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Supreme Court of India
National Insurance Co.Ltd. vs M/S Hareshwar Enterprises (P) … on 18 August, 2021Author: Hemant Gupta
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.7033 OF 2009
National Insurance Company Ltd. .…Appellant(s)
Versus
M/s. Hareshwar Enterprises (P) Ltd. ….Respondent(s)
& Ors.
JUDGMENT
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
Natarajan
Date: 2021.08.23
17:21:50 IST
Reason:
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
(Insured).
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
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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
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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
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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,
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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
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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:-
“21. CAUSE OF ACTION
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
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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
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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
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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
proceedings.
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
assessor.”
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
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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
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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
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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:
Kgs.
Stock Quantity as on 30.4.99 5,367.75
Add : Purchases from 1.5.99 to
6.11.99 1,14,155.60
____________
1,19,523.35
Less : Sales from 1.5.99 to 6.11.99
Balance Quantity on 6.11.99 75,444.73
_________
44,078.62
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
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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
modified.
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.
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20. Pending application, if any, shall stand disposed of.
……………………….J.
(HEMANT GUPTA)
……………………….J.
(A.S. BOPANNA)
New Delhi,
August 18, 2021
Page 22 of 22
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