LexNATIONAL INSURANCE CO. LTD. versus SUJIR GANESH NAYAK AND CO. AND ANR.
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A B NATIONAL INSURANCE CO. LTD. v. SUJIR GANESH NA YAK AND CO. AND ANR. MARCH 21, 1997 [A.M. AHMADI, CJ. AND K.S. PARIPOORNAN AND SUJATA V. MANOHAR, JJ.) Contract Act, 1872/Limitation Act, 1963-Section 28/Article 44 C (b )-Clauses of the Insurance Policy containing conditions that if claim not pressed within twelve 111onths from happening of any loss or damage and also that if claim 111ade but rejected, no action or suit commenced within three months after such rejection, all benefits under the policy would stand f 01feited and Insurance Company shall cease to be liable-Held: Such conditions were valid and effective, even though the peliod specified in the clauses for com- D mencing suit or action was sh01ter than the pen'od presCJibed by Li111itation Act-Not hit by section 28 of the Contract Act. The respondent firm obtained two fire policies from the appellant • insurance company dt. 5.11.1976 and 2.5.1977, both for a period of twelve months and had a 'Riot and Strike' endorsement of covering damage E caused by riot and strike to the property of the insured. By a letter dt. 28.4.1977 the respondent informed the appellant that on account of strike in the unit from 26.3.1977, the firm had suffered heavy loss as the produc- tion had come to a halt and the finished products were damaged lying outside the factories. The appellant, by a letter dt. 10.5.1977 replied that p the loss sustained by the respondent was not convered by the insurance policies. By letters dt.17.8.1977 and 25.8.1977 the respondent made claims for he payment of the loss from the appellant. By letter dt. 22.9.1977, the appellant reiterated its earlier reply disowning its liability for the loss incurred by the respondent. After serving a legal notice on 25.10.1978, the respondent filed a suit for recovery of the claim on 2.6.1980. The Trial G Court dismissed the suit holding that damaged was not covered by the insurance policies in view of the Special Condition 5 (l)(b) of the 'Riot and Strike' endorsement of the policy, clause 19 of the policy was not hit by section 28 of the Contract Act, 1872 and the suit was barred by limitation. In appeal, the High Court allowed the claim of the respondent reversing H the findings of the Trial Court. Hence this appeal by the appellant-in- 202 NATIONAL INSURANCE CO. Lm. v. SUJIR GANESH NAY AK AND CO. 203 surance company. A Allowing the appeal, this Court HELD : 1. The claims of the respondent can not be allowed as the suit was filed after the expiry of the stipulated period as per clause 19 as well as the forfeiture clause 12 of the policies. [208-C] B 2. Curtailment of the period of limitation is not permissible in view of section 28 of the Contract Act, 1872, but extinction of the right itself, unless exercised within a specified time is permissible and can be enforced. If the policy of insurance provides that if a claim is made and rejected and C no action is commenced within the time stated in the policy, the benefits flowing from the policy shall stand extinguished and any subsequent action would be time barred, such a clause would fall outside the scope of section 28 of the Contract Act. In the instant case the claim was not subject to any action or arbitration proceedings during the period of twelve months referred to in clause 19 of the conditions of the insurance policy. Clause 19 D had therefore the effect of extinguishing the right itself and consequently the liability also. The appellant insurance company was informed about the strike by Jetter dated 28.4.1977. The insured respondent was replied oiJ. 10.5.1977 that under the policy the appellant had no liability. This was reiterated by letter dt. 22.9.1977. Even so more than twelve months there- E after, on 25.10.1978 the notice of demand was issued and the suit was filed on 2.6.1980. The forfeiture clause 12 the policy also provides that if the claims is made but rejected, an action or suit must be commenced within three months after such rejection, failing which all benefits under the policy would stand forfeited. So, looked at from any point of view, the suit appears to be filed after the right stood extinguished. Therefore, the High Court was F wrong in allowing the claini of the respondents. [212-G; 214-G; 215-B-C] Food Corporation of India v. New India Assurance Co. Limited, [1994) 3 sec 324, relied on. Vulcan Insurance Co. Ltd. v.Maharaj Singh, [1976) 1SCC943; Baroda G Spg. &
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