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Suit No. 536 of 1978, decided on 27th May, 1982.

‑‑ Read with Contract Act (IX of 1872), S. 2 (d)‑Insurable interest‑Consideration in contract of insurance ‑ Insurable, in terest in insured property ‑ Insured taking possession of car, transfer whereof banned for one year‑Insured also taking post dated letter of transfer executed by importer (transferor) operative from a date one year afterwards creating valid transfer in favour of insured‑Car stolen after expiry of such period of one year‑Insurable interest, meaning interest of claimant in insured property which may on happening of peril covered by policy be affected in such manner that insured may suffer pecuniary loss insured, held, had insur able interest in car.

William v. Baltic Insurance Association of London (1924) 2 K B 282 ; Lucena v. Craufurd (1806) 2 B O S & P N R 269 (H L) and Ivamy on General Principles of Insurance Law, 1966 Edn., p. 19 ref.

‑‑ S. 18‑Misrepresentation of fact‑Insured stating to have produced all relevant papers including registration book of car in name of former owner and mortgage deed before relevant officers of Insurance Company alongwith proposal form‑Insured further stating that during currency of insurance policy, Insurance Company on perusal of such docu ments paid compensation to insured for two other claims ‑Held, such facts lead to conclusion that insured made all facts known to Insurance Company and Insurance Company indicated declaration contrary to facts stated in registration book and issued insurance policy causing risk mentioned in policy.

Syed Hamid Ali for Plaintiff.

Razzak Puri for Defendant.

Dates of hearing : 1st, 6th, 7th, 8th, 12th and 19th April, :982.

The plaintiff has filed this suit for recovery of Rs. 65,000 from the defendants with whom her car was insured. One Ghulam Qadir imported Toyota Corolla Delux Car which was registered bearing No. KAQ 4580. After the registration on 13th March, 1974 he mortgaged the car with the plaintiff' for Rs. 70,000. One of the conditions of the mortgage was that if the mortgagor fails to redeem the car within one year the same would become the property of the mortgage. In view of the above condition the importer executed a receipt for consideration as well as a letter of transfer in favour of the plaintiff. The plaintiff thus claiming to have an insurable interest in the Car as mortgagee and owner thereof on expiry of period for redemption, got the said car insured with the defendants in the sum of Rs. 50,000. The defendants issued policy covering the risk effective from 22nd June, 1974 to 21st June, 1975. The plaintiff has alleged that at the time of insurance the plaintiff had disclosed her insurable interest in the car and had not concealed any material facts from the defendants. The policy covered risks of damages by accident, fire, theft, and third party risks. During the currency of the policy and before the fateful incident when the car was stolen two claims were made by the plaintiff which were paid by the defendants. It has been stated in the plaint that on expiry of period of one year i.e. 13th March. 1975 the car vested in the plaintiff who became its absolute owner. The car was, however, stolen on 10th June. 1975 which was reported to the police. Similar intimation was also sent to Excise & Taxation Office and to the defendants. The defendants, however, rejected the claim. Hence the present suit. The plaintiff has assessed the value of the car at Rs. 50,000 and has claimed this amount from the defendants.

In the written statement the defendants have admitted that the plaintiff had insured a car No. KAQ 4580 with the defendants as the owner of the car but it has been denied that the plaintiff had any insurable interest in the car as mortgagee and owner thereof on expiry of period of redemption. It has been pleaded that the plaintiff had not disclosed her insurable in terest in the car but had concealed all material facts from the defendants which have for the first time been stated in the plaint. It has been admitted that two small claims were paid to the plaintiff but it has been pleaded that these claims were made on misrepresentation of material facts by the plaintiff claiming herself to be the owner of the car and the same had been paid under a bona fide mistake. It has been denied that the defendant had registered the plaintiff's claim. The main plea is that as the plaintiff had obtained the insurance policy on misrepresentation of fact that she was the owner of the car insurance policy was null and void and therefore no decree can be passed against the defendants. On these pleadings the following Issues were framed.

(1) Whether the plaintiff had insurable interests in Car No. KAQ‑4580 at the time it was stolen

(2) Whether the claim is barred by time

(3) Whether the plaintiff has secured insurance of the car by fraud and misrepresentation, if so, what is its effect

(4) What should the decree be

Issues Los. 1 and 3.‑I will take Issues Nos. 1 and 3 together. The car was imported by Ghulam Qadir and was registered with the Excise & Taxation Department bearing No. KAQ‑4580. It seems that plaintiff wanted to pur chase this car and as there was restriction on transfer of car for a period of one year from the date of import the plaintiff devised a mean by executing a mortgage deed under which the car was mortgaged. This agreement provid ed that the plaintiff had advanced a loan of Rs. 70,000 to Ghulam Qadir who promised to pay this loan within a period of one year. In case Ghulam Qadir failed to repay the loan within a period of one year the plaintiff was entitled to acquire full title of ownership of the vehicle in lieu of the mortgage debt and thereafter the plaintiff shall become the sole and absolute owner hereof and Ghulam Qadir shall stand discharged from the debt. It seems that the possession of the car was given to the plaintiff who was responsible to pay taxes and maintain it properly. Gulam Qadir also exe cuted a letter of transfer dated 13th April, 1975, a post‑dated letter of transfer which establishes that on expiry of one year be would have become the owner of the car. This letter of transfer though executed in favour of the plaintiff was not filed before the Excise & Taxation Authorities and re mained in possession of the plaintiff. The plaintiff obtained an insurance policy which inter alla covered the risk of theft of car during the period 22nd June, 1974 to 21st June, 1975. The car was stolen on 10th June, 1975. On these facts it is to be considered whether the plaintiff had any insurable interest in the car and also whether the insurance was obtained by fraud and misrepresentation.

Before any insured becomes entitled to claim under the policy he should establish that he had an insurable interest in the property and has suffered the risk covered by the policy. insurable interest has not been defined in the Insurance Act but on the bass of the leading authorities it is now well settled that it is a right in a property or a right arising out of the contract in relation to the property insured which if lost or damaged will affect the possession or enjoyment of the claimant. It is sufficient if the claimant is able to establish some relation or concern in the subject matter of insurance which by happening of the perils insured against may be so affected as to pro duce some pecuniary loss to the claimant. Such interest may be at the time of commencement of the policy or it may even accrue after the commence ment and before the expiry of the policy. A policy can be taken out in anticipation of an interest (William v. Baltic Insurance Association of London ((1924) 2 K B 282), but at the time of loss the claimant must have an interest legal or equitable. The insurable intere4t is thus an interest of the claimant in the insured property which may on happening of the peril covered by the policy be affected in such manner that the insured may suffer a pecuniary loss. The classical definition of insurable interest was given by Lawarence, J. in Lucena v. Craufurd ((1806) 2 BOS & P N R 269). (H. L.) at page 302. This was case under the Marine Insurance Act but the definition given by Lawrence, J. has been so far accepted by all decisions and authors which is reproduced as follows :‑

"A man is interested in a thing to whom advantage may arise or pre judice happen from the circumstances which may attend it and whom it importeh that its condition as to safety or other quality should continue interest does not necessarily imply a right to the whole or a part of a thing, nor necessarily and exclusively that which may be the subject of privation, but the having some relation to, or concern in the subject of the insurance, which relation or concern by the happening of the perils insured against may be so affected as to produce a damage, detriment, or prejudice to the person insuring ; and where a man is so circumstanced with respect to matters exposed to certain risks or damages, or to have a moral certainty of advantage or benefit, but for those risks or dangers, he may be said to be in terested in the safety of the thing. To be interested in the preservation of a thing, is to be so circumstanced with respect to it as to have benefit from its existence, prejudice from its destruction. The pro perty of a thing and the interest devisable from it may be very different ; of the first the price is generally the measure, but by in terest in a thing every benefit or advantage arising out of or depending on such thing may be considered as being comprehended".

It is well‑settled that ownership is not the only criteria for determining the insurable interest. Insurable interests may be founded on contract and Ivamy in General Principles of Insurance Law 1966 Edition at page 19 has stated "Thus, a bailee who has contracted, expressly or impliedly, to be responsible for the safety of goods belonging to another, or who has contracted to insure them has an insurable interest in them. Apart from any question of contract, the mere fact of possession, if lawful, is sufficient to give an insurable interest. An interest to be insurable must have a pecuniary value. Its nature however, is broadly speaking, immaterial."

It is now to be seen whether in the facts of the present case the plaintiff had an insurable interest. Mr. S. Hamid Ali the learned counsel for the plaintiff has contended that the plaintiff had obtained a mortgage of the car which was to be transferred to him at the expiry of one year and a letter of transfer had also been issued in his favour and therefore he had an insurable interest in the car. Mr. Puri the learned counsel for the defendants on the other hand has contended that transfer of car for a period of one year from the date of import had been prohibited under law and therefore, the plaintiff could not have obtained a valid transfer or possession of the car and thus cannot claim to have an insurable interest in the property. It is true that under the Import and Export Control Act, 1950 the cars were allowed to be imported under personal baggage scheme and it was one of the condi tions of the import permit that the car shall not be transferred for a period of one year. Any agreement in breach of these provisions will be against public policy.

From the evidence it is established that the plaintiff had taken posses sion of the car in pursuance of the agreement. The period of one year dur ing which ban was operative was to expire on 12th March, 1975. 1t is1 correct that the plaintiff had entered into an agreement which was not per' missible under law as the car was not transferable upto 12th March, 1975. Besides the agreement the plaintiff had also obtained from Ghulam Qadir a. post dated letter of transfer. This letter of transfer was to be operative from 13th March, 1975 creating a valid transfer in favour of the plaintiff. This was in anticipation that after expiry of the period of restriction the car will be transferred to the plaintiff. This transfer though executed on 13^th March, 1974 was operative from 13th March, 1975 and therefore at the material time the plaintiff had an insurable interest in the property. M finding therefore on Issue No. 1 is in the affirmative.

Now it is to be considered whether the plaintiff had disclosed the correct facts to the defendants before obtaining the insurance policy. The defendant has relied on the statement of the plaintiff's attorney who has stated that the plaintiff purchased the car and had so declared in the proposal form. From this the learned counsel for the defendants wanted to infer that the policy has been obtained by misrepresentation and fraud as in the declaration form the plaintiff has claimed to be the owner and not the mortgagee. The learned counsel for the plaintiff in this regard has contended that all material facts including the ownership, mortgage and possession of the car were brought to the notice of the defendants. In this regard it may be noted that before the transfer the car had been registered under No. KAQ‑4580. This presupposes that the plaintiff would have been in her possession the registration book of the car which was in the name of Ghulam Qadir. In order to ascertain the name of the owner and particulars of the car, at the time of obtaining policy alongwith the proposal form the registration book is the most important document which should be examined. The plaintiff has stated that all re levant documents including registration book and mortgage deed were pro duced before the relevant officers of the defendants for their examination and it was on their satisfaction that the policy was issued and premium was paid. The defendants have denied this and stated that on mere representation and declaration of the plaintiff, policy was issued. This has been stated by the witness of the defendants who had joined the department after the claim had been made. He, therefore, cannot depose anything about the incidents that may have happened at the time of obtaining the policy. In the normal course it is unbelievable that an insurer will accept the declaration in the proposal form without verifying its particulars from the registration book. The plaintiff has further stated that during the currency of the policy two claims had arisen in respect of which the plaintiff had submitted the re gistration as well as the mortgage agreement and all facts were apprised to the defendants who after consideration had passed the claim and paid compensa tion. All these facts lead to the conclusion that the plaintiff had made all facts known to the defendants at the time of obtaining the policy. It is cor rect that the plaintiff had made a declaration in the declaration form that she was the owner of the car but side by side as all the documents were produced before the defendants the defendants could have examined and found out the discrepancy in the documents and could have refused to issue the policy. But in spite of these documents and discrepancies and conflicting declara tions made by the plaintiff the defendants chose to issue that policy. The only inference that can be drawn from such facts is that the defendant had waived such declaration which was contrary to the facts stated in the re gistration documents and issued an insurance policy covering the risk mentioned in the policy. A contract of insurance is a contract entered into in good faith and such a contract obtained by misrepresentation will be void., However, if at the time of obtaining the policy all the facts and circum stances have been fully apprised to the insurer and with knowledge of these facts the insurers issue a policy they cannot set up a defence to an action on the policy that the fact was not communicated to them and it amounted to misrepresentation.

The plaintiff has thus obtained insurance policy by disclosing all the necessary facts and circumstances of the case and, therefore, it cannot be said that it was obtained by misrepresentation of fact as declared by her in the proposal form. My finding on issue No. 3 is in the negative.

Issue No. 2.‑Mr. Puri the learned counsel for the defendants has stated that the suit is time‑barred. He has however not been able to show on‑ fact as well as in law how the suit is not within time. The theft of the car occurred on 10th June, 1975 and the suit was filed on 10th June, 1978 during vacations. In‑my opinion the suit is within time.

Issue No. 4.‑The plaintiff has claimed Rs. 50,OOO,towards price of the car and Rs. 15,000 as interest for 3 years. There is no dispute that the car was not insured for Rs 50,000 and in view of the finding on issues Non.1 and 3 the defendants are liable to pay Rs 50,000 to the plaintiff. So far the interest is concerned in the facts and circumstances of the case I am not inclined to grant interest claimed by the plaintiff.

The suit is therefore decreed for Rs.50,000 against the defendants with interest at the rate of 12% per annum from the date of suits till recovery with proportionate cost.

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