This revision petition was admitted and notices were issued by this Commission vide order dated 10.05.2011 extracted hereunder:

“Heard learned counsel for the petitioner.

The revision petition is directed against the concurrent findings of the District Consumer Forum and the State Commission.

Issue notice limited to the question “whether the petitioner was liable to pay the amount of compensation, though the policy was reportedly cancelled and there was no privity of contract between the parties as alleged by the petitioner.?.  Notice returnable on 20.09.2011.

In the meanwhile, the impugned order shall remain stayed till the next date.”

The petition has been moved by the Insurance Company, questioning the correctness of the orders of the DCDRC Bathinda, Punjab (hereinafter referred to as the District Commission) dated 03.12.2004 as affirmed in Appeal by the SCDRC Punjab (hereinafter referred as the State Commission) vide order dated 15.02.2011, contending that both the Fora below have committed a patent error in allowing the Complaint by ignoring the communicated condition no.5 of the policy which is not in dispute.  It is urged that the terms of the policy are binding and condition no.5 had been complied with by the Insurance Company before terminating the policy, hence the conclusion drawn by the Fora below is not only erroneous on facts but as well in law, inasmuch as, even if the Consumer Fora provides for a Forum to aggrieved parties as a beneficial piece of legislation, the learned counsel urges that the parties cannot travel beyond the terms of contract of insurance to pray for reliefs even beyond the same unless any breach is established.  Learned counsel submits that once it has been accepted by the District Commission that condition no.5 has been complied with, then there was no occasion to have proceeded further to treat insufficient communication and compliance of condition no.5 as there was no breach at all.  It is urged that the conclusions drawn are mutually destructive and incoherent, hence the findings are perverse and are liable to be interfered with.  It is submitted that the same error has been committed by the State Commission in proceeding to confirm the said finding, hence the impugned orders suffer from patent illegality and are liable to be set aside in the exercise of revisional jurisdiction by this Commission.

As noted above, notices were issued to the respondents who had put in appearance and Mr. Rajat Bhardwaj, Advocate, had appeared as counsel for respondents no. 1 to 4.  Respondent no. 5 had been proceeded ex-parte.  This is evident from the order sheets and it is also evident that a counter affidavit was filed on behalf of respondents no.1 to 4. 

Nonetheless on 29.10.2015 the Commission was intimated about the pendency of Civil Writ Petition No. 3445 of 2004 before the High Court of Punjab and Haryana filed by the State Bank of India Staff Association (Respondent No.5 herein) assailing the terms and conditions of the policy.  The challenge is that the said condition is arbitrary and the Insurance Company cannot clothe itself with any such unguided power in order to terminate the policy at any time.  A copy of the said Writ Petition has been filed along with a compilation that was filed on 09.12.2015 vide diary no. 35503.  It is on this ground that the petition came to be adjourned on several occasions where-after the Pandemic intervened.  According to the learned counsel for the petitioner/Insurance Company, the Writ Petition still remains pending before the High Court without any orders thereon and this is also evident from the information downloaded from the website of the High Court of Punjab and Haryana that is available on record.

It is evident that the respondents no.1 to 4 counsel had been appearing till 2020 but thereafter none of them have appeared continuously till date as is evident from the order sheets whenever the case was listed and was adjourned simply on the ground of pendency of the Writ Petition.  

The fact remains that the terms of the policy on the basis whereof the termination had been resorted was subjected to a challenge in the Writ Petition referred to above.  A perusal of the Writ Petition demonstrates that this issue pertaining to the validity of condition no.5 has been raised in paragraph-8 of the Writ Petition which is extracted hereunder:

“8.      That after the contract between the parties came into operation with all the terms and conditions having been settled and reduced into writing, the policy was finally sent which was merely a formality as terms and conditions have already been settled between the parties and the same were only binding between the parties, however, the policy on its reverse side which is not signed by any of the parties also contains some of the terms and conditions which were neither intimated to the petitioner nor were ever accepted by the petitioner, thus are not having any binding effect, particularly in the light of letters issued by respondent No.2 (Annexure P-1 to P-4), however, none of the said condition were ever intimated at the time of offer or acceptance of premium.  The policy on its reverse contains condition NO.5, whereby, the insurance company has clothed itself with an arbitrary and unguided power and got itself empowered to terminate the policy of insurance at any time.  The said condition is unguided, unfettered and unbridled and thus is arbitrary and cannot bind the petitioner more particularly as the same was never inserted with the consent of the petitioner.  The same being arbitrary is liable to be ignored and struck down by this Hon’ble Court.  Copy of the Insurance Policy is annexed herewith as Annexure P-5.”

As noted above, condition no.5 is also admitted to have been mentioned on the reverse side of the policy and therefore there is no doubt that the said condition was well known to the State Bank of India Staff Association and its members.  Admittedly, the policyholder is the State Bank of India Staff Association even though the beneficiaries are its members.  This fact has been explicitly dealt with by the District Commission in paragraph-9 of the order dated 03.12.2004 that is extracted hereunder:

“9.      Condition No. 5 of the policy, photocopy of which is Ex.C-8, is reproduced as under:-

          “The company may at any time by notice in writing cancel this policy provided that the company shall in the case return to the insured the then last paid premium less a pro-rata part thereof for the portion of current insurance period which shall have expired.  Such notice shall be deemed sufficiently given if posted addressed to the insured at the address last registered in the company’s books and shall be deemed to have been received by the insured at the time when the same would be delivered in the ordinary course of post.”

          It is clear from the aforesaid condition No.5 that the insurance company could cancel the policy but subject to compliance of two conditions viz (i) refund of proportionate amount of premium, (ii) notice to the insured.  Mode of sending the notice has also been prescribed in this condition No.5.  According to them, notice shall be deemed sufficiently given if post-addressed to the insured at the address last registered in the company’s books and shall be deemed to have been received by him at the time when the same would be delivered in the ordinary course of post.  No doubt, in this case, opposite parties No.1 & 2 wrote letter, photocopy of which is Ex.R-2, to the Manager, M/s Verma News Agency, Hisar for publication of the notice in the Tribune (English), Punjab Kesri (Hindi), Hindi Samachar (Urdu) and Jag Vani (Punjabi) and the notice was published and that notice was issued for cancellation of the policy w.e.f. 30.03.2003 and that cheque of the amount mentioned above was also sent to the General Secretary of SBISA on account of refund of the premium, yet it cannot be said to be sufficient compliance of condition No.5 as no evidence has been led that proportionate amount of premium was refunded to the deceased/insured and notice to him (insured) was issued as envisaged in this condition.  It being so, the communication, if any, to the SBISA cannot be treated as sufficient communication and compliance of condition No.5 of the policy.  In these circumstances, it will be deemed that the deceased died during the subsistence of the policy as the cancellation of the policy cannot be said to be cancellation qua him as it is in contravention of condition No.5 and as such, the complainants, who are legal representatives are entitled to get the amount insured.  In the case of Lucknow Development Authority Vs. M.K. Gupta – AIR 1994 SUPREME COURT-787, their Lordships of the Hon’ble Supreme Court have held that the Act is a social benefit oriented legislation and the provisions should, therefore, be construed in favour of the consumer.  The primary duty of the court while construing its provisions is to adopt a constructive approach.  Almost similar matter as is involved in this case came up before Hon’ble State Commission of Chhattisgarh in the case of Oriental Insurance Co. Ltd. Vs. Chandralata Chandrakar-2004 (2) CLT-483.  In that case, insurance claim under Janta Accident Personal Policy was repudiated on the ground that policy was cancelled.  Cancellation of policy was subject to two conditions – firstly refund of proportionate amount of premium and secondly, notice to the insured.  Conditions were not complied with.  Insurance company was held liable to pay the assured amount along with interest to each of the complainants.  Appeals preferred by the insurance company were dismissed with costs.  This authority is applicable to the case in hand on all the fours.  Hence, the conclusion is that opposite parties have wrongly refused to entertain the claim and to make payment of the sum assured to the complainants after the death of Hari Chand Goyal.  Certainly there is deficiency in service and unfair trade practice on the part of opposite parties No. 1 and 2.  Accordingly, complaint is maintainable.”

The complaint was allowed against which the Insurance Company filed an appeal being First Appeal No. 18 of 2005 that was also dismissed on 15.02.2011 by recording as follows:

“16.    The cancellation of the policy was done through the publication in the newspaper and no intimation was given by the appellants to the deceased Sh. Hari Chand Goyal or his family members and mere intimating respondent State Bank of India Staff Association or making the payment to the said respondent in no way absolves the appellant insurance company to pay the insured amount to the nominee of the insured Sh. Hari Chand Goyal.  There is no document to prove that any intimation of cancellation was sent to the husband of the respondent Lalita Goyal or to Lalita Goyal.”

Learned counsel for the petitioner/Insurance Company has rightly urged that so long such a condition in the policy remains intact, the parties are bound by the terms and conditions and the finding of the District Commission itself is explicitly clear to the effect that the communications as per the said terms and conditions were made by requisite information as contemplated therein to the policyholder who is none else than the petitioner Association in the Writ Petition.  The intimation according to the condition prescribed is to be sent to the policyholder.  The same has been done by effective publication to the Association.  There is no denial about the compliance of notice to the Association.  There is also no denial of the refund sent to the policyholder, namely the insured Association.  This fact stands confirmed from the pleadings and the findings of the Fora below as referred to in the impugned orders quoted above.

In our considered opinion once this finding of fact has been arrived at by the District Commission, then the conclusion that it was insufficient is contrary to the terms and conditions and there are no reasons on the basis whereof it can be concluded that the terms and conditions as contained in condition no.5 have not been complied with.  The finding therefore is incoherent once the District Commission itself has found that the procedure prescribed in condition no.5 has been followed.  The conclusion drawn by the District Commission and the State Commission that mere intimation of the Association or refund to it is not sufficient is clearly contrary to the terms which does not require individual intimation to beneficiaries under the policy or separate refund to them.  It is the Association that is the policyholder mentioned as the insured in the policy to whom intimation was undoubtedly sent and notice served together with refund which the petitioner states has also been encashed by the Association.

The findings therefore are contrary to the terms and conditions of the policy and its affirmance by the State Commission for no valid reasons also makes the order dated 15.02.2011 in Appeal infirm and invalid.  Both the impugned orders therefore cannot be sustained for the same reasons.

From a perusal of the impugned orders, it appears that reliance has been placed by the respondents no.1 to 4/complainants on the order of the SCDRC Chhattisgarh in the case of Oriental Insurance Co. Ltd. Vs. Mrs. Chandralata Chandrakar, II (2004) CPJ 123.  The said dispute was also in relation to a similar condition no.5 contained in the policy where the cancellation intimation was alleged to have been sent to the Steel Workers Union, Bhilai.  The deceased who had admittedly expired after the date of the cancellation of the policy was the cause in that case where his dependents had claimed indemnification.  The Insurance Company had repudiated the claim on the very same ground that the policy condition no.5 had been complied with and the cancellation had been intimated to the Steel Workers Union that was insured under a group insurance policy known as Janta Personal Accident Insurance Policy.  On facts it was found therein that no evidence including the letter of cancellation had been produced to establish that the letter had been sent to the insured person nor had the twin condition of refund been complied with.  Consequently that was a case where on facts none of the conditions had been complied with as a result whereof the State Commission dismissed the appeal filed by the Insurance Company.  The said decision is clearly distinguishable on facts, inasmuch as, as noted above not only the notice was published in the newspapers but the refundable amount had been paid through cheque that was also encashed.  Consequently the ratio of the judgment as relied on by the complainants would not apply on the facts of the present case.    

As noted above, paragraph-8 of the Writ Petition leaves no room for doubt that condition no.5 was printed on reverse side of the policy.  The contention raised by the Association before the High Court in the Writ Petition while raising a challenge to condition no.5 quoted hereinabove seems to dispute the same that the said condition was mentioned on the reverse side of the policy without the consent of the Association or any signatures on the said page either expressly consenting, accepting or testifying or verifying the same.  The fact remains that the said issue has not been held against the Insurance Company and it remains an allegation.  There is no proof or evidence led in this case to accept the said allegation.  Consequently, there is no reason for this Commission to ignore the said condition.  As a matter of fact, no such finding has been recorded by the Fora below that the condition was non-existent or not communicated.  To the contrary the said condition has been held to have not been complied with on the wrongful interpretation attributed by the Fora below.  The condition therefore continues to be an integral part and effectively binding part of the contract.

A condition if communicated along with the terms and conditions of the policy cannot be ignored and is binding as held by the Apex Court in the case of General Assurance Society Ltd. Vs. Chandumull Jain And Anr., AIR 1966 SC 1644, paragraph-19 extracted hereunder:

“19. The learned Judges of the Divisional Bench did not follow the decision of the Judicial Committee because they found it unacceptable. But a similar view of an identical condition was taken by this Court in the Hartford Fire Insurance Co. case [AIR (1956) SC 1288] . Sarkar, J. there pointed out that a clause in this form was a common term in policies and must therefore be accepted as reasonable and that the right to terminate at will cannot, by reason of the circumstances, be read as a right to terminate for a reasonable cause. In that case the Hartford Office insured certain goods against fire between March 20, 1947 and March 1948 in the town of Amritsar. The policy was extended to loss by riot or civil commotion. Riots occurring in July 1947 in the Punjab, a godown in Bakarwana Bazar in Amritsar where insured goods were stored was looted and some goods were lost. The Hartford Office was informed and on August 7, 1947 they wrote saying that the goods be removed to a safe place or the policy would stand cancelled after August 10, 1947, under Condition 10 which was similar to Condition 10 here. On August 15, 1947, the goods were lost by fire. The Hartford Office was held to be protected by the said condition. The reason of the Rule appears to be that where parties agree upon certain terms which are to regulate their relationship, it is not for the court to make a new contract, however reasonable, if the parties have not made it for themselves. The contract here gave equal rights to the parties to cancel the policy at any time and the assurers could therefore invoke the condition to cancel the policy.”

Apart from this, as noted by the District Commission itself, the condition no.5 was followed and the communications were received as well as published in the newspapers and not only this, the cheques which were tendered in accordance with condition no.5 were also received and encashed. 

The mere pendency of the Writ Petition challenging the terms and conditions cannot be a ground for this tribunal to travel beyond the terms and conditions of the policy which remains intact.  It may be pointed out that a pendency of a challenge raised to the validity of a contractual condition governing the benefits of an insurance in a Writ Petition filed two decades ago with no orders either interim or final therein  in our humble opinion does not preclude this Commission from testing the validity, illegality or irregularity of the orders impugned herein. 

Such a principle can be gathered and supported by the opinion expressed by the Apex Court in the decision of the Sanjiv Kumar Singh Vs. The State of Bihar & Ors. (Special Leave to Appeal (C) No. 19038/2022, decided on 24.01.2023, extracted hereunder:

“Though, such contention is put forth by the respondents, keeping in view the provisions as contained in Order 41 Rule 5 of CPC, unless the appeal is listed and there is an interim order, the mere filing of the appeal would not operate as a stay. If that be so, the judgment and decree dated 25.08.2021 would enure to the benefit of the petitioner as on today and the rejection of the NOC only on the ground that the appeal has been filed, would not be justified. In that view, the High Court was also not justified in rejecting the petition.”

This also flows from the principles of Order 41 Rule 5 (CPC) that has been explained by the Apex Court in paragraph-6 of the decision in the case of Collector of Customs, Bombay Vs. Krishna Sales (P) Ltd., 1994 Supp (3) SCC 73, and reiterated in paragraph-8 of the decision in the case of Atma Ram Properties (P) Ltd. Vs. Federal Motors (P) Ltd., (2005) 1 SCC 705 and followed in H.G. Rangangoud Vs. State Trading Corporation of India Ltd. and Ors., (2012) 1 SCC 297, paragraph-14.  Thus merely because the terms and conditions have been challenged 20 years ago and are still pending adjudication without any orders, the same cannot be a ground to prevent the Commission from proceeded with this matter.

In the aforesaid circumstances and the mere pendency of the Writ Petition without the said condition having been declared as either arbitrary or invalid, the consumer fora does not have the jurisdiction to override the same.  The terms of the policy cannot be treated or deemed to be arbitrary by a circumvented route of convenient interpretation under the garb of the policy being a beneficial contract.  The tribunals have limited summary jurisdictions, and in insurance contracts, it is only where the terms are ambiguous that the rule of contra proferentem can be applied to favour the insured if possible.  The legal latin maxim governing the said principle “verba chartarum forties accipiuntur contra proferentem” has been described in the Law Lexicon (P. Ramanatha Iyer) edited by Justice Y.V. Chandrachud (2006) as follows:

“The words of deeds are to be most strongly against the person offering it. 

The words of deeds are to be taken most strongly against him who uses them.

This maxim ought to be applied only where other rules of construction fail.  Indeed, in Taylor v. St. Helen’s Corporation (1877), 6 Ch. D. 264, at p. 270, M.R., said: “I do not see how, according to the now established rules of construction as settled by the House of Lords in the well-known case of Grey v. Person, followed by Roddy v. Fitzgerald and Abbott v. Middleton, that maxim can be considered as having any force at the present day. The rule is to find out the meaning of the instrument according to the ordinary and proper rules of construction. If, on the other hand, we cannot find out its meaning, then the instrument is void for uncertainty, and in that case it may be said that the instrument is construed in favour of the grantor, for the grant is annulled.” But the maxim was applied in Nill v. Dake of Devonshire (1882), 8 App. Cas. 135 and John Lee and Son (Grantham) v. Railway Executive (1949), 65 TLR 604. (Latin for lawyer)”  

It has been held by the Apex Court that where the words used are free from ambiguity in the sense that if fairly and reasonably construed, they admit of only one meaning, there the rule has no application.  It is a rule for resolving ambiguity and it cannot be invoked to create a doubt.  The terms of condition no.5 are explicit and admit of no doubt as to whom the notice and consequential refund have to be served.  It is the insured only who is none else than the Association, the respondent no.5 herein, that has challenged its validity before the High Court but has failed to appear before this Commission.  There is therefore neither any dispute about the identity of the entity defined in condition no.5, and in the absence of any ambiguity, the service of notice and refund to the Association in the present dispute is the correct form of communication that is fully in conformity and in consonance with the letter and intent of condition no.5.  The assumptions recorded by the Fora below regarding condition no.5 are fictional and amount to adding a meaning by extending it to individual beneficiaries that does not seem to have been ever intended by the said terms.  The Fora below could not have extended a meaning contrary to the specific terms indirectly which was not intended directly. 

The law applicable to construction of contracts as held by the Apex Court is reflected in the ratio of the decision in the case of Bank of India Vs. K. Mohandas, (2009) 5 SCC 313 (Paras 28 to 31).  This has been extended and applied by the Apex Court to contracts of Insurance as held in the case of Industrial Promotion and Investment Corporation of Orissa Ltd. Vs. New India Assurance Co. Ltd., (2016) 15 SCC 315 (Para 9).  The same judgment refers to the true import and application of the Rule of contra proferentem in paras 10 to 13, extracted hereunder:

“10. We proceed to deal with the submission made by the counsel for the appellant regarding the rule of contra proferentem. The Common Law rule of construction “verba chartarum fortius accipiuntur contra proferentem” means that ambiguity in the wording of the policy is to be resolved against the party who prepared it. MacGillivray on Insurance Law [ Legh-Jones, Longmore et al (Eds.), MacGillivray on Insurance Law (9th Edn., Sweet and Maxwell, London 1997) at p. 280.] deals with the rule of contra proferentem as follows:

“The contra proferentem rule of construction arises only where there is a wording employed by those drafting the clause which leaves the court unable to decide by ordinary principles of interpretation which of two meanings is the right one. ‘One must not use the rule to create the ambiguity — one must find the ambiguity first.’ The words should receive their ordinary and natural meaning unless that is displaced by a real ambiguity either appearing on the face of the policy or, possibly, by extrinsic evidence of surrounding circumstances.”

(footnotes omitted)

11.Colinvaux's Law of Insurance [ Robert and Merkin (Eds.), Colinvaux's Law of Insurance (6th Edn., 1990) at p. 42.] propounds the contra proferentem rule as under:

“Quite apart from contradictory clauses in policies, ambiguities are common in them and it is often very uncertain what the parties to them mean. In such cases the rule is that the policy, being drafted in language chosen by the insurers, must be taken most strongly against them. It is construed contra proferentes, against those who offer it. In a doubtful case the turn of the scale ought to be given against the speaker, because he has not clearly and fully expressed himself. Nothing is easier than for the insurers to express themselves in plain terms. The assured cannot put his own meaning upon a policy, but, where it is ambiguous, it is to be construed in the sense in which he might reasonably have understood it. If the insurers wish to escape liability under given circumstances, they must use words admitting of no possible doubt.

But a clause is only to be contra proferentes in cases of real ambiguity. One must not use the rule to create an ambiguity. One must find the ambiguity first. Even where a clause by itself is ambiguous if, by looking at the whole policy, its meaning becomes clear, there is no room for the application of the doctrine. So also where if one meaning is given to a clause, the rest of the policy becomes clear, the policy should be construed accordingly.”

(footnotes omitted)

12. This Court in General Assurance Society Ltd. v. Chandmull Jain [General Assurance Society Ltd. v. Chandmull Jain, (1966) 3 SCR 500 : AIR 1966 SC 1644] held that there is no difference between a contract of insurance and any other contract except that in a contract of insurance there is a requirement of uberrima fides i.e. good faith on the part of the insured and the contract is likely to be construed contra proferentes i.e. against the company in case of ambiguity or doubt. It was further held in the said judgment that the duty of the Court is to interpret the words in which the contract is expressed by the parties and it is not for the Court to make a new contract, however reasonable.

13. In United India Insurance Co. Ltd. v. Orient Treasures (P) Ltd. [United India Insurance Co. Ltd. v. Orient Treasures (P) Ltd., (2016) 3 SCC 49 : (2016) 2 SCC (Civ) 14] cited by the counsel for the appellant, it was held that there is no ambiguity in the insurance policy and so the rule of contra proferentem was not applicable. A standard policy of insurance is different from other contracts and in a claim under a standard policy the rule of contra proferentem is to be applied. The policy in this case is in a standard form. The policy for burglary and housebreaking in United India Insurance Co. Ltd. v. Orient Treasures (P) Ltd. [United India Insurance Co. Ltd. v. Orient Treasures (P) Ltd., (2016) 3 SCC 49 : (2016) 2 SCC (Civ) 14] and the policy in this case are identical. If there is any ambiguity or doubt the clause in the policy should be interpreted in favour of the insured. But we see no ambiguity in the relevant clause of the policy and the rule of contra proferentem is not applicable.”

The said enunciation was earlier stated by quoting Halsbury’s Laws of England in para-37 of the decision of the Apex Court in the case of United India Insurance Co. Ltd. Vs. Orient Treasurers (P) Ltd., (2016) 3 SCC 49, extracted hereunder:

“37. In Halsbury's Laws of England (5th Edn., Vol. 60, Para 105) principle of contra proferentem rule is stated thus:

“Contra proferentem rule.—Where there is ambiguity in the policy the court will apply the contra proferentem rule. Where a policy is produced by the insurers, it is their business to see that precision and clarity are attained and, if they fail to do so, the ambiguity will be resolved by adopting the construction favourable to the insured. Similarly, as regards language which emanates from the insured, such as the language used in answer to questions in the proposal or in a slip, a construction favourable to the insurers will prevail if the insured has created any ambiguity. This rule, however, only becomes operative where the words are truly ambiguous; it is a rule for resolving ambiguity and it cannot be invoked with a view to creating a doubt. Therefore, where the words used are free from ambiguity in the sense that, fairly and reasonably construed, they admit of only one meaning, the rule has no application.”

In the instant case on the facts as discussed above, the rule is nowhere attracted.

Consequently, we find that the contentions raised on behalf of the petitioner/Insurance Company deserve to be accepted.  The impugned orders dated 03.12.2004 and 15.02.2011 are unsustainable for the reasons stated hereinabove.   

The revision petition is allowed.  The impugned orders are accordingly set aside with no order as to costs.