GENERAL ASSURANCE SOCIETY LTD. versus CHANDUMULL JAIN AND ANR.

Citation: [1966] 3 S.C.R. 500 · Decided: 07-02-1966 · Supreme Court of India · Bench: P.B. GAJENDRAGADKAR · Disposal: Appeal(s) allowed

Cited by 5 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

GENERAL ASSURANCE SOCIETY Ltd. 
v. 
CHANDUMULL JAIN AND ANR. 
February 7, 1966 
[P. B. GAJENDRAGADKAR, C. J., K. N. WANCllOO, M. 
HIDAYATULLAH, V. RAMASWAMI AND P. SATYANARAYANA 
RAJU, JJ.] 
• 
lnsurcuzce-Accep1'111ct' and covers notes issued by insurer-J'olicy 
1101 i.ssued--Conditions of policy whether applicable to contract-Condi-
tion ttllowing parties to cancel contrc1c1 whether reasonab/e--Cancel/ation by 
insurer u•hen 
~·alid. 
Letters of acceptance of the proposals and cover notes were is~ued by 
the appellant Society purporting to insure certain houses belonging to the 
respondents against damage from fire, flood etc. 
According to the cover-
notes the insurance was subject to the 'usual conditions of the Society"s 
polices.' 
However, the Society had not issued the policies by the time 
the Ganges, 
near the banks of which the houses stood, 
began to 
got into flood. 
Soon thereafter the society cancelled the risk. relying on 
condition ( 10) of its Fire policy. 
The houses were washed away and 
the rc:,pondents filed a suit in the High Coun demanding payment under 
the policies. 
The trial Judge dismissed it but the High Court decreed it. 
The questions that fell for determination were, whether Condition (10) 
of the Fire policy was applicable to tho facts of the case, whether the said 
condition wa<; reasonable, and v.1hether 1hc cancellation of the policy by 
the society was valid : 
Hfil..D: (i) Looking at tho proposal, the letter of acceptance and the 
cover notes it was clear that a contract of insurance under the ;:;tandard 
policy of fire and extended to cover flood, cyclone, etc., had come into being. 
The fact that the policy was not actually delivered made no difference 
becau<;e when a contract of insurance is complete, it is in1materi:!l whether 
tho policy is actually delivered after the loss, and for the same reason the 
rights of the parties arc governed by the policy lo be, between acceptance 
and delivery of the policy. 
Even if no terms are spccifted the term~ con-
tained in a policy cust-Omarf-ly issued in such a case, apply. 
Jn the present 
caS"e the cover notes clearly said that the usual terms of the 
society's 
policie~ would apply. 
Condition (JO) was a usual condition of such 
policies and therefore 1t could be invoked by the Society. 
[510 B: 51~ 
D-GJ 
(ii- There i" nothin~ wrong in incJuding in a. contract or in~urance a 
mutual condition for the cancellation of the contract. 
Condition ( 10) 
of the Fire policy gave equal right< of cancellation to both panics and 
was not unreasonable. 
[513 B-C) 
(iii) A condition such a<; Condition (10) is intended lo cancel the 
risk but not to avoid liability for Joss which has taken place. or to avoid 
risk when it 
i<1 alrcadv turning into a loss. 
Cancellation is rea'ionab1y 
possible before the liability under the policy has commenced or h.., become 
inevitable, and it is a q~tion of fact in each CMO whether the cancel-
lation is legitimate or illegitimate. 
On the facts of the case it could not 
tie said that the societv cancelled the policies after the loss had already 
commenced or had hecome inevitable. 
The cancellation was therefore 
vaM. 
[514 H-515 C: 515 GJ 
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ASSURANCE soc. v. CHANDUMULL (Hidayatullah, !.) 
501 
Sun Fire Office v. Hart &: Ors. (1889) 14 A. C. 98 a d The 
Central Bank of India v. Hartford Fire Insurance Co. Ltd. n. I. R. 
(1956) S. C. 1_288, relied on. 
A 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 886 of 1963. 
Appeal from the judgment and decree dated 13th/14th July, 
1961 of the Calcutta High Court in Appeal No. 44 of 1959. 
C. B. Agarwala, B. M. Agarwala and I. N. Shroff, for tile 
appellant . 
Niren De, Additional Solicitor General, G. L. Sanghi, Nirmal 
Kumar Ghosal, J.B. Dadachanji, 0. C. Mathur and Ravinder Narain, 
for the respondents. 
The Judgment of the Court was delivered by 
Hidayatullah J. This appeal is taken from a judgment of the 
High Court of Calcutta, July 13 and 14, 1961, by which a Divisional 
Bench of the High Court, reversing the judgment of a learned single 
Judge of the same Court, decreed the respondents' claim for damag-
es. The circumstances were these. The appellant is a general 
insurance company. On June 2, 1950 the respondents submitti!d 
proposals to the company with a view to insuring certain houses in 
Dhullian bearing Holding Nos. 274, 274/-A-B-C-and D and 273, 
273/A-B-C and D, for Rs. 51,000 an

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