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Petitioner: ABDUL RAZAK and 4 otherss VS Respondent: STANDARD INSURANCE COMPANY LTD.
Court Name: Sindh High Court Judge(s): Abdul Rahim Kazi Title: ABDUL RAZAK and 4 otherss vs STANDARD INSURANCE COMPANY LTD. Case No.: Suit No, 518 of 1974 Date of Judgment:1989-12-20 Reported As: 1990 MLD 1842 Result: Suit decreed
JUDGMENT
JUDGMENT ' The present suit has been filed for the recovery of Rs,6,00,000 (Rupees six lacs). The case of the plaintiffs is that the plaintiffs being businessmen run a Flour Mills by the name of M/s. Bawany Roller Flour Mills, Hyderabad. In the year 1973 the plaintiffs were approached by the defendants for insurance of the said Mills and the Plaintiffs obtained a Fire Insurance Policy being Policy No, 101-F- 15371/73 from the defendants for the insurance of Bawany Roller Flour Mills as per schedule annexed to the Policy. The Policy was effective from 21-8-1973 in consideration of which a sum of Rs, 12,262.77 was paid as premium. It is further the case of the plaintiffs that on the night between 13th and 14th October, 1973 an accidental fire broke out in the said Mills at Hyderabad with the result that there was an extensive damage to the building, machinery and stock. Such intimation was given to the defendants through cable which was acknowledged by the defendants, who through a letter sent blank claim forms for completion and also appointed M/s. Republican Surveyors and M/s. Ghafoor Associates Karachi to survey the loss. The surveyors are said to have visited the premises of the Mills and assessed the loss and that in the meantime the Plaintiffs had submitted the completed claim forms. However, it is further claimed by the plaintiffs that the defendants authorised the said Surveyors to negotiate settlement of loss with the plaintiffs which was ultimately settled at a sum of Rs,8,00,000 (Rupees eight lacs) in full and final satisfaction of the total claim which was accepted by the plaintiffs and in pursuance thereof the defendants made a payment of 25% of the agreed loss i,e, Rs,2,00,000 (Rupees two lacs) to the plaintiffs and promised to pay the balance of Rs,6,00,000 (Rupees six lacs) after the receipt of final Survey Report. Thereafter the plaintiffs had been writing repeated letters to the defendants for the payment of the remaining amount, but the defendants through letter dated 11-5-1975 rejected the plaintiffs' claim
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in toto and therefore, the present suit was filed by the plaintiffs. During the pendency of the suit the plaintiff died and his L.Rs, were substituted and an amended plaint was filed. 2. The defendants contested the suit and filed their written-statement wherein they denied the plaintiffs' claim. The preliminary objections were taken in the written-statement to the effect that the plaintiffs have no insurable interest, the suit is bad for non-joinder of M/s. Habib Bank Limited and that the suit is barred by Condition No,13 of the Insurance Policy. The defendants did not admit that the fire had broken out accidentally. The defendants however did not deny the fact of occurrence of fire in their Written-Statement and also the taking out of the Insurance Policy by the Plaintiffs. The case of the defendants, as given in the Written-Statement, is that the insurance was subject to the Warranties, terms and conditions, as stated in the Fire Policy and the schedule which have not been complied with by the Plaintiffs. It was admitted by the defendants that the surveyors had inspected the site, but they denied that the loss was assessed for more than Rs,8,00,000 (Rupees eight lacs) or that the Surveyors were authorised to make any settlement. On the contrary the case of the defendants is that the plaintiffs had forfeited whatever benefit they could get under the insurance for the reasons that they had obtained the interim on account payment of Rs,2 lacs through fraudulent means by producing before the surveyors quotation of a Mill Plant of the capacity of 200 tons per day, whereas the capacity of the plaintiffs' Mills Plant was only 150 tons per day. With regard to payment of Rs,2,00,000 (Rupees two lacs) to the Plaintiffs, the defendants asserted that the same was paid as an interim on account relief on the recommendation of the Surveyors subject to fmal report. 3. On the above pleadings of the parties the following issues were framed:-- (1) Has the plaintiff any insurable interest? (2) Is Habib Bank Ltd. a necessary party and is the plaintiff competent to sue alone? (3) Did the plaintiff commit fraud as stated in paragraph 8 of the written-statement and is the suit barred by condition No,13 of the policy? (4) Was the fire accidental and due to an insured peril? (5) Did the defendant authorise the surveyors to settle the claim of the plaintiff at Rs, 8,00,000 or any other amount; and is the settlement binding on the defendant? (6) Did the defendant admit its liability for Rs,8,00,000 and is he estopped from denying it? (7) Was the amount of Rs,2,00,000 paid by the defendant to the plaintiff as a result of the fraud committed by the plaintiff on the surveyors? (8) Has the plaintiff committed breach of the warranties and conditions of the Policy? (9) What amount of loss, if any, has been suffered by the plaintiffs and is he entitled to recover the same from the defendant under the Policy? (10)To what relief, if any, is the plaintiff entitled? 4. The plaintiffs examined Najmul Hassan, the sole-proprietor of M/s. Republican Surveyors as Ex.6, Muhammad Bashir, Accounts Officer of Sindh Milling Corpn. As Ex. 9, Usman Abdul Ghafoor from the Surveyors M/s. Ghafoor Associates, Karachi as Ex. -10 and Muhammad Yaseen, the son of the deceased Plaintiff as Ex. -11 and produced certain documents and closed their side. 5. The defendants examined Anwar Mubeen, Insurance Surveyors from Lahore as Ex. -34, Nazar Muhammad from Lahore as Ex. 36 and Muhammad Bashir, Accounts Officers, Sindh Flour Milling Corporation as EL - 37. They produced only one letter from D.W. Anwar Mubeen addressed to the defendants and closed their side. 6. I have heard Mr. Abdul Rauf and Mr. Shamsul Arfin learned counsel for the parties. Their submissions and my findings are as under:-- ISSUE No,1: ' On this issue Mr. Shamsul Arfin, learned counsel for the defendants has referred to paragraph No, 20 of the plaint. He has submitted that three different items have been mentioned in this
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paragraph on which the cause of action is alleged to have accrued i,e, firstly on 6-12-1973, when the Insurance Policy was taken, secondly on 14-10-1973, when the fire broke out and finally on 11-2- 1974, when a new contract was made. From this the learned counsel for the defendants has contended that admittedly the insurance policy was taken, on 6-12-1973, whereas the fire is said to have broken out earlier and therefore, the plaintiffs had no insurable interest on the said date. Replying to the above submission, Mr. Abdul Rauf, the learned counsel for the plaintiffs has submitted that the Insurance Policy has been produced in evidence as Ex.- 12 which .Shows that the said policy is effective from 21-8-1973 to 21-8-1974 and shows the payment of Insurance Premium amounting to Rs,12,262.77. This covers the period when the fire broke out and therefore, the plaintiff did have the insurable interest. The learned counsel for the plaintiffs has further referred to the paragraphs 3 and 4 of the plaint wherein the period of currency of Insurance policy and payment of Premium is mentioned. He has also referred to paragraph 4 of the written- statement wherein the facts that the premium was paid by the Plaintiffs and that the Insurance Policy was effective from 21-8-1973 to 21-8-1974 are admitted. The learned counsel for the plaintiffs has further referred to the defendants' letter dated 15-10-1973 (Ex.-13), Fire Claim Form (EL-15) and has submitted that the above letter shows that when the defendants were informed of the fire, they sent the claim Form to the plaintiffs to be filled in and returned. He has further submitted that the letter (EL 13) is dated 15-10-1973 (the very next day of fire) and mentions cover note numbers. This letter is issued before the issuance of policy (Ex. 12). Mr. Abdul Rauf, learned counsel for the plaintiffs has further submitted that in insurance business usually first a cover note is issued by the Insurer on receipt of payment of premium and thereafter the Insurance Policy is formally issued after survey of the Insured premises or goods and that the interest is created at the time when the premium is paid and, cover note is issued. He has referred to the "General Principles of Insurance Law" by E.R. Hardy Ivamy, IInd Edition, wherein while dealing with the chapter pertaining to 'Cover Note', it has been said at page 72: "1. The purpose of the Cover Note. A proposal is not necessarily accepted at once since the insurance company may take time to consider it. If the proposal is submitted through an agent, the agent usually has no authority to accept it himself, but must forward it to the insurers in order that they may decide whether to accept it or not. There is therefore, as a rule an interval of time between the making of the proposal and the final decision, so it is the practice of insurance companies in the case of some types of insurance especially motor, burglary and fire insurance to give the proposer protection by the issue of a 'cover note'. Cover notes are not issued in life insurance." ' Again at page 74 it is observed: "3 "The Duration of the Cover Note: ' The question of the duration of the cover note is of little importance where the proposal is accepted, since the cover note comes to an end when the policy is issued. It is only where the proposal is not accepted that the question becomes important." ' AND at page 76 it is said: "4 "The Effect of the Cover Note: ' The cover note is in itself a contract of insurance, governing the rights and liabilities of the parties in the event of a loss taking place during its currency. The assured is, therefore, entitled to enforce the contract contained in the cover note, provided that he has complied with its conditions e.g. As to payment of the premium." ' The learned counsel has also referred to the Insurance Policy (Ex. 12) which shows that it has been issued in lieu of the Cover Note No, 008826. 'The learned counsel for the plaintiff has also referred to the case of Julien Praet Et Cie, S/A v. H.G. Poland Ltd. (1960) 1 Lloyd Rep 420.
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From the above discussion it can safely be concluded that the interest of the insurer is created the moment Cover Note is issued by Insurer or his agent and premium is paid. This effect of the Cover Note continues till the Insurance Policy is issued and the Insured is entitled to the protection. The Insurer can be deprived of such protection only in case the Cover Note itself provides that it is to remain in force until the insurers intimate that they have rejected the proposal or where it is expressly stated in the Cover Note that it would be effective for a certain period only. In the present case the defendants have accepted the interest of plaintiffs by sending them the claim Form. In these circumstances I would hold that the plaintiff has the insurable interest and answer the issue in affirmative. ISSUE No,2: ' This issue has not been pressed by the parties. ISSUE No,3: ' Mr. Shamsul Arfm, learned counsel for the defendants has submitted that second part of the Issue No,3 deals with the consequences of non-compliance of condition No,13 of the Insurance Policy and is dependent on the first part of this issue, but in my view both these parts of this issue are inter connected for the reasons that follow. Mr. Shamsul Arfin learned counsel for the defendant has submitted that the plaintiffs by having played fraud upon the Surveyors misled them to allow enhanced claim and recommend part-payment as interim relief. It is the contention of the learned counsel that this payment of Rs,2,00,000 being 25 % of the adjusted claim does not by itself mean that the claim of the plaintiffs is settled at Rs,8,00,000 and that the defendants are liable to pay the same. The learned counsel has referred to the first letter of the defendant dated 15-10-1973, which on the very top of it is headed as 'without prejudice'. From this it is the contention of the learned counsel that these words show that this letter by itself does not admit the defendant's liability to pay to the plaintiff the damages suffered by them on account of the fire. He has referred to the meaning of the words "without prejudice" from the Black's Law Dictionary Revised 4th Edition which reads as under:-- "Where an offer or admission is made 'without prejudice,' or a motion is denied or a suit dismissed 'without prejudice', it is meant as a declaration that no rights or privileges of the party concerned are to be considered as thereby waived or lost except in so far as may be expressly conceded or decided. ' The words 'without prejudice' import into any transaction that the parties have agreed that as between themselves the receipt of money by one and its payment by the other shall not of themselves have any legal effect on the rights of the parties, but they shall be open to settlement by legal controversy as if the money had not been paid... ' The words 'without prejudice', as used in judgment, ordinarily import the contemplation of further proceedings, and when they appear in an order or decree, it shows that the judicial act is not intended to be res judicata of the merits of the controversy." ' He has further referred to the letter dated 11-5-1974 from the defendant addressed to the Plaintiffs wherein it has been specifically stated that the claim of the plaintiffs is repudiated on account of breach of condition No,13 of the Insurance Policy and also for the reason that the defendant had played the fraud by having placed before the Surveyors inflated quotations showing the price of the plant '200 tons capacity' whereas their mills had the machinery/plant of 150 tons capacity' and thereby the plaintiffs had manoeuvred to induce the Surveyors to value the plaintiffs' plant at a higher value. In support of his above-said contention, the learned counsel has placed reliance on the evidence of defendant's witness Anwar Mubeen (Ex. 34) and his other witnesses. He has also referred to the certificate issued by the defendant's said witness Anwar Mubeen, which is on record as E.-35. He has placed reliance on the case of Muhammad Sarwar and another v. Fazal-ur- Rehman 1982 CLC 1286 and the case of M. Krishnaswami Naidu v. Secretary of State and others A I
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R 1943 Madras 15, in support of his contention that the burden of proof heavily lay on the plaintiffs to prove that they had obtained the correct report from the Surveyors. He has also placed reliance on the provisions of Article 129 (g) Qanun-e-Shahadat and has argued that the presumption should be drawn against the plaintiffs for the reason that they have not produced the evidence which was available with them in order to prove their loss. Repelling the above said submission of the learned counsel for the defendant, Mr. Abdul Rauf, learned counsel for the plaintiffs has submitted that it is the cardinal principle of law that the burden of proof always lay on the persons who advance a positive proposition. He has also placed reliance on the provisions of Articles 117, 118 and 119 of the Qanun-e-Shahadat. The contention of the learned counsel for the plaintiffs is that the allegation of fraud is a positive allegation which requires to be proved as a matter of fact by the party alleging fraud. He has placed reliance on the case of Slattery v. Mance 1962 (1) A E R 525. This was a case of insurance where a vessel had suffered a loss on account of fire and it was held that "mere fact that the vessel had suffered loss on account of fire, would show that the assured had made a prima facie case and the onus is on the insurer to show on a balance of probabilities that the fire was caused or connived at by the assured." He has also placed reliance on the case of Ehsan Ali and others v. District Judge and others PLD 1969 SC 167, wherein their Lordships, while dealing with section 17 of the Contract Act, had held that the burden of proving fraud lay on the party alleging the same. Reliance is also placed on the case of Zahoor Ahmad v. Mehmood Ali and another PLD 1977 Lah. 1377 and the case of Haji Moosa Haji Umer v Ahmad Abdul Ghani PLD 1968 Kar. 320. From the above discussion of the case-law cited by the learned counsel it is quite clear that the fraud has to be proved from the facts constituting the fraud which finding is to be arrived at on the basis of the evidence brought on record and that this being a positive allegation, the burden would be on the party alleging the fraud to prove the same. In the light of the above, I have examined the evidence which is on record as brought by the defendant. Their case depends on the letter of wepudiation which is dated 11-5-1974 (Ex.32). A persual of this letter shows that the claim of the assured has been denied mainly on account of the allegation that he had placed inflated quotations before the Surveyors. On this point the defendant has further relied on the evidence of their first witness Anwar Mubeen, who is an Insurance Surveyor from Lahore, who has produced a letter addressed by him to one Mr: Chishti of the defendant Insurance Company. In this letter he says that "once I met one Mr. Nazar of M/s. Pakistan Flour Mills, Lahore and showed him the copies of the letter addressed by him to M/s. Awany Roller Flour Mills and also the two quotations, for 150 tons and 200 tons capacity Flour Mills plants and that Mr. Nazar had verbally confirmed that the quotation for 200 tons capacity plant is bogus and not issued by him." This evidence of witness Anwar Mubeen does not go to prove that the said quotation was a bogus quotation unless this Nazar is examined. The defendants have examined the above said Nazar Muhammad, who has said in his evidence "I do not know Mr. Anwar Mubeen". In the last line of his examination-in-chief he has further stated 'nobody with name of Anwar Mubeen met me in this connection at Lahore.." This evidence of Nazar Muhammad completely belies the contention of the defendant's witness Anwar Mubeen. ' The second aspect to prove the fraud would be for the defendants to show that the assured had in fact placed this quotation of the plaint of 200 tons capacity before the Surveyors. The plaintiffs have examined two witnesses, one each from the office of both the Surveyors appointed by defendants and not a single question has been put to them by the defendants in their cross- examination, if the plaintiffs had placed before them the alleged bogus inflated quotations of 200 tons capacity or even that the plaintiffs mill was of about 150 tons capacity. ' From the above, discussion I have no hesitation in holding that the defendants have failed to prove that the plaintiffs had committed any fraud upon them or the surveyors in order to get the
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benefit. ' The second part of the Issue No,3 deals with the suit being affected having been filed after lapse of more than three months from the date of rejection of the plaintiffs' claim. In order to appreciate this contention of the learned counsel for the defendants, it would be proper to reproduce the condition No,13 of the Insurance Policy which reads as under:-- "13. If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devices are used by the Insured or any one acting on his behalf to obtain any benefit under this Policy; or, if the loss or damage be occasioned by the wilful act, or with the, connivance of the Insured; or, if the claim be made and rejected and an action or suit be not commenced within three months after such rejection, or (in case of an arbitration taking place in pursuance of the 18th Condition of this Policy) within three months after the arbitrator or arbitrators or umpire shall have made their award, all benefits under this Policy shall be forfeited." It may be observed that the very opening words of this condition are "if the claim be in any respect fraudulent". From this it is obvious that this condition would be applicable only where the defendants prove that the plaintiffs' claim is fraudulent and not otherwise. If the defendants succeed in proving the fraud, then only the plaintiff would forfeit all benefits under the Policy, in case he files suit after the lapse of a period of three months, but where the fraud is not so proved, the suit of the plaintiff would be governed by ordinary law of limitation. ' I, therefore, answer this issue as not proved and that the suit is not barred by condition No, 13 of the Insurance Policy. ISSUE No,4: ' On this issue Mr. Shamsul Arfin, learned counsel for the defendants has submitted that the onus is on the plaintiffs to prove that the fire was an accidental fire. The learned counsel for the defendants has further submitted that the evidence led by the plaintiffs on this issue is entirely inadmissible. According to the learned counsel, the plaintiff himself had expired during the pendency of the suit and his son was examined, who is Mr. Muhammad Yaseen and that this Muhammad Yaseen has in his evidence stated that during the period the fire had broken, he was studying and had absolutely no connection with the mills. The other evidence which has been produced by the plaintiffs is the form of Certificate issued by Sub-Divisional Inspector of Police as Ex. 16 and the Chief Fire Officer as Ex. 17. The learned counsel has further submitted that the authors of these two certificates have not been examined and therefore, the same cannot be said to be conclusive proof of the fact contained therein. According to the learned counsel, it was incumbent upon the plaintiffs to have examined these authors or to have brought any other evidence on record to prove that the fire had accidentally occurred and was not a managed affair. He has placed reliance on the case of Muhammad Yousuf Khan Khattak v. S.M. Ayub PLD 1973 SC 160 wherein their Lordships have held as under:-- "When I say that the document Exh. P.E. Is unproved, I have in mind the mandatory provisions of section 67 of the Evidence Act, which lays down that 'if a document is alleged to be signed or written wholly or in part by any person, the signature or the handwriting of so much of the document as is alleged to be in that person's handwriting must be proved to be in his handwriting." ' In support of his above contention he has also placed reliance on the case of Deutsche Dampschiffaharps Gesellaghaft and another v. Central Insurance Co. Ltd. Karachi PLD 1975 Kar. 819. Reliance is also placed on the cases of National Bank of Pakistan v. Sardar Khan PLD 1973 Azad J & K. 11 and Ebrahim Saley Mayet v. Ghulam Hussain Pakseema PLD 1960 Kar. 297 and the case of G.I.P. Railway Co. v. Radhakisan Jaikisan and another AIR 1926 Nagpur 57.
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' Replying to the above-said contention, the learned counsel for the plaintiffs has submitted that the letters which have been placed on record by the said witness of plaintiffs namely Muhammad Yaseen, are either the copies of the letters written by the plaintiffs to the defendants which are signed by the deceased plaintiff himself and also bear the stamp of the defendants company acknowledging the receipt of the original letters such as Exs. 20, 21, 23, 25, 27, 28 and 29. The other documents brought on record by the said witness are the letters written by the defendants to the plaintiffs, which are original letters. The learned counsel for the plaintiffs has further submitted that nothing has been said by the defendant's witness that there was no exchange of such correspondence between the parties. Mr. Abdul Rauf has further submitted that on the contrary, the inference should be drawn against the defendants themselves, as they have deliberately avoided to step into the witness-box and to submit to the rigours of the cross-examination. It is the submission of the learned counsel for the plaintiffs that it was the duty cast upon the defendants to have examined themselves and denied the plaintiffs' claim in the witness-box. The learned counsel has further submitted that it is an admitted position that fire did take place which fact is also supported by the said correspondence between the parties as well as the evidence of the Surveyors. The two Surveyors have been examined by the plaintiffs and they both confirm the fact of fire and also the fact that loss had occurred to the plaintiffs. In view of the above fact it is submitted by the learned counsel for the plaintiffs that the onus heavily shifted upon the defendants to prove that the fire was not accidental, but was caused or connived at by the assured. He has placed reliance on the…
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