Condition of insurance policy prohibiting filing of claim after specified period of time void as contrary to Section 28 of Contracts Act: Supreme Court


The Supreme Court observed that a term of the insurance policy which prohibits the filing of the claim after the specified time is contrary to Section 28 of the Indian Contracts Act 1872 (“Act”) and therefore void .

The observation was made by the bench of Judges Hemant Gupta and V Ramasubramanian while denying a request for special permission filed by the Oriental Insurance Company against the order of the Allahabad High Court dated September 22, 2021.

Section 28 of the Act deals with Limitation of Legal Proceedings Agreements and provides that agreements which extinguish a party’s right to sue after the expiration of the specified time period are void.

The article reads as follows:

[Every agreement,—

(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or

(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to the extent.]”

Case in Allahabad High Court

The insurance company had applied to the High Court to challenge the order dated January 4, 2020 made by Permanent Lok Adalat, Muzaffarnagar whereby the claim of Smt. Sanjesh, was cleared and the insurance company was asked to pay Rs. 5 lacs to Smt Sanjesh under the “Mukhiamanti Kisan Evam Sarvhit Bima Yojna”.

The lawyer representing the insurance company had argued that the accident took place on August 29, 2017 and that the deceased died of his injuries on September 5, 2017 and that the claim was filed after December 20, 2017 after a period of about 3 months. The lawyer relied on the agreement between the insurance company and the state that, in the event of a delay of more than one month in filing the claim after the expiration of the insurance, the collector has the power to tolerate the delay of one month only. Therefore, the claim was statute-barred, the insurer argued.

Relying on the conclusion of the Permanent Lok Adalat, counsel for the defendant argued that this request was only filed with a delay of 15 days.

Counsel relied on the judgment given by the Bench Division of the High Court in Gautam Yadav v State of UP et al, 2020(11) ADJ 321 in which the Division Bench considered the statute of limitations for filing the claim and it was held that, “the prescription provided for by the said scheme is unreasonable and arbitrary and have replaced the said period by a period of three years”.

While dismissing the plea, the Bench Judge Saurabh Shyam Shamshery in the said order,

“The policy itself provides the excuse of delay up to two months, even after the end of the policy. Therefore, strictly speaking, the delay is a little over a month. It does not There is no clause in the policy that specifically prohibits consideration of the claim by the relevant court even beyond the two-month period. supreme in the request for special authorization (civil) n. ‘just over a month and the insurance policy is a welfare policy and although the question of law is pending in the Supreme Court but the claim has been paid in this case, to where the short delay in filing the petition can be tolerated. No further submissions are made on behalf of the petitioner. ranting, therefore, the motion in writ is accordingly dismissed. »

Case before the Supreme Court

Appearing for the insurance company, the lawyer had argued that the claim had not been filed within a month or extending the tolerated period by a month.

The bench, while denying the insurance company’s preferred appeal and relying on section 28 of the statute, said:

“In view of the aforementioned article, the condition of submitting a request within a period of one month, extendable for an additional month, is contrary to article 28 of the law and therefore void. In view of the said fact, we find no reason to interfere with the order made by the High Court. The application for special leave is, therefore, dismissed.”

Case Title: The Oriental Insurance Company Limited v Sanjesh and Anr | SLP(C) 3978 from 2022

Reference: 2022 LiveLaw (SC) 303

Coram: Judges Hemant Gupta and V Ramasubramanian

Counsel for the Applicant: Lawyer(s) Pankaj Seth, Manjeet Chawla and Yashvardhan S. Soam

Click here to read/download the Supreme Court order

Click here to read/download the High Court judgment


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