SAURASHTRA CHEMICALS LTD. (PRESENTLY KNOWN AS SAURASHTRA CHEMICALS DIVISION OF NIRMA LTD.) versus NATIONAL INSURANCE CO. LTD. on 13 December 2019

1. In view of the law laid down by the three Judge Bench inthe Sonell Clocks and Gifts Ltd. v. New India Assurance CompanyLtd, the argument that by appointing a surveyor the respondent-insurer is estopped from raising the plea of violation of conditionprescribing a time limit for intimation/lodging of the claim, hasno legs to stand. Thus, issue is answered accordingly. [Para18][34-E-F]

Sonell Clocks and Gifts Ltd. v. New India AssuranceCompany Ltd (2018) 9 SCC 784 : [2018] 10 SCR 35 –relied on.

Galada Power and Telecommunication Ltd. v. UnitedIndia Insurance Company Ltd & Another (2016) 14SCC 161 – referred to.

Whether in the absence of any mention, of aspect of delayin intimation and violation of conditions of Clause 6(i) of GeneralConditions of Policy, in the repudiation letter, the same could betaken as defence before the NCDRC.

2. Insofar as this issue is concerned it is undisputed thatthe letter of repudiation did not even remotely mention anythingabout violation of duration clause stipulated in Clause (6) (i) ofthe General Conditions of Policy. The Respondent-insurerrepudiated the claim solely on the ground that since spontaneouscombustion did not result into fire and loss had not been causedby fire as stipulated by policy conditions, there was no liabilityunder the policy. It was for the first time the respondent-insurerraised the issue of delayed intimation of claim and violation ofstipulation of Clause 6(i) of the General Conditions of Policy inits reply filed before NCDRC. [Para 19][34-G-H]

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A3. Undoubtedly, this Court in Sonell Clocks has distinguishedGalada Power on facts and held that the appointment of a surveyorcannot, as a matter of law, be construed as a waiver of the termsand conditions of the insurance policy. However, in Sonell Clocks,the insurer had taken a specific plea in the repudiation letter thatthe loss was not conveyed within the stipulated period. HenceBthe singular issue before this Court was only whether the insurerhad waived the condition as to delay in intimation by appointing asurveyor. This Court in Sonell Clocks did not have the occasionto consider whether the insurance company could have raiseddelay as a ground for repudiation for the first time before theCconsumer forum. [Para 21][35-E-F]4. Hence, this Court is of the considered opinion that thelaw as laid down in ‘Galada’ on issue (2) still holds the field. It isa settled position that an insurance company cannot travel beyondthe grounds mentioned in the letter of repudiation. If the insurerDhas not taken delay in intimation as a specific ground in letter ofrepudiation, they cannot do so at the stage of hearing of theconsumer complaint before NCDRC. [Para 22][35-G-H]

Galada Power and Telecommunication Ltd. v. UnitedIndia Insurance Company Ltd & Another (2016) 14ESCC 161 – relied on.Sonell Clocks and Gifts Ltd. v. New India AssuranceCompany Ltd (2018) 9 SCC 784 : [2018] 10 SCR 35 –referred to.

5. Admittedly in the case at hand there was no reference ofFdelay in intimation or lodging of the claim as stipulated in Clause6(i) of the General Conditions of Policy in the repudiation letter.The NCDRC has failed to take into consideration this aspect ofthe matter and, therefore, cannot be held to be justified inrejecting the claim of the appellant, on that ground. [Paras 23Gand 24]

Case Law Reference

(2016) 14 SCC 161[2018] 10 SCR 35

referred to

Para 18Para 18

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(2016) 14 SCC 161 relied onParas 21, 22[2018] 10 SCR 35 referred toParas 21, 22

CIVIL APPELLATE JURISDICTION: Civil Appeal No.2059 of2015.

From the final Judgment and Order dated 06.01.2015 of theNational Consumer Disputes Redressal Commission at New Delhi inConsumer Case No.115 of 2007.

Nikhil Goel, Ms. Naveen Goel, Dushyant Sarna, Advs. for theAppellant.

Yogesh Malhotra, Gaurav Sharma, Advs. for the Respondent.

The Judgment of the Court was delivered by KRISHNA MURARI, J.

1. The appellant purchased a standard fire and special perils policyfrom the respondent National Insurance Company Ltd. thereby insuringthe risk of loss/damage to the stock of coal and lignite stored in its factorycompound. An additional premium of Rs. 59,200/- was paid by theappellant company so as to cover the risk of loss of the aforesaid stockon account of spontaneous combustion. The appellant was declared aSick Unit and was accordingly registered under SICA. The factoryremained closed from 17.02.2006 to 09.08.2006 and was re-opened on10.08.2006.

2. After re-opening it was noticed between the period from11.8.2006 to 20.8.2006 that some amount of stock of coal and lignite hasbeen diminished/destroyed on account of spontaneous combustion, causingloss and damage. Intimation in this regard was sent to the respondent-insurer on 12.09.2006.

3. Pursuant to the claim made, a surveyor was appointed whovisited the premises of the appellant on 18.09.2006 and sought certaindetails, which were provided on 28.11.2006. After carrying out the requisitesurvey, the surveyor submitted his report on 11.04.2007 assessing totalloss to the tune of Rs. 63,43,679/-.

4. The claim lodged by the appellant was however repudiated bythe respondent-insurer vide communication dated 27.07.2007 on theground that since spontaneous combustion did not result into fire thus, A

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28SUPREME COURT REPORTS

Aloss had not been caused by fire as stipulated in the relevant endorsementwith respect to spontaneous combustion of the insurance policy. Theappellant was further informed through the letter that unless spontaneouscombustion results into fire, there is no liability under the policy.

5. On denial of the claim the appellant approached the NationalBConsumer Disputes Redressal Commission (hereinafter referred to asthe NCDRC) vide consumer complaint no. 115 of 2007 seeking followingreliefs:- (a) To direct the respondent company to allow the demanded claimof Rs. 98,46,732/- on account of loss suffered by it on accountCof loss of stock of goods insured with the respondent; (b) To award compensation of a sum of Rs. 25,00,000/- on accountof pain and suffering suffered by the appellant on account ofdeficient service provided by the respondent company;

(c) Award of sum of Rs. 11,81,608/- being interest @ 18% fromDthe date of the claim till the filing of the petition; (d) Award further interests @ 18% pendent lite on amountsspecified in Clause (a) and (b); (e) Award cost of Rs. 1,00,000/- to the complainant; EThe complaint was resisted by the Insurer on three main grounds:-

(i) No claim was payable under the terms and conditions onwhich policy was issued inasmuch as destruction or damage,if any, caused to the property by fire on account of its ownfermentation, natural heating or spontaneous combustion orFundergoing natural heating or drying process is not covered.

(ii) Since the factory remained closed from 17.02.2006 to09.08.2006, the insurance cover ceased to operate in viewof the condition no. 3 of the policy which provides that unlessthe insured has obtained the prior sanction of the company inGthis regard, the insurance would cease to operate as regardsthe property affected :

(a) if the trade or manufacture carried on be altered or ifthe nature of occupation of or other circumstances affectingthe building insured or containing the property insured beH

changed in such a way as to increase the risk of loss ordamage.

(b) if the building insured or containing the insured propertybecomes unoccupied and so remains for a period of morethan 30 days.

(iii) Intimation of claim was sent with considerable delay of overa month thereby violating condition no. 6(i) of the GeneralConditions of Policy.

6. Insofar as ground nos. (i) and (ii) are concerned, the samewere not accepted by NCDRC and were decided against the respondent-insurer. The said two grounds (i) and (ii) are not in issue before us in thisappeal as such we need not enter into the same.

7. However ground no. (iii) raised by the respondent-insurer indefence to the claim of the appellant found favour with the NCDRC andthe complaint was dismissed on the premise that there was breach ofconditions incorporated in Clause 6(i) of the General Conditions of Policy.Under Clause 6(i) the intimation of loss and damage was required to begiven in writing by way of notice within 15 days of the occurance thereof.It is an admitted case between the parties that intimation of loss/damagewas given by the appellant to the respondent-insurer for the first time on12.09.2006 and a claim for loss for a sum of Rs. 1.4 Crores to 1.5Crores was made vide letter dated 14.09.2006.

8. The NCDRC rejected the claim holding that since thecomplainant (Appellant herein) had contravened Clause 6(i) of the GeneralConditions of Policy, no claim is payable.

9. We have heard Sh. Nikhil Goel, Learned Counsel for theappellant and Sh. Yogesh Malhotra for the respondent.

10. It is submitted by Learned Counsel for the appellant that theNCDRC has erred in holding that the claim stands defeated because ofdelayed intimation as postulated in Clause 6(i) of the General Conditionsof Policy. It is also contended that, since respondent company hadappointed a surveyor, its right to advance the plea, with respect to theclaim being not maintainable because of delayed intimation as envisagedin Clause 6(i), stood waived. It is further contended that since the letterof repudiation does not even remotely refer to delayed intimation or A

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Adelayed claim, as postulated in Clause 6(i), the said ground cannot betaken as a defence to the claim. Reliance in support of the abovecontentions is placed upon judgment rendered by this Court in GaladaPower and Telecommunication Ltd. vs. United India InsuranceCompany Ltd & Another.[1]B11. Mr. Yogesh Malhotra, Learned Counsel for the respondent- B11. Mr. Yogesh Malhotra, Learned Counsel for the respondent-insurer while supporting the order passed by the NCDRC contendedthat by mere appointment of a surveyor, the insurer is not estopped fromraising a plea of the violation of a condition warranting repudiation of theclaim. Hence there is no waiver of the condition relating to delay inCintimation as stipulated in the General Conditions of Policy. It is furthersubmitted that the judgment rendered by the two judge Bench of thisCourt in the case of Galada (Supra) was considered by a three JudgeBench in the case of Sonell Clocks and Gifts Ltd. v/s New IndiaAssurance Company Ltd.[2]and was distinguished on the ground thatdictum in Galada case was in context of peculiar facts of that case.

D12. We have considered the argument advanced by LearnedCounsel at the bar.

The twin issues which arise for consideration in this appeal are:-

(1) Whether the respondent-insurer had waived the conditionErelating to delay in intimation and lodging of the claim, byappointing a surveyor.

(2) Whether in the absence of any mention, of aspect of delay inintimation and violation of conditions of Clause 6(i) of GeneralConditions of Policy, in the repudiation letter, the same couldFbe taken as defence before the NCDRC.

13. It is not disputed that on the basis of the communication madeby the appellant, the respondent-insurer appointed a surveyor on18.09.2006 without any caveat and qualification.

G14. The Surveyor submitted his report dated 11.04.2007 assessingtotal loss to the tune of Rs. 63,43,679/-. Subsequently, vide letter dated27.07.2007 the respondent-insurer repudiated the claim by stating asunder:- 1 (2016) 14 SCC 161H2 (2018) 9 SCC 784

M/s Saurashtra Chemicals Ltd.Nirma House,Ashram Road,Ahmedabad, Kind Attn: Sh. Deepak Shah, Company Secretary.

Dear Sir,

Re:- Policy No. 301200/11/06/3300000033

Claim No. 301200/33/37/2007

Loss/Damage due to Spontaneous Combustion to Lignite andCoal.

This has reference to the claim lodged by you as above.

On scrutiny of survey reports, various claim documents, thenature cause and circumstances of the loss, it is noticed that in theinstant case the Spontaneous Combustion has occurred, but it didnot result into the fire and loss has not been caused by fire only asstipulated in the relevant endorsement of spontaneous combustion.

Further, the spontaneous combustion endorsement is clearand unambiguous in this regard and unless the spontaneouscombustion results into fire, there is no liability under the policy.

In view of the above the competent authority has decided torepudiate the said claim which please note.

Sd/-

(George Valamchery)

Sr. Divisional Manager.

15. As is evident from the repudiation letter there is no referenceto any of the aspects enumerated in Clause 6(i) of the General Conditionsof Policy which reads as under:-

“6(i) On the happening of any loss or damage, the insuredshall forthwith give notice thereof to the company and shallwithin 15 days after the loss or damage or such further timeas the company may in writing allow in that behalf deliver tothe company.”

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16. Insofar as issue (1) is concerned, a two Judge Bench of thisCourt in the case of Galada (supra) where despite violation of durationclause stipulated in Clause 5(3) to Clause 5(5) of the policy insurancecompany had appointed a surveyor held as under:- “13. The National Commission has relied upon Clause 5 andBon that basis has rejected the claim by putting the blame onthe complainant. The letter of repudiation dated 20-9-1999,which we have reproduced hereinbefore, interestingly, doesnot whisper a single word with regard to delay or, in fact,does not refer at all to the duration clause. What has beenstated in the letter of repudiation is that the claim lodged byCthe complainant does not fall under the purview of transitloss because of the subsequent investigation report. It isevincible, the insurer had taken cognizance of thecommunication made by the Appellant and nominated asurveyor to verify the loss. Once the said exercise has beenDundertaken, we are disposed to think that the insurer couldnot have been allowed to take a stand that the claim is hit bythe clause pertaining to duration…………….

18. In the instant case, the insurer was in custody of the policy.It had prescribed the clause relating to duration. It was veryEmuch aware about the stipulation made in Clauses 5(3) to5(5), but despite the stipulations therein, it appointed asurveyor. Additionally, as has been stated earlier, in the letterof repudiation, it only stated that the claim lodged by theinsured was not falling under the purview of transit loss. Thus,by positive action, the insurer has waived its right to advanceFthe plea that the claim was not entertainable becauseconditions enumerated in duration clause were not satisfied.In our considered opinion, the National Commission couldnot have placed reliance on the said terms to come to theconclusion that there was no policy cover in existence andGthat the risks stood not covered after delivery of goods to theconsignee.”

17. However, the dictum in Galada case (supra) came up forconsideration before a three Judge Bench of this Court in the case ofSonell Clocks and Gifts Ltd. (supra) and it was distinguished on theHground that dictum in Galada is in context of the peculiar facts and circumstances of that case and does not lay down that on appointmentof the surveyor, the insurer is estopped from raising of plea of violationof condition stipulated in the insurance policy. It may be relevant to extractthe following from the said report:-

“20. The Respondent has rightly pointed out the otherdistinguishing features in the present case. To wit, in that case[Galada], the Court had considered Clause 5 of a MarineInsurance Policy wherein the issue was whether the insurancecover itself had extinguished by efflux of time and that theintimation given by the insured to the insurer was not madewithin 7 days of arrival of the vehicle at the destinationmentioned in the policy. According to the insurer, on expiryof 7 days from delivery the insurance cover stood perishedand no cover would subsist beyond the said 7 days’ period. Itis in that context, the Court noted that appointment of thesurveyor by the insurer beyond the said period can beconstrued as an act of waiver by the insurer of the positionthat the policy stands extinguished. In other words,appointment of a surveyor by the insurer was interpreted asa manifestation of the stand of the insurer that the insurancecover still subsists. This is evident from the dictum in para 13of the reported decision as the Court noted that once asurveyor was nominated to verify the loss, the insurer couldnot be allowed to take a stand that the claim is hit by theclause pertaining to duration and more so because of absenceof any mention in the letter of repudiation. Thus, it went on tohold that from the positive conduct of the insurer inunequivocally appointing a surveyor, the insurer had waivedthe right which was in its favour under the duration clause.

21. The expression “duration” is of some significance whichis reflective of the existence or otherwise of the policy itself.In the present case, there is no dispute about the subsistenceof the policy but is one of violation of Condition 6 of thepolicy. Furthermore, in the present case the controversy willhave to be answered on the basis of Standard Fire and SpecialPerils Policy relatable to Condition 6 obligating the insuredto give forthwith intimation of the loss to the insurer. The twoclauses are materially different and relate to two different A

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and distinct insurance policies. In other words, Clause 5 ofthe Marine Insurance Policy and Clause 6 of the present policyare incomparable being qualitatively different.

22. To put it differently, Galada case was not a case whichconsidered repudiation based on a premise or a reason similarBto Condition 6 of the present policy and a specific plea takenby the insurer in that behalf in the repudiation letter itself.Notably, Clause 5 of the Marine Insurance Policy which wasthe subject-matter in Galada case did not have a negativecovenant as in this case in the proviso to Condition 6 of theCsubject policy. The fulfilment of the stipulation in Clause 6 ofthe General Conditions of the Policy is the sine qua non tomaintain a valid claim under the policy.

23. We, therefore, agree with the Respondent that the dictumin Galada case is in the context of the facts of that case andDdoes not lay down that on the appointment of a surveyor, perse, the insurer is estopped from raising a plea of violation ofthe condition warranting a repudiation of the claim. The factumof waiver has to be gathered from the totality of the obtainingcircumstances.”

(Emphasis supplied)

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18. In view of the law laid down by the three Judge Bench in theSonell Clocks (supra), the argument that by appointing a surveyor therespondent-insurer is estopped from raising the plea of violation ofcondition prescribing a time limit for intimation/lodging of the claim, hasFno legs to stand. Thus issue no. (1) is answered accordingly.

19. Insofar as issue no. (2) is concerned it is undisputed that theletter of repudiation did not even remotely mention anything about violationof duration clause stipulated in Clause (6) (i) of the General Conditionsof Policy. The Respondent-insurer repudiated the claim solely on theGground that since spontaneous combustion did not result into fire andloss had not been caused by fire as stipulated by policy conditions, therewas no liability under the policy. It was for the first time the respondent-insurer raised the issue of delayed intimation of claim and violation ofstipulation of Clause 6(i) of the General Conditions of Policy in its replyfiled before NCDRC.H

20. This court in the case of Galada Power Ltd. (supra) haselucidated upon issue (2) as under :

“It is evincible, the insurer had taken cognizance of thecommunication made by the Appellant and nominated asurveyor to verify the loss. Once the said exercise has beenundertaken, we are disposed to think that the insurer couldnot have been allowed to take a stand that the claim is hit bythe clause pertaining to duration. In the absence of anymention in the letter of repudiation and also from the conductof the insurer in appointing a surveyor, it can safely beconcluded that the insurer had waived the right which was inits favour under the duration clause. In this regard, Mr.Mukherjee, learned Senior Counsel appearing for theAppellant has commended us to a decision of the High Courtof Delhi in Krishna Wanti v. LIC, wherein the High Court hastaken note of the fact that if the letter of repudiation did notmention an aspect, the same could not be taken as a standwhen the matter is decided. We approve the said view.”

(Emphasis supplied)

21. Undoubtedly, as mentioned supra, this Court in Sonell Clocks(supra) has distinguished Galada Power on facts and held that theappointment of a surveyor cannot, as a matter of law, be construed as awaiver of the terms and conditions of the insurance policy. However, inSonell Clocks, the insurer had taken a specific plea in the repudiationletter that the loss was not conveyed within the stipulated period. Hencethe singular issue before this Court was only whether the insurer hadwaived the condition as to delay in intimation by appointing a surveyor.This Court in Sonell Clocks did not have the occasion to consider whetherthe insurance company could have raised delay as a ground for repudiationfor the first time before the consumer forum.

22. Hence we are of the considered opinion that the law as laiddown in ‘Galada’ on issue (2) still holds the field. It is a settled positionthat an insurance company cannot travel beyond the grounds mentionedin the letter of repudiation. If the insurer has not taken delay in intimationas a specific ground in letter of repudiation, they cannot do so at thestage of hearing of the consumer complaint before NCDRC.

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A23. Admittedly in the case at hand there was no reference ofdelay in intimation or lodging of the claim as stipulated in Clause 6(i) ofthe General Conditions of Policy in the repudiation letter.

24. The NCDRC has failed to take into consideration this aspectof the matter and, therefore, cannot be held to be justified in rejectingBthe claim of the appellant, on that ground.

25. In view of the aforesaid analysis the appeal stands allowedand the impugned judgment and the order of the NCDRC is set aside.The Respondent-insurer is directed to make payment of Rs. 63,43,679/-, as assessed by the surveyor, to the appellant with interest @ 8% fromCthe date of the filing of the claim of petition till date of payment. Thepayment, as above, be made within eight weeks from today.

26. There will be no order as to costs.

D

Ankit Gyan

Appeal allowed.

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