1. ' K. E. C4AUHAN, J.-This is an appeal against the judgment and decree of the learned Civil Judge, Rawalpindi. Dated 5-6-1971, whereby he dismissed the suit of Mst. Zobida Haq (plaintiff) widow of Lieutenant Colonel Maul Haq. The facts of the case are that Lt. Col. Ataul Haq (hereinafter called the promisor) on 3-7-1965 filled in and sent a formal proposal Exh. D/1 for getting himself insured with the defendant company for life, for a sum of Rs, 60,000. The plaintiff was the nominee, the beneficiary and also an agent, as indicated In the proposal form. Unfortunately the promisor died on 24-7-1965 where after the plaintiff filed the present suit for recovery of the aforesaid amount.
2. Her case was that the proposal form was signed and sent on 3-7-1965. The promisor was medically examined on the same date. The promisor also sent a cheque for Rs, 3,000 as advance/first premium which was encashed on 9-7-1965 and this, according to her, constituted completion of contract and acceptance of the proposal which was sufficient to burden the defendant company with the corresponding liability.
2. The stand of the defendant company was that the company had not yet either accepted or communicated acceptance of the proposal to the promisor, and as such, no binding contract between the parties had come into existence. It was submitted that in the instant case the matter had not yet passed beyond the negotiations stage, because, it was one of the terms of the proposal itself that liability was to arise only when a formal letter of acceptance was issued and the first premium was adjusted by a formal receipt in terms of that letter towards the policy. As both these things had not yet taken place, therefore, no liability at all came into existence.
3. On the pleadings of the parties, the learned Civil Judge framed as many as 9 Issues out of which Issues Nos. 5, 6, 7 and 9 are relevant, inasmuch as. Arguments were addressed before us by the parties only on these issues. They are as follows:- ' Issue No, 5.-Whether the proposal was accepted by the defendant? 0. P.
3. ' Issue No, 6.-Whether the plaintiff is entitled to recover the suit amount from the defendant? 0. P.D ' Issue No, 7.-What is the effect of the acceptance of the premium of Rs, 3,000 by the defendant? 0.
4. P. D.
5. ' Issue No, 9.-Relief.
6. ' After recording the evidence produced by the parties, the learned Civil Judge, decided the aforesaid issues against the plaintiff and dismissed the suit with costs. Hence this appeal.
4. Raja Mohammad Anwar, learned counsel for the plaintiff-appellant took us through the provisions of sections 2 to 7 of the Contract Act IX of 1872 and submitted that in the instant case the parties had definitely come to a final agreement, though they intended to have a formal document drawn up in the form of "insurance policy" later on, which, according to him, was of course to be preceded by a "letter of acceptance" and "first premium receipt" showing adjustment of the advance/first premium, but-the mere fact that a formal "letter of acceptance" or "first premium receipt" showing adjustment of the premium was not issued or a formal insurance policy was not remitted, was immaterial so far as the facts and circumstances of the present case are concerned, because, according to him, the encashment of first premium cheque was sufficient by itself to bring about a concluded contract binding on the defendant. The real test, it was argued by Raja Mohammad Anwar, to see if a contract between the parties is complete or not, is the intention of the parties as to whether or not there is to be no binding contract till the document is executed or whether the document is merely to commemorate in the manner required by law the terms of the bargain already concluded. This was a general principle of law of contract and, according to him, is to apply to the present case as well. There is no quarrel with the general principle of law.
7. However, if we judge the present case in the light of the aforesaid principle, the result is bound to be against the plaintiff-appellant and her contention of a binding contract having come into existence on the peculiar facts and circumstances of the present case, as we will presently, show, has no merit. This is a case of the type where the issuance of "letter of acceptance" and issuance of the "first premium receipt" in terms thereof was a condition precedent, if we can say so, of the very bargain under examination. It is a case where no acceptance of the proposal at all took place.
8. Section 2 of the Contract Act IX of 1872 lays down that . . "in this Act the following words and expressions are used in the following senses unless a contrary intention appears from the context- -(a) when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal; (b) when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted becomes a promise; (c) the person making the proposal is called the "promisor" and d the person accepting the proposal is called the "promise"; (d) when, at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise; (e) every promise and every set of promise forming the consideration for each other, is an agreement; (f ) promises which form the consideration or part of the consideration for each other are called reciprocal promises; (g) an agreement not enforceable by law is said to be void; (h) an agreement enforceable by law is a contract . . . ". Chapter 1 of the Act consists of sections 3 to 9 and headed as "Of the Communication, Acceptance and Revocation of Proposal". Section 3 which is headed as "Communication, acceptance and revocation of proposals" lays down that "the communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it". Section 4 is headed as "Communication when complete" and states that "the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. The communication of an acceptance is complete, as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; - as against the acceptor, when it comes to the knowledge of the proposer. The communication of a revocation is complete - as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it,- as against the person to whom it is made, when it comes to his knowledge".
9. Section 7 is headed as "acceptance must be absolute" and states that "in order to convert a proposal into a promise, the acceptance must (1) be absolute and unqualified; (2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such mariner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance".
10. ' A study of these provisions of law will show that in order to bring about a binding contract of insurance, it was necessary that there should have been acceptance of the proposal of the promisor i,e, the deceased doctor Ataul Haq and the acceptance should have been communicated to him by the promise i,e, the company. If we examine the present case in the light of the above principles, we notice that the proposal Exh. D/1 which was made by Dr. Ataul Haq himself contained a term in the form of condition No, 4 (in the part headed as "declaration") to which he agreed and which was to the following effect "Condition No, 4.-That any payment made by me in advance either in cash or cheque or both and acknowledged by the company provisionally shall be treated as deposit involving no liability to the company till the same is adjusted as premium in terms of the company's letter of acceptance by issuance of a first Premium Receipt."
11. This means that the acceptance in the instant case was to be in a specified manner, namely, by a Letter of Acceptance, and adjustment of advance or the first premium by issuance of a "first premium receipt" in terms of the said letter. The documentary evidence brought on the record, however, shows that here none of these conditions stand fulfilled. No doubt, the proposal Exh. D/1 is dated 3-7-1965. The person to be insured Dr. Ataul Haq was medically examined on the same day, vide examination report Exh. D/2. The advance premium of Rs, 3,000 was paid in the form of a cheque, as stated in para. 4(d) of Exh. D/1. The relevant cheque, however, it was conceded before us the learned counsel for the appellant, was dated 7-7-1965 and was encashed on 9.7-1965 and as deposed by D. W. 2 Mohammad Bashiruddin the amount was kept only in a suspense account.
12. (This statement he made by bringing the relevant account record in Court), Neither any "letter of acceptance" nor any "first premium receipt" showing regular adjustment of the advance amount towards the premium was issued to the promisor in terms of condition No,
4. In these circumstances, it cannot be held that any binding contract between the company and Lt. Col. Dr. Ataul Hag came into existence, because, as shown above, the very acceptance of the proposal in this case did not take place in the manner prescribed. When confronted with the above situation, learned counsel for the appellant referred to Exh. P/3 which is a letter of the company, dated 9/l0th July 1965 to show that acceptance of the proposal had duly taken place. This letter reads as follows:- "Letter dated 9/10th July 1965 ' Re: Proposal No, L-6195/65 Own Life Table IV - Sum Proposed Rs, 60,000 ' Term: 27 year.
13. ' We are indeed grateful to you for the above proposal. The papers are being scrutinised and our letter conveying the decision will follow shortly.
14. ' In the meantime, we would request you to please remit a sum of Rs, 3,000 representing the initial yearly Premium so that the first Premium Receipt covering risk on your valued life be issued immediately the proposal is accepted by us at Ordinary Rates and as applied for.
15. ' The issue of the policy will be facilitated if steps are taken at this stage to have your age admitted by producing (sic.)
16. ' Assuring you of our best attention and services at all times."
17. ' Para. 1 of this letter shows that the papers of the promisor were still being scrutinized and a decision was to follow after that scrutiny was over. The words "in the meantime" in para. 2 indicate that they refer to the period intervening the scrutiny and the final decision. Learned counsel for the plaintiff-appellant referred to the phrase "the proposal is accepted" to show that the said letter was itself communicating acceptance of proposal. This is not correct. In the context in which the above words occur they are meant to require the addressee to do the things mentioned therein so that the proposal is accepted. The words "so that" which occur in the beginning of the relevant sentence cover the whole of that sentence and the words "proposal is accepted" cannot be taken out of that context. Read in this way it will mean that the promisor was being asked to do certain things if we can put it in a proper form "so that the proposal is accepted". Even otherwise the meanings which are being sought to be put on the words do not fit in the text of the letter and, therefore, cannot be introduced therein by us in the form of any generous addition. At this stage learned counsel for the plaintiff-appellant referred to another letter Exh. P/1 dated 16-7-1965.
18. ' This letter reads as follows :- {{TABLE}} "Telephone No, 64697 Telegram "Efulife"
19. P.
0. Box 238 Eastern Federal Union Insurance Co. Ltd.
20. (Established in 1932)
21. Edward Road, Rawalpindi.
22. Ref. No, Dated 16th July, 1965 The Zonal Manager (Life), Lahore Dear Sir, It sounds rather unfortunate that in most of the cases wherein first premium is paid and the letters of acceptance are due, the company issues premium payment notices thereby delaying risk over note without any justification.
23. In connection with proposal No, L-6195/65 a sum of Rs, 3.000 was paid on 9-7-1965 and the B. M. No, 061798 in this case was in your office when premium payment notice was issued.
24. Kindly look Into this case and see that risk cover note is issued at earliest.
25. Thanking you.
26. Yours faithfully, (Sd.)
27. (A. R. BHATTI)
28. "Lt.-Col. Ataul Haq." {{TABLE}} ' This letter was produced by the appellant herself. Instead of supporting the appellant it goes against her inasmuch as it is based on the acknowledgement of the fact that letter of acceptance had not been till then issued to the Lt. Col. Atual Haq and rather raised a protest as to why that had not been done despite the payment of the first premium. This letter was issued by A. R. Bhatti, P. W.
29. 1, who during those days used to work as employer of Agents. He disclosed that Mst. Zubeda Hag, plaintiff, wife of Dr. Ataul Hag was also working as an Agent for the Company. In this case, therefore, she occupied a dual position, namely, as an agent and as a nominee. The witness categorically stated that the defendant had not accepted the proposal of Lt. Col. Ataul Hag. In the face of this copious material against the plaintiff, it is not possible to hold that the company had accepted the proposal of the late Dr. Ataul Haq and as is manifest the communication of acceptance was never conveyed to him by the company.
5. Learned counsel for the plaintiff-appellant referred to Hindusthan Co-operative Insurance Society Ltd. v. Shyam Sunder and others (1) for the proposition that unconditional appropriation of first premium can tantamount to acceptance of proposal. This case has no application to the case before us, because, here the first premium was not appropriated but was kept in suspense as shown above. The Calcutta case itself points out that where first premium is kept in suspense account than that will not amount to acceptance of proposal. Moreover in the present case there is an additional specific term in black and white In form of condition No, 4 laying down the mode of communication of acceptance which has been dealt with above. In the face of that express term the question of any implied acceptance, which even otherwise does not stand proved on this record, does not arise. He then referred to Ram Dev Mool Chand v. The Lakshmi Insurance Co. Ltd.
30. And another (2) and the case referred to therein, namely, Muhammad Sultan v. Clive Insurance Co.
31. Ltd. And another (3). The facts of both these cases are distinguishable, because, in our case no acceptance had yet at all taken place.
6. The upshot of the above discussion is that the present appeal has no merit and is dismissed with no order as to costs.
(1) AIR 1952 Cal 691
(2) AIR. 1962 Pb. 125
(3) AIR 1934 All. 298