- (1.) This appeal is taken from a judgment of the High Court of Calcutta, July 13 and 14, 1961, by which a Divisional Bench of the High Court, reversing the judgment of the learned Single Judge of the same Court, decreed the respondents' claim for damages. The circumstances were these. The appellant is a general insurance company. On June 2, 1950 the respondents submitted proposals to the Company with a view to insuring certain houses in Dhulian bearing Holding Nos. 274, 274/A-B-C and D and 273, 273/A-B-C and D, for Rs. 51,000 and Rs. 65,000 respectively against fire and including loss or, damage by cyclone, flood and/or change of course of river or erosion of river, land-slides and subsidence. The town of Dhulian is situated on the banks of the Ganges and for several years the river had been changing its course and in 1949 a part of the town was washed away. The insurance was obviously effected with this risk in sight. The period of insurance was to be from June 3, 1950 to June 2, 1951. The Company accepted the proposals by two letters (Ex. D) on June 3, 1950 and the letters stated that in accordance with the proposals the assured was held covered under cover notes enclosed with the letters. At the back of these letters of acceptance, there was description of the houses and an endorsement which read : "Including Cyclone, Flood and/or loss by change of course of river, diluvium and/or Erosion of River, Landslide and/or subsidence. It is further noted that there is a thatched building of residence within 50 ft. of the above premises." Two interim protection cover notes Nos. 18848 and 18850 in respect of the two proposals were filed by the Insurance Company along with the written statement and they were said to be copies of cover notes sent with the letters of acceptance, but they bore the date June 5, 1950. There is some dispute as to whether they were at all enclosed with the reply showing acceptance of the proposals. Of the two convernotes, which are identical except for details we may read one only : "Messrs. Chandmull Lal Chand, P. O. Dhulian Murshidabad being desirous to effect an Insurance from loss by Fire, for Rs. 51,000 on the following property viz. - One Pucca built and roofed building (C. J. Vizandah) holding Nos. 274, 274-A, 274-B and 274-C occpd. as residence and/or shop for the storage of hydrogenated G. nut oil (vanaspati) and safety matches also situated at Dhulian Ward No. IV, District Murshidabad. Incl. Loss or damage by cyclone, flood and/or change of course of river and/or Erosion of river, landslides and/or subsidence. It is further noted that there is a thatched building of residence within 50 ft. of the above premises. for one year from 3rd June, 1950 to 3rd June, 1951. The said property is hereby held insured against damage by Fire, subject to the terms of the Applicant's proposal and the usual Condition of the Society's policies. It is, however, expressly stipulated that this protection Note cannot, under any circumstances be applicable for a longer period than Thirty Days, and that it is also immediately terminated before that date by delivery of the policy, or if the Risk be declined by the notification of such declinature. Prem : Rs. 892-8-0 Fire at the rate of 28 as per cent. Prem : Rs. 382-8-0 flood and other risks at the rate of 12 as per cent. Premium : Rs. 1275-0-0." On June 7, the assured sent the premia by cheque. As no policy was received by them, the assured wrote a letter on July 1 (Ex. A/g) asking for the policy or for extension of the cover notes. This was not done.
(2.) On July 6, 1950 the Company wrote to the assured two identically worded letters (except for changes in amounts and numbers of the policies) which read : Calcutta 6th July, 1950 .............. .............. To, M/s. Chandmull Lal Chand, P. O. Dhulian, Murshidabad. Dear Sir, ............ .............. ............ .............. In accordance with the inspection report lodged with this Co. we cancel the risk from 6th July, 1950 as noted below. The relative Endorsement is under preparation and will be forwarded to you in due course. Yours faithfully, Sd. Illegible Ag. Manager and Underwriter, Nature of Alteration : The above covernote is cancelled by the General Assurance Society Ltd. as from 6th July, 1950." On July 15, 1950 the assured wrote to say that they held the Company bound because although there was no erosion by the river when the proposals were submitted and accepted, the Company was trying to get out of the contract when the river was eroding the banks. They ended this letter by saying : "Now when the erosion and/or change of course of river and/or subsidence have commenced, it is quite impossible to take any precautionary measure or to reinsure the same with any other office of Insurance at this stage." On July 17, 1950 the Company prepared an endorsement for the policies cancelling the risk and sent the endorsements to the assured. The endorsement read : ............ .............. ............ .............. In the name of : - Messrs. Chandmull Lalchand, P. O. Dhulian, Murshidabad. It is hereby declared and agreed that as from 6th July 1950 the insurance by this policy is cancelled by. The General Assurance Society Ltd. Calcutta, and a refund premium of Rs. .............. is hereby allowed to the assured on a pro rata basis Sd. Illegible, Ag. Manager and Underwriter. Calcutta, ................." In reply the latter said that as the risk had already "commenced" and "taken place" there could be no cancellation as there was no time left for the assured to take precautionary measures by reinsuring. In reply the Company referred to condition 10 of the Fire Policy under which the Company claimed to cancel the policy at any time. Condition 10 of the Fire policy read: "10. This insurance may be terminated at any time at the request of the Insured, in which case the Society will retain the customary short period rate for the time the policy has been in force. This insurance may also at any time be terminated at the option of the Society, on notice to that effect being given to the Insured, in which case the Society shall be liable to repay on demand a ratable proportion of the premium for the unexpired terms from the date of the cancelment." In reply the assured wrote on August 2 that the condition did not apply to any risk except that of fire and could not, in any event, protect the company after risk had commenced. On 13th and 15th August the houses were washed away. After unsuccessfully demanding payment under the policies, the assured filed the present suit on the Original Side of the Calcutta High Court. It was dismissed with costs by G. K. Mitter, J., but on appeal the claim was decree to the extent of Rs. 1,10,000 with costs, the decretal amount to carry interest at 3 per cent per annum. The High Court certified the case as fit for appeal and the present appeal has been filed by the company.
(3.) Before we deal with the question in dispute we may say a few words about the position of the Ganges river in relation to the Dhulian town in general and the insured houses in particular. The town of Dhulian is situated on the bank of river which, for several years, has been changing its course and eroding the bank on the side of Dhulian. In 1949 there was much erosion and the river had come as close at 1.1/2 to 2 furlongs from the town and a few of the godowns lying close to the bank had been washed away. There is ample material to show what the condition of the river in relation to the insured houses was between June 2, 1950 when the proposal for insurance was made and August 13/15 when the houses were washed away, with particular reference to the 18th June, 1950 when one P. K. Ghose (D. W. 2) visited Dhulian to make local inquiries on behalf of the Company and the 6th July when the Company cancelled the risk and withdrew the cover. The evidence comes from both sides but is mostly consistent. Lalchand Jain (P. W. 1) for the assured stated that on the 2nd of June the houses were 400./500 feet away from the bank of the river (Q. 73) and on that date there was no erosion because the river was quite calm (Q. 132). This continued to the second week of June (Q. 16). The river began to rise in the 3rd week of June but there was no erosion (Q. 137). Erosion began by the end of June (Q. 142) and the current was then swift (Q. 144) and the right bank started to be washed away. Houses within 10-50 feet of the bank were first affected in the last week of June (Q. 180). At that time the insured houses were 400/-500 feet away. Even on July 15, 1950 the distance between these houses and the river was 250 feet (Q. 179). Surendranath Bhattacharjee (P. W. 2), Overseer and Inspector, Dhulian Municipality stated that the erosion started four or five days after Rathajatra which took place on or about June 20, 1950. Bijoy Kumar (P. W. 4), Retired Superintending Engineer is an important witness. He submitted three reports Exs. F, G and H to Government on May 27, 1949, November 4, 1949 and September 11, 1950. In these reports he gives a description of the scouring the Dhulian town on August 5, 1950. He said nothing about the State of affairs in the first week of July which he would undoubtedly have said if erosion had already begun then. With his report submitted on September 11, 1950, he sent a letter of 9th August, in which he said that he had visited Dhulian Bazar on August 5, 1950 and found that the scouring of the compound of the Police Station at the junction of the Ganges and Bagmari rivers had begun a fortnight earlier and that scouring must have been at the rate of 20-25 feet per day. From this evidence it is possible to form an opinion about state of the river on or about July 6, 1950. To that we shall come later.;