Holding

The complaint was time‑barred and clause 6(ii) does not contravene Section 28, so the appeal is dismissed.

Summary

The appellant, H.P. State Forest Co. Ltd., insured timber with United India Insurance Co. Ltd. under a policy dated 16 November 1987 that was later found to be a typographical error and effectively covered only eight months. The timber was washed away in September 1988, and the insurer repudiated the claim on 13 October 1988, invoking a clause that the right to claim extinguished after twelve months from the loss. The appellant filed a complaint before the National Consumer Disputes Redressal Commission in April 1994, well beyond the twelve‑month period stipulated in the policy and beyond the three‑year period under Section 44 of the Limitation Act. The Commission dismissed the complaint as time‑barred, relying on the Sujir Ganesh Nayak decision. On appeal, the Supreme Court held that even assuming the three‑year limitation, the complaint was still barred, and that clause 6(ii) of the policy does not violate Section 28 of the Contract Act because it extinguishes the right rather than merely curtailing the limitation period. Consequently, the appeal was dismissed.

Issues considered

The validity of clause 6(ii) of the insurance policy under Section 28 of the Contract Act, 1872
Whether the limitation period for filing the complaint is governed by Section 44 of the Limitation Act, 1963
Whether the complaint filed in 1994 was time‑barred
Whether a valid insurance contract existed at the time of the loss

Legislation cited

Indian Contract Act, 1872s. 28
Limitation Act, 1963s. 44

Subjects

insurancelimitation periodSection 28 Contract ActSection 44 Limitation Acttime‑barred claimconsumer dispute redressalpolicy typographical errorextinction of right

Judgment

[2008] 17 S.C.R. 1013

H.P. STATE FOREST COMPANY LTD. A
_,
v.
-l MIS. UNITED INDIA INSURANCE CO. LTD.
(Civil Appeal No. 634 7 of 2000)

DECEMBER 18, 2008
8
[DALVEER BHANDARI AND HARJIT SINGH BEDI, JJ,]

Insurance - Insurance company agreed to insure 'timb~r
...J - Timber washed away due to flood - Insurance company
repudiated claim in 1988 -Complaint filed in 1994: - c
Dismissed by National Consumer Commission as time
barred - On facts, held: On date of flood, there was no
insurance policy in existence nor any commitment on behplf
of insurance company to make payment - Even accepting
the case at its very best that the period of limitation was 3
D
years under s. 44 of the Limitation Act, the complaint was, evfJn

•- ~
then, beyond time - No case made out for interference by
Supreme Court - Limitation Act, 1963 - s.44.
Contract Act, 1872 - s.28 - Contract of insurance -
Clause providing for forfeiture or waiver of the right itself if no
E
action was commenced within period stipulated - Held: Not
violative of s.28 - Though curtailment of period of limitation
is not permissible in view of s.28 but extinction of the right
itself unless exercised within a specified time is permissible
and can be enforced.
F
Respondent insurance company agreed to insure
... timber lying in forest areas of the State and issued cover
~
note followed by an insurance policy to be purportedly
valid for one year from 6th November, 1987 onwards. The
timber was washed away some time in September~ 1988 • I

on account of heavy rains and consequent large scale G
flooding in the State.
When appellant laid claim before the respondent, the
~ latter vide its communication dated 13th October 1988
refuted its liability and repudiated the claim contending
1013 H
1014 SUPREME COURT REPORTS [2008] 17 S.C.R.
11-
A that the insurance policy was issued for 8 months only
starting from 6th November, 1987 and ending on 5th July; ....
1988 and the period of one year mentioned in the policy ),.--
.....
was on account of a typographical mistake. It is alleged
that Respondent even accepted additional premium after
B the policy was repudiated and still declined to make good
the loss.
Appellant filed complaint before National Consumer
Commission. The Complaint was dismissed as time
barred having been filed after expiry of the 12 months ·
~-
c period stipulated by Clause 6(ii) of the insurance policy.
The order passed by the National Consumer
Commission was challenged in the present appeal on
grounds that Clause 6(ii) of the insurance policy could
not be sustained being violative of s.28 of the Contract
D Act, 1872 and in any event s.44 of the Limitation Act, 1963
provided a limitation period of 3 years from the date of
disclaimer. ~
)

.....
Dismissing the appeal, the Court
-+
HELD:1. It is clear from the record that the timber had
E been washed away some time in September, 1988 and
after prolonged correspondence, the respondent
ultimately vide its communication dated 13th October,
1988 repudiated the appellant's claim. It is also clear from
the counter affidavit filed by the respondent that the
F appellant had, vide its letter dated 7th November 1987,
asked for insurance cover for a period of 8 months and
that the period of o'ne year fixed in the insurance policy ) "'
was evidently a typographical mistake which had, in any
case, been rectified in the records of the company on 17th
December 1987, that is long before the flo.od. The claim
G of the appellant that the respondent company had, even
after the 13th October 1988, impliedly admitted its liability
under the policy also appears to be incorrect as the
surveyors had been appointed on.the persistent demand )-
of the claimant/appellant and the premium taken
H thereafter was only to make good the deficiency in the
''
H.P. STATE FOREST COMPANY LTD. v. UNITED INDIA 1015
INSURANCE CO. LTD.

premium that had been paid for the policy for the period A
of eight months. It is, therefore, apparent that as on the
~ date of the flood, there was no insurance policy in
existence or any commitment on behalf of the
respondent to make the payment under the policy.
Therefore, even accepting the case of the appellant at its 8
very best that the period of limitation would be 3 yea11s
under Section 44 of the Limitation Act, the complaint
would, even then, be beyond time, having been filed in
April 1994. [Para 5] [1018-G-H; 1019-A-D]
2. As regards the issue of clause 6 (ii) of the c
insurance policy vis-a-vis s.28 of the Contract Act, 1872,
the National Commission had relied upon the Sujir
Nayak's case to hold that the complaint could not be
entertained as being time barred. In Sujir Nayak's case,
while dealing with an identical situation where a contra~t
contained a provision prescribing a period of limitation D
shorter than that prescribed by the Limitation Act, it was
held that the contractual provision was n9t hit by s.28 ~s
the right itself had been extinguished. The plea of the
appellant that in view of the Food Corporation of India's
case, the Sujir Nayak's case was liable for reconsideratiQn E
has no merit since in Sujir Nayak's case, Food Corporation
of India's case was specifically considered. [Paras 6, 8 and
9] [1019-0; 1021-B-D]
National Insurance Co. Ltd. vs. Sujir Ganesh Nayak &
Co. & Anr. (1997) 4 SCC 366; Food Corporation of India vs. F
New India Assurance Co. Ltd. & Ors. (1994) 3 SCC 32~;
Vulcan Insurance Co. Ltd. vs. Maharaj Singh & Anr. (1976) 1
SCC 943 and Muni Lal vs. Oriental Fire & General Insurance
Co. Ltd. & Anr. (1966) 1 SCC 90, referred to.
Case Law Reference: G
(1997) 4 sec 366 referred to Para 3
(1994) 3 sec 324 referred to Para 3
(1976) 1 sec 943 referred to Para 3
(1966) 1 sec 90 referred to Para 3
H
1016 SUPREME COURT REPORTS [2008] 17 S.C.R.

A CIVIL APPELLATE JURISDICTtON : Civil Appeal No.
6347 of 2000.
~
From the final Judgment and Order dated 16.8.2000 of the
National Consumer Disputes Redressal Commission, New
Delhi in Original Petition No. 95 of 1994. -
B Naresh K. Sharma for the ARpellant.
K.L. Nandwani and Debasis 'Misra for the Respondent.
The Judgment of the Cou~ was delivered by
HARJIT SINGH BEDI, J. 1. The facts leading to this
c appeal are as under:
2. In October 1987, a meeting was convened by the
Managing Director of the appellant with representatives of
various Insurance Companies in Shimla with a proposal to
insure the timber lying in several forest areas of the State. A
D proposal was also made to the National Insurance Company
on 26th October 1987 to act as a lead company while the other
Insurance Companies were to be co-sharers. After
negotiations, the respondent agreed (on the 30th October 1987)
to insure the timber lying in the South Zone in the value of
Rs.3.42 Crores and also issued a cover note dated 7th
E
November 1987 followed subsequently by a policy dated 16th
November 1987 to be valid from 6th November 1987 to 5th
November 1988. The appellant also deposited a sum of
Rs.2,43,504 as the tentative premium subject to the approval
by the Tariff Advisory Commission. It appears that on account
F of heavy rains in the Shimla region in September 1988 and ··
consequent large scale flooding in the South Zone, the insured
timber was washed away. This fact was conveyed to the
I
respondent by several letters between 3rd October 1988 and
31st September 1989. The case of the appellant is that instead
G of meeting its contractual obligations, the respondent refuted
its liability to pay on the 13th October 1988 on the pretext that
the policy had, in fact, been issued for a period of 8 months
only starting from 6th November 1987 and ending on 5th July )
1988 and the period of one year mentioned in the policy was
on account of a typographical mistake. It also appears that after
H
H.P. STATE FOREST COMPANY LTD. v. UNITED INDIA 1017

... INSURANCE CO. LTD. [HARJIT SINGH BEDI, J.]

prolonged negotiations, some additional premium was paid A
., with respect to the aforesaid policy. It is the grievance of the
...... appellant that despite having accepted the additional premium
' -J
even after the policy had been repudiated on 13th October
1988, the respondent-company still refused to make good the
loss. The appellant accordingly issued a legal notice dated 7th B
May 1992 followed by another dated 7th December 1992 but
to no avail, and on the contrary, the respondent vide its
communication dated 24th December 1992 yet again
repudiated the appellant' claim. Faced with this situation, the
-+ appellant through its Advocate, issued a notice dated 18th April
c
1993 to the respondent under clause 13 of the Insurance Policy
....
....
calling for the appointment of an arbitrator. In its reply dated 19th
May 1993, the Insurance Company refused to accept this
proposal as well. Frustrated thereby, the appellant filed a
complaint before the National Consumer Redressal Forum
(hereinafter called the "Commission") on 18th April 1994 on D

..
........_

"'"'
which notice was issued to the respondent. Several objections
such as the complaint being belated as the claim had been
repudiated by letter dated 13th October 1988, and that the
insurance covered only a period of 8 months, were taken by
the respondent. A rejoinder affidavit was thereafter filed by the E
appellant controverting the pleas raised by the respondent. The
Commission, however, after prolonged hearing by its order
dated 15th February 1996 relegated the appellants to the
remedy of a civil court. This order was challenged and was set
aside by this Court on 13th March 1997 and a direction was
F
issued to the Commission to examine the complaint on merits.
~
The Commission accordingly went in to the matter and

' dismissed the complaint on 16th August 2000 holding that the
issues were covered against the appellant by the judgment of
this Court in National Insurance Co.Ltd. vs. Sujir Ganesh
Nayak & Co. & Anr. (1997) 4 SCC 366 in which it had been G.
held that the complaint could not be entertained as it was time
barred having been brought before the Commission after the
expiry of the period fixed by Clause 6(ii) of the Insurance Policy.
-\
It is against this order that the present appeal has been filed.
3. Mr. Sharma. the learned counsel for the appellant has H
1018 SUPREME COURT REPORTS [2008] 17 S.C.R.

A submitted that Section 44 of the Limitation Act provided a
period of limitation of 3 years from the date of disclaimer and
as such the period of 12 months fixed by clause 6(ii) could not
be sustained by virtue of the provisions of section 28 of the
Contract Act, 1872. In this connection, he has pointed out that
8 this matter was concluded against the respondent by the
judgment in Food Corporation of India vs. New India
Assurance Co.Ltd. & Ors. (1994) 3 SCC 324 which had been
reaffirmed in Mu[li Lal vs. Oriental Fire & General Insurance
Co.Ltd. & Anr. (1996) 1 SCC 90 and that Sujir Ganesh Nayak
case (supra) which was based on the pre amended Section
C 28 ibid was, therefore, inapplicable. Mr.-- Nandwani, the learned
counsel for the respondent has, however, submitted that the
claim had, in fact, been repudiated on 13th October 1988 and
as the 3 years period was deemed to have commenced from
that day, the complaint was barred even on the appellant's best
D case as the complaint had been filed in April 1994. He has,
further, argued that as far back as in the judgment in Vulcan
Insurance Co.Ltd. vs. Maharaj Singh & Anr. (1976) 1 SCC
943 and followed subsequently in several judgments (~nd even
in those referred to above), it had been held that a clause in
E an Insurance Policy fixing a period of limitation extinguishing
the right to file a suit or complaint within a certain stipulated
period which could be less than that prescribed by the
Limitation Act, was not violative of Section 28 of the Contract
Act and as such the findings of the Commission were perfectly
F in accordance with the law for this additional reason as well.
4. We have considered the arguments advanced by the
learned counsel for the parties .
. 5. It is clear from the record that the timber had been
washed away some time in September 1988 and after
G prolonged correspondence, the respondent ultimately vide its
communication da_ted 13th October 1988 repudiated the
appellant's claim. It is also clear from the counter affidavit filed
by the respondent that the appellant had, vide its letter dated
7th November 1987, asked for insurance cover for a period of
H 8 months and that the period of one year fixed in the insurance
\
H.P. STATE FOREST COMPANY LTD. v. UNITED INDIA 1019
INSURANCE CO. LTD. [HARJIT SINGH BEDI, J.]

.policy was evidently a typographical mistake which had, in any A
case, been rectified in the records of the company on 17th
'~ December 1987, that is long before the flood. The claim of the
appellant that the respondent company had, even after the 13th
October 1988, impliedly admitted its liability under the policy
also appears -to be incorrect as the surveyors had beep
B
appointed on the persistent demand of the claimant/appellant
and the premium taken thereafter was only to make good the
deficiency in the premium that had been paid for the policy for
the period of eight months. It is, therefore, apparent that as om
the date of the flood, there was no insurance policy in existence
or any commitment on behalf of the respondent to make the c
payment under the policy. We, therefore, endorse the argument
raised by the respondent that even accepting the case of the
appellant at its very best that the period of limitation would be
3 years under Section 44 of the Limitation Act, the complaint
would, even then, be beyond time, having been filed in April D
1994.
~ 6. In view of the above observations, we find that the
."" second issue with regard to the implications of clause 6(ii) of
the policy vis-a-vis Section 28 is really academic, but as the
learned counsel for the parties have addressed us on this E
score, we have chosen to deal with it as well. We see from the
order of the Commission that it has relied upon . Sujir Ganesh
Nayak's case (supra) to hold that the complaint could not be
entertained as being time barred. The counsel for the appellant
had, however, argued before the Commission as before us,
F
. that as Section 28 of the Contract Act had 'Undergone
\ significant amendments, the aforesaid judgment required a re-
appraisal. This, submission had been rejected by the
Commission by observing that it was bound by the judgment
in Sujir Ganesh Nayak's case and that the appellant could ·
agitate the question as to its correctness before the Supreme ' G
Court. The matter was, accordingly, adjourned by us to enable
the parties to find out if the amendment had, indeed, been made
and, if so, to what effect. During the resumed hearing, the
learned counsel for the appellant candidly admitted that the
amendment had been made but had thereafter been repealed H
H.P. STATE FOREST COMPANY LTD. v. UNITED INDIA 1021
INSURANCE CO. LTD. [HARJIT SINGH BEDI, J.]
" Exception 2 - Nor shall this section render illegal any A
contract in writing, by which two or more persons agree
.......
.....,. to refer to arbitration any question between them which has
already arisen, or affect any provision of any law in force
for the time being as to references to arbitration."
8. In Sujir Nayak's case (supra) to which primary reference B
has been made by the learned counsel for the parties while
dealir:m with an identical situation where a contract contained
a provision prescribing a period of limitation shorter than that
. -t prescribed by the Limitation Act, it was held that the contractual
provision was not hit by Section 28 as the right itself had been c
extinguished.
---I" 9. Mr. Sharma has, however, submitted that in view of the
observations in some paragraphs in Food Corporation of
" Sujir--N~yak's case were liable
India's case,. the observations in
.. to reconsideration. We, however, find no merit in this plea for D
the reason that in Sujir Nayak's case, Food Corporation of
India's case (supra) has been specifically considered and
.; Vulcan Insurance Company's case (supra) too had been
relied upon. In Sujir Nayak's case, this Court was called upon
"' to consider condition 19 of the policy which was in the following
terms: E
"Condition 19. - In no case whatever shall the company
be liable for any loss or damage after the expiration of 12 •
months from the happening of loss or the damage unless
the claim is the subject of pending action or arbitration."
F
10. While construing this provision vis-a-vis Section 28 of
the Contract-Act and the cases cited above andiseveral other
cases, in addition, this is what the Court ultimatejy concluded:
. I

"16. From the case-law referred to above the legal
position that emerges is that an agreement which in effect G
seeks to curtail the period of limitation and prescribes a
shorter period than that prescribed by law would be void
as offending Section 28 of the Contract Act. That is
~ because such an agreement would seek to restrict the
,.
party from enforcing his right in Court after the period
H

..
1022 SUPREME COURT REPORTS [2008] 17 S.C.R.

;
A prescribed under the agreement expires even though the
period prescribed by law for the enforcement of his right
has yet not expired. But there could be agreements which r
..,;.
do not seek to curtail the time for enforcement of the right
but which provide for the forfeiture or waiver of the right
B itself if no action is commenced within the period
stipulated by the agreement. Such a clause in the
agreement would not fall within the mischief of Section 28
of the Contract Act. To put it differently, curtailment of the
period of limitation is not permissible in view of Section

c 28 but extinction of the right itself unless exercised within .~
a specified time is permissible and can be enforced. If the
policy of insurance provides that if a claim is made and
rejected and no action is commenced within the time
stated in the policy, the benefits flowing from the policy shall
stand extinguished and any subsequent action would be
D time-barred. Such a clause would fall outside the scope ..
of Section 28 of the Contract Act. This, in brief, seems to
be the settled legal position. We-may now apply it to the
facts of this case.
..,,.
".,
19. The clause before this Court in Food Corpn. case
E extracted hereinbefore can instantly be compared with the
clause in the present case. The contract in that case said
that the right shall stand extinguished after six months from
the termination of the contract. lhe clause was.found valid
because it did not proceed to say that to keep the right
F alive the suit was also required to be filed within six months.
Accordingly, it was interpreted to mean that the right was
required to be asserted during that period by making a
claim to the Insurance Company. It was therefore held that
the clause extinguished the right itself and was therefore
not hit by Section 28 of the Contract Act. Such clauses are /
G
generally found in insurance contracts for the reason that
undue delay in preferring a claim may open up possibilities
of false claims which may be difficult of verification with
reasonable exactitude since memories may have faded by f-
then and even ground situation may have changed. Lapse .....

H of time in such cases may prove to be quite costly to the
H.P. STATE FOREST COMPANY LTD. v. UNITED INDIA 1023
INSURANCE CO. LTD. [HARJIT SINGH BEDI, J.]

insurer and therefore it would not be surprising that the ~
A
----- insurer would insist that if the claim is not made within a
'"' ~
stipulated period, the right itself would stand extinguished.
-"'
Such a clause would not be hit by Section 28 of the
Contract Act.
21. Clause 19 in terms said that in no case would B
the insurer be liable for any loss or damage after the
expiration of twelve months from the happening of loss or
damage unless the claim is subject of any pending action
or arbitration. Here the claim was not subject to any action
or arbitration proceedings. The clause says that if the claim
c
...
...,
is not pressed within twelve months from the happening
of any loss or damage, the Insurance Company shall
cease to be liable. There is no dispute that no claim was
made nor was any arbitration prqceeding pending during
the said period of twelve months. The clause therefore has
the effect of extinguishing the right itself and consequently D
the liability also. Notice the facts of the present case. The
Insurance Company was informed about the strike by the
":..-"
letter of 28-4-1977 and by letter dated 10-5-1977. The
~·
insured was informed that under the policy it had no
liability. This was reiterated by letter dated 22-9-1977. E
Even so more than twelve months thereafter on 25-10-
1978 the notice of demand was issued and the suit was
"t
filed on 2-6-1980. It is precisely to avoid such delays and
to discourage such belated claims that such insurance
policies contain a clause like clause 19. That is for the
F
reason that if the claims are preferred with promptitude
they can be easily verified and settled but if it is the other
\ way round, we do not think it would be possible for the
insurer to verify the same since evidence may not be fully
and completely available and memories may have faded.
The forfeiture clause 12 also provides that if the claim is G
made but rejected, an action or suit must be commenced
within three months after such rejection; failing which all
l 4, benefits under the policy would stand forfeited. So, looked
~ at from any point of view, the suit appears to be filed after
H
1024 SUPREME COURT REPORTS [2008) 17 S.C.R.

A the right. stood extinguished. That is the reason why in
Vulcan Insurance case while interpreting a clause couched
in similar terms this Court said: (SCC p. 952, para 23) ,, -"
)..._

"It has been repeatedly held that such a clause is not
hit by Section 28 of the Contract Act."
B Even if the observations made are in the nature of
obiter dicta we think they proceed on a correct reading of
the clause."
In the light of the fact that Food Corporation's case has been.
considered in Sujir Nayak's case, no further argument remains t-
c in the present matter, as Clause 6(ii) and·condition 19 are, in
their essence, pari materia.
11. Mr. Sharma has also placed reliance on Muni Lal's
case(supra). In this case, the primary issue before the Court
- ....

-...
was as to whether an amendment under Order 6 Rul~J 7 of
D the CPC ought to be allowed after the relief which had been
sought to be introduced had become time barred. We,
therefore, find that no case for interference is made out. The "..,,_
appeal is, accordingly, dismissed. There will be no order as to r
costs.
E B.B.B. Appeal dismissed.

.,.
"

\
l