9911796707
TMI Blog1969 (9) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... was likely to tour India during December, 1968, or January-February, 1969. Upon payment of a premium of Rs. 800 the petitioner took from the company a special contingency policy being policy No. SC-A 82812, dated October 15, 1968, with a view to insure himself against the risk of non-publication and/or non-production of his proposed brochure during the test match to be played by the M.C.C. Cricket Team. The insurance was to be effective from October11, 1968, and was to continue till the date of the distribution of the said brochure at the test match but not later than the end of February, 1969. It is the petitioner's case that upon a true construction of the policy, it constitutes a contract between the petitioner and the company, inter alia , to pay a sum of Rs. 65,000 in the event of the happening or materialisation of any of the contingencies specified in the said policy and in particular in the event of the proposed M.C.C. test match not taking place in Bombay for any reason whatsoever. After obtaining this policy, according to the petitioner, by about November 12, 1968, he collected confirmed advertisement orders in a sum of Rs. 62,400 and was waiting for the receipt of furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his letter, the company pointed out that the policy of insurance was issued relying upon certain representations made by the petitioner which are specified in this letter. They also contended that the risk covered by the policy was a loss of the cost of getting the advertisements printed which loss was estimated by the petitioner in anticipation at Rs. 65,000. By this letter, the company pointed out that the threat of adopting winding-up proceedings against the company was unjustified, that it was an attempt to terrorise the company to accept and pay the claim which was not justified at all; that a winding-up petition was not a way of seeking to enforce a payment of debt which was bona fide disputed. Thereupon further correspondence ensued between the petitioner and the company but the company was unwilling to comply with the request of the petitioner to pay Rs. 65,000. On August 8, 1969, the petitioner presented to this court a petition for the winding up of the company on the ground that the company had neglected to pay the debts in spite of a statutory notice being served upon the company. It was alleged that the company was unable to pay the debts and was in insolvent circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, Mr. Nariman, on behalf of the company, contended that the policy merely contained a contract of indemnity, that it was not a consequential loss policy, which specifically insured profits. He urged that the present policy was issued in favour of the petitioner relying upon the various representations which are set out in the company's attorneys' letter dated February 5, 1969, addressed to the petitioner's attorneys. He submitted that the policy was not, what is normally called in insurance law, a valued policy, that having regard to the terms and conditions of the policy, the petitioner was only entitled to claim a loss that may be suffered by him by reason of cost of advertisements being incurred by him ; that the sum of Rs. 65,000 mentioned in the policy was the maximum amount that could be claimed by way of loss under the policy. He also pointed out that having regard to the terms and conditions of the policy, there was an arbitration clause and an award of the arbitrators as therein specified was a condition precedent to any effective claim being made by the petitioner. His submission is that there is a bona fide dispute as regards the existence of the liability of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well-settled. It is unnecessary to refer to the various cases on this point. It will be enough if reference is made to the decision of the Supreme Court in Amalgamated Commercial Traders ( Pvt. ) Ltd. v. A.C.K. Krishnaswami [1965] 35 Comp. Cas. 456 (SC), wherein the Supreme Court has approved of the law laid down in Buckley on the Companies Acts, 13th edition, page 451. It is there observed: "It is well-settled that a winding-up petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. A petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatized as a scandalous abuse of the process of the court. At one time petitions founded on disputed debts were directed to stand over till the debt was established by action. If, however, there was no reason to believe that the debt, if established, would not be paid, the petition was dismissed. The modern practice has been to dismiss such petitions. But, of course, if the debt is not disputed on some substantial ground, the court may decide it on the petition and make the order." The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well-settled that the essence of any indemnity clause is that the assured must prove a loss. The assured cannot recover anything under the main indemnity clause or make any claim against the insurance until the assured has been found liable and so sustained a loss. Sometimes it may happen that the policy may be a pure and simple contingency insurance. When such is the case, ordinarily, in general terms, it may be defined as an insurance which provides for the making of a payment in the event of a specified event occurring, the payment representing either the loss or the possibility of loss which that event entails. Having regard to the heading of the policy and the terms thereof, it will be one of the questions to be decided whether it contains a mere contract of indemnity or whether it is a simple contingency insurance under which consequential loss has been specifically insured without further inquiring into the actual amount of loss sustained by the insured. Further, it is the case of the company that this policy was issued relying upon certain representations that were made by the petitioner at the time when he approached the company for issue of the policy. It is the case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 434 because he has no cause of action until he has first secured the award as therein provided. These are, amongst others, the several complex questions and the petitioner insists upon their determination under pressure or threat of a winding up petition. This is not a case where the company has denied its liability on frivolous or vexatious grounds. The denial of liability by the company is based upon substantial grounds. When such is the case, it cannot be said that the company has neglected to pay the debt within the meaning of section 434(1)( a ) of the Companies Act. To permit the petitioner to agitate all the questions by resorting to a winding up petition will be an abuse of the process of the court. The only ground on which the inability to pay the debts is pleaded is the neglect to pay within the meaning of section 434(1)(a) of the Companies Act. It is not the case of the petitioner that the company is commercially insolvent or is in insolvent circumstances. In the result, the petition is dismissed. The costs of this petition are quantified at Rs. 500. Such costs will be the costs in the arbitration proceedings or a suit, if such arbitration proceedings ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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