Govindan Nair, C.J.
1. The question raised in this appeal is covered by a direct authority of this Court against the appellant which has been referred to by Gopalan Nambiyar, J., in the judgment under appeal; the decision in M/s. Marikar Motors Ltd. v. Chief Enforcement Officer, Emergency Bisks Insurance Scheme, Madras, AIR 1973 Ker 2. A Division Bench of the Madras High Court in the decision in M/s. Stoneware Pipes (Madras) Ltd. v. Union of India, AIR 1971 Mad 442 has taken a different view. The question turns on the interpretation of Section 1 (3) of the Emergency Risks (Goods) Insurance Act, 1962, for short, the Goods Act, and Section 1 (3) in identical terms of the Emergency Risks (Factories) Insurance Act, 1962, for short, the Factories Act We shall extract the sub-section from the Goods Act :
'It shall remain in force during the period of operation of the Proclamation of Emergency issued on the 26th October, 1962 and for such further period as the Central Government may, by notification in the Official Gazette, declare to be the period of emergency for the purposes of this Act, but its expiry shall not affect anything done or omitted to be done before such expiry and Section 6 of the General Clauses Act, 1897, shall apply upon the expiry of this Act as if it had been repealed by a Central Act.'
2. The appellant before us, M/s. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd., (Pulp Division), was governed by the above Acts is admitted. That they were liable to take out policies of Insurance as envisaged by the Acts is also admitted. That they were the sellers or suppliers of goods of the description referred to in Section 3 is further admitted. In fact they had taken policies of insurance of such goods during the time the Acts were in force. The emergency ceased in 1968 and so the Acts also ceased to exist in 1968. The authorised officer purporting to act under Section 8 (1) of the Goods Act issued notices to the appellant to furnish certain information for determining whether the appellant had failed to insure as required by the Goods Act or at least had failed to insure to the full amount as required by the Act. The notices were issued after the Acts ceased to exist. A contention has been raised in the Original Petition that notwithstanding the provisions in Section 1 (3) of the Goods Act and the provisions in Section 6 of the General Clauses Act, 1897, no investigations can be made by the authorised officer after the expiry of the Acts to determine whether there has been insurance to the full extent as required by the Act and it is therefore prayed that the notices be quashed and Nambiyar, J., refused to grant the reliefs and dismissed the petition. The learned Judge has referred to the relevant provisions of the Act and has extracted them in the judgment under appeal. We do not think it necessary to extract all those sections again in this judgment though we think, we should read Sections 7 and 8 of the Goods Act :
'7. (1) While the Scheme is in operation, no person shall, after such date as may be specified in this behalf by the Central Government by notification in the Official Gazette, carry on any business in India as a seller or supplier of goods, unless, in respect of any goods insurable under this Act which are for the time being owned by him in the course of that business, there is in force a policy of insurance against emergency risks issued in accordance with the Scheme, whereby he is insured in respect of such goods for a sum not less than the value thereof for the time being :
Provided that the Scheme shall not restrict the carrying on of business as aforesaid by any person, if and so long as the value of all goods insurable under this Act which are for the time being owned by him within one and the same Presidency town or district in the course of that business does not exceed thirty thousand rupees. (2) Whoever contravenes the provisions of this section shall be punishable with fine which may extend to one thousand rupees and with further fine which may extend to five hundred rupees for every day after the first on which the contravention continues.
8 (1) Without prejudice to the provisions of Sub-section (2) of Section 7, where any person has failed to insure as, or to the full amount, required by this Act, and has thereby evaded the payment by way of premium of any money which he would have had to pay but for such failure, an officer authorised in this behalf by theCentral Government may determine the amount payment of which has been so evaded and the amount so determined shall be payable by such person and shall be recoverable from him as an arrear of land revenue and shall be a first charge on the goods in respect of which the default was made,
(2) A person against whom a determination is made under Sub-section (1) may, within the period specified in the Scheme, appeal against such determination to the Central Government whose decision thereon shall be final.'
3. It is not disputed before us that the appellant was obliged by the provisions in Section 7 to take out insurance policies as envisaged by the Act and as provided in the Scheme. The arguments on the other hand, turned on the question whether there has been a concluded contract of insurance. According to counsel for the appellant a concluded contract of insurance will result only when an application as envisaged by the Scheme and the Schedule to the Act has been made and this has been accepted efter scrutiny of the valuation and a policy in. the form prescribed was issued to the person seeking insurance. It is said that such a policy had been issued and it was urged that if an insurance is to be effected at a higher valuation of the goods there should be a fresh application and a fresh policy should be issued and till a fresh policy is thus issued, there is no liability to pay any premium and therefore there was no omission during the period the Act was in force and there having been no omission there will be no consequence after the repeal of the Act notwithstanding Section 1 (3) of the Goods Act and Section 6 of the General Clauses Act, 1897.
4. We are unable to accept this argument. Section 7, we think, clearly indicates that there must be an insurance taken out as envisaged by the Act and the Scheme. This being so, premium must be paid for the full value of the goods and there is provision in the Scheme for determining the value of the goods. If the premium had not been paid on the full value of the goods, there will be a failure to comply with the provisions of the said Act. This we conceive would be an omission. This omission having occurred during the time when the Act was in force, for if there were goods which were liable to be insured under the Act for a period during which the Act was in force, there would be omission to pay the premium for the full value of the goods and if such value had not been paid, Section 1 (3) would be attracted. In such circumstances action can be taken under Section 8 (1) of the Goods Act. Section 7 (2) Indicates that penal action may also be taken under that sub-section.
5. Chief Justice Veeraswami in the decision in M/s. Stoneware Pipes (Madras) Ltd. v. Union of India, AIR 1971 Mad 442 on which great emphasis was placed by counsel for the appellant, if we may say so with great respect, correctly summarised the provisions of tine Act in the following manner in paragraph 3 of the judgment :
'3. The provisions of the Act under the Scheme bring out that insurance under the Act to the full insurable value Is compulsory, and failure to insure for the full value of the property is an offence punishable with fine, and that, in case of such failure, or under insurance besides the punishment therefor as an offence, provisions are made for recovery of the relative premia, and to effectuate this purpose for the procedure of determination of the insurable value and of the premium evaded from payment These features are peculiar to Emergency Risks Insurance under the Act and) the Scheme laid down thereunder. In ordinary cases, insurance is voluntary, and it is left to the choice of the Insured to mention the value of the property sought to be insured. There is no compulsion in voluntary insurance that the cover should be made for the entire insurable value of the property. The premium collected in voluntary insurance is related to the quantum of risk undertaken in the light of the insurable value suggested by the assured.'
Having said so, the learned Judge proceeded to observe :
'But for these differences, by and large, the principles of insurance in other respects do not appear to be uncommon between ordinary insurance in the light of statutory provisions, if any, and insurance under the Emergency Risks (Factories) Insurance Act, 1962. In the case of ordinary insurance the terms and conditions in the policy constitute the contract, while insurance under the Act being contractual the terms of which appear in the policy to be issued, the contract is also controlled by the provisions of the Act, especially the obligatory character of the insurance to the full value of the property and the liability of the Central Government as an insurer limited to 80 per cent of the insurable value of the property covered. But even in insuranceunder the Act, the premium is related to the risk and as in private insurance, so in insurance under the Act, the premium is paid in consideration of the cover provided, and it Implies that if there is no risk, no premium can be collected. In other words, premium is paid or compulsorily collected, which will be in consideration of the Union Government as the Insurer, undertaking to indemnify the Insured against loss or damage on account of the emergency risks as defined in the Act.'
With great respect we are unable to agree with this expression of opinion. Under the Act, the liability does not arise from agreement or contract but by virtue of the mandatory provisions in the Act obligations had been created. There can be little doubt that those obligations would crystallise as soon as the goods of the description come into existence and if such liabilities had come into existence those liabilities will remain liabilities notwithstanding the absence of an application for insurance and notwithstanding the non-issue of a policy of insurance. This would be the position as long as the Act remained in force. If there was a liability to pay a certain quantum of money by way of premium, there could be an investigation as to whether that premium had been paid. There could also be an insistence that the premium so to be paid should be paid and for failure to do so the defaulter can be punished. These are all provided by the statute; namely, that investigations can be made whether proper premium had been paid, that it can be insisted that proper premium be paid and that penal action can be taken for the nonpayment of the proper premium. It is difficult, if not impossible to conceive that such action could be taken without there having been an omission to carry out the obligation imposed by law. That obligation would arise as we indicated on the coming into existence of the goods. It is not disputed before us that the goods were in existence at the relevant time. Whether they have been fully covered by the Acts and the Scheme is now a matter of controversy and it is this matter that has to be investigated. If they had not been fully covered as envisaged by the Act, for that omission action can be taken even after the date of the expiry of the Act because of the provision in Sub-section (3) of Section 1. It is idle to contend that the liability gets determined or the liability will be incurred or that the liability will occur only on the determination of the exact amount that was payable and only on the policy of insurance being issued. We are unable to accept these submissions.
6. We see no reason to interfere with the judgment under appeal. We dismiss the appeal. There will be no order as to costs.