Supreme Court of India
National Insurance Co.Ltd. vs M/S Hareshwar Enterprises (P) … on 18 August, 2021Author: Hemant Gupta





National Insurance Company Ltd. .…Appellant(s)


M/s. Hareshwar Enterprises (P) Ltd. ….Respondent(s)
& Ors.


A.S. Bopanna,J.

1. The appellant (insurer) who was arrayed as

respondent No.1 in the complaint filed before the National

Consumer Disputes Redressal Commission, New Delhi

(“NCDRC” for short) in O.P. No.102/2003 is before this

Court in this appeal being aggrieved by the order dated

Signature Not Verified
27.03.2009. The respondent No.1 (insured) was the
Digitally signed by R

claimant before NCDRC. The plant and machinery in the
Date: 2021.08.23
17:21:50 IST

factory owned by respondent No.1 was charged in favour

Page 1 of 22
of respondent No.2 as security, while the stock in trade

was hypothecated in favour of respondent No.3 (Thane Jan

Sahakari Bank) for discharge of loan obtained from them.

Since the respondent No. 2 and 3 are entitled to adjust the

claim towards their outstanding dues, they are arrayed as

parties to the proceedings.

2. Through the order dated 27.03.2009 impugned

herein, the NCDRC has allowed the complaint in part

and directed the insurer to pay the sum of

Rs.79,34,703/- with interest at 12 % per annum. Out of

the said amount, a sum of Rs.49,56,897/- is ordered to

be apportioned in favour of respondent No.2

(Maharashtra State Financial Corporation) and the

balance amount of Rs.29,77,806/- is ordered to be paid

to the respondent No.3 (Thane Jan Sahakari Bank

Limited). The total amount awarded is against the claim

of Rs.1,25,25,319/- made by the respondent No.1


3. The brief facts leading to the claim before the

NCDRC is that the respondent No.1 was engaged in the

business of manufacture of polyethylene, plastic films

Page 2 of 22
and other similar packaging materials. The respondent

No.2 had advanced loan to the respondent No.1 against

security of its building, plant and machinery. The

respondent No.3 had also advanced money to the

respondent No.1 for procurement of stock in trade,

which was accordingly hypothecated to them. In order

to cover the risk of fire, flood and earthquake to the

factory building and also the plant and machinery, the

respondent No.1 secured insurance policies from the

appellant. One policy was to cover the risk during the

period 05.02.1999 to 04.02.2000. Another policy in

respect of the risk to the stock in trade was also secured

which was for the period of 17.09.1999 to 16.09.2000.

The respondent No.1 was accordingly carrying on its

business in the factory premises while on 06.11.1999

fire broke out causing total destruction of the plant and

machinery, raw material as also finished and unfinished

goods. The respondent No.1 intimated the appellant

regarding the fire incident on 07.11.1999.

4. The appellant accordingly appointed M/s. H.

Manna and Company and Virendra Padmasi Shah

Page 3 of 22
jointly as surveyors to assess the loss. The surveyors

visited the site on 09.11.1999. On having obtained the

documents and records submitted their interim report

on 23.03.2000 and the final report on 13.03.2001 to the

insurer. The surveyors through the said report had

assessed the loss at Rs.1,06,00,000/- excluding the loss

of business and other losses. The insurer, however, did

not settle the claim nor repudiate the same. Instead, the

insurer through their letter dated 22.06.2001 informed

the respondent No.1 regarding appointment of Om

Nityanand Enterprises as investigators to look into the

claim. It is in that view, since the repeated request and

demand ultimately made through the legal notice had

not been complied with by the appellant, the respondent

No.1 filed the complaint before the NCDRC. As already

noted, the NCDRC after considering the matter in detail

has arrived at its conclusion and has passed the order

allowing part of the claim.

5. Mr. Vishnu Mehra, learned counsel for the

appellant at the outset contended that very proceedings

before the NCDRC was not sustainable since the claim

Page 4 of 22
was filed beyond limitation. In this regard, the learned

counsel has referred to Section 24A of the Consumer

Protection Act, 1986 (‘Act 1986’ for short) which provides

the limitation to file the complaint within two years from

the date on which the cause of action has arisen. In that

light, it is contended that the fire incident had taken

place on 06.11.1999, but the respondent No. 1 had filed

the complaint before the NCDRC on 26.03.2003 which

is way beyond the period of two years provided under

the said provision. In order to buttress his submission

the learned counsel has relied on the decision reported

in the case, State Bank of India vs. B.S. Agriculture

Industries (I) (2009) 5 SCC 121 with specific reference

to paragraphs 11 and 12. A perusal of the said decision

no doubt would indicate that it has been held by this

Court that the provision is peremptory in nature and

requires the consumer forum to see before it admits the

complaint that it has been filed within two years from

the date of accrual of cause of action.

6. Having noted the contention, on the provision as

contained, there is no ambiguity whatsoever. However,

Page 5 of 22
what is required to be taken note is that the provision

indicates that the complaint is required to be filed within

two years from the date on which the ‘cause of action’

has arisen. In that context, another decision relied on by

the learned counsel for the appellant in the case,

Kandimalla Raghavaiah and Company vs. National

Insurance Company and Another (2009) 7 SCC 768

with specific reference to para 18 would indicate that the

term ‘cause of action’ though not defined in the Act,

but it is of wide import and it would have different

meaning in different context while considering

limitation. It has been held therein that pithily stated

‘cause of action’ means, cause of action for which the

suit is brought and which gives occasion for and forms

the foundation of the suit. Reliance is placed on this case

by the learned counsel since in the said case, which was

also in respect of a fire incident it was held that the date

of accrual of cause of action has to be a date on which

the fire breaks out. However, what cannot be lost sight

is that, such conclusion was reached in the cited case

since the fire in tobacco godown took place

Page 6 of 22
22/23.03.1988 and the bank in whose favour the stocks

had been hypothecated was informed about it by the

appellant on 23.03.1988 itself, but insofar as the claim,

the matter had rested there till 06.11.1992 when for the

first time the appellant addressed the letter to the

insurance company and sought for claim form. The facts

therein, if noted would indicate the reason for which this

court had indicated that the date on which the fire broke

out is the date of accrual of cause of action since it did

not move forward in any other manner. It has not been

laid in strait jacket. The cause of action will remain

flexible to be gathered from the bundle of facts arising in

each case.

7. In contradistinction, in the instant case as noted

the fire incident had occurred on 06.11.1999. The

appellant had informed the insurer on 07.11.1999,

where after the joint surveyors were appointed and on

verification had submitted their final report on

13.03.2001. Despite said report, the insurer through

their letter dated 22.06.2001 had appointed an

investigator but did not proceed to either accept the

Page 7 of 22
claim or repudiate the same. In that background, a

perusal of the complaint filed by the respondent No.1

before the NCDRC would indicate that the cause of

action has been mentioned in para 21 as follows:-

The cause of Action arose for the first time
when property belonging to the
Complainant was destroyed in the fire on
6.11.1999. Then it continued from time to
time when the survey was complete and the
Complainant was not paid the claim
amount. It arose when the legal notice on
behalf of Complaint was issued and same
was replied by advocate on behalf of the
Opponent No. 1. Hence the present Original
Petition is in limitation. The Advocate for the
complainant issued legal notice on 5.1.2003
demanding money from opposite party No.
The copy of the said letter is annexed hereto
and marked as Annexure P/13.”

Further, in the reply filed on behalf of the insurer before

the NCDRC reference is contained that correspondence

was exchanged between the investigator appointed by

the insurer and the respondent No.1 through the letters

dated 07.03.2002, 05.04.2002, 03.05.2002, 03.06.2002

and 13.07.2002.

8. If in the above context the fact situation herein is

noticed, though the fire incident occurred on
Page 8 of 22
06.11.1999, the same merely provided the cause of

action for the first time to make the claim but the same

did not remain static at that point. On the other hand,

the process of joint survey though had concluded with

its final report on 13.03.2001, the letter dated

22.06.2001 addressed by the insurer to the respondent

No.1 regarding appointment of the investigator had

created a fresh cause of action and kept the matter

oscillating. Thereafter, the matter did not rest at that but

there was repeated action being taken by the

investigators seeking for details. When the same did not

conclude in an appropriate manner, the respondent

No.1 (Insured) got issued a legal notice dated

05.01.2003 to which reply was issued, when in fact the

repudiation was gathered and the complaint was filed.

Even if the date on which the process of intimation of

appointment of the investigator through the letter dated

22.06.2001, received by the respondent No.1 is taken

into consideration, from that date also the complaint

filed on 26.03.2003 is within time. There was no need

for the NCDRC to pass any separate order at the outset

Page 9 of 22
to hold the claim to be within limitation and then

proceed when it is clear on the fact of it. As such the

consideration of the complaint on merits by the NCDRC

was justified. The contention therefore urged by Mr.

Vishnu Mehra, learned counsel on that ground is

accordingly rejected.

9. On the merits of the claim, a perusal of the

impugned order dated 27.03.2009 passed by the

NCDRC indicates that the NCDRC has made detailed

reference to the report submitted by the joint surveyors,

dated 13.03.2001 and has ultimately allowed the claim,

in part. In the surveyor report dated 13.03.2001

consideration was made to two parts; firstly, the

assessment of loss relating to the stock of LDPE plastic,

powder, granules, tubings and films as contained in

clause 8.1 of the report. Next, the loss caused due to the

destruction of plant and machinery is assessed in clause

8.2 and the sum of Rs.46,60,459/- being the

depreciated value has been awarded for loss of plant and

machinery. In respect of the said claim the respondent

No.2 (Maharashtra State Financial Corporation) is

Page 10 of 22
interested. In that regard, the learned counsel for the

appellant, as also the learned counsel for respondent

No. 1 and 2 are agreed that there is no serious dispute

with regard to the consideration made either by the

surveyors or the NCDRC on the aspect of plant and

machinery. The same having not been a major issue

before the NCDRC, need not be gone into in these


10. In that view of the matter the only question on

merits which needs consideration herein is with regard

to the loss assessed towards destruction of the stock-in-

trade in the fire incident. On this aspect, the learned

counsel for the appellant while contending that the

NCDRC has committed an error in relying on the

surveyor report as sacrosanct without giving credence to

the investigation report has referred to the decision in

the case, New India Assurance Company Limited vs.

Pradeep Kumar (2009) 7 SCC 787 and referred to para

21 and 22 which read as hereunder: –

“21. Section 64-UM(2) of the Act, 1938 reads:

Page 11 of 22
“64-UM. (2) No claim in respect of a loss
which has occurred in India and requiring to
be paid or settled in India equal to or
exceeding twenty thousand rupees in value on
any policy of insurance, arising or intimated
to an insurer at any time after the expiry of a
period of one year from the commencement of
the Insurance (Amendment) Act, 1968, shall,
unless otherwise directed by the Authority, be
admitted for payment or settled by the insurer
unless he has obtained a report, on the loss
that has occurred, from a person who holds a
licence issued under this section to act as a
surveyor or loss assessor (hereafter referred to
as “approved surveyor or loss assessor”):
Provided that nothing in this sub-section
shall be deemed to take away or abridge the
right of the insurer to pay or settle any claim
at any amount different from the amount
assessed by the approved surveyor or loss
The object of the aforesaid provision is that
where the claim in respect of loss required to
be paid by the insurer is Rs.20,000/- or more,
the loss must first be assessed by an approved
surveyor (or loss assessor) before it is
admitted for payment or settlement by the
insurer. Proviso appended thereto, however,
makes it clear that insurer may settle the
claim for the loss suffered by insured at any
amount or pay to the insured any amount
different from the amount assessed by the
approved surveyor (or loss assessor).
22. In other words although the assessment
of loss by the approved surveyor is a pre-
requisite for payment or settlement of claim of
twenty thousand rupees or more by insurer,
but surveyor’s report is not the last and final
Page 12 of 22
word. It is not that sacrosanct that it cannot
be departed from; it is not conclusive. The
approved surveyor’s report may be basis or
foundation for settlement of a claim by the
insurer in respect of the loss suffered by the
insured but surely such report is neither
binding upon the insurer nor insured.”

11. In the said decision, it is no doubt held that

though the assessment of loss by an approved surveyor

is a prerequisite for payment or settlement of the claim,

the surveyor report is not the last and final word. It is

not that sacrosanct that it cannot be departed from and

it is not conclusive. The approved surveyor’s report may

be the basis or foundation for settlement of a claim by

the insurer in respect of loss suffered by insured but

such report is neither binding upon the insurer nor

insured. On the said proposition, we are certain that

there can be no quarrel. The surveyor’s report certainly

can be taken note as a piece of evidence until more

reliable evidence is brought on record to rebut the

contents of the surveyor’s report.

12. The learned counsel for the appellant has also

relied on the decision in the case, National Insurance

Page 13 of 22
Company Limited vs. Harjeet Rice Mills (2005) 6 SCC

45 with reference to paragraphs 5, 6 and 7. In the facts

arising in the said case the insured was seeking to rely

on the surveyor’s report to bind the insurer in view of

the provisions contained in Section 64-UM (c) of the

Insurance Act, 1938. The Insurer had however sought

to rely on the investigation report. The State

Commission refused to look into report of the private

investigator. In that circumstance, this court was of the

view that the State Commission should have given an

opportunity to the insurer to prove the investigation

report. In the said case, the very nature of the fire

incident was in dispute from the very inception. The

claimant had contended that the fire was caused by a

short circuit, which was seriously disputed by the

insurer and an investigation in that regard had been

held. It is in that light, a conclusion was to be reached

by the forum adjudicating the claim as to whether any

fraud was committed in making the claim with reference

to the very nature of the incident. In that circumstance,

even though at the first instance, there was an

Page 14 of 22
investigation held by the police, the private investigation

held by the insurer would have been relevant to decide

the question. As such, in the said circumstance it was

imperative that the investigator’s report was to be

considered threadbare and a decision ought to have

been arrived at.

13. On the other hand, in the instant facts there is

no serious dispute with regard to the fire incident. Even

going by the contention put forth, it is noted that the

loss caused by destruction of the plant and machinery

in the fire incident is not much of an issue. The dispute

raised insofar as the loss caused to the raw-

materials/stock is by contending that the purchase of

stock during the months of August, September and

October 1999 is shown excessive as compared to the

stock position from April to July 1999. In that

circumstance, in the facts and circumstances herein

whether the investigation report was an indispensable

document or as to whether the survey report is

exhaustive enough to arrive at a conclusion on that

aspect is the issue.

Page 15 of 22
14. Having noted the said decisions, we are of the

opinion that the same cannot alter the position in the

instant case. On the proposition of law that the

surveyor’s report cannot be considered as a sacrosanct

document and that if there is any contrary evidence

including investigation report, opportunity should be

available to produce it as rebuttal material, we concur.

However, the issue to be noted is as to whether the

surveyor’s report in the instant case adverts to the

consideration of stock position in an appropriate

manner and in that circumstance whether an

investigation report which is based on investigation that

was started belatedly should take the centre stage. The

fact remains that the surveyors report is the basic

document which has statutory recognition and can be

made the basis if it inspires the confidence of the

adjudicating forum and if such forum does not find the

need to place reliance on any other material, in the facts

and circumstance arising in the case. If in that light, the

surveyors report, on which reliance has been placed by

the NCDRC is taken note insofar as the assessment

Page 16 of 22
relating to the loss due to destruction of stock, the

consideration of the same has been adverted in clause

8.1.1 and the stock position as declared to the bank has

been referred to in clause 8.1.3. The learned counsel for

the appellant as also the learned counsel for the

respondents has made detailed reference and taken us

through details contained in the report.

15. The consideration made by the surveyors to

ascertain the correctness of the details relating to the

stock indicates that reference is made to the value of the

stock declared to the bank; value of the stock as per

audited manufacturing account and balance sheet for

the year ended 31.03.1999; the explanation offered for

the purchase made during the months of August 1999

to October 1999. In that regard, the surveyors have also

visited the source from which the LDPE was procured

during September 1999 to 04.11.1999. It is on making

such verification and inquiries, the surveyors arrived at

the conclusion as follows: –

“8. 1. 8 Though the purchases and sales were found to
be in order as per records, we could not accept
the total quantity of 73585 kgs claimed by the
Insured. Opening stock considered for arriving at

Page 17 of 22
this balance is higher as compared to quantity
declared to bank. For assessing the quantity we
have taken Stock quantity as on 30.04. 99 as per
Bank declaration and then made addition/
deduction for purchase & sale quantity during
the period 1.5.99 to 6.11.99. Accordingly the
quantity of stock as on date of loss worked out
as follows:

Stock Quantity as on 30.4.99 5,367.75
Add : Purchases from 1.5.99 to
6.11.99 1,14,155.60

Less : Sales from 1.5.99 to 6.11.99
Balance Quantity on 6.11.99 75,444.73
8.1.9 We have valued the stock as per the latest
purchase rate viz. At market value. The last
purchases made by Insured prior to loss was on
4. 11. 99. The rate including Octroi is Rs.68.238
per kg. The rate matches with the selling price
fixed by IPCL. Further the entire quantity was
considered to be raw material avoiding any
addition of Insureds own manufacturing cost.

8 .1.10 Salvage : There was small quantity of remnants
of the burnt stock, in lump/me ted form.
Considering the limited quantity which could be
extracted and its scrap value we have deducted
1% as salvage value.

8.1.11 The Loss Assessed for Stock is as follows
Cost of 44078.620 Kgs. of LDPE
@ Rs. 68.238 per kg. Rs. 30,07,885

Page 18 of 22
Less : Salvage value 1% Rs. 30,079
Loss Assessed Rs. 29,77,806

16. Thus, a perusal of the surveyor’s report would

indicate that the same is not perfunctory but has

referred to all aspects, discarded what was not reliable

and the assessment has been made thereafter. In that

background, as noted, the fire incident had occurred on

06.11.1999 and the surveyors had visited the site on

09.01.1999 itself and the interim as also the final report

were submitted on 23.03.2000 and 13.03.2001 to the

insurer after due deliberations. The insurer did not take

any steps immediately but after much delay appointed

the investigator on 22.06.2001 and had not concluded

the said process though the respondent No.1 had made

repeated request. The insured had approached the

NCDRC and it is in the said proceedings, for the first

time the insurer seeks to rely on the investigator’s

report. Therefore, in the facts and circumstances herein

the surveyors report was submitted as the natural

process, the conclusion reached therein is more

Page 19 of 22
plausible and reliable rather than the investigation

report keeping in view the manner in which the insurer

had proceeded in the matter. Hence, the reliance placed

on the surveyor’s report by the NCDRC without giving

credence to the investigation report in the facts and

circumstances of the instant case cannot be faulted. In

that view, the conclusion reached on this aspect by the

NCDRC does not call for interference.

17. One other aspect of matter which arises for

consideration herein is with regard to the rate of

interest. The learned counsel for the appellant

contended that the interest rate at 12% per annum is

excessive. The learned counsel for the respondent,

however, contended that there was delay in payment of

the amount payable to the respondent No.1 which was

necessary to be compensated appropriately and the

NCDRC was justified in that regard. Having considered

this aspect, the rate of interest to be awarded in a

normal circumstance should be commensurate so as to

enable the claimant for such benefit for the delayed

payment. There is no specific reason for which the

Page 20 of 22
NCDRC has thought it fit to award interest at 12% per

annum. Therefore, the normal bank rate or thereabout

would justify the grant of interest at 9% per annum.

Accordingly, the amount as ordered by the NCDRC shall

be payable with interest at 9% per annum instead of

12% per annum. To that extent, the order shall stand


18. It is to be noted that this Court while admitting

the appeal and granting stay of the order, it was made

subject to deposit 50% of the amount before the National

Commission. The second and third respondents were

permitted to withdraw the same in the ratio of 60:40

subject to their furnishing, security to the satisfaction of

the Commission. The appellant shall therefore deposit

the balance amount within six weeks, before the

National Commission and the disbursement shall be

made in the ratio to constitute the payment of the full

amount awarded. The second and third respondents

shall be permitted to withdraw the same.

19. In terms of the above, the appeal is allowed in part.

Page 21 of 22
20. Pending application, if any, shall stand disposed of.


New Delhi,
August 18, 2021

Page 22 of 22


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