Insurance policies
, especially those relating to trade and commerce, contain a clause prescribing a period ranging of one, six or twelve months within which litigation should be initiated from the date of repudiation of the claim, otherwise the right to enforce the claim would be deemed to have been abandoned. The question was whether such a clause would be valid or not.
The Supreme Court, in National Insurance Co. v/s Sujir Ganesh Nayak, analysed this clause in the context of the provisions of the
Contract Act
1872 prior to its amendment. It observed that the clause did not seek to curtail the limitation period, but merely provided for forfeiture, waiver, or extinction of the right to the claim. So it concluded that this clause was not contrary to law.
Subsequently, in several cases the
National Commission
held this clause to be illegal in view of the amendment to the Contract Act in 1997. The amended clause 28 provides that any clause in an agreement which restricts a person from absolutely from enforcing his rights through legal proceedings, or which limits the time within which he may enforce his rights; or provides for extinguishing his rights, would be void.
Despite this, insurance companies have been trying to mislead courts by arguing that the National Commission's interpretation is incorrect and contrary to the law laid down by the Supreme Court, conveniently overlooking the amendment to the Contract Act. Now, in a landmark decision given on March 11, 2022 in Oriental Insurance Co. Ltd. v/s Sanjesh, the Supreme Court has authoritatively put this controversy to rest by holding such a clause in the policy would be void, being contrary to the provisions of the amended Contract Act. (The author is a consumer activist and has won the Govt. of India's National Youth Award for Consumer Protection. E-mail is jehangir.gai.columnist@outlook.in)