JUDGMENT

Harjit Singh Bedi, J. —

1. The facts leading to this appeal are as under:

2. In October 1987, a meeting was convened by the Managing Director of the appellant with representatives of various Insurance Companies in Shimla with a proposal to insure the timber lying in several forest areas of the State. A proposal was also made to the National Insurance Company on 26th October 1987 to act as a lead company while the other Insurance Companies were to be co-sharers. After negotiations, the respondent agreed (on the 30th October 1987) to insure the timber lying in the South Zone in the value of Rs.3.42 Crores and also issued a cover note dated 7th November 1987 followed subsequently by a policy dated 16th November 1987 to be valid from 6th November 1987 to 5th November 1988. The appellant also deposited a sum of Rs.2,43,504 as the tentative premium subject to the approval by the Tariff Advisory Commission. It appears that on account of heavy rains in the Shimla region in September 1988 and consequent large scale flooding in the South Zone, the insured timber was washed away. This fact was conveyed to the respondent by several letters between 3rd October 1988 and 31st September 1