IMPORTANT POINT
The insurer cannot assume risk unless and until premium is received or guaranteed or deposited. A policy issued can assume the risk from a retrospective date provided such date is not earlier than the date on which premium had been paid in cash or by cheque to the insurer.

ORDER

R.V. Raveendran, J. —

The appellant imported a De-hydration Machine financed by Maharashtra State Finance Corporation (for short ‘MSFC’). The machine was insured by the appellant with the respondent (also referred to as the ‘Insurer’) through MSFC, against the risk of fire for the period 12.9.1986 to 12.3.1988. Long after the expiry of the policy, on 25.8.1988, MSFC sent a cheque for Rs.3,135/- on behalf of the appellant for renewal of the policy. A formal stamped receipt was issued by the insurer confirming the receipt of the cheque on 26.8.1988.

2. By letter dated 7.4.1989, the insurer informed the appellant that it had received the premium amount from MSFC, but as no proposal had been received from appellant, it was not in a position to issue the fire insurance policy. The insurer sent a standard proposal form to the appellant along with the said letter. The appellant filled and signed proposal form and delivered it to the insurer on 16.6.1989. In the said proposal, the appellant stated that insurance cover was required for the period 12.3.1988 to 12.9.1989. But the insurer issued an insurance policy dated 30.6.1989 extending insurance cover for the period 26.8.1988 to 25.8.1989. The Insurer sent the insurance policy to MSFC as required. MSFC did not raise any objection about the period of cover when the policy was received by it. Nor was the policy renewed beyond 25.8.1989.

3. On 10.2.1990, the machine was damaged in a fire accident. On 17.2.1990, the appellant lodged a claim for Rs.26,91,139/- with the insurer, in regard to the said damage. The insurer rejected the claim on the ground that there was no insurance cover on 10.2.1990. Feeling aggrieved, the appellant approached the National Consumer Disputes Redressal Commission (‘Commission’ for short) complaining deficiency in service by the Insurer. The said complaint was dismissed on 23.9.1992 on the ground that the complaint involved decision on complex issues of fact and, therefore, the appropriate remedy was by way of suit. The appellant thereafter filed a civil suit on 29.3.1993 claiming Rs.26,91,130/-, being the value of the damaged machine, with interest etc. The appellant submitted that the suit was in time, if the period spent in prosecuting the claim before the Commission was excluded under section 14 of Limitation Act, 1963.

4. The Trial Court by judgment and decree dated 16.9.1999 dismissed the suit. It upheld the contention of the appellant that the insurance cover could only be prospective, that is for a period of one year from the date of issue of the policy; and that as the insurance policy was issued on 30.6.1989, it should be deemed to have been issued to cover a period of one year commencing from that date; and that therefore, as on the date of the fire accident - 10.2.1990, the machine must be deemed to have been insured. However, the trial court dismissed the suit as barred by limitation. It refused to exclude the time spent in prosecuting the complaint before the National Consumer Redressal Commission for purposes of limitation. Feeling aggrieved, the appellant filed an appeal before the Bombay High Court contending that the finding regarding limitation was erroneous. The insurer filed cross-objections challenging the finding that the insurance was in force on the date of fire accident. The High Court by its judgment dated 9.3.2001 dismissed the appeal by the appellant and allowed the cross-objections of the insurer. The High Court held the suit was not barred by limitation. But it held that the suit was liable to be rejected on merits, as there was no insurance cover on 10.2.1990. It held that the date of insurance policy was immaterial and what was material was the date of assumption of risk; and as the insurer had assumed risk with effect from 26.8.1988 for a period of one year upto 25.8.1989, it cannot be made liable for a fire accident which occurred after the expiry of the policy. The High Court also noted that when the policy was sent to MSFC