- (1.) Upon the invasion of the Northern Frontier of India by the Chinese Forces, the President of India issued a proclamation under Article 352 (1) of the Constitution on 26th October, 1962 declaring that a grave emergency existed threatening the security of India. The proclamation of emergency continued in force until it was revoked under Article 352 (2) of the Constitution, by a subsequent proclamation issued on the 10th January, 1968. Following and during the emergency so declared the Emregency Risks (Factories) Insurance Act and the Emergency Risks (Goods) Insurance Act were enacted in 1982 by the Parliament hereinafter referred to as the Factories Insurance Act and the Goods Insurance Act respectively. The object of these two Acts and the schemes framed thereunder were more or less identical and the object of the two Acts was to make provision for insurance of property and goods against damages by enemy action during the period of emergency. These Acts were intended to cover for war risks which were normally excluded from cover by insurance companies. The schemes were framed under the said Acts, The petitioners under Article 226 of the Constitution took out policies of insurance against the emergency risks in respect of teas, other miscellaneous stores, factories and other buildings, standing crop and machinery of their estates. The petitioners are producers and manu. facturers of tea and for the aforesaid purpose had tea gardens named Mohurgong and Gulam Tea Estates in West Bengal. The petitioners had also at all material times a factory for processing of tea leaves. The petitioners also had diverse buildings, inter alia, for office and resi. dential purposes of their staff and also for housing the said factory. The petitioners contend that the petitioners duly paid all premia payable under the said insurance policies. The petitioners duly took out policies for every quarter against the emergency risks in accordance with the Schemes whereby the petitioners were insured in respect of all properties insurable under the Acts for the insurable value of such property. On the 12th August, 1970, two notices were issued under Section 8/11 under the Emergency Risks (Goods/Factories) Insurance Acts and the respondent no. 2 called upon the petitioners for pro. ductioa of documents as per the lists in the said two notices. In compliance with the said notices the petitioners submitted the documents as called for. The petitioners contend that the petitioners supplied the said documents being unaware of the position that the respondents had no authority to call for the documents. Thereafter there were two demands both dated the 10th December, 1970 and being annexures 'C and'D' whereby the respon. dent no. 2 had called upon the petitioners to pay a sum of Rs. 1,571/- under the Goods Insurance Act and a sum of Rs. 8,372/- under the Factories Insurance Act on the ground that the petitioners had under-valued the insurable value of the property for the period1st quarter, 1963 to 2nd quarter, 1966. under the aforesaid two Acts, two notices being annexures 'B' and 'C' The petitioners state that pursuant to the said demand and being unaware of the position the petitioners prayed for instalment and paid the said sum to the respondents. The last of such payments of Rs. 8,372/- was made on the 10th Jane, 1971. As the petitioners paid the demand for alleged under-insurance, the petitioners did not pay the sums of Rs. 760/. and Rs. 1,341/-. for compounding the alleged offences and no demand in respect of the same was made also at that time. Thereafter, by a notice dated the 28th August, 1971, the respondent No. 1 called upon the petitioners to show cause why proceedings to prosecute the petitioners under Section 7 (2) of the Goods Insurance Act should not be initiated for the alleged offence of not having the goods insured under the Goods Insurance Scheme for 1st quarter. 1963 to 4th quarter, 1984, September 1935, 4th quarter, 1985, 1st quarter, 1966 and 1st quarter, 1937, It was further stated in the said notice that the respondent No. 1 had no objection to compound the alleged offence on payment of a sum of Rs. 760/. in lieu of the prosecution proceedings. The petitioners denied that there was failure on the part of the petitioners to insure the goods on the insurable value. The said notice dated the 28th August, 1971, is annexure ' '. The petitioners challenge in this application under Article 226 of the Constitution the notice dated the 12th August, 1970, the demands on the 10th December, 1971 and the notice dated the 28th August, 1971 and the 17th June, 1972.
(2.) The main point urged on behalf of the petitioners is that after the expiry of the emergency the said two Acts expired and, therefore, action which has been taken after the expiry of the said two Acts was not valid, I had occasion to deal with a similar question in a case which was factually though not identical was similar,, namely, in the case of Nandv V/s. Union of India,1972 76 CalWN 952. Counsel for the petitioners, however, contended that unlike the facts of the aforesaid case in the instant case the notice of demand had been given after the expiry of the emergency and also after the expiry of the said Acts, Therefore, he contended that the ratio of the said decision would not be applicable. He, further c intended that until jthere was a determination of the liability under Acts, the proceedings could not be continued after the expiry of the Act or after the expiry of the emergency. I am unable to accept this position. In my opinion section 7 creates the liability. That liability continues and proceeding for determination is part of the proceeding for the enforcement of the liability. Section 11 of the Act provides for recovery of premiums unpaid. Sub-section (3) of section 1 is material and it is necessary to set out the same : "(3) It shall remain in force during the period of operation of the Proclamation of Emergency issued on the 26th October, 1962,' and for such further period as the Central Government may, by notification in the Official Gazette, declare to be the period of emergency for the purposes of this Act, but its expiry shall not affect anything done or omitted to be done before such expiry and section 6 of the General Clauses Act, 1897(10 of 1897), shall apply upon the expiry of this Act as if it had been re pealed by a Central Act." Counsel also drew my attention to the observations of the Madras High Court in toe case of M/s. Stoneware Pipes (Madras) Ltd. V/s. Union of India, 1971 AIR(Mad) 442in support of the proposition that until there was a determination the liability did not arise and if the liability did not arise during the continuance of the Act, the same could not be enforced thereafter. In view of the language of section 7 of the Factories Insurance Act I am unable to accept this position, Indeed, the aforesaid observations of the Madras High Court were not accepted by the learned Judges of the Mysore High Court in the case of M/s. Radio House V/s. Union of India, 1973 AIR(Mys) 256and in the case of Eastern Bihar Divisional Chamber of Commerce, Bhagal pur V/s. Chief Enforcement Officer, Govt, of India, 1972 AIR(Pat) 314, I am in respectful agreement with the observations of the Mysore High Court and the Patna High Court on this point. Counsel for the petitioners contended that inasmuch as no policy of insurance could be issued by the Government at this stage there was no mutuality and as such the petitioners could not be made iiable. This position has been dealt with in the judgment of the Allahabad High Court in the case of Raja Ram Om Prakash V/s. Union of India, 1971 41 CompCas 1055. At page 1059 Pathak, J. as the Chief Justice then was, observed as follows : "Section 8 contemplates the recovery of premium the payment of which has been evaded. In other words, it contemplates the payment of premium which a person was liable to pay pursuant to section 7 of the Act and which he has failed to pay. The Scheme makes detailed provision in paragraph 14 for the procedure to be followed. Sub-paragraph (1) provides for the determination of the amount which would have been paid as premium if the payment had not been evaded. Sub-paragraph (3) requires that after the evaded amount so determined has been fully recovered the Government agent must forthwith send the requisite application form to the defaulter for completion and return, and on receipt of the application, he must issue an insurance policy. The insurance policy takes effect from the date on which the amount was fully recovered. Now, it is clear that the insurance policy must relate to a period which has expired, either wholly or in part. It may also be that the goods covered by the policy may have already been sold or supplied by the insured. Never. theless, the insurance policy covers the emergency risks in the sense that any diminution in the value of the goods during the period covered by the policy caused by loss or damage by an act comprised in the expression "emergency risks" will entitle the insured to be indemnified by the Government. It is immaterial that in some cases the period has expired and the goods never suffer any loss or damage during that period, so that no risk in the usual sense can possibly ba said to be in contemplation when the insurance policy is issued. In those cases, it would seem that the issue of an insurance policy is a meaningless or unnecessary act. But regard must be had to the object of section 8, which is to recover the premium the payment of which has been evaded. The Act and the Schema created an absolute obligation on persons liable under it to take out insurance. Any attempt to avoid the statutory obligation was intended to be foiled by enacting section S. The intention appears to be to put the insured in the same position which he would have occupied if he had applied for an insurance policy from the very outset as the law intended him to. In its practical consequences, an insurance policy issued under paragraph 14 of the Scheme stands on the same footing as an insurance policy issued under paragraph 11 of the Scheme the essential difference between them lying only with regard to the date on which they take effect." St is true that the government in its affidavit in this case has stated that no policy could be issued now. That position in law in my opinion is not quite correct. A policy perhaps can be issued covering the diminution in value of the goods during the period covered by the period of the emergency. But as in this case there has been no diminution, at least there is no allegation, the issuance of the policy would be useless. In the aforesaid view of the matter I am unable to accept the position that there was no mutuality in this case.
(3.) In the premises, in view of the position in law as I have held in the case of Nandy V/s. Union of India,1972 78 GalNW 952and in view of the decision of the Allahabad High Court in the case of Raja Ram Om Prakash V/s. Unioa of India, 1971 41 CompCas 1055with which I am in respectful agreement I am unable to accept the contention urged in support of this application. The application, therefore, fails and is accordingly dismissed. Rule nisi is discharged. Interim order, if any is vacated. There will be no order as to costs.;