The main legal point established in the judgment is that in an Open Marine Insurance Policy, the premium is guaranteed to be paid and is to be demanded by the insurer from time to time depending on the shipment. The court also emphasized the importance of declarations and warranties under the policy.

SANJAY KISHAN KAUL, J.

1. The present appeal arises out of a long drawn dispute over the last 27 years with a Public Insurance Company and a Public Sector Corporation arrayed against each other.

2. The claim of the respondent for loss of goods on account of unprecedented rain at Kandla Port was rejected by the appellant-Insurance Company. The only question thus is as to which pocket of the government is enriched.

3. The respondent is a Public Sector Corporation and acts as a canalizing agent of the Government of India inter alia for export of rice. The respondent thus purchases rice from different locations in India which is shipped through different ports including the one at Kandla.

4. The appellant is a subsidiary of the General Insurance Corporation of India. The appellant issued an Open Marine Inland Transit Insurance Policy ('the Policy' in short) for the benefit of the respondent in respect of the rice which was being shipped. Unprecedented rain and cyclone hit the Kandla Port on 09/10.07.1981 which, as per the respondent, affected 22,538 metric tons of rice. The respondent thus made a claim for loss of Rs. 1.64 crores under the Policy. The claim was, however, rejected by the appellant resulting in the suit being filed by the respondent against the appellant on the Original Side of this Court being CS(OS) No. 274/1982 for Rs. 1,73,17,336/- consisting of claim for damages amounting to Rs. 1,64,92,701/- along with interest till the date of filing of the suit along with claim for future interest. The suit stands decreed in terms of the impugned judgment and decree dated 19.03.1996 for a sum of Rs. 1,38,39,684/- along with interest at the rate of 12 per cent per annum from the date of institution of the suit till realization. The appellant has thus come in appeal.

5. The submissions of the learned Counsel for the appellant are two-fold:

(i) The storage of the rice at the port was not covered under the said Policy as the said Policy covered goods only during transit;

(ii) The failure of the respondent to comply with the warranties and conditions of the insurance policy discharged the appellant of its obligations;

6. In order to appreciate the aforesaid pleas, the factual matrix resulting in the issuance of the insurance cover has to be set out.

7. The appellant to further his business approached the respondent on 02.01.1981 with a request for placing the insurance business covering the risks during transit of rice from different centres of procurement to the port. The formal proposal was sent vide a letter dated 02.01.1981 expressing the reluctance of the appellant to normally accept transit insurance of rice against all risks but in view of the cordial relations between the parties, the appellant expressed its willingness to underwrite the business of the respondent against all risks excluding infestation loss, weevil or web damage and shortage in weight out of sound bags at the rate of Rs. 2.50 % less 5 %. The additional premium was also prescribed against some other kinds of risks. This was followed up by a letter dated 02.02.1981 (Ex P-18) in respect of the finalization of the rates. The respondent in reply sent a letter dated 10.02.1981 (Ex P-17) as a follow up. The rates and terms & conditions were sent by the appellant under the cover of the letter dated 02.03.1981 (Ex P-14) and a provisional bill was also sent for depositing a premium of Rs. 25,001/- (Ex P-15).

8. The respondent in pursuance thereto sent a reply dated 23.03.1981 (Ex P-21). This letter clearly stated that in cases where the stocks of the respondent might be stored at the godown or at the ports for a period of fortnight or so pending shipment, all such risk of fire and rain etc. were to be included in the proposal, but the storage would not exceed three fortnights. The request thus made was for issuance of an Open Cover Policy on the above lines including storage at the warehouses or at the ports and for fire and rain risks for a maximum period of thr