Back
1999 Supreme(Bom) 100
IN THE HIGH COURT OF BOMBAY
D.G. Deshpande, J.
The Oriental Insurance Company Ltd. ..... Plaintiff.
Versus
Captain Ram Moorjani.... Defendant.
Commercial Causes Suit No. 407 of 1991, decided on 11-2-1999.
Advocates appeared :
K. Setalwad with Toral Shah i/b. T. Dayabhai Co., for the plaintiffs.
C.T. Kriplani, for the defendant.
Headnote:Section 10 - Consideration his case it was held that payment of insurance claim cannot be said to be a consideration for executing indemnity bond and hence it is not legally enforceable.
Section 16-Payment of insurance amount-Insured person asked by Insurance Company for execution of indemnity bond in lieu of payment-Validity-Held, highly unjustified and illegal in absence of any contractual obligation-Moreover bond was obtained by use of undue influence and without consideration.-The plaintiff has misused their dominating position. The plaintiffs are not doing any favour to the defendant by giving him Rs. 3,00,000/- because they were giving the payment under the contractual obligation under the insurance policy, having accepted the final finding of the Medical Board regarding the disablement of the defendant. This payment of Rs. 3,00,000/was a statutory and contractual liability of the plaintiff vis-a-vis the defendant but the said payment is treated by the plaintiff for their own benefit as consideration for getting the indemnity bond executed. Admittedly and as discussed above, this indenmity bond is not obtained by the plaintiffs pursuant to any legal or statutory authority but it is obtained by them on the basis of some practice prevailing on their part. Therefore obtaining of this indemnity bond is highly unjustified, illegal and improper and at any rate this indemnity bond is without consideration because the plaintiffs had no legal authority to convert their legal liability as consideration for further fresh agreement, i.e. indemnity bond.
-Section 16-Contract of insurance-Plaintiff Insurance Company under contractual obligation to pay Rs. 3,00,000/- to defendant-pilot of Air India who had suffered bodily injury during the course of employment-Insurance Company paid Rs. 72,000/- to defendant towards temporary disability and was liable to pay Rs. 2,28,000/- on being declared permanently unfit for flying duties-Insurance Company paid Rs. 2,28,000/to defendant and obtained indemnity bond to repay to plaintiff sum of Rs. 2,28,000/- on regaining his flying licence-Plaintiff had no statutory, contractual or legal authority for obtaining indemnity bond-Insistence on part of plaintiff to execute indemnity bond as condition of payment of Rs. 2,28,000/- was due to undue influence.
Sections 16 and 10-Execution of indemnity bond under undue influence-Suit for recovery of insurance amount already paid to defendant on strength of indemnity bond-Defendant a pilot in Air India declared medically unfit, plaintiff paid him insurance amount-Plaintiff also got executed indemnity bond by defendant agreeing to repay insurance amount in case defendant regained his flying licence-Subsequently defendant regained his flying licence-Hence present suit by plaintiff Insurance Company-Held, such agreement by way of indemnity bond having no statutory or contractual basis was executed under undue influence-Moreover payment of insurance claim is not consideration for executing indemnity bond and thus not legally enforceable.-It is not material here that plaintiffs had handed over the cheque of Rs. 2,28,000/- to the defendant before obtaining indemnity bond. Because the plaintiffs were in a position to stop payment of that cheque if the defendant had not executed the indemnity bond. The plea of the defendant regarding undue influence is required to be accepted because there was no alternative for him but to execute the bond as required by the plaintiff otherwise he would have been required to forgo his claim under the insurance and his claim to the remaining amount of Rs. 2,28,000/-. If the defendant had some other option or avenue available for recovering the amount under the insurance policy then it could not have been said that there was any undue influence by the plaintiff upon him but that the defendant was left with no alternative and had no option but to accede to the demand of the plaintiff to execute the indemnity bond particularly when the plaintiff had no statutory, contractual or legal authority for obtaining the said indemnity bond then the only inference that can be drawn is that the defendant was required to execute the indemnity bond due to undue influence. Apart from this, there is one more serious aspect to this case and that is as rightly argued by the counsel for the defendant, there is no consideration to the agreement, i.e. indemnity bond. As per the Contract Act consideration is an indispensable part of any legally enforceable contract. It is an admitted fact that payment of Rs. 3,00,000/- under the insurance policy by the plaintiffs to the defendant was their statutory obligation. It has also been observed that the plaintiff had no legal authority to ask for the indemnity bond and therefore as rightly argued by the counsel for the defendant this indemnity bond is an agreement without consideration because under no provision of law or agreement, the plaintiffs could convert the payment of Rs. 3,00,000/- to the defendant as a consideration for the defendant execution of indemnity bond.
Section 25-Plaintiff Insurance Company which was liable to pay Rs. 3,00,000/- towards statutory and contractual liability having earlier paid Rs. 72,000/- vis-a-vis defendant pilot plaintiff obtained indemnity bond from defendant pilot in respect of the amount of Rs. 2,28,000/-Indemnity bond not been obtained pursuant to any legal or statutory authority but on basis of some practice prevailing-It was void being without consideration-Plaintiff had no legal authority to convert their legal liability as consideration for further fresh agreement, i.e. indemnity bond.
2.It is the case of the plaintiff that at the time of payment of Rs. 2,28,000/- the defendant voluntarily and on his own accord gave an undertaking/indemnity bond to the plaintiff agreeing thereby to repay to the plaintiff sum of Rs. 2, 28,000/- in the event of regaining his flying licence either in India or abroad. According to the plaintiff, the defendant thereafter regained his flying licence therefore the plaintiff has become entitled to recover amount of Rs. 2,28,000/- for which the present suit is filed.
3.On the other hand it is the case of the defendant that firstly the plaintiff had no right to obtain such indemnity bond from the defendant and secondly from the circumstances mentioned in the written statement and revealed by the correspondence and the factual position at the time of execution of the indemnity bond, the same indemnity bond came to be executed by him under undue influence and coercion and that at any rate it is not a document voluntarily executed by the defendant and hence the plaintiffs have no right to file the suit or claim any amount from the defendant.
4.On the basis of the aforesaid pleadings the following issues were framed by me on 11-1-1999:
ISSUES
1) Whether the plaintiff is entitled to a decree in the principal amount of Rs. 2, 28,000/- along with interest thereon as per the statement of claim annexed at Exhibit 1 to the plaint ?
2) Whether the defendant proves that undertaking dated 3-6-1989 (being Exhibit B to the plaint) is not an indemnity bond/ security as pleaded in paragraph 8 of the written statement?
3) Whether the defendant proves that the undertaking dated 3-6-1989 (being Exhibit B to the plaint) was obtained by undue influence/duress as pleaded in paragraph 8 of the written statement?
4) Whether the defendant proves that the plaint discloses no cause of action and/or is liable to be dismissed with compensatory costs as pleaded in paragraphs 1 and 2 of the written statement?
5) What Order and Decree?
5.However, when the matter was on board for recording evidence, both the parties agreed that the questions involved in the suit and the question raised by the defendant could be decided on the basis of the documents already filed and no oral evidence was required. Therefore, arguments at length of the plaintiff's advocate as well as of the defendant's advocate were heard by me, not only with reference to the pleadings of the parties but also with reference to the documents relied upon.
6.It was firstly contended by the Counsel for the plaintiff that the indemnity bond was obtained by the plaintiff as per their usual practice in order to protect their interest. Secondly, it was contended that the plea of the defendant regarding execution of the indemnity bond under undue influence or coercion could not at all to be entertained and considered by the Court because no particulars in that regard as required under Order VI, Rule 4 of the Code of Civil Procedure were given by the defendant anywhere in the written statement. It was further contended that the pleadings of the defendant regarding undue influence and coercion as raised in the written state
