Sathish Ninan, J.
1. The suit for money under a contract of insurance, was dismissed by the trial court. The plaintiffs are in appeal.
2. The plaintiffs are two partnership firms. The second plaintiff is stated to be a sister concern of the first plaintiff. The plaintiffs are represented by its common Managing Partner. The firms are engaged in seafood processing business. Plaintiffs 1 and 2 had entered into contracts of insurance with the first defendant Insurance Company for ₹ 1.20 Crores and Rs.70 lakhs respectively. The second defendant is the Bank from which the plaintiffs had availed credit facilities on hypothecation of the stock in trade. The plaintiffs had a common storage facility. On 22.07.1994, there occurred a major fire in the storage room, resulting in huge damage. Immediately, the incident was intimated to the defendants. The first defendant, through its surveyor, estimated the loss of the first plaintiff at Rs. 51,62,498/-, and of the second plaintiff at Rs. 36,72,091. Though the claim of the plaintiffs were for a higher amount, they acceded to the assessment. However, the Insurance Company repudiated the entire claim. Hence the suit was filed for realisation of the damages, with interest at 13%, it being the rate payable to the second defendant Bank by the plaintiffs under the credit facilities.
3. The first defendant contended that the plaintiffs firms are unregistered and hence the suit is barred under Section 69(2) of the Indian Partnership Act, 1932 (for short, “the Act”). It was contended that the suit is bad for mis-joinder of parties. The repudiation of the claim was justified contending that the fire incident was not an accident but was caused by the plaintiffs themselves though their deliberate and fraudulent action, to secure insurance claim.
4. Before the trial court, the plaintiffs examined PWs.1 to 16 and marked Exts.A1 to A46. On the side of the first defendant, DWs.1 to 4 were examined and Exts.B1 to B19(f) were marked. The trial court negatived the defence plea that the plaintiffs had deliberately caused the fire incident. However, the suit was held to be barred under Section 69(2) of the Act and dismissed the same.
5. We have heard Sri.P.B.Krishnan, the learned Senior Counsel for the appellants and Sri.George Cherian, the learned Senior Counsel on behalf of the first respondent.
6. The points that arise for determination are :-
"(i) Is the finding of the trial court that the suit is barred under Section 69(2) of the Act, correct in law
(ii) Was the trial court right in negativing the plea of mis-joinder of parties
(iii) Does the finding of the trial court with regard to the entitlement of the plaintiffs for the insurance claim warrant any interference"
7. The trial court found that the plaintiffs firms were registered as early as in the year 1978 and 1990 respectively. The registration is evidenced by Exts.A31 and A32. However, finding that the names of the persons who were partners of the firms as on the date of filing of the suit were not shown in the Register of Firms as partners, held the suit to be barred under Section 69(2) of the Act. The finding that the names of the partners as on the date of suit, did not find a place in the Register of Firms, is not disputed.
8. Since the arguments are centered around the understanding of Section 69(2), it is extracted hereunder:-
“S. 69. Effect of non-registration.-
(1) ...
(2) No suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.”
On a plain reading of the Section it is evident that the mandates thereunder to institute a suit by a partnership firm are, as on the date of filing of the suit, (i) the firm shall be a registered one, and (ii) the persons suing are or have been shown in the register of firms as partners in the firm. The first requirement is undisputedly satisfied. The controversy is centered around the second requirement.
9. Relying on the judgment of this Court in Balakrishna Trading Corporation v. Krishna Kurup (1969 KLT 855) and that of the High Court of Mysore in M.A.Hussain and anr. v. Panchamal Vasudev Ganapath Kamath and Brothers and anr. (AIR 1970 Mysore 299), Sri.P.B.Krishnan the learned Senior Counsel for the appellant would contend that, the second part of Section 69(2) of the Act only requires that the persons suing are either partners of the firm, or the persons suing have been shown in the register of firms as partners of the firm. It is not necessary that the names of the partners existing as on the date of filing of the suit should find a place in the Register of Firms. According to the learned senior counsel, the section recognises two classes/categories of persons who are entitled to maintain a suit; one, who are partners of the firm on the date of suit – whose names need not find a place in the Register of Firms and the other, persons whose names have been shown in the register of firm as partners. The latter need not necessarily be, in fact, partners of the firm on the date of suit, or else, the legislature would not have used the words “...are or have been...” it is argued. Since the present suit falls within category one, the suit is maintainable, is the contention.
10. In Balakrishna Trading Corporation v. Krishna Kurup (1969 KLT 855), this Court on analysing Section 69(1) and 69(2) held, “Of course, the firm must be registered; but is it obligatory that the name of the suing partner should be shown in the register of firms as a partner. I read S.69(1) and, in the same manner S.69(2) in the following way. ‘The person suing is a partner in the firm or has been shown in the Register of Firms as a partner of the firm’”. A similar view was expressed by the High Court of Mysore in M.A.Hussain and anr. v. Panchamal Vasudev Ganapath Kamath and Brothers and anr. (AIR 1970 Mysore 299).
11. With great respect, we are unable to concur with the view expressed in Balakrishna Trading Corporation v. Krishna Kurup and M.A.Hussain and anr. v. Panchamal Vasudev Ganapath Kamath and Brothers and anr. above. Unlike a company registered under the Companies Act, a firm is not a legal persona. Order XXX of the Code of Civil procedure enables a suit to be filed in the name of the firm without requiring all its partners to be eo-nominee arrayed as parties. Still it is a suit by all the partners of the firm [See Purushottam Umedbhai and Co. v. M/s Manilal and sons (AIR 1961 SC 325), Her Highness Maharani Mandalsa Devi and others v. M. Ramnarain Pvt. Ltd. And others (AIR 1965 SC 1718), M/s Grand Buoy Enterprises v. National Insurance Co. Ltd. (1994 (2) KLT 679].
12. In V. Subranmaniam v. Rajesh Raghuvandra Rao [2009(5) SCC 608], the Apex Court held that the primary object behind requiring the registration of a firm is, to afford protection to third parties. The Apex Court held,
“23. The primary object of registration of a firm is protection of third parties who were subjected to hardship and difficulties in the matter of proving as to who were the partners. Under the earlier law, a third party obtaining a decree was often put to expenses and delay in proving that a particular person was a partner of that firm. The registration of a firm provides protection to the third parties against false denials of partnership and the evasion of liability. Once a firm is registered under the Act the statements recorded in the register regarding the constitution of the firm are conclusive proof of the fact contained therein as against the partner. A partner whose name appears on the register cannot deny that he is a partner except under the circumstances provided.”.
13. Sections 58 and 59 of the Act deal with, application for registration of firm and Registration, respectively. Section 63 deals with recording of changes in the constitution of a registered firm. The section reads thus,
“S.63. Recording of changes in an dissolution of a firm.— (1) When a change occurs in the constitution of a registered firm any incoming, continuing or outgoing partner, and when a registered firm is dissolved any person who was a partner immediately before the dissolution, or the agent of any such partner or person specially authorised in this behalf, may give notice to the Registrar of such change or dissolution, specifying the date thereof; and the Registrar shall make a record of the notice in the entry relating to the firm in the Register of Firms, and shall file the notice along with the statement relating to the firm filed under section 59.”
It requires notice of change in the constitution of a firm to be intimated to the Registrar, who is obliged to make a record of the same in the Register of Firms. This is followed by Section 69 which provides for bar of suit, in case of non-registration and absence of the names of partners in the Register.
14. In Commissioner of Income Tax, Andhra Pradesh, Hyderabad v. Jayalakshmi Rice and Oil Mills Contractor Co. (AIR 1971 SC 1015) and Kerala Road Lines Corporation v. Commissioner of Income Tax, Kerala (AIR 1964 Ker.251) the principle that, cognate provisions are to be read together and along with the scheme of the other provisions of the Act was recognised.
15. With the object of the provision and the relevant sections and its arrangement in mind, when we read Section 69(2), the only conclusion could be that, the names of the partners as on the date of suit are to find a place in the Register of Firms. Any other interpretation would defeat the very provision.
16. There is yet another reason why the theory of, two category/classes of persons, one who are partners and the other whose names find in the Register, is not liable to be accepted. Section 69(1) of the Act also imposes a restriction akin to Section 69(2). It prohibits institution of suit by a partner against the Firm. The provision reads thus,
“[s 69] Effect of non-registration.- (1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm."
It also employs identical words as in Section 69(2) though in singular form namely, “...person suing is or has been shown in the Register of Firms as a partner in the firm”. As noticed, it deals with suit by “a partner”. If the two category/class theory is applied, then the provision has to be understood as, no suit shall be instituted by a partner against the firm unless, (i) he is a partner or, (ii) he is shown in the Register of Firms as a partner. It would mean that, under category (i), no suit shall be instituted by a person suing as a partner against the firm unless he is a partner. Such a reading and understanding does not make any sense or stand to logic. If a person sues as a partner and he fails prove to be a partner, his suit necessarily fails. There is no reason or ratiocination in incorporating a statutory prohibition against such a suit. Therefore, such an understanding of the provision would result in absurd results and is to be avoided. Similar would be the result if we apply the argument to Section 69(2).
17. In our opinion, the words “...are or have been…” needs to be understood as taking within its sweep both, “persons who may have stepped in recently and the already continuing partners”. Irrespective of as to whether they are recent entrants or existing partners, their names are to find a place in the Register of Firms. Only such an understanding would give effect to the purpose behind the provision.
18. Shreeram Finance Corporation v. Yasin Khan (AIR 1989 SC 1769), was a case where, there was a change in the constitution of the firm. The suit was instituted before the change was notified in the Register. The Apex Court categorically held that, the names of the partners of the plaintiff firm as on the date of filing of the suit, should find a place in the Register of Firms. The Apex Court held thus :-
““6. In the present case the suit filed by the appellants is clearly hit by the provisions of sub-sec. (2) of S. 69 of the said Partnership Act, as on the date when the suit was filed, two of the partners shown as partners as per the relevant entries in the Register of firms were not, in fact, partners, one new partner had come in and two minors had been admitted to the benefit of the partnership, firm regarding which no notice was given to the Registrar of Firms. Thus, the persons suing, namely, the current partners as on the date of the suit were not shown as partners in the Register of Firms. The result is that the suit was not maintainable in view of the provisions of sub-sec. (2) of S. 69 of the said Partnership Act and the view taken by the trial Court and confirmed, by the High Court in this connection is correct.”
The same dictum was laid in, Sree Balaji Enterprises v. Greeta Exports & ors [AIR 2007 NOC 48(Mad.)], Sri Meenakshi Mills Ltd., A Limited Company At Madura, By Managing Agents, K.R.M.T.T Thiyagaraja Chettiar And Co. v. C. Swaminatha Mudaliar And Brother (AIR 1944 Mad. 443), T.Savariraj Pillai v. RSS Vastrad & Co. (AIR 1990 Mad.198), Bharat Sarvodaya Mills Co. Ltd. v. Mohatta Brothers (AIR 1969 Guj.178), M/S. Badrimal Ramcharan And Co. v. M/S. Gana Kaul And Sons And Others (AIR 1971 J&K 109), Gandhi and Co. v. Krishna Glass Pvt.Ltd (AIR 1987 Bom.348), Basant Lal Jain v. Union Of India (AIR 1965 Pat.426). In Bank of Koothattukulam v. Itten Thomas (1955 KLT 108), the Travancore-Cochin High Court, referring to the corresponding provision in the Travancore Partnership Act held, “Again, S.68(2) [S.69(2) of the Indian Act] prescribes another condition also, ie., Persons suing are or have been shown in the Register of Firms as partners in the Firm. In Bharath Trust v. Divakara Rao (1992 (2) KLT 493), this Court relying on the judgment of the Apex Court in Shreeram Finance Corporation (supra) held, “The above decision is an authority for the proposition that the persons suing viz. the current partners as on the date of the suit, should be shown as partners in the Register of Firms and if it is not so, the suit will be hit by S.69(2) of the Partnership Act”. Shreeram Finance Corporation’s case was again followed and the law was again reiterated by this Court in, Popular Automobiles v. G.K.Chami (AIR 2002 Ker. 33). and Navabharath Kuries & Trading Co. v. C.E.Job & others (2007 (1) KLJ 22). Therefore, in terms of the second part of S.69(2), when the suit is instituted, the names of the persons suing must find a place in the Register of Firms as partners in the firm.
19. The objects and reasons of the Act are contained in the report of the Special Committee appointed by the Government of India to examine the provisions of the Bill before it came to be passed by the Legislature. Paragraphs 17 and 18 of the Report of the Special Committee read thus,
“17. The outlines of the scheme are briefly enumerated as follows and are: The English precedent insofar as it makes registration compulsory and imposes a penalty for non-registration has not been followed, as it is considered that this step would be too drastic for a beginning in India and wold introduce all the difficulties connected with small and ephemeral undertakings. Instead, it is proposed that registration should lie entirely within the discretion of the firm or partner concerned; but, following the English precedent, any firm which is not registered will be unable to enforce its claims against third parties in the Civil Courts, and any partner who is not registered will be unable to enforce his claims either against third parties or against his fellow partners. One exception to this disability is made. Any partner in any firm, registered or unregistered, may sue for dissolution of the firm. The exception is made on the basis of the principle that registration is designed primarily to protect third parties, and the absence of registration need not prevent the disappearance of an unregistered or imperfectly registered firm. Under the scheme, a small firm or a firm created for a single venture which does not meet with difficulty in getting payment, need not get registered; and even a firm with a large business need not register until it is faced with litigation. Registration may, then, be effected at any time before the suit is instituted. The rights of third parties to sue the firm or any partner are left intact.
18. Once registration has been effected, the statements recorded in the register regarding the constitution of the firm will be conclusive proof of the facts therein contained against the partners making them, and no partner whose name is on the register, will be permitted to deny that he is a partner with certain natural and proper exceptions which will be indicated later. This should afford a strong protection to persons dealing with firms against false denials of partnership and the evasion of liability by the substantial members of a firm.”
In Utkal Contractors And Joinery Pvt. Ltd. And Others v. State Of Orissa And Others (AIR 1987 SC 1454) the Apex Court held,
“9. In considering the rival submissions of the learned Counsel and in defining and construing the area and the content of the Act and its provisions, it is necessary to make certain general observations regarding the interpretation of statutes. A statute is best understood if we know the reason for it. The reason for a statute is the safest guide to its interpretation. The words of a statute take their colour from the reason for it. How do we discover the reason for a statute There are external and internal aids. The external aids are Statement of Objects and Reasons when the Bill is presented to Parliament, the reports of committees which preceded the Bill and the reports of Parliamentary Committees. Occasional excursions into the debates of Parliament are permitted. Internal aids are the preamble, the scheme and the provisions of the Act. Having discovered the reason for the statute and so having set the sail to the wind, the interpreter may proceed ahead. No provision in the statute and no word of the statute may be construed in isolation. Every provision and every word must be looked at generally before any provision or word is attempted to be construed. The setting and the pattern are important.”.
We are also conscious of the judgment of the Apex Court in Commissioner Of Income Tax, Andhra Pradesh, Hyderabad v. Jayalakshmi Rice And Oil Mills Contractor Co. (AIR 1971 SC 1015) that, the report of the Special Committee above is not to be taken into consideration for interpreting the Act. We referred to the Report only to notice that, the interpretation given by us to the provision is found to be in consonance with the same.
20. Thus we hold that, when a suit is instituted in the name of the firm, S.69(2) mandates that, the names of the partners as on the date of filing of the suit must find a place in the Register of Firms as partners in the firm. The argument of the appellants to the contrary, is only to be negatived and we do so.
21. The learned Senior Counsel for the appellants, relying on the judgment of this Court in Neldon Company v. Radhakrishnan (1990 (1) KLJ 313), and Noble Kuries v. Sebastian and ors. (2009 (4) KHC 863) would contend that, a plea under Section 69(2) of the Act is one that could be waived. It is for the defendant, if they dispute, to specifically raise a plea that the firm is unregistered and also that the names of the partners as on the date of filing of the suit does not find a place in the Register of Firms. In the case at hand though there is a bald plea that the firm is unregistered (which has been disproved by the evidence on record), there is no specific plea with regard to the absence of the names of the partners in the Register of Firms. Unless there is such a specific contention there could not have been an adjudication on the same, it is argued.
22. Compliance with the requirements under Section 69(2) of the Act is mandatory (See Seth Loonkaran Sethiya and others. v. Mr. Ivan E. John & others (1977 (1) SCC 379), ESI Corporation v. Varun Impex Ltd. (2017) 4 LLJ 425 and Popular Automobiles v. G.K.Chami (AIR 2002 Ker. 33). Section 69(2) of the Act prohibits the institution of any suit unless the requirements thereunder are complied.
23. Whether the firm is a registered one, and the names of the partners of the firm as on the date of institution of the suit find a place in the Register of Firms, are all matters within the knowledge of the plaintiff. Those may not be matters within the knowledge of the defendant. Of course he could, on enquiry at the Registrar of Firms get the details. But then again he will have to seek the assistance of the Court for a direction to the plaintiff to get the names of the partners suing. Without recourse to such a procedure, a defendant will not be genuinely able to raise a plea of absence of registration of the plaintiff firm and the absence of the names of the partners in the register of firms. Or else, the defendant would be required to raise a plea of denial, without any bona fides and knowledge thereof. We do not think that, law would intend such a course.
24. When the Statute mandates that no suit shall be instituted without compliance with certain requirements, and the facts are within the knowledge of the plaintiffs, it is for the plaintiffs to plead and prove that such requirements have been duly satisfied. It is not dependent on the plea of the defendant. This is unlike in cases like, the bar of suit under Section 11 of the Code of Civil Procedure - Res judicata. Under Section 11 CPC, the Court is prohibited from proceeding with the trial of a suit under certain circumstances. Therein, the facts dis-entitling the plaintiff to proceed with the suit is well within the knowledge of the defendant. On such facts being brought to the notice of the Court, the Court is prohibited from proceeding with the trial of the suit. It is for the defendant to plead and prove such facts. In the absence thereof it could only be assumed that the prohibition does not apply. In such cases it could be said that it is for the defendants to plead and prove regarding the nonmaintainability of the suit or its prosecution. For the reasons stated above, the said principle cannot be applied to the case of the bar under Section 69(2) of the Act. To maintain the suit it is obligatory on the plaintiff to plead and prove that the requirements under Section 69(2) of the Act are satisfied. It is not correct to say that the obligation of the plaintiff arises only on a plea of denial by the defendant. In Surajmull Nagoremull v. Triton Insurance Co.Ltd (AIR 1925 PC 83) it was held, “No court can enforce as valid that which competent enactments had declared shall not be valid, nor is obedience to such an enactment a thing from which a court can be dispensed by the consent of the parties, or by a failure to plead or to argue the point at the outset: Nixon v. Alibion Marine Insurance Co., [(1867) 2 Ex 338]. The enactment is prohibitory, It is not confined to affording a party a protection, of which he may avail himself or not as he pleases.” In Lokramdas Chatomal Firm and Ors. v. Tharumal Shevaram (AIR 1939 Sind 206), it was held that, to hold that the suit is maintainable inspite of non-compliance of S.69(2) for the reason of absence of plea is to frustrate the legislative intent. Here it is relevant to note that, in Seth Loonkaran Sethiya and others. v. Mr. Ivan E. John & others (1977 (1) SCC 379) the Apex Court while asserting the mandatory nature of S.69(2) held, “A bare glance at the section is enough to show that it is mandatory in character and its effect is to render a suit by a plaintiff in respect of a right vested in him or acquired by him under a contract which he entered into as a partner of an unregistered firm, whether existing or dissolved, void.”. This further fortifies our conclusion as above.
25. Incidentally it is noticed that, the High Courts of Madras, Karnataka and Delhi have, in N.A Munavar Hussain Sahib And Another v. E.R Narayanan And Others (AIR 1984 Mad.47), Andavar Finance Corporation v. V.Murthy & another (AIR 2000 Karnataka 236) and Preeti Chandra v. Kauten Kraft (2014 SCC Online Delhi 4226), taken the view that, a specific denial with reference to Section 69(2) is necessary. However, the Andhra Pradesh High Court has taken the view that, it is obligatory on the plaintiff to plead and prove the satisfaction of the mandates of S.69(2) and that a defence plea with regard to non-compliance of Section 69(2) is not necessary. It was held that the requirements stated in the Section are jurisdictional facts and that the burden to plead and prove compliance with the same is always on the plaintiff firm in view of the legislative mandate under Section 69(2) of the Act.
For the reasons stated supra, we are in respectful agreement with the view expressed by the High Court of Andhra Pradesh. We disagree with the law laid down in Neldon Company v. Radhakrishnan (1990 (1) KLJ 313) and Noble Kuries v. Sebastian and ors. (2009 (4) KHC 863), and by the Madras, Karnataka and Delhi High Courts, to the contrary.
26. It is to be noticed that, in the case at hand, though it was contended that the firm was unregistered, there was no specific plea with regard to the absence of the names of the partners in the Register of Firms. As noted supra, in Neldon Company v. Radhakrishnan (1990 (1) KLJ 313), and Noble Kuries v. Sebastian and ors. (2009 (4) KHC 863) this Court was of the opinion that, a specific plea was required to be raised in the said regard also. Even taking it to be the law, in the case at hand the plaintiff themselves produced Exts.A45 and A46, true extracts of the Register of Firms which reveal that, as on the date of filing of the suit the names of the then partners were not included in the Register of Firms. Even under such circumstances, is the plaintiff entitled to rely on the theory of, “absence of plea” and contend that the Court cannot find non-compliance with the requirements of Section 69(2) of the Act
27. Here we have to bear in mind that the purpose behind the insistence of a plea is, to put the opposite party on notice with regard to the disputed facts. This would enable the opposite party to prove such disputed facts. Any evidence adduced by a party on a fact which is not disputed, would prejudice the opposite party. It is therefore the law that, no evidence shall be looked into a plea never raised. However, when the plaintiffs themselves produce documents which exhibits noncompliance with the mandatory requirements under Section 69(2) of the Act, and they do not dispute the factual aspect evidenced by such documents, there is no question of any prejudice being caused to the plaintiff consequent on any absence of plea by the defendant. On the very documents produced by the plaintiffs it is evident that there is non-compliance with the second limb of Section 69(2) of the Act. Therefore the principle of “absence of plea and prejudice” does not arise in the case at hand. In Popsingh Mahadeo Prasad v. Dipchand Ray And Another (AIR 1960 Ori.123) the Court held that, if materials on record reveal non-compliance of S.69(2), the Court cannot ignore the same and be a party to perpetuate illegality. We are in respectful agreement with the above statement. Viewed from the said angle also, the judgment of this Court in Neldon Company and Noble Kuries (supra) cannot be of any assistance to the plaintiffs/appellants.
28. The learned Senior Counsel for the appellants raised a further argument that, the reconstitution of the firm was subsequently intimated to the registrar pending the suit, and that once recorded, the correction will relate back to the date of reconstitution. Hence it must be deemed that the names of the partners were shown in the Register of Firms even as on the date of filing of the suit, it is contended. The learned senior counsel relied on the judgment of the Apex Court in Gwaliar Oil Mills v. Supreme Industries (1999 (9) SCC 113), to canvass such contention.
29. The case before the Apex Court was one where the intimation regarding change of partners was given to the Registrar prior to the institution of the suit, but the relevant entries were made only after the institution of the suit. Once the change is notified to the registrar, what remains is, effecting of such entries. The Apex Court held that, it could not be said that the plaintiff is disabled from instituting a suit in the interregnum. In such circumstances the suit could be saved.
30. In Raptakos Brett & Co Ltd v. Ganesh Property (1988 (7) SCC 184), the Apex Court observed that, a suit though incompetent in terms of Section 69(2) of the Act, if the plaintiff rectifies the defect and puts its house in order, then the defect which resulted in treating the original suit as still born, would no longer survive if the suit is deemed to have been instituted on the date on which the registration was obtained. Noticeably, the Apex Court held that the deemed date of institution of the suit is to be reckoned as, the date of obtaining of the registration and not the original date of institution of the suit. Thus the above two judgments of the Apex Court, relied on by the learned Senior Counsel for the appellants, are of no avail to him.
31. The contention of the appellant that, once notified and changes effected, it relate back to the date of reconstitution, is not liable to be accepted. If it is accepted then it will have vast and far reaching consequences in the liability of partners in transactions with third parties. Possibly, in the light of the judgment of the Apex Court in Raptakos Brett & Co Ltd (supra), the theory of relation back could be applied; but it could not by any stretch be extended prior to the date of intimation.
32. The learned Senior Counsel for the appellants would raise a further argument that, the suit is not one on a contract but is based on the statutory liability of the Insurance Company under the Insurance Act. The suit being not one on a contract the bar under Section 69(2) is not attracted, it is urged. The learned Senior Counsel would refer to the judgment of the Apex Court in Shiv Developers v. Aksharay Developers & others (AIR 2022 SC 772) to buttress his contention that, Section 69(2) of the Act is not attracted when the suit is filed on a statutory right.
33. The law as urged by the learned Senior Counsel that, if the suit is founded on a statutory liability/ right, the bar under Section 69(2) of the Act is not attracted is too well settled. However, in the case at hand, the suit is based on the contracts of insurance entered into between the plaintiffs and the first defendant. It is not a statutory right/liability. The claim and liability stems out of the contracts between the parties. Hence the said contention also fails.
34. On the above discussions it can only be held that the suit is not maintainable for non satisfaction of the stipulations prescribed under Section 69(2) of the Act. The finding of the trial court with regard to the same warrants no interference. Point No.(i)is answered accordingly.
35. On the finding on point No.(i), the suit is bound to fail. In terms of Order XIV Rule 2(2), when the suit is liable to be disposed of on an issue of law relating to the bar of suit created by any law in force, it is not necessary for the Court to pronounce judgments on all issues. Therefore, it would suffice to have the appeal disposed of on the finding of the bar of suit under Section 69(2) of the Act. However, since the trial court had proceeded to consider the issues of misjoinder of parties and the merits of the plaintiffs' claim, and the said issues were addressed before this Court, it is deemed appropriate to consider the said issues also.
36. Coming to the plea of mis-joinder of parties, according to the Insurance company, since the contracts of insurance of plaintiffs 1 and 2 are separate and the claims are on the same they could not have joined in one suit. We do not find the contention appealing. Though the suit is on the separate insurance contracts, as was noticed, the premises in question is one that was shared between the two. The incident which resulted in damages is also one and the same. Only the quantum of the claims could vary. Order I Rule 1 (a) read with Order III Rule 3 CPC, adequately takes care of such situations enabling joinder of parties and causes of action. We agree with the trial court in its finding that the suit is not bad for mis-joinder of parties. Point No.(ii) is answered accordingly.
37. On the merits, the claim of the plaintiffs is sought to be denied by the Insurance Company on the contention that, the fire incident in question was not an accident but, was a self created one by the plaintiffs. During the relevant period the plaintiffs were in financial crunches consequent on the rejection of their exported consignments to Italy. The fire incident was stage managed by the plaintiffs to raise claim against the Insurance Company to recoup value of such goods, it is contended. According to the learned senior counsel for the Insurance company, the reports of the authorities do not go together nor do their depositions go in harmony. Therefore, it has to be found that the incident in question could not have been the result of a short circuit as claimed by the plaintiffs but has resulted consequent on the fraudulent act of the plaintiffs. The conditions in the policy of insurance absolves the Insurance Company from liability in case of fraudulent claims. The claims are thus bound to fail, it is argued.
38. Relying on the judgment of this Court in K.Reghunathan v. The National Insurance Company Ltd & Ors., (2003 SCC OnLine KER 499) the learned senior counsel for the Insurance Company argued that, the evidence on record casts shadow on the genuineness of the plaintiffs’ claim. Hence it was necessary for the plaintiff to prove before the Court the cause of the fire. The learned Senior Counsel for the Insurance Company referred to the relevant reports and the deposition of witnesses and attempted to establish that the case of “fire by short circuit” is improbable.
39. In K.Reghunathan. v. The National Insurance Company Ltd & Ors., (supra) this Court held,
“As per the Insurance law, onus of proof that the loss was caused by a peril insured against, lies upon the assured. The assured is not, however, required to prove the cause of loss conclusively. It is for the Court in each case to see whether the probability is so slight, or so equally balanced by counter-probabilities or is one-sided as the amount to legal proof as stated in Nobel's Explosive Co-op v. British Dominions General Insurance Co. (1918) WC & Ins Rep 106). The authoritative text book on the subject is “General Principles of Insurance Law” by E.R.Hardy Ivamy. At page 434 of that book (Fourth Edition) it is noted that since it is the duty of the assured to observe the utmost good faith in his dealing with the insurers throughout, the claim which he puts forward must be honestly made; and, if it is fraudulent, he will forfeit all benefit under the policy whether there is a condition to that effect or not. The assured must make a full disclosure of the circumstances of the case in his dealings with the insurers throughout. From page 439 onwards, Chapter 40 begins and it deals with burden of proof. At page 440, the following passage refers.
SELLERS, L.J., said that in order to succeed the insured had to prove a loss of goods covered by the policy due to a risk insured against, and that obligation remained none the less where the evidence called by the underwriter might establish or tend seriously to show that a crime had been committed by the claimant. If the evidence of all the witness and the effect of all the documents left the Court in doubt on the question whether or not there had been a fortuitous loss – i.e. by breaking and entering and stealing – the insured would not be entitled to judgment as he would not have established the fact that the loss of the goods was due to a risk insured by the policy.”
40. The learned Senior Counsel for the appellants would on the other hand contend that, the case of a self inflicted fire was never set up by the Insurance Company till the filing of the written statement. Immediately on the happening of the event, the Managers of the Insurance Company– the Branch Manager and the Senior Divisional Manager, had reached the spot and had witnessed the incident. DW4 the Preliminary Surveyor and PW16 the Surveyor of the Insurance Company never had a case that the plaintiffs had deliberately caused the fire. All the authorities suggested that the reason for the incident was “electrical short circuit”. There is no material to find that the fire was caused by the plaintiffs themselves. Though the burden was heavy upon the Insurance Company to prove the same, it has not been discharged, it is argued.
41. All the governmental/statutory authorities including Forensic Science authorities, Electrical Inspectorate, Police and even the statutory surveyor of the Insurance Company certified the cause of the incident to be an “electrical short circuit” that occurred in the godown. The statutory surveyor of the Insurance Company submitted Exts.B5 and B6 reports accordingly.
42. Admittedly the policies of insurance (Exts.A1 and A2) cover accidents by fire. Clause (8) in the Conditions of policy reads thus:-
“8. If the claim be in any respect fraudulent, or if any false declaration be made or used to support thereof or if any fraudulent means of device are used by the Insured or any one acting on his behalf to obtain any benefit under the policy or if the loss on damage be occasioned by the willful act or with the connivance of the Insured, all benefits under this policy shall be forfeited.”
The claims of the plaintiffs were repudiated by the Insurance Company under Exts.A26 and A26(a). All that the letters of repudiation stated was that, the case of the plaintiffs that the incident occurred out of short circuit “could not be established”. Even in such letters or at any point of time prior to the same, the Insurance Company had a case that it was a self created “accident” by the plaintiffs. As contended by the appellants, such a case was brought in for the first time only in the written statement. Even in Ext.B17 report prepared based on Exts.B4, B10, B12, B14 and B16 it has been categorically stated that there is no evidence to find that the incident occurred because of any foul play of the plaintiffs. The repudiation letters only said that “the cause of fire is not established”. There was no allegation of any fraud and fraudulent claim.
43. In New India Assurance Co. Ltd. v. Mudit Roadways, (2024 (3) SCC 193) the Apex Court held that, the Insurance Company could not urge a new ground of repudiation from what is stated in their letter of repudiation. In holding so, the Apex Court followed its earlier judgments in Galada Pwer and Telecommunications Ltd. v. United India Insurance Co.Ltd and anr. (2016) 14 SCC 161, Saurashtra Chemicals Ltd. v. National Insurance Co. Ltd. (2019) 19 SCC 70 and J.S.K Industries Pvt.Ltd v. Oriental Insurance Co. Ltd. MANU/SC/1355/2022.
44. In Shobika Attire v. New India Assurance Co.Ltd.& Co. (2006) 8 SCC 35, the Apex Court, on the issue of burden of proof in a claim under fire insurance held, “In our view, the appellants had discharged the initial burden regarding destruction, damage of the showroom and the stocks therein by fire and riot in support of the claim under the insurance policy and it was for the insurance company to disprove such claim with evidence, if any. In our view, the insurance company, despite the report of the investigator, failed to establish that the claim of the appellants was not justified and was not covered by the policy of insurance.”
45. The quote in K.Reghunathan's case – supra, with regard to the burden of proof, is taken from “General Principles of Insurance Law by E.R.Hardy Ivamy. It is necessary to quote the further two paragraphs in the said book given in continuation to the above quoted portion. It reads thus,
“The burden of proving that he did not cause the loss himself does not lie on the insured.
Thus, in Slattery v. Mance ( [1962]1 Lloyd's Rep. 60)
A yacht was insured under a marine insurance policy. It was totally destroyed by fire, which was one of the perils insured against. Arson was allegedly by the underwriter
Held, once it was shown that the loss was caused by fire, the plaintiff had made out a prima facie case, and the onus was on the underwriter to show that on a balance of probabilities the fire was caused or connived at by the plaintiff
SALMON, J, said.
“In my judgment once it is shown that the loss has been caused by fire, the plaintiff has made out a prima facie case and the onus is upon the defendant to show on a balance of probabilities that the fire was caused or connived at by the plaintiff. Accordingly, if at the end of the day, the jury come to the conclusion that the loss is equally consistent with arson as it is with an accidental fire, the onus being on the defendant, the plaintiff will win on that issue.” [Extracts from Pg. No.365 of “ General Principles of Insurance Law” (2nd Edn) by E.R.Hardy Ivamy]"
Therefore, once the plaintiff makes out a prima facie case, the burden is on the Insurance Company to adduce evidence to show that the probable cause of the fire is not as claimed by the plaintiff but could have been at his instance. Till the filing of written statement the Insurance Company never had a case of “self created fire” attracting condition (8) of the policy. If any such notice was given, the plaintiffs could have taken steps then and there to get expert reports to substantiate the cause of fire. A case of “fraudulent claim” was not put forward or indicated at all, even in the repudiation letter.
46. Exts.B5 and B6 are the reports of the Surveyor of the Insurance Company who was examined as PW16. There is nothing therein or in the oral evidence to discredit the same. As noticed earlier, the reports of the electrical inspectorate, forensic laboratories and police authorities do not militate against the evidence of PW16 the Surveyor. The trial court noticed that the Branch Manager and the Senior Divisional Manager of the Insurance company, though were present at the spot and had witnessed the incident, were not examined. The learned senior counsel for the Company would argue that their non-examination is insignificant since they could not have stated anything regarding the cause of fire. However, when the Company attempts to put forward a case of self inflicted fire, they having witnessed the incident, could have been questioned with regard to its probability. Ext.B19 report of the preliminary surveyor stated that on the day of the incident “nothing could be seen inside the cold storage as it was filled with smoke.” Though it is stated that on the subsequent visit to the site with the branch manager, an electrical light was seen glowing, it is not stated where it was located. PW5, a retired Chief Engineer of the Kerala State Electricity Board deposed that, at the time of short circuit the temperature will reach 60,000 degree Celsius. Thus even if the temperature of cold storage is minus 20 degree Celsius there is possibility of the hardboard paper carton going ablaze.
47. There is no sufficient evidence to enter a finding that, probably the fire was the result of a fraudulent act of the plaintiffs. The trial court has taken note of all the relevant materials while arriving at such conclusion. The said finding warrants no interference. Point No.(iii) is answered as above.
48. On the finding on the bar of suit under Section 69(2) of the Act, the appeal is bound to fail. The trial court was right in having dismissed the suit.
49. Accordingly, the appeal is dismissed. No costs.
