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Supreme Court of India
Oriental Insurance Company … vs Malana Power Company Ltd. on 15 November, 2021Author: R. Subhash Reddy
Bench: R. Subhash Reddy, Hrishikesh Roy
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.5132 OF 2019
The Oriental Insurance Co. Ltd. …Appellant(s)
versus
Malana Power Company Ltd. …Respondent(s)
J U D G M E N T
R.SUBHASH REDDY, J.
1. This Civil Appeal is filed by the appellant/the
Oriental Insurance Company Limited, aggrieved by the
order dated 28.02.2019 passed in O.P. No.53 of 2005,
by the National Consumer Disputes Redressal
Commission, New Delhi. By the aforesaid order, the
National Commission has allowed the complaint filed
by the respondent/complainant Company and directed
the appellant to pay a sum of Rs.4,68,33,840/-
Signature Not Verified
Digitally signed by
towards the loss suffered by the respondent, in
Rajni Mukhi
Date: 2021.11.15
14:47:35 IST
Reason:
terms of insurance policy along with interest @ 6%
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per annum from the date of filing the complaint till
the date of payment.
2. The respondent is a company which runs a Hydro
Power Project around Malana Nalah. The respondent
was interested in securing an indemnity in respect
of any shortfall that may take place in aggregate
annual power generation at its Hydro Power Plant due
to failure of hydrology which depends upon vagaries
of nature.
3. For the year 2001-02, the respondent has obtained
policies from M/s. IFFCO-TOKIO General Insurance
Company. M/s.IFFCO-TOKIO General Insurance Company
provided a package deal of the two insurance
policies to the respondent. First one was Industrial
All Risk Insurance Policy which covered material,
damages due to fire and special perils, machinery
breakdown, loss of profit etc., for a period of 12
months. The second insurance policy was Special
Contingency Policy which covered loss of power
generation due to loss of hydrology. The insurance
coverage for the year 2001-02 was for a period of 12
months commencing from 07.07.2001 to 06.07.2002. The
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respondent has obtained policies from the appellant
in similar lines for the period commencing from
07.07.2002 to 06.07.2003. In respect of Special
Contingency Policy, which covered the loss of power
generation due to loss of hydrology, the risk cover
for the year 2001-02 was Rs.5.00 crores. Since the
likely loss of power generation was estimated to be
around Rs.8.00 Crores, the respondent wanted the
risk coverage enhanced from Rs.5.00 Crores to
Rs.10.00 Crores for the year 2002-03. The terms and
conditions were accepted by the appellant. The
Special Contingency Policy which is obtained from
the appellant for the year 2002-03 covered Rs.10.00
Crores instead of Rs.5.00 Crores, as provided by the
earlier insurer i.e. IFFCO-TOKIO for the previous
year i.e. 2001-02. The Special Contingency Policy
issued by the appellant was identical to the one
issued by M/s.IFFCO-TOKIO except the sum insured was
Rs.10.00 Crores in case of short-fall in the
aggregate annual power generation due to loss of
hydrology. A premium of Rs.16,95,750/- was paid by
the respondent. As per the terms of the contract
entered into, the Insurance Company was entitled to
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cancel the policy by issuing 7 (seven) days’ prior
notice.
4. When the appellant was not able to obtain
reinsurance in the reinsurance market for getting it
protected as per the requirements of business
retention norms by the Insurance Industry, it has
addressed a letter dated 11.11.2002 to the
respondent for modifying the terms and conditions of
the policy to reduce the insurance coverage to
Rs.5.00 Crores from Rs.10.00 Crores. It is
specifically mentioned in the letter dated
11.11.2002 issued by the appellant that the sum
insured had to be kept at Rs.5.00 Crores as no
reinsurer was willing to accept the sum insured
beyond Rs.5.00 Crores. When the said proposal for
revising the policy with a sum insured of Rs.5.00
Crores was not accepted by the respondent, the
appellant vide proceedings dated 25.11.2002
cancelled the policy by refunding the premium on
pro-rata basis for the remaining period i.e., from
27.11.2002 to 06.07.2003.
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5. The respondent vide letter dated 26.11.2002
informed the appellant that there has been a
shortfall of 28302839 KWH of electricity generated
from 07.02.2002 to 20.11.2002 and the loss suffered
was Rs.5,20,37,800/- and after deduction of 10%, the
respondent has claimed an amount of
Rs.4,68,33,840/-. By the said letter, the respondent
has made a formal claim with the appellant for
reimbursement of the amount as per the terms of the
policy. As the same was not acceded to, the
respondent approached the National Consumer Disputes
Redressal Commission, New Delhi, claiming an amount
of Rs.8,56,77,608.81 as per the Special Contingency
Policy.
6. The appellant has filed written statement
opposing the claim. While contesting the claim on
various grounds, mainly it was the case of the
appellant that the respondent has fraudulently
suppressed the hydrological data of that project of
the previous year. The plea of the appellant was not
accepted by the National Commission mainly on the
ground that the appellant, with open eyes, had
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entered into a Memorandum of Understanding (MoU)
with the respondent and issued the policy on the
same lines as that of preceding year for the year
2001-02, by duly incorporating the available
hydrology data. The National Commission has found
that there is no non-disclosure of material
information in terms of the insurance policy issued
by the appellant when the available hydrology data
was duly supplied by the respondent and incorporated
in the policy itself. Further, with reference to
cancellation of the insurance policy, the National
Commission has found that at no point of time, there
was any complaint of any material suppression with
regard to hydrology data and further noticed that
the notice dated 20.11.2002 for cancellation of the
special contingency policy was also only for the
reason that the respondent was not accepting for
amendment of the policy for revision of the sum
insured to Rs.5.00 Crores from Rs.10.00 Crores only
on the ground that they were not able to reinsure
their interest. The National Commission by clearly
recording a finding that there was no suppression
and fraud on the part of respondent, has allowed the
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claim of the respondent and directed to pay an
amount of Rs.4,68,33,840/- which is the loss
suffered by the respondent in terms of the policy
along with interest @ 6% per annum.
7. We have heard Sri Mahavir Singh, learned senior
counsel appearing for the appellant and Sri Neeraj
Malhotra, learned Senior Counsel appearing for the
respondent.
8. Even in this appeal, by referring to the
impugned order and other material placed on record,
the learned Senior Counsel appearing for the
appellant has mainly contended that the respondent
had obtained policy by playing fraud and
suppression, as such, the respondent is not entitled
to make any claim against the appellant. It is
submitted that there is non-disclosure of previous
hydrology data of the year 2001-02 before obtaining
the policy despite the same was available with the
respondent. It is further submitted that after
obtaining the subject policy from the appellant, few
days thereafter, the respondent made a claim against
the earlier insurer M/s.IFFCO-TOKIO, which itself
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shows that by changing the insurance companies, the
respondent was in the habit of making wrong claims.
It is submitted that in view of the suppression /
non-disclosure of hydrology data of the previous
year though it was available with the respondent,
the appellant has rightly repudiated the claim of
the complainant company. It is contended that the
National Commission without considering the matter
as per the settled legal position, by recording
erroneous findings, allowed the claim made by the
respondent. In support of his argument, the learned
Senior Counsel has placed reliance on the judgment
of this Court in the case of Oriental Insurance
Company v. Mahendra Construction1.
9. On the other hand, Sri Neeraj Malhotra, learned
Senior Counsel appearing for the respondent, by
taking us to the findings recorded by the National
Commission and other material placed on record, has
submitted that there was no suppression or fraud
played by the respondent, as pleaded and the claim
of the respondent was rightly allowed by the
National Commission. The learned Senior Counsel has
1
(2019) 18 SCC 209
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also submitted that in the absence of any errors in
the order impugned, there are no grounds to
interfere with the same. It is contended that the
appellant is aware of the conditions of the
insurance policy which the respondent has obtained
for the previous year 2001-02 from M/s.IFFCO-TIKIO
and as per the same terms and conditions, the
subject policy was issued by the appellant. At no
point of time, the appellant asked for the hydrology
data. It is submitted that without informing the
respondent, the appellant has appointed M/s. A.K.
Gupta & Associates for carrying out a survey and
called for report on the loss of power generation.
The Surveyor appointed by the Insurance Company has
submitted a report which was not even furnished to
the respondent and based on such report, the claim
made by the respondent was repudiated. It is
submitted that having regard to the material
produced before the National Commission, it has come
to a definite finding that there was no suppression
or non-disclosure from the side of the respondent,
as such, there was no reason or justification for
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repudiating the claim made by the respondent and
allowed the claim of Rs.4,68,33,840/-.
10. On hearing the learned counsel on both sides
and perusal of the material placed on record, we too
are of the opinion that there was no suppression or
non-disclosure by the respondent in suppressing any
hydrology data of the previous year, as pleaded by
the appellant. The data of the years 1993 to 2002
could not be provided as the same was not available
with the respondent and it was also made known to
the appellant.
11. The Surveyor appointed by the Insurance Company
instead of assessing the loss of hydrology as per
the policy, went into several aspects which are
irrelevant to the claim. The Special Contingency
Policy for the year 2001-02 was obtained from IFFCO-
TOKIO and sum insured was only Rs.5.00 Crores. When
the respondent has requested to increase the
coverage to Rs.10.00 Crores, the same was agreed by
the appellant and entered into an MoU with the
similar terms and conditions of the previous year
policy which was with IFFCO-TOKIO. Except the amount
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of coverage was increased from Rs.5.00 Crores to
Rs.10.00 Crores in the policy issued by the
appellant, all other terms and conditions were the
same. The appellant was aware of the earlier
insurance policy entered into by the respondent with
the IFFCO-TOKIO prior to issuance of the subject
policy in favour of the respondent for the period
covering from 07.07.2002 to 06.07.2003. If they were
to examine the hydrology data of the previous year,
it was well within the knowledge of the appellant to
ask for such data even before entering into
contract. It is not a case of suppression or non-
disclosure of data as pleaded, and whatever data was
available, the respondent has made known to the
appellant. When the appellant was aware of the
earlier insurance policy obtained from IFFCO-TOKIO
by the respondent, there was no reason for not
asking for such hydrology data of the previous year.
As such, it cannot be said that there was non-
disclosure of hydrology data or any fraud from the
side of the respondent, as is projected by the
appellant so as to repudiate the claim.
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12. Further, it is to be noticed that the
cancellation of the subject policy vide proceedings
dated 25.11.2002 was also not on account of
suppression or fraud played by the respondent, but
it was only for the reason that the respondent has
not acceded to the request of the appellant to
modify the sum insured from Rs.10.00 Crores to
Rs.5.00 Crores. Further, the cancellation of policy
is on the ground that they were not able to re-
insure the claim in the re-insurance market for
protection of their interest. If there was any
suppression or non-disclosure, as pleaded, the
appellant would have cancelled only on such ground.
No such ground was raised at any point of time
either at the stage of issuing notice dated
20.11.2002, or while issuing the proceedings dated
25.11.2002 cancelling the policy for the remaining
period by refunding premium on pro-rata basis.
13. Though it is contended by Mr. Mahavir Singh,
learned Senior Counsel that the respondent has
encashed the cheque which was issued towards refund
of pro-rata premium, we are of the view that the
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same will not make any difference as the claim was
only for the period for which the insurance policy
was in force.
14. In view of the above, we are of the view that
there was no non-disclosure or fraud, as pleaded by
the apellant to repudiate the claim. Whether there
was any material suppression or not, is a matter of
fact, which is to be verified from the facts and
circumstances of each case and material on record.
15. Though the learned counsel for the appellant
relied on the judgment of this Court in the case of
Oriental Insurance Company Limited v. Mahendra
Construction1, but the same would not render any
assistance to support his case. In the aforesaid
judgment, there was non-disclosure of previous claim
against the insured goods in the proposal for
insurance itself. In view of the same, this Court
has held that insured made a false representation
and suppressed relevant material. Coming to the case
on hand, the previous policy with IFFCO-TOKIO for
the preceding year, for the period from 07.07.2001
to 06.07.2002 was made known to the appellant, as
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such, it cannot be said that there was any
suppression or non-disclosure.
16. For the aforesaid reasons, we are of the view
that there is no merit in this Civil Appeal, and the
same being devoid of merit, is dismissed. The
appellant has deposited an amount of Rs.1.25 crores
before Registry of this Court which is kept in
fixed deposit. We permit the respondent to withdraw
the said amount of Rs.1.25 crores along with accrued
interest, if any, without furnishing any security.
The appellant shall pay the balance amount due to
the respondent within a period of three (03) months
from today.
…………………………………………J
(R. SUBHASH REDDY)
…………………………………………J
(HRISHIKESH ROY)
NEW DELHI;
November 15th, 2021
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