JSK INDUSTRIES PVT. LTD versus ORIENTAL INSURANCE COMPANY LIMITED on 18 October 2022

JSK INDUSTRIES PVT. LTD.

v.

ORIENTAL INSURANCE COMPANY LIMITED

(Civil Appeal No. 7630 of 2022)

OCTOBER 18, 2022

[DINESH MAHESHWARI AND ANIRUDDHA BOSE, JJ.]

Insurance: Insurance Claim – Repudiation of – Appellantstook insurance coverage – However, insurance company repudiatedtheir claim on the ground that there was no sufficient balance tocover the declaration and/or loss – State Commission as alsoNational Commission rejected the claim – Held: Insurance companytook a defense which did not form the basis of repudiation of theclaim – National Commission ought not to have gone beyond thegrounds of repudiation and into the nature of coverage, whichaccording to the National Commission had effectively changed from“anywhere in India to anywhere in India” to a sales turnover policy,limiting the policy coverage of the subject- goods from the points ofdeparture at the two locations – Matter remanded to StateCommission for taking decision afresh on the claim of the appellantson the ground which formed the basis of repudiation.

Allowing the appeal, the Court

HELD: 1.1 The National Commission rejected the appealof the appellant on the ground that they had converted “fromanywhere in India to anywhere in India” policy into the salesturnover policy covering transportation of goods only from twolocations specified in the endorsement. The repudiation of theappellants’ claim was on the ground of exhaustion of insurancecoverage and the State Commission also determined the issueprimarily on that ground. Both the National Commission and theState Commission had referred to the nature of the policy but theState Commission did not come to a specific finding as to whetherthe goods otherwise remained insured from the port to theappellants’ factory. It was the finding of the National Commissionon the other hand that the policy was only applicable on suppliesmade from the two locations. As regards financial limit of the

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Apolicy, the appellants’ stand before the National Commission wasthat there was available coverage to accommodate their claim.On this count, the observation of the National Commission wasthat if exhaustion of the coverage limit was the sole reason forrepudiation of the claim, the matter could have been remandedto the State Commission for the decision of the complaint onBmerits. That was the course which ought to have been directedby the National Commission because the only ground on whichrepudiation of the claim was made was lack of financial coverage.The National Commission ought not to have gone beyond thegrounds of repudiation and into the nature of coverage. Thus,Cthe order of the National Commission as also State Commissionare set aside and the matter is remanded to the State Commissionfor taking a decision afresh on the claim of the appellants on thegrounds which formed the basis of repudiation and determine asto whether at the material point of time there was sufficientbalance to cover the claim on account of declaration made asDregards loss suffered by the appellants. [Paras 14, 15][589-C-G;590-B-C]

Saurashtra Chemicals Ltd. v. National Insurance Co.Ltd. (2019) 19 SCC 70 – referred to.E

Case Law Reference

(2019) 19 SCC 70referred toPara 14

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7630

Fof 2022.

From the Judgment and Order dated 15.01.2018 of the NationalConsumer Disputes Redressal Commission at New Delhi in First AppealNo. 700 of 2012.

GGopal Shankarnarayan, Sr. Adv., D. Bharat Kumar, TadimallBhaskar Gowtham, Aman Shukla, Ms. Tanya Srivastava,M. Chandrakanth Reddy, Gopal Jha, Advs. for the Appellant.

S. M. Suri, Ms. Manjeet Chawla, Yashvardhan S. Soam, Advs.for the Respondent.H

The Judgment of the Court was delivered by ANIRUDDHA BOSE, J.

Leave granted.

2. The repudiation of a claim in respect of a “Marine Cargo-OpenPolicy” gives rise to this appeal and the appellants are the claimantsbefore us. The policy, initially covered a sum of rupees two hundredcrores. Under the heading “Risk Details”, against Sl.No.1 of the policydocument, next to the column “Voyage”, it was indicated “from anywherein India to anywhere in India”. Period of Insurance was from 29[th] October2009 to Midnight on 28[th] October 2010. There was subsequent additionof terms and raising of insurance coverage as well. Fresh endorsementschedules were issued incorporating the changes. These endorsementschedules, however, carried the expression “Attached to and formingpart of policy No.12012/21/2010/876” (that being the original policynumber). The endorsement schedule dated 25[th] November 2009 describedthe policy as “On the Sales Turnover basis”. This endorsement becameeffective from 14:50 hrs on 25[th] November 2009. The next endorsementwas made on 8[th] April 2010, also attached to the original policy, by whichsum insured was raised by a further rupees two hundred crores.

3. The appellants are traders and manufacturers of aluminiumproducts. They claim to have purchased, by high seas sale agreementdated 22[nd] June 2010, eight containers of aluminium ingots. Thesecontainers had arrived at Jawaharlal Nehru Port Trust (JNPT) and fromthere, they were sent to the appellants’ factory unit at Silvassa by atransporter by road. The appellants’ case is that out of the eight containers,one was stolen and the incident of theft took place on 2[nd] July 2010.According to the appellants, value of stolen goods was rupees thirty-four lakhs ninety two thousand and eighty one. Their claim was lodgedwith the respondent on 18[th] March 2011 but this was repudiated by thelatter. The appellants then approached the State Consumer DisputesRedressal Forum (Maharashtra) against the insurance company. Weshall henceforth refer to the said forum as the State Commission.

4. The appellants’ initial Complaint Case no. CC/12/177 wasrejected by the State Commission, by an order passed on 27[th] July 2012and the appeal against that dismissal order registered as Appeal No. 700of 2012, was also dismissed by the National Consumer Disputes A

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ARedressal Commission (“National Commission”) by an order pronouncedon 15[th] January 2018. This decision is under appeal before us.

5. As we have already narrated, the policy underwent somechanges. Clause 3 of the endorsement schedule dated 25[th] November2009 specified:- B

“3. The supplies made from the following two works locationsare held covered under the locations mentioned below.

a)JSK Industries Private Limited,

Survey No. 369/1/1/2,

CBehind Siyaram Silk Mills,

Village Sayil,Slivassa-396230,

UT of Dadra and Nagar Haveli.D

b)JSK Industries Private Limited,126/1-8 Rakholi High School Road, Rakholi Village,Slivassa-396240

UT of Dadra and Nagar haveli.EOther terms and conditions of the policy remainunaltered.

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6. After the appellants lodged the claim, the insurance companyby a communication dated 7[th] September 2011, raised certain queries.GThese included:- “1. The above stock turn over policy was issued on 29.10.2009for a sum insured of Rs. 200 crores. As per the documentsand statements submitted the above sum insured has exhaustedas on 22.12.2009 & no balance was available to cover furtherHdeclarations.

2. Endorsement for increase in sum insured was passed on08.04.2010 for Rs. 200 crores which was fully utilized to coverdeclarations for the period 08.04.2010 till May 2018 as perthe documents and statements submitted.

3. The above loss has occurred between 10.07.2010 &12.07.2010 and as per 1 % 2 above there is no sufficientbalance to cover the above declarations and/ or loss.

However you being given one more opportunity tosubstantiate your claim in view of the grounds of repudiationmentioned before a final decision is taken of cure end yourrepresentation/ clarification must reach us within 2 weeks fromthe date of receipt of this letter, Please note that in case wehave response from you within 2 weeks from the date of receiptof this letter the claim shall stand repudiated for the reasonsindicated above without further advices from us.”

7. As it would be evident from the aforesaid communication, theappellants were given an opportunity to explain their stand in the light ofthe preliminary view of the insurance company that their claims werenot tenable. The appellants took a stand that their insurance coveragewas enhanced to Rs.400 crores and in a table contained in their responsedated 20[th] September 2011, it was explained by them that the aforesaidcoverage of Rs.400 crores was not exhausted. The insurance company,however, stuck to their stand and formally repudiated their claim by aletter issued on 24[th] January 2012. The ground for repudiation was thatthere was no sufficient balance to cover the declaration and/or loss. Therepudiation letter recorded:- “The reply submitted by you have been examined and theCompetent Authority has concluded that no new facts havebeen brought/furnished by you which could satisfactorilyanswer the issues raised in our above letter.

Your claim therefore has been repudiated for the reasonmentioned in our above letter i.e. “there is no sufficientbalance to cover the above declaration and/or loss”

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A8. The State Commission rejected the claim of the appellants,taking into account the fact that their policy was subsequently convertedinto Sales Turnover basis to cover sale transaction up to Rs.400 croresin a given time and though their policy coverage had been enhanced, thesame did not cover the loss on which their claim was raised. It was,inter-alia, held by the State Commission:-B

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“5. On the date of occurrence i.e. cause of action (02/07/2010) insurance cover under the policy though earlierincreased with sum assured of 400 crores but such contingencywas not covered as admittedly, the sales transactions takenplace were not covered for lack, of balance of salesCtransaction to cover under insurance policy. Even during thecourse of argument, Ld. counsel for the complainant companyconceded to this position, yet he tried to press for admissionof this complaint. Interestingly, survey report of the authorizedsurveyor available on record to assess the loss due to theft ofDthe container with material therein states that such a coverunder insurance policy is not extended and rightly so on goingthrough the policy terms and conditions. Complainantcompany has not made carrier as a party against whompossibly the complaint could have been processed. We do notfind any merit in complaint and, therefore, complaint isErejected in limine at the admission stage itself.”

9. As we have already indicated, the National Commission, inappeal, also rejected the appellants’ contention. The National CommissionFin its decision under appeal construed the implication of Sales Turnoverand held:- “8. I have thoroughly examined the record and have given athoughtful consideration to the arguments advanced by boththe sides. It is true that the order of the State Commission isGvery cryptic and does not clearly state the details of the reasonson which the complaint has been dismissed. Prima facie, theState Commission has dismissed the complaint on the basis ofthe facts mentioned in the repudiation letter that the insurancelimit was exhausted before the claim arose. This assertion hasbeen disputed by the complainant and it has been claimedHthat there was still an insurance limit left for Rs.3.89 crores JSK INDUSTRIES PVT. LTD. v. ORIENTAL INSURANCECOMPANY LIMITED [ANIRUDDHA BOSE, J.]

and, therefore, it was not correct to hold that the totalinsurance limit was exhausted and that too, without gettingthe version of the OP. Had this been the only reason, thematter could have been remanded to the State Commission,for the decision of the complaint on merits, but the fact of thematter is that the nature of the policy after the endorsementdated 25.11.2009 became such that only the sold materialwas covered and not the imported material. The StateCommission has obliquely mentioned this fact, but has notmade this a point for dismissal of the complaint. In fact, thecomplainant should have taken some other insurance fortransport of the goods from JNPT to Silvasa. The complainanthad neither taken any extra policy nor has he made thetransporter, a party in the complaint case.

9. The endorsement of 25.11.2009 that the policy would beon “sales turn-over basis” also mentions that the insurancewould be on “sales turn-over basis” on the material goingout from the two premises of the industry at Silvasa.

10. Learned counsel for the Appellant has not shown anydocument to controvert this assertion of the insurancecompany that the policy was only applicable on the salessupplies from the two premises of the industry at Silvasa.

11. It is a settled principle of law that the terms of the policyare to be construed as per the written agreement of the policy.It could not be shown by the learned counsel for the Appellantthat any imported material would also be included in thecovered items under the policy even after the endorsementdated 25.11.2009 which restricts the policy to only on “salesturn-over basis” on the supplies, from two locations of theindustry at Silvasa.”

10. Mr. Gopal Shankarnarayan, learned senior counsel for theappellants has argued both on substantive and procedural points to assailthe aforesaid orders. His first submission is that the insurance companycannot resist a claim petition on grounds beyond those cited by themwhile repudiating a claim. In support of this argument, a decision of thisCourt in the case Saurashtra Chemicals Ltd. v. National Insurance AB

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ACo. Ltd. [(2019) 19 SCC 70] has been cited. In this judgement, it hasbeen held:-

“23. Hence, we are of the considered opinion that the law, aslaid down in Galada [Galada Power & TelecommunicationLtd. v. United India Insurance Co. Ltd., (2016) 14 SCC 161 :B(2017) 2 SCC (Civ) 765] on Issue (2), still holds the field. It isa settled position that an insurance company cannot travelbeyond the grounds mentioned in the letter of repudiation. Ifthe insurer has not taken delay in intimation as a specificground in letter of repudiation, they cannot do so at the stageof hearing of the consumer complaint before NCDRC.”CAs regards implication of the Sales Turnover Policy, his argumentis that the said policy cannot be construed to mean to cover only thosegoods which are already sold. His submission on this count is that insuch a situation the title of the goods would have passed on to the buyerand the appellants would not have any insurable interest in the said goods.D

11. He has further argued that the National Commission erred ininterpreting the terms of the policy. According to him, the policyendorsement dated 25[th] November 2009 did not withdraw coverage ofany of the goods named in the policy while in transit “from anywhere inIndia to anywhere in India” and the implication of including the twoElocations specified meant that as per the ‘Sales Turnover policy’ theappellants were required to declare their sales made from the mentionedtwo work locations (factories) on monthly/quarterly basis to the respondentonly for the purpose of computing the balance cover.

12. Mr. S. M. Suri, learned counsel for the respondent-insuranceFcompany submitted that the main case of the insurance company is thatthe policy covered only those goods within the coverage which left thetwo units which have been specified in the earlier part of this judgment.

13. First, we shall examine the ratio of the decision of this Courtin the case of Saurashtra Chemicals Ltd. (supra). In that case, it wasGa claim relating to standard fire and special perils policy. Repudiationwas solely on the ground that a spontaneous combustion did not resultinto fire and loss had not been caused by the fire as stipulated by policyconditions. The insured had approached the National Commission. Oneof the defenses taken by the insurance company in the Commission wasthat the intimation of claim was with delay for over a month. This delay,H

according to the insurance company vitiated condition 6(i) of the generalconditions of the policy, as applicable in that case. The insurance companywas successful before the National Commission. The insured preferredan appeal which was heard and decided by a Coordinate Bench. Beforethe Bench, the main point on which the case turned was that the insurancecompany was taking a defense which did not form the basis of repudiationof the claim. It is in that context this Court held this was impermissible.The reasoning of the Court appeared in paragraph 23 of the report,which we have quoted above.

14. Addressing the merits of the present case, we find that theNational Commission mainly rejected the appeal of the appellant on theground that they had converted “from anywhere in India to anywhere inIndia” policy into the sales turnover policy covering transportation ofgoods only from two locations specified in the endorsement made on25[th] November 2009. The repudiation of the appellants’ claim was onthe ground of exhaustion of insurance coverage and the State Commissionalso determined the issue primarily on that ground. Both the NationalCommission and the State Commission had referred to, in their respectivedecisions, the nature of the policy but the State Commission did notcome to a specific finding as to whether the goods otherwise remainedinsured from the JNPT port to the appellants’ factory. It was the findingof the National Commission on the other hand that the policy was onlyapplicable on supplies made from the two locations at Silvassa. We havequoted this passage from the order of the National Commission earlierin this judgment. As regards financial limit of the policy, the appellants’stand before the National Commission was that there was availablecoverage of Rs. 3.89 crores to accommodate their claim. On this count,the observation of the National Commission was that if exhaustion ofthe coverage limit was the sole reason for repudiation of the claim, thematter could have been remanded to the State Commission for thedecision of the complaint on merits. In our opinion, that was the coursewhich ought to have been directed by the National Commission becausethe only ground on which repudiation of the claim was made was lack offinancial coverage. Thus, following the ratio of the decision of theCoordinate Bench in the case of Saurashtra Chemicals Ltd. (supra),the National Commission ought not to have gone beyond the grounds ofrepudiation and into the nature of coverage, which according to theNational Commission had effectively changed from “anywhere in Indiato anywhere in India” to a sales turnover policy, limiting the policy A

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Acoverage of the subject-goods from the points of departure at the twolocations at Silvassa. These are all terms of art applicable to the insurancetrade but we do not consider it necessary to dilate on this aspect of thedispute having regard to the decision of this Court in the case ofSaurashtra Chemicals Ltd. (supra).

B15. Under these circumstances, we set aside the decisions of theNational Commission as also of that State Commission and remand thematter to the State Commission for taking a decision afresh on the claimof the appellants on the grounds which formed the basis of repudiationand determine as to whether at the material point of time there wassufficient balance to cover the claim on account of declaration made asCregards loss suffered by the appellants.

16. The appeal stands allowed in the above terms.

17. There shall be no order as to costs.

18. Pending application(s), if any, shall stand disposed of.

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Appeal allowed.

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