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2006 (3) CPR 366 (NC)
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION,
NEW DELHI
S.N. Kapoor, Presiding Member and B.K. Taimni, Member
M/s. Sujata Chemicals—Appellant
versus
United India Insurance Co. Ltd.—Respondent
First Appeal No. 1 of 1997
Decided on 2-11-2006
For the Appellant:Mr. R.P. Bhatt, Sr. Advocate with Mr. Chirag Shroff & Ms. Tanuja Sheel, Advocates.
For the Respondent:Mr. K.L. Nandwani, Advocate.
IMPORTANT POINT
Amendment in Section 28 of Contract Act, 1872 is of declaratory nature and is retrospective in operation. It applies to complaints under CP Act.
Headnote:Consumer Protection Act, 1986—Sections 19, 2(1)(g)—Contract Act, 1872—Section 28 (as amended in 1997-1998)—Agreement in restraint of legal proceeding—Insurance Contract—Clause 12—Forfeiture clause—If complaint about repudiation of insurance claim is not filed within 3 calendar months it shall be deemed to have been abandoned—Claim repudiated on 27-4-1995—Complaint filed on 24-1-1996—Dismissed by State Commission in terms of clause 12 of the policy on 28-10-1996—Appeal against—Section 28 of the Contract Act amended in 1998 w.e.f. 8-1-1997—Such clause was declared void—Whether amendment would apply to this case retrospectively? (Yes)—Appeal allowed—Case remanded for decision afresh. Case Law referred.
Held: In view of the above, it is felt that the amendment in Section 28 is of declaratory nature would have retrospective effect and consequently the claim of the complainant could not be dismissed on the ground of assumption that he had abandoned the claim against known fact. (Para 11)
One would not be oblivious to the distinction about the right to seek arbitration and right to approach the court. In so far as arbitration is concerned, this kind of condition could be acceptable but in case it refuses the right to approach court or concerned tribunal, it is difficult to accept the proposition particularly in the light of the amendment of Section 28 being of declaratory nature. (Para 12)
Held Consequently:Since the matter has been decided only to this point, we feel that this order cannot be sustained in view of the declaratory nature of the Section 28 and the ultimate impact of such clause on the right to suit beyond the right to claim arbitration. We feel that the matter has to be remanded back to the State Commission to decide the matter on merits after giving an opportunity to both the parties after leading the evidence. (Para 15)
Result: Appeal allowed, case remanded.
S.N. Kapoor, Presiding Member—The appellant feeling aggrieved by the order dated 28.10.1996 dismissing the complaint relating to insurance claim passed by the State Commission, Ahmedabad, has filed the present appeal.
2. Facts giving an occasion to the appellant to file this appeal are as under:
The appellant was a registered partnership firm and is engaged in manufacturing acids and also involved in processing and distillation and sale of chemicals at its factory at Vadodara for the last more than 30 years. The appellant had taken Machinery Breakdown Insurance Policy from the respondent for the period from May 10, 1994 to May 9, 1995 in regard to 1,500 litre glass linked reactor for a sum of Rs. 4,50,000 for installation in the factory. Pre-Insurance survey of the reactor was done by the surveyor of the respondent. After obtaining the insurance policy, the reactor was put to use and it was functional till August 25, 1994. The insurance policy was issued for a total sum of Rs. 4,69,272.40 which covered the value of the glass parts. However, at about 3 p.m. on 25.8.94, it was noticed that it had developed holes. The appellant accordingly informed the appellant about damage to the reactor on 26.8.94. The respondent appointed a surveyor. The appellant supplied whatever information was demanded by the surveyor. The respondent repudiated the claims vide letter dated 27.4.1995 on the ground that damage to heat resisting and anti-corrosive lining and cracking of glass lining were excluded. The reactor contained 80% glass parts and if glass parts were excluded, it would have been meaningless to have insurance. In the aforesaid circumstances, the complainant filed the claim for Rs. 6,00,000/- as compensation and costs.
3. The respondent resisted the claim by asserting that the repudiation of the claim vide letter issued on 27.4.95 was fully justified and there was no deficiency in service. Since the complaint has not been filed within three calendar months from the date of repudiation, the complaint was not
maintainable under Clause 12 of the policy for the complaint was not filed on 24.1.1996.
4. The State Commission took the view that in terms of Clause 12 of the policy, the complainant had abandoned its claim and consequently dismissed the complaint.
5. We have heard the parties counsel and gone through the record.
6. Before proceedings further, let us see the Clause 12 of the policy, which reads as under:
“It is also hereby further expressly agreed and declared that if the Company shall dis-claim liability to the insured for any claim hereunder and such claim shall not within 3 calendar months from the date of such disclaimer have been made the subject matter of a suit in a Court of law, then the claim shall for all purposes be deemed to have abandoned and shall not thereafter be recoverable hereunder”.
7. Since the complaint has not been filed within three calendar months from the date of repudiation, the short question, which needs our consideration is as to whether the complaint was maintainable or not under Clause 12 of the policy.
8. Section 28 of the Contract Act was amended w.e.f. 8.1.1997. The Bench of this Commission presided over by Hon’ble Mr. Justice M.B. Shah on a similar point in the case of New India Assurance Co. Ltd. v. K.A. Abdul Hameed and Anr.1 after considering numerous judgments, observed as under:
“4. Prima facie, it appears that the aforesaid condition in the insurance policy would be void in view of Section 28(b).
5. Section 28 is as under:
“28. Agreements in restraint of legal proceedings, void—
Every agreement,
(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any con
