SUMIT KUMAR SAHA versus RELIANCE GENERAL INSURANCE COMPANY LTD. on 30 January 2019

[2019] 1 S.C.R. 763

SUMIT KUMAR SAHA

v.

RELIANCE GENERAL INSURANCE COMPANY LTD.

(Civil Appeal Nos. 1299 of 2019)

JANUARY 30, 2019

[UDAY UMESH LALIT AND R. SUBHASH REDDY, JJ.]

Consumer Protection Act, 1986 – Loss – Calculation of, basis– Appellant purchased an Excavator in the year 2007 for a totalpurchase value of Rs.51.74 lacs and immediately got it insured –Insurance policy was renewed for the period 22.7.2009 to 21.7.2010and the sum insured was Rs.46.56 lacs – The Excavator was hiredand was used at a different location and the change of locationwas duly intimated – On 3.6.2010, the Excavator was badly damagedin a fire while it was at such changed location – Surveyor of Insurerassessed the loss and damage at Rs.25.24 lacs – Complaint filed byappellant before the State Commission – Appellant submitted thatthe Excavator was a total loss and that he was entitled to insuredamount of 46.56 lacs along with interest and compensation –Appellant’s surveyor assessed loss on “total loss basis” at Rs.41.90lacs – State Commission allowed the complaint and directed to payRs.41.90 lacs with interest – National Commission partly allowedrespondent’s appeal and directed it to pay Rs.34.17 lacs – Onappeal, held: It was common ground that as a result of fire, theExcavator was a “total loss” – Both the sides had arrived at aparticular figure to be the real value of the subject matter ofinsurance – It was not open to any party to dispute said sum andcontend that the real value was something different from what wasdeclared by the parties to be the sum insured – If the parties hadagreed and arrived at an understanding, which understanding wasotherwise not vitiated by any misrepresentation, fraud or coercion,the parties must be held bound by such figure – The Surveyor of theInsurer worked out depreciation by starting with the figure of Rs.51lakhs as the cost of a new Excavator and then deducting 32.5% byway of depreciation assuming the life of Excavator to be 10 years –The Surveyor of the Insurer disregarded the figure stipulated as‘sum insured’ – Depreciation has to be always computed keeping

763

A

B

C

DEF

G

H

Athe figure of “sum insured” in mind – The starting figure, therefore,in this case had to be the figure which was stipulated as “suminsured” – Since Excavator, after the policy was taken out was usedfor eleven months, some reasonable depreciation ought to bededucted from the “sum insured” – The surveyor appointed by theinsured was right in deducting 10% and in arriving at the figure ofBRs.41.90 lacs – The decision of the National Commission is dismissedand the judgment and order passed by the State Commission isrestored.

Allowing the appeal, the Court

Allowing the appeal, the Court

CHELD: 1. The policy in question indicated that the “yearof make” of the Excavator was “2007” while the policy was forthe period 22.07.2009 to 21.07.2010. The parties were awarethat the Excavator was purchased in the year 2007 for Rs.51.74lakhs. If the contract mentioned the sum insured to beRs.46,56,600/- the parties must be deemed to be aware aboutDthe significance of that sum and the fact that it represented thevalue of the Excavator as on the date when the coverage wasobtained. It is not the case of the Insurance Company that therewas any “under insurance” in the instant matter. On the otherhand, the contention was that as against the sum insured whichEwas Rs.46,56,600/- the depreciated value was Rs.34,42,500/-. Soaccording to the Insurance Company, if at all it was a case of overinsurance. If going by the idea of receipt of premium, then theInsurance Company had received more than what according to itthe real value would have justified. If both the sides, with theireyes open, had arrived at a particular figure to be the real valueFof the subject matter of insurance, it is not open to any party todispute said sum and contend that the real value was somethingdifferent from what was declared by the parties to be the suminsured. If both the parties had agreed and arrived at anunderstanding, which understanding was otherwise not vitiatedGby any misrepresentation, fraud or coercion, the parties must beheld bound by stipulation of such figure. [Paras 11, 14 and 15][773-E-F; 776-B-E]

2.1 The Surveyor of the Insurance Company worked thefigure of depreciation by starting with the figure of Rs.51 lakhsHas the cost of a new Excavator and then deducting 32.5% by way of depreciation assuming the life of Excavator to be 10 years. Inhis assessment, therefore, the stipulation of the figure ofRs.46,56,600/- on the day the contract was entered into, had nosignificance. Was he right and justified and how could he assumethe life of the Excavator to be 10 years? If that was theunderstanding between the parties, the figure of sum insuredcould have been different. If the surveyor was calculating thedepreciation from the day when the policy was entered into tillthe date when the accident occurred, such exercise could certainlybe justified. But the exercise undertaken was in the nature ofnot only considering the depreciation post the policy but evenincluding the period prior thereto. That exercise was alreadyundertaken by the parties and in their assessment the real valueof the Excavator as on the day when the policy was taken out wasRs.46,56,600/-. In the face of such agreement and understanding,the surveyor could not have calculated depreciation for a periodprior to the date of policy or contract. The purport of said clausewas to arrive at proper valuation as on the day when there wastotal destruction. He could have undertaken the exercise postthe date of policy to assess the real value of the insured propertyas on the date when the fire actually took place. And for suchpurposes, the assessment must start with the amount describedas “sum insured” on the day when the contract was entered into.It was not open to the Surveyor or to the Insurance Company todisregard the figure stipulated as ‘sum insured’. The loss had tobe assessed in the instant case, keeping said figure in mind. [Para16][776-G-H; 777-A-D]

2.2 Except in cases where the agreement on part of theInsurance Company is brought about by fraud, coercion ormisrepresentation or cases where principle of uberrima fide isattracted, the parties are bound by stipulation of a particular figureas sum insured. Therefore, the surveyor and the InsuranceCompany were not justified in any way in questioning anddisregarding the amount of “sum insured”. Further depreciation,if any, can always be computed keeping the figure of “suminsured” in mind. The starting figure, therefore, in this case hadto be the figure which was stipulated as “sum insured”. SinceExcavator, after the policy was taken out was used for elevenmonths, there must be some reasonable depreciation which ought AB

CD

E

F

G

H

Ato be deducted from the “sum insured”. The surveyor appointedby the insured was right in deducting 10% and in arriving at thefigure of Rs.41,90,940/-. The assessment made by the StateCommission was quite correct and that made by the NationalCommission was completely incorrect. [Para 17][777-D-H]

BDharmendra Goel v. Oriental Insurance CompanyLimited (2008) 8 SCC 279 : [2008] 11 SCR 578 – reliedon.

Sikka Papers Limited v. National Insurance CompanyLimited and others (2009) 7 SCC 777 – heldCinapplicable.

Case Law Reference

(2009) 7 SCC 777held inapplicablePara 9[2008] 11 SCR 578relied onPara 11

DCIVIL APPELLATE JURISDICTION: Civil Appeal No. 1299of 2019.

From the Judgment and Order dated 16.02.2018 of the NationalConsumer Disputes Redressal Commission, New Delhi in First AppealNo. 182 of 2014.

E

Soumya Roop Sanyal, Ms. Heena Rohra, Nirnay Guptak, SubhroSanyal, Advs. for the appellant.

Joy Basu, Sr. Adv., Navneet Kumar, Vikas Bhadana, Kanak Bose,Parijat Kishore, Advs. for the respondent.

FThe Judgment of the Court was delivered by UDAY UMESH LALIT, J. 1. Leave granted.

2. This appeal arises out of final judgment and order dated16.02.2018 passed by the National Consumers Disputes RedressalCommission (‘the National Commission’, for short) in First Appeal No.182Gof 2014.

3. On 27.03.2007 the appellant purchased one Volvo HydraulicExcavator for a sum of Rs.49,75,000/- with VAT amounting toRs.1,99,000/-, the total purchase value thus being Rs.51,74,000/-.Immediately after the purchase said Hydraulic Excavator was insured H

with the respondent vide “Contractor, Plants & Machinery InsurancePolicy” bearing number 150719225001168. The insurance policythereafter stood renewed. For the period 22.07.2009 to 21.07.2010, thesum insured was Rs.46,56,600/- on payment of premium of Rs.33,700/.The column regarding ‘coverage’ mentioned the ‘year of make’ of saidExcavator as ‘2007’. Under the caption – PROVISIONS, the policycontained following stipulations:- “1. SUM INSURED –

It is a requirement of this insurance that the sum insured shall beequal to the cost of replacement of the insured property by newproperty of the same kind and same capacity, which shall meanits replacement cost including freight, dues and customs duties ifany and erection costs.

2. BASIS OF INDEMNITY -

a) In cases where damage to an insured item can be repaired theCompany will pay expenses necessarily incurred to restore thedamaged machine to its condition immediately prior to the accident/loss plus the cost of dismantling and re-erection incurred for thepurpose of effecting the repairs as well as ordinary freight to andfrom a repair-shop, customs duties and dues if any, to the extentsuch expenses have been included in the sum insured. If therepairs are executed at a workshop owned by the insured, theCompany will pay the cost of materials and wages incurred forthe purpose of the repairs plus a reasonable percentage to coveroverhead charges.

No deduction shall be made for depreciation in respect of partsreplaced, except those with limited life, but the value of any salvagewill be taken into account. If the cost of repairs as detailedhereinabove equals or exceeds the actual value of the machineryinsured immediately before the occurrence of the damage, thesettlement shall be made on the basis provided for in (b) below.

b) In cases where an insured item is totally destroyed the Companywill pay the actual value of the item immediately before theoccurrence of the loss, including costs for ordinary freight, erectionand customs duties if any, provided such expenses have beenincluded in the sum insured, such actual value to be calculated by AB

C

DE

F

G

H

A

deducting proper depreciation form the replacement value of theitem. The Company will also pay any normal charges fordismantling of the machinery destroyed but the salvage shall betaken into account.

Any extra charges incurred for overtime, night-work, work onBpublic holiday, express freight, are covered by this insurance onlyif especially agreed to in writing.

In the event of the Makers’ drawing, patterns and core boxesnecessary for the execution of a repair, not being available, theCompany shall not be liable for the cost of making any suchCdrawings, patterns and core boxes.

The cost of any alteration, improvements or overhauls shall notbe recoverable under this Policy.

The cost of any provisional repairs will be borne by the Companyif such repairs constitute part of the final repairs, and do notDincrease the total repair expenses.

If the sum insured is less than the amount required to be insuredas per Provision-I herein above, the Company will pay only insuch proportion as the sum insured bears to the amount requiredto be insured. Every item, if more than one, shall be subject toEthis condition separately.

The Company will make payments only after being satisfied, withthe necessary bills and documents, that the repairs have beeneffected or replacement have taken place, as the case may be.The Company may, however, not insist for bills and documents inFcase of total loss where the insured is unable to replace thedamaged equipment for reasons beyond their control. In such acase claims can be settled on ‘Indemnity Basis’.”

4. Said Hydraulic Excavator was hired and was to be used at adifferent location. The appellant duly intimated the change of location.GOn 30.06.2010 the Hydraulic Excavator was badly damaged in a firewhile it was at such changed location. An FIR was lodged on 01.07.2010with the local police and the respondent was also immediately intimatedabout the damage and was requested to survey the damage and settlethe claim.

H

5. On 07.07.2010 a surveyor came to be appointed by therespondent to survey and assess the loss and damage. Though the surveywas undertaken, the claim of the appellant was not getting settled and assuch reminders were sent by the appellant on 18.08.2010 and 10.02.2011.Thereafter, on 13.04.2011 the appellant was intimated that the loss wasassessed by the surveyor at Rs.25,24,273/-. The relevant portion fromthe report of the surveyor Cunningham Lindsey was to the followingeffect :- A

B

C

D

E

F

G

H

A

B

C

D

6. The appellant being aggrieved, filed case No.CC/18/11 beforethe State Consumer Disputes Redressal Commission, West Bengal (‘theState Commission’, for short). The appellant submitted that the Excavatorwas a total loss and that he was entitled to the insured amount ofERs.46,56,600/- along with interest @ 12% p.a. and compensation asclaimed in the complaint. During the pendency of the matter, the appellantplaced on record the report of a surveyor appointed by him. Said surveyorhad assessed the loss on two counts, namely “loss assessed on repairingbasis” at Rs.94,64,357.70 and on “total loss basis” at Rs.41,90,940.00.FThe relevant portion from the report of said surveyor named SubbiahJeyakarthigesan was as under :-

“LOSS ASSESSED ON REPAIRING BASISRs.9,464,357.70 (Rupees Ninety four lacs sixty four thousandthree hundred fifty seven & seventy only).

GASSESSMENT ON TOTAL LOSS BASIS

Present depreciated cost of the Excavatoras declared to the Insurance Company andaccepted by them Nu. 4,656,600.00

H

Less: 10% Depreciation for usage fromthe date of insurance to the date of accident Rs. 465,660.00

______________

Assessed on Total Loss Basis

Rs. 4,190,940.00

(Rupees Forty one lacs ninety thousand nine hundred forty only.)

UNDER INSURANCE

In my opinion the under insurance in this case will not be applicableas the total machine has been totally burnt. The machine hasbeen insured for Rs.46,56,600.00 which is after application ofdepreciation from the period of purchase to the last renewal ofthe insurance policy, as such I have not applied any under insurancein this case.”

7. The State Commission allowed the complaint. The relevantportions of its order dated 04.12.2013 are as under :- “Thirdly, the loss assessed by the Surveyor appointed by theinsurance company has taken into consideration the depreciationvalue @ 32% of the original purchase value of Rs.51,74,000/-only, but the premium as on 7[th] July 2009 was made after fixingdepreciation value. It is quite reasonable that the depreciationvalue, as pointed out by the surveyor appointed by the insured inreply to question No.8 of the OP, that the depreciation has beenapplied by the OP at the time of renewal of policy and depreciationcan be applied only once, only from the period from the date ofrenewal of insurance to the date of accident. Again, in reply toquestion No.9 of the OP, it has been held that under insurance @8.71% is incorrect as the insurance company has put in their ownvalue at the time of renewing the policy without obtaining theproposal form from the owner of the excavator machine. Wealso agree with the view taken by the surveyor appointed by theinsured as stated in his reply to question No.10 of the OP thatsalvage wreck is the property of the insurance company and itcannot be forced upon the owner of the damagedmachine…………….

Ordered

That the complaint be and the same is allowed on contest againstO.P.Nos. 1 & 2 who are hereby directed to pay a sum of A

B

C

DEF

G

H

ARs.41,90,940/- (Forty one lakh ninety thousand nine hundred andforty only) with interest @ Rs.8% p.a. from the date of filing ofthe claim. The said OPs. are also directed to pay a sum ofRs.1,00,000/- (One lakh only) as compensation for harassment,mental agony and financial loss, apart from another sum ofRs.5,000/- (Five thousand only) as costs. The entire amount shallBbe paid by OP Nos.1 & 2 within 45 days from the date of thisorder in default whereof, interest @9% p.a. shall be payable tillfull realisation.”

8. The respondent, being aggrieved filed First Appeal No.182 of2014 which was partly allowed by the National Commission vide itsCjudgment and order dated 16.02.2018. The National Commission heldas under:

“… … …The Insurance Company is responsible to indemnifythe loss on the basis of the replacement of the damaged machinein the same condition at which it was at the day of the accident.DIn the present case, though IDV of Rs.46,56,000/- was mentionedin the policy and was agreed between the parties, however, if thenew machine is available for Rs.51,00,000/- then on that basis thesame machine of 3.25 years age could be available on theapproximate price being arrived at by deducting the depreciationEfor 3.25 years from the current price of the new machine.Obviously, the insurance Company shall go for this price forreplacement as this is less than the IDV. On this basis, thesurveyor has calculated depreciated price of the new machine fitfor replacement as Rs.34,42,500/- after applying depreciation of10% p.a. since the purchase of the machine on the current priceFof new machine till the date of accident.”

The National Commission further observed that the salvage valueto the tune of Rs.6,50,000/-, which was realized by the respondent couldnot have been deducted from the aforesaid sum of Rs.34,42,500/. TheNational Commission, thus directed the respondent to pay a sum ofGRs.34,17,500/- for settlement of the insurance claim of the appellant. Itwas found that since the respondent was willing to settle the matter forRs.25,42,273/-, the respondent would be liable to pay interest on thedifferential amount of Rs.8,93,227/- @ 8% p.a.

9. The decision of the National Commission is presently underappeal. We heard Mr. Soumya Roop Sanyal, learned Advocate for theappellant and Mr. Joy Basu, learned Senior Advocate for the respondent.The appellant contended that it was a case of a total loss as accepted byboth the surveyors and going by the “sum insured” as agreed by theparties, the appellant was entitled to Rs.46,56,000/-. It was submittedthat the Insurance Company was well aware that the Excavator was of2007 make and after deducting appropriate depreciation the value thatwas arrived at for the purposes of cover of insurance was Rs.46,56,600/-.Countering said submission, the respondent submitted that despitestipulation of such amount as sum insured, the Insurance Company wouldnot be disentitled in the present case from contending that the actualvalue after suffering appropriate depreciation ought to be one that wasindicated by its surveyor. Reliance was placed upon the decision of thisCourt in Sikka Papers Limited v. National Insurance CompanyLimited and others[1].

10. It is common ground that as a result of fire, the Excavatorwas a “total loss” and the insured would be entitled to the replacementcost of the Excavator. The point, however, is what is the amount orvalue that the insured is entitled to.

11. The policy in question indicates that the “year of make” of theExcavator was “2007” while the policy was for the period 22.07.2009 to21.07.2010. The parties were aware that the Excavator was purchasedin the year 2007 for Rs.51.74 lakhs. If the contract mentioned the suminsured to be Rs.46,56,600/- the parties must be deemed to be awareabout the significance of that sum and the fact that it represented thevalue of the Excavator as on the date when the coverage was obtained.In this regard the conclusion arrived at and the observations made inDharmendra Goel v. Oriental Insurance Company Limited[2 ]arenoteworthy.In that case a vehicle was bought in the year 2000 and therelevant period of coverage was 2002-2003. The vehicle met with anaccident. The surveyor found it to be a total loss which was assessed atRs.1,80,000/-. In an action instituted in the Consumer Forum, the NationalCommission had granted compensation at said level of Rs.1,80,000/-with interest. Questioning such assessment, the insured was in an appealand submitted, inter alia, that he was entitled to the sum insured, namely, 1 (2009)7 SCC 777

2 (2008) 8 SCC 279

AB

C

D

E

F

G

H

ARs.3,54,000/-. Paragraphs 5 and 7 of the decision bring out the principlethat the Insurance Company having accepted the value of the vehicle tobe Rs.3,54,000/-, was bound by that value. Said paragraphs 5 and 7were as under:

“5. We have heard the learned counsel for the parties and havegone through the record very carefully. The facts as narratedabove remain uncontroverted. Admittedly, the accident hadhappened on 10-9-2002 during the validity of the insurance policytaken on 13-2-2002 insuring the vehicle for Rs 3,54,000 on apremium of Rs 8498. It is also the admitted position that the vehiclehad been declared to be a total loss by the surveyor appointed bythe Company though the value of the vehicle on total loss basishad been assessed at Rs 1,80,000. We are, in the circumstances,of the opinion that as the Company itself had accepted the valueof the vehicle at Rs 3,54,000 on 13-2-2002, it could not claim thatthe value of the vehicle on total loss basis on 10-9-2002 i.e. on thedate of the accident was only Rs 1,80,000.

B

C

D

… … …

B

C

D

… … …

7. It must be borne in mind that Section 146 of the Motor VehiclesAct, 1988 casts an obligation on the owner of a vehicle to take outan insurance policy as provided under Chapter XI of the Act andany vehicle driven without taking such a policy invites a punishmentunder Section 196 thereof. It is, therefore, obvious that in the lightof this stringent provision and being in a dominant position theinsurance companies often act in an unreasonable manner andafter having accepted the value of a particular insured good disownthat very figure on one pretext or the other when they are calledupon to pay compensation. This “take it or leave it” attitude isclearly unwarranted not only as being bad in law but ethicallyindefensible. We are also unable to accept the submission that itwas for the appellant to produce evidence to prove that thesurveyor’s report was on the lower side in the light of the factthat a price had already been put on the vehicle by the Companyitself at the time of renewal of the policy. We accordingly holdthat in these circumstances, the Company was bound by the valueput on the vehicle while renewing the policy on 13-2-2002.”

E

F

G

12. Mr. Basu, learned Senior Advocate, however relied upon thedecision of this Court in Sikka Papers(supra). In that matter a dieselgenerating set purchased in the year 1997 for Rs.45 lakhs was insuredfor Rs.35 lakhs for the period from 08.04.1999 to 07.04.2000. Saiddiesel generating set broke down. The complainant demanded what ithad paid i.e. Rs.25 lakhs for the repairs but the insurer, relying upon thereport of the Surveyor, did not agree. According to the Surveyor the netloss was Rs.14,45,000/-. But the Surveyor found that the generating setwas under insured and as such the figure of net loss that was assessedought to suffer deduction of 25.71%. The net assessed loss was,therefore, at the level of Rs.10,47,491/-. This Court raised two questions:

“(1) Whether the insurer was justified in accepting report dated15-5-2000 submitted by the surveyor who had assessed the lossof Rs.14,45,000/- after deducting about Rs.10,55,000/- fromRs.25,00,000/- i.e. actual amount paid by the complainant forrepairing the diesel generating set?

(2) Whether the insurer was justified in deducting an amount ofRs.3,71,509.50 (25.71%) as under insurance from the lossassessed at Rs.14,45,000/- by the surveyor in its report dated 15-5-2000?”

As regards first question, this Court found that insurer would notbe liable in respect of wearing out of machinery from normal use orexposure and the cost of replacement of insured property by new propertyof the same kind and same capacity would be subject to the exceptionthat repair or replacement would not extend to the machinery or partswhich had undergone normal wear and tear. With regard to the secondquestion, on facts it was found that there was an element of underinsurance and the surveyor was justified in deducting 25.71%.

13. We do not see how the decision in Sikka Papers (supra)could be of any relevance in the present matter. The cases of “underinsurance” stand on a completely different footing. In such cases theInsurance Company stands denied of appropriate premium. If the suminsured is, in any way, lesser than the real value of the subject matter ofinsurance, and if there be cases of partial replacement or partial loss, itis well accepted that the Insurance Company is entitled to proportionatededuction representing the proportion of undervaluation. It is this facetof the matter which weighed with the Court in Sikka Papers (supra) in A

B

C

D

EF

G

H

A

B

C

D

EF

G

H

Aaffirming the surveyor’s report in so far as 25.71% deduction wasconcerned. Even in the present matter under the caption “Provisions”,the stipulation in para 2 is to the effect that if the sum insured “is lessthan the amount required to be insured ……. the company will pay onlyin such proportion as the sum insured bears to the amount required to beinsured.”B

14. It is not the case of the Insurance Company that there wasany “under insurance” in the present matter. On the other hand, thecontention is that as against the sum insured which was Rs.46,56,600/-the depreciated value was Rs.34,42,500/-. So according to the InsuranceCompany, if at all it was a case of over insurance. If we go by the ideaCof receipt of premium, then the Insurance Company had received morethan what according to it the real value would have justified.

15. It is precisely in this set of facts that the question in the presentmatter arises. If both the sides, with their eyes open, had arrived at aparticular figure to be the real value of the subject matter of insurance,Dis it open to any party to dispute said sum and contend that the real valuewas something different from what was declared by the parties to bethe sum insured. One may understand cases where there is non-disclosure of material facts which may go to the root of the matter andas such the sanctity of the agreement itself may get affected. But ifEboth the parties had agreed and arrived at an understanding, whichunderstanding was otherwise not vitiated by any misrepresentation, fraudor coercion, the parties must be held bound by stipulation of such figure.This was the idea and the underlying principle in Dharmendra Goel(supra)

F16. The relevant stipulation in the present case, namely clause (b)of Provision -Basis of Indemnity speaks of calculation of actual value bydeducting “proper depreciation”. The Surveyor of the InsuranceCompany has worked the figure of depreciation by starting with thefigure of Rs.51 lakhs as the cost of a new Excavator and then deducting32.5% by way of depreciation assuming the life of Excavator to be 10Gyears. In his assessment, therefore, the stipulation of the figure ofRs.46,56,600/- on the day the contract was entered into, had nosignificance. Was he right and justified and how could he assume thelife of the Excavator to be 10 years? If that was the understandingbetween the parties, the figure of sum insured could have been different.

H

If the surveyor was calculating the depreciation from the day when thepolicy was entered into till the date when the accident occurred, suchexercise could certainly be justified. But the exercise undertaken wasin the nature of not only considering the depreciation post the policy buteven including the period prior thereto. That exercise was alreadyundertaken by the parties and in their assessment the real value of theExcavator as on the day when the policy was taken out was Rs.46,56,600/-. In the face of such agreement and understanding, the surveyor couldnot have calculated depreciation for a period prior to the date of policyor contract. The purport of aforesaid clause was to arrive at propervaluation as on the day when there was total destruction. He couldhave undertaken the exercise post the date of policy to assess the realvalue of the insured property as on the date when the fire actually tookplace. And for such purposes, the assessment must start with the amountdescribed as “sum insured” on the day when the contract was enteredinto. It was not open to the Surveyor or to the Insurance Company todisregard the figure stipulated as ‘sum insured’. The loss had to beassessed in the present case, keeping said figure in mind.

17. Having considered the entire matter, in our view, except incases where the agreement on part of the Insurance Company is broughtabout by fraud, coercion or misrepresentation or cases where principleof uberrima fide is attracted, the parties are bound by stipulation of aparticular figure as sum insured. Therefore, the surveyor and theInsurance Company were not justified in any way in questioning anddisregarding the amount of “sum insured”. Further depreciation, if any,can always be computed keeping the figure of “sum insured” in mind.The starting figure, therefore, in this case had to be the figure whichwas stipulated as “sum insured”. Since Excavator, after the policy wastaken out was used for eleven months, there must be some reasonabledepreciation which ought to be deducted from the “sum insured”. Thesurveyor appointed by the insured was right in deducting 10% and inarriving at the figure of Rs.41,90,940/-. The other issue which weighedwith the surveyor appointed by the Insurance Company regardingdeduction of salvage value was rightly answered by the NationalCommission and as such does not require any elaboration. We, thus,find that the assessment made by the State Commission was quite correctand that made by the National Commission was completely incorrect.

ABCDE

F

G

778SUPREME COURT REPORTS[2019] 1 S.C.R.

A18. We, therefore, allow this appeal, set aside the decision of theNational Commission and restore the judgment and order passed by theState Commission. No costs.

B

Devika Gujral

Appeal allowed.

C

D

E

F

G

H