THE ORIENTAL INSURANCE CO. LTD. versus MALANA POWER COMPANY LTD. on 15 November 2021

1. This Civil Appeal is filed by the appellant/the Oriental InsuranceCompany Limited, aggrieved by the order dated 28.02.2019 passed inO.P. No.53 of 2005, by the National Consumer Disputes RedressalCommission, New Delhi. By the aforesaid order, the National Commissionhas allowed the complaint filed by the respondent/complainant Companyand directed the appellant to pay a sum of Rs.4,68,33,840/- towards theloss suffered by the respondent, in terms of insurance policy along with A

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Ainterest @ 6% per annum from the date of filing the complaint till thedate of payment.

2. The respondent is a company which runs a Hydro Power Projectaround Malana Nalah. The respondent was interested in securing anindemnity in respect of any shortfall that may take place in aggregateBannual power generation at its Hydro Power Plant due to failure ofhydrology which depends upon vagaries of nature.

3. For the year 2001-02, the respondent has obtained policies fromM/s. IFFCO-TOKIO General Insurance Company. M/s. IFFCO-TOKIOGeneral Insurance Company provided a package deal of the twoCinsurance policies to the respondent. First one was Industrial All RiskInsurance Policy which covered material, damages due to fire and specialperils, machinery breakdown, loss of profit etc., for a period of 12 months.The second insurance policy was Special Contingency Policy whichcovered loss of power generation due to loss of hydrology. The insurancecoverage for the year 2001-02 was for a period of 12 months commencingDfrom 07.07.2001 to 06.07.2002. The respondent has obtained policiesfrom the appellant in similar lines for the period commencing from07.07.2002 to 06.07.2003. In respect of Special Contingency Policy, whichcovered the loss of power generation due to loss of hydrology, the riskcover for the year 2001-02 was Rs.5.00 crores. Since the likely loss ofEpower generation was estimated to be around Rs.8.00 Crores, therespondent wanted the risk coverage enhanced from Rs.5.00 Crores toRs.10.00 Crores for the year 2002-03. The terms and conditions wereaccepted by the appellant. The Special Contingency Policy which isobtained from the appellant for the year 2002-03 covered Rs.10.00 Croresinstead of Rs.5.00 Crores, as provided by the earlier insurer i.e. IFFCO-FTOKIO for the previous year i.e. 2001-02. The Special ContingencyPolicy issued by the appellant was identical to the one issued byM/s. IFFCO-TOKIO except the sum insured was Rs.10.00 Crores incase of short-fall in the aggregate annual power generation due to lossof hydrology. A premium of Rs.16,95,750/- was paid by the respondent.GAs per the terms of the contract entered into, the Insurance Companywas entitled to cancel the policy by issuing 7 (seven) days’ prior notice.

4. When the appellant was not able to obtain reinsurance in thereinsurance market for getting it protected as per the requirements ofbusiness retention norms by the Insurance Industry, it has addressed aHletter dated 11.11.2002 to the respondent for modifying the terms and conditions of the policy to reduce the insurance coverage to Rs.5.00Crores from Rs.10.00 Crores. It is specifically mentioned in the letterdated 11.11.2002 issued by the appellant that the sum insured had to bekept at Rs.5.00 Crores as no reinsurer was willing to accept the suminsured beyond Rs.5.00 Crores. When the said proposal for revising thepolicy with a sum insured of Rs.5.00 Crores was not accepted by therespondent, the appellant vide proceedings dated 25.11.2002 cancelledthe policy by refunding the premium on pro-rata basis for the remainingperiod i.e., from 27.11.2002 to 06.07.2003.

5. The respondent vide letter dated 26.11.2002 informed theappellant that there has been a shortfall of 28302839 KWH of electricitygenerated from 07.02.2002 to 20.11.2002 and the loss suffered wasRs.5,20,37,800/- and after deduction of 10%, the respondent has claimedan amount of Rs.4,68,33,840/-. By the said letter, the respondent hasmade a formal claim with the appellant for reimbursement of the amountas per the terms of the policy. As the same was not acceded to, therespondent approached the National Consumer Disputes RedressalCommission, New Delhi, claiming an amount of Rs.8,56,77,608.81 asper 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 ofthe appellant that the respondent has fraudulently suppressed thehydrological data of that project of the previous year. The plea of theappellant was not accepted by the National Commission mainly on theground that the appellant, with open eyes, had entered into aMemorandum of Understanding (MoU) with the respondent and issuedthe policy on the same lines as that of preceding year for the year2001-02, by duly incorporating the available hydrology data. The NationalCommission has found that there is no non-disclosure of materialinformation in terms of the insurance policy issued by the appellant whenthe available hydrology data was duly supplied by the respondent andincorporated in the policy itself. Further, with reference to cancellationof the insurance policy, the National Commission has found that at nopoint of time, there was any complaint of any material suppression withregard to hydrology data and further noticed that the notice dated20.11.2002 for cancellation of the special contingency policy was alsoonly for the reason that the respondent was not accepting for amendmentof the policy for revision of the sum insured to Rs.5.00 Crores from AB

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ARs.10.00 Crores only on the ground that they were not able to reinsuretheir interest. The National Commission by clearly recording a findingthat there was no suppression and fraud on the part of respondent, hasallowed the claim of the respondent and directed to pay an amount ofRs.4,68,33,840/- which is the loss suffered by the respondent in terms ofthe policy along with interest @ 6% per annum.B7. We have heard Sri Mahavir Singh, learned senior counselappearing for the appellant and Sri Neeraj Malhotra, learned SeniorCounsel appearing for the respondent.

8. Even in this appeal, by referring to the impugned order andother material placed on record, the learned Senior Counsel appearingCfor the appellant has mainly contended that the respondent had obtainedpolicy by playing fraud and suppression, as such, the respondent is notentitled to make any claim against the appellant. It is submitted thatthere is non-disclosure of previous hydrology data of the year 2001-02before obtaining the policy despite the same was available with theDrespondent. It is further submitted that after obtaining the subject policyfrom the appellant, few days thereafter, the respondent made a claimagainst the earlier insurer M/s.IFFCO-TOKIO, which itself shows thatby changing the insurance companies, the respondent was in the habit ofmaking wrong claims. It is submitted that in view of the suppression /non-disclosure of hydrology data of the previous year though it wasEavailable with the respondent, the appellant has rightly repudiated theclaim of the complainant company. It is contended that the NationalCommission without considering the matter as per the settled legal position,by recording erroneous findings, allowed the claim made by therespondent. In support of his argument, the learned Senior Counsel hasplaced reliance on the judgment of this Court in the case of OrientalFInsurance Company v. Mahendra Construction[1].

9. On the other hand, Sri Neeraj Malhotra, learned Senior Counselappearing for the respondent, by taking us to the findings recorded bythe National Commission and other material placed on record, hassubmitted that there was no suppression or fraud played by theGrespondent, as pleaded and the claim of the respondent was rightly allowedby the National Commission. The learned Senior Counsel has alsosubmitted that in the absence of any errors in the order impugned, thereare no grounds to interfere with the same. It is contended that theappellant is aware of the conditions of the insurance policy which theH1 (2019) 18 SCC 209

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 wasissued by the appellant. At no point of time, the appellant asked for thehydrology data. It is submitted that without informing the respondent,the appellant has appointed M/s. A.K. Gupta & Associates for carryingout a survey and called for report on the loss of power generation. TheSurveyor appointed by the Insurance Company has submitted a reportwhich was not even furnished to the respondent and based on suchreport, the claim made by the respondent was repudiated. It is submittedthat having regard to the material produced before the NationalCommission, it has come to a definite finding that there was no suppressionor non-disclosure from the side of the respondent, as such, there was noreason or justification for repudiating the claim made by the respondentand allowed the claim of Rs.4,68,33,840/-.

10. On hearing the learned counsel on both sides and perusal ofthe material placed on record, we too are of the opinion that there wasno suppression or non-disclosure by the respondent in suppressing anyhydrology data of the previous year, as pleaded by the appellant. Thedata of the years 1993 to 2002 could not be provided as the same wasnot available with the respondent and it was also made known to theappellant.

11. The Surveyor appointed by the Insurance Company insteadof assessing the loss of hydrology as per the policy, went into severalaspects which are irrelevant to the claim. The Special Contingency Policyfor the year 2001-02 was obtained from IFFCO-TOKIO and sum insuredwas only Rs.5.00 Crores. When the respondent has requested to increasethe coverage to Rs.10.00 Crores, the same was agreed by the appellantand entered into an MoU with the similar terms and conditions of theprevious year policy which was with IFFCO-TOKIO. Except the amountof coverage was increased from Rs.5.00 Crores to Rs.10.00 Crores inthe policy issued by the appellant, all other terms and conditions werethe same. The appellant was aware of the earlier insurance policy enteredinto by the respondent with the IFFCO-TOKIO prior to issuance of thesubject policy in favour of the respondent for the period covering from07.07.2002 to 06.07.2003. If they were to examine the hydrology dataof the previous year, it was well within the knowledge of the appellant toask for such data even before entering into contract. It is not a case ofsuppression or non-disclosure of data as pleaded, and whatever data A

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Awas available, the respondent has made known to the appellant. Whenthe appellant was aware of the earlier insurance policy obtained fromIFFCO-TOKIO by the respondent, there was no reason for not askingfor such hydrology data of the previous year. As such, it cannot be saidthat there was non-disclosure of hydrology data or any fraud from theside of the respondent, as is projected by the appellant so as to repudiateBthe claim.

12. Further, it is to be noticed that the cancellation of the subjectpolicy vide proceedings dated 25.11.2002 was also not on account ofsuppression or fraud played by the respondent, but it was only for theCreason that the respondent has not acceded to the request of the appellantto 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 notable to re-insure the claim in the re-insurance market for protection oftheir interest. If there was any suppression or non-disclosure, as pleaded,the appellant would have cancelled only on such ground. No such groundDwas raised at any point of time either at the stage of issuing notice dated20.11.2002, or while issuing the proceedings dated 25.11.2002 cancellingthe policy for the remaining period by refunding premium on pro-ratabasis.

13. Though it is contended by Mr. Mahavir Singh, learned SeniorECounsel that the respondent has encashed the cheque which was issuedtowards refund of pro-rata premium, we are of the view that the samewill not make any difference as the claim was only for the period forwhich the insurance policy was in force.

14. In view of the above, we are of the view that there was noFnon-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 caseand material on record.

15. Though the learned counsel for the appellant relied on theGjudgment of this Court in the case of Oriental Insurance CompanyLimited v. Mahendra Construction[1], but the same would not renderany assistance to support his case. In the aforesaid judgment, there wasnon-disclosure of previous claim against the insured goods in the proposalfor insurance itself. In view of the same, this Court has held that insuredH

made a false representation and suppressed relevant material. Comingto the case on hand, the previous policy with IFFCO-TOKIO for thepreceding year, for the period from 07.07.2001 to 06.07.2002 was madeknown to the appellant, as such, it cannot be said that there was anysuppression or non-disclosure.

16. For the aforesaid reasons, we are of the view that there is nomerit 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 Registryof this Court which is kept in fixed deposit. We permit the respondent towithdraw the said amount of Rs.1.25 crores along with accrued interest,if any, without furnishing any security. The appellant shall pay the balanceamount due to the respondent within a period of three (03) months fromtoday.

Nidhi Jain

Appeal dismissed.

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