' The plaintiff firm has filed this suit claiming a refund of insurance premium amounting to Rs,1,81,843.75 from the defendant Insurance Company. The plaintiff imported Khopra worth Rs,55 lakhs from Indonesia per S.S. Aman an old vessel. At the instance of Habib Bank Limited, the plaintiffs were required to provide insurance cover, from the date of loading of the cargo in September, 1966. Plaintiff's, therefore, approached the defendant company in February, 1967 and obtained Marine open cover No,6506-A dated 1-2-1967 for this cargo. It was mentioned in this cover note that the premium would be charged according to the tariff and the cover note was subject to extras if any for over-age vessels. It is the case of the plaintiffs that they were given to understand that the over-age extra would be 1.5 per cent of the sum assured. The plaintiffs had to furnish a Bank guarantee for the premium according to the condition in the cover note as required under section 3-C of Insurance Amendment Act, 1958. No such Bank guarantee was, however, furnished. On 28th February, 1967, the plaintiffs were sent a bill for the premium, charging over-age extra at 4 per cent. Since the plaintiffs avoided furnishing of Bank guarantee or payment of this premium the defendants by their letter, dated 1st March, 1967, cancelled this open cover. The plaintiffs, however, insisted that since they had agreed to 1.5 per cent. Over-age extra they could not demand the extra at 4 per cent, because the reinsurers had raised the over-age extra from 1st March, 1967. The plaintiffs then tried to obtain insurance for this cargo from other Insurance Companies but they did not succeed. Since the cargo according to the Bank's requirement had to be insured on warehouse to warehouse basis the plaintiffs again started further negotiations with the defendant Insurance Company. The defendants informed the plaintiffs that in case their reinsurers agreed to charge premium at a rate lower than 4 per cent they would refund the difference. The plaintiffs, therefore, sent a premium with over-age extra at 4 per cent as demanded by the defendant-Company and obtained the insurance policy containing an endorsement that the risk was to commence from the date of bill of lading. It was also mentioned in the policy that it was issued in lieu of open cover No,6506, dated 1st February, 1967. The cargo of Khopra reached Karachi in damaged condition and there was also shortage. The plaintiffs, however, preferred a claim against the Shipping Company which remained pending before the Arbitrator in London.
Meanwhile the plaintiffs filed this suit claiming that according to the agreement the defendants had to issue the Insurance policy charging 1.5 per cent over-age extra, they should, therefore, refund 2-1/2 per cent charged by them in excess amounting to Rs,1,81,843.75.
2. The defendant Insurance Company contended in their written statement that they had issued the cover not in which the rate of overage extra was left open and after ascertaining the rate from reinsurers they sent the bill to the plaintiffs. The plaintiffs avoided to pay the premium or to furnish Bank guarantee and consequently the cover note was cancelled. Since the plaintiffs could not get the insurance cover from the other companies, they again started negotiations with the defendants and they sent their cheque according to the premium at 4 per cent overage extra without any condition, in full and final settlement. The defendants have also raised a plea that since the plaintiffs had failed to furnish Banks guarantee or pay the premium, the cover note became ineffective as under section 3-C of the Insurance Act as amended, no contract of insurance was valid unless premium was paid or Bank guarantee was furnished. That the plaintiffs had kept quiet for one year and had preferred this claim after the arrival of the vessel. That no premium could be refunded after the voyage when the company had remained at risk throughout the period of the voyage.
3. On the above pleadings of the parties the following consent issues were adopted:--
(1) Whether the plaintiff is a registered firm?
(2) Whether the cover note was subject to extras, if any, for overage vessels?
(3) Whether the rates of extra premium for overage vessel on or about 1-2-1967 was 1.5 per cent.
And on or about 1-3-1967 was 4 per cent.?
(4) Whether the plaintiff was liable to pay the extra premium for overage vessel at 1.5 per cent. Or 4 per cent.?
(5) Whether the plaintiff paid 4 per cent. Extra premium under protest?
(6) Whether the defendant is liable to refund to the plaintiff Rs,1,37,500 or any other sum?
4. It has been argued by Mr. Noor Muhammad on behalf of the plaintiffs that the cover note being an agreement to issue a policy on payment of the premium was a valid agreement and the defendant Insurance company was bound to issue the policy in accordance with the conditions settled at the time the cover note was issued. That the cover note is dated 1st February, 1967. Under the cover note the premium has to the charged according to the tariff. That it has been admitted by the defendants in their letter Ex.5/10, dated 5th March, 1967, that the previous rating for overage extra was 1.5 per cent but the same has been enhanced from 1st March, 1967 to 4 per cent. That since according to the cover note issued on 1st February, the tariff rate was at 1.5 per cent overage extra the insurance company was bound to accept the premium at this rate and they were, therefore, bound to return the excess premium charged. That the cover contained a condition that the same could not be cancelled within 30 days from the date of issue. The cover note, therefore, remained valid and the policy had been issued in lieu of this cover note. That cancellation of the cover note was not, therefore, justified, nor was there a new contract after consultation between the parties for payment of overage extra at 4 per cent.
5. It has on the other hand been pointed out by Mr. Abdul Rauf on behalf of the defendants that for overage extra there was no tariff. This extra had to be ascertained by reference to the reinsurers since the risk to the extent of Rs,55 lakhs could not be borne by the defendants alone. That even under the Insurance Act the reinsurance was compulsory. That the defendants had been advised by the reinsurers in England, in reply to their letter, dated 15th February, 1967, that the overage extra would be charged at 4 per cent. Under these circumstances they could not accept 1.5 per cent from the plaintiffs. That the cover note contained the condition of acceptance of premium according to the tariff but the cover note was subject to overage extra which was left open as the rate had to be ascertained from the insurers. That there was no tariff in respect of the overage extra rates. It has next been argued that the cover note did not consitute a valid agreement since the basis for this agreement was the furnishing of Bank guarantee. In the absence of this Bank guarantee the cover note was without consideration. Mr. Rauf has also pointed out that under section 3-C (4) of Insurance Act in case the premium is not paid nor guaranteed no risk is assumed and under Rule 49(3) of the Rules framed under section 104 of the Insurance Act, even a cover note could not be issued unless Bank guarantee had been furnished. Therefore, the cover note was not an effective agreement for issue of the Insurance Policy and as such it could be cancelled even before the expiry of 30 days. That in any case the parties could not contract out of the statute and the cover note was not a binding agreement.
6. Lastly, it has been argued that when the defendants demanded overage extra at 4 per cent it was refused and the negotiations came to an end. The defendants then cancelled the cover note and this fact was communicated to the plaintiff by a letter dated 1-3-1967. The plaintiffs then admittedly approached other companies to provide a cover but they could not succeed. They opened negotiations with the defendants and paid the premium as demanded and defendants promised to make a refund in case their reinsurers accepted overage extra at a rate lower then 4 per cent. The defendants afterwards informed the plaintiffs that the reinsurers did not reduce the overage extra premium and no refund was to be made. That the previous contract having come to an end with the cancellation of the cover note a new contract was entered into by the parties and the premium with 4 per cent overage was paid unconditionally.
7. It has been established by production of the cover note Ex.5/2 that though the premium rate was according to the tariff it was "subject to an extra for overage vessels." This overage extra was thus left open and it depended upon the rate demanded by the reinsurers. Even if there was any oral promise for payment of overage extra at 1.5 per cent that promise came to an end when the cover note was cancelled. Fresh negotiations were then started and the plaintiffs had paid premium with overage extra at 4 per cent subject to refund of any amount charged less by the reinsurers. This was certainly a new contract and it was entered into on fresh terms and conditions.
8. In view of the above discussion the issues are answered as under:--
9. Issue No,1: The plaintiffs firm is a registered firm as per certificate of registration Exh.5/1.
10. Issue No,2: The cover note was subject to overage extra, the rate to be ascertained afterwards.
11. Issue No,3: The rates of extra premium of overage vessels had to be ascertained, subject to the rates quoted by the reinsurers. The overage rate quoted was 1.5 per cent in February but it was enhanced during that month by the under writers in London and the resultant alteration in the rates was made in Pakistan from 1st March, 1967.
12. Issue No,4: Since the question of overage extra according to the cover note was left open and the reinsurers demanded extra premium at 4 per cent the plaintiffs were liable to pay the extra at that rate. Even otherwise the cover note having been cancelled, the plaintiffs had entered into a fresh contract and paid premium at 4 per cent extra subject to refund if the reinsurers charged less than 4 per cent.
13. Issue No,5: Since there was a fresh contract the plaintiffs had paid 4 per cent extra premium without any condition but subject to refund if the extra was charged at lower rate by the reinsurers.
There was no question of payment under protest.
14. Issue No,6: The defendant Insurance Company is not liable to refund the premium already paid at 4 per cent overage extra after conclusion of the voyage especially when the reinsurers had not accepted the lower rate.
' In the result, the suit of the plaintiffs is dismissed. The parties are, however, left to bear their own costs under the circumstances.