattacharjee immediately took them back with the promise that he will issue the policy shortly. Thus, admittedly the cover-notes are not in the possession of the plaintiff. On a perusal of the various documents which have been placed on record by the plaintiff, I find that in the letters issued by the plaintiff immediately after the fire broke out on June 2, 1982, no reference is made to the cover-notes or the insurance policy. The plaintiff examined only two witnesses on September 5, 1988 ; one was Shri R.P. Sharma, Manager, United Bank of India, Connaught Circus Branch, New Delhi, as PW-1 who has stated that the last policy taken out by the bank for the facto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e receipt of cover-notes by Shri Ashok Kumar Jhajharia for 10 to 15 minutes by examining Shri Dilip Bhattacharjee himself. But the plaintiff has not chosen to do that and the plaintiff relies only on the statement of PW-2, Shri Ashok Kumar Jhajharia, for that purpose. I find that Shri Dilip Bhattacharjee was summoned by the plaintiff and he in fact appeared before the Deputy Registrar on December 18, 1987. The plaintiff had, however, not given the particulars of the documents which Shri Dilip Bhattacharjee was required to produce. The plaintiff later on gave the particulars of the required documents and this witness was again summoned for the dates of trial fixed from September 2, 1988, to September 6, 1988. The plaintiff examined PW 1 and PW-2 onSeptember 5, 1988, and closed the evidence. The plaintiff did not insist onthe examination of Shri Dilip Bhattacharjee. It was contended by learned counsel for the plaintiff that since Shri Dilip Bhattacharjee was in the employment of the defendant and the cover-notes were also in the possession of the defendant, it is the defendant who should have examined Shri Dilip Bhattacharjee and produced the cover-notes. I do not find any force ..... X X X X Extracts X X X X X X X X Extracts X X X X
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