JAMMU AND KASHMIR HIGH COURT
Ali Mohammad Magrey and Vinod Chatterji Koul, JJ.
Sajad Ahmad Malik & Ors. —Petitioners
versus
Divisional Manager, National Insurance Company Ltd. & Anr. —Respondents
MA No.120/2013 c/w MA Nos. 139/2013; 140/2013
Decided on 22.6.2020

IMPORTANT POINTS
(1) Amendment of a Statute which is not retrospective in operation does not affect pending proceedings, except where amending provision/ Act, expressly or by necessary intendment, provides otherwise.
(2) Duty of mutual and fair dealing requires all parties to a contract to be fair and open to each other in order to create and maintain trust between them—Any inaccurate answer will entitle insurer to repudiate his liability.

Headnote:

(A) Jammu and Kashmir Reorganization Act, 2019 – Section 13 – Jammu and Kashmir Consumer Protection Act, 1987 – Section 17 – General Clauses Act, 1897 – Section 6(c) and (e) – Appeal – Jurisdiction of court – these appeals arise out of the common order passed by the erstwhile Jammu and Kashmir State Consumer Disputes Redressal Commission in terms of Section 17 and have remained pending for adjudication before this Court for the last more than seven years – During pendency of these appeals, Parliament passed Jammu and Kashmir Reorganization Act, 2019, thereby leading to formation of two new Union Territories out of erstwhile State of Jammu and Kashmir, viz. (i) Union Territory of Jammu and Kashmir with Legislature; and (ii) Union Territory of Ladakh without Legislature – Amendment of a Statute which is not retrospective in operation does not affect pending proceedings, except where amending provision/ Act, expressly or by necessary intendment, provides otherwise – When a lis commences, all rights and obligations of parties get crystalized on that date – All pending proceedings/appeals arising out of orders or awards passed by erstwhile Jammu and Kashmir State Consumer Disputes Redressal Commission are to continue to be heard and decided by this Court as if unamended provision/ Act is still in force. (Paras 6 to 9)

(B) Insurance Act, 1938 – Section 45 – Jammu and Kashmir Consumer Protection Act, 1987 – Section 17 – Insurance – Insured building sustained heavy damage in encounter with terrorists – There was evidently a non-disclosure of earlier cover for insurance held by insured – Before a non-disclosure can be utilized as a ground to repudiate, it must pertain to a realm where it can be found that non-disclosure was of a circumstance or fact which would have affected decision of insurer regarding whether or not to grant a cover – Insured must disclose to insurer all facts material to an insurer’s appraisal of risk which are known or deemed to be known by assured, but neither known or deemed to be known by insurer – Breach of this duty on part of insured, entitles insurer to avoid contract of insurance so long as he/ she can show that non-disclosure induced making of contract on relevant terms – Relationship between an insurer and insured is recognized as one where mutual obligation of trust and good faith are paramount. (Paras 17 and 18)

(C) Jammu and Kashmir Consumer Protection Act, 1987 – Section 17 – Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, 2002 – Regulation 2(d) and 4 – Insurance – Insured building sustained heavy damage in encounter with terrorists – Compensation and cost awarded by Jammu and Kashmir State Consumer Disputes Redressal Commission – There was evidently a non-disclosure of earlier cover for insurance held by insured – Purpose of the disclosure is to enable insurer to decide whether to accept or decline to undertake risk – Whether a question concealed is or is not material is a question of fact – Materiality of a fact also depends on the surrounding circumstances and nature of information sought by insurer – It covers a failure to disclose vital information which insurer requires in order to determine; firstly, whether or not to assume risk of insurance, and, secondly, if it does accept risk, upon what terms it should do so – Insurer is better equipped to determine limits of risk-taking as it deals with exercise of assessments on a day- to-day basis – Contracts of Insurance’ are governed by principle of utmost good faith – Duty of mutual and fair dealing requires all parties to a contract to be fair and open to each other in order to create and maintain trust between them – Any inaccurate answer will entitle insurer to repudiate his liability – Failure of insured/ complainant to disclose occupation of premises by terrorists as well as existence of simultaneous policy of insurance obtained from other Insurance Company with regard to same premises entitled insurer to repudiate claim under policy – Commission has erred in arriving at conclusion so reflected in impugned order, which is not only contrary to evidence on record, but also law governing the subject – Order impugned, being full of legal infirmities, cannot withstand test of judicial scrutiny, as such, declared as illegal and set aside – Complaint dismissed. (Paras 19, 20, 21, 25, 28, 29 and 30)

Result:Appeals Partly allowed.