Mr. Gopal Shankarnarayan, learned senior counsel for the
appellants has argued both on substantive and procedural
points to assail the aforesaid orders. His first submission is
that the insurance company cannot resist a claim petition on
grounds beyond those cited by them while repudiating a claim.
In support of this argument, a decision of this Court in the case
Saurashtra Chemicals Ltd. v. National Insurance Co. Ltd.
[(2019) 19 SCC 70] has been cited. In this judgement, it has
been held:
“23. Hence, we are of the considered opinion that the law, as
laid down in Galada [Galada Power & Telecommunication
Ltd. v. United India Insurance Co. Ltd., (2016) 14 SCC 161 :
(2017) 2 SCC (Civ) 765] on Issue (2), still holds the field. It is
a settled position that an insurance company cannot travel
beyond the grounds mentioned in the letter of repudiation. If
the insurer has not taken delay in intimation as a specific
ground in letter of repudiation, they cannot do so at the
stage of hearing of the consumer complaint before NCDRC.”
{Para 10}
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7630 OF 2022
JSK INDUSTRIES PVT. LTD. Vs ORIENTAL INSURANCE COMPANY LIMITED
Author: ANIRUDDHA BOSE, J.
Dated: 18th October 2022
Leave granted.
2. The repudiation of a claim in respect of a “Marine CargoOpen
Policy” gives rise to this appeal and the appellants are the
claimants before us. The policy, initially covered a sum of
rupees two hundred crores. Under the heading “Risk Details”,
against Sl.No.1 of the policy document, next to the column
“Voyage”, it was indicated “from anywhere in India to anywhere
in India”. Period of Insurance was from 29th October 2009 to
Midnight on 28th October 2010.There was subsequent addition
of terms and raising of insurance coverage as well. Fresh
endorsement schedules were issued incorporating the changes.
These endorsement schedules, however, carried the expression
“Attached to and forming part of policy
No.12012/21/2010/876” (that being the original policy
number). The endorsement schedule dated 25th November 2009
described the policy as “On the Sales Turnover basis”. This
endorsement became effective from 14:50 hrs on 25th November
2009. The next endorsement was made on 8th April 2010, also
attached to the original policy, by which sum insured was
raised by a further rupees two hundred crores.
3. The appellants are traders and manufacturers of
aluminium products. They claim to have purchased, by high
seas sale agreement dated 22nd June 2010, eight containers of
aluminium ingots. These containers had arrived at Jawaharlal
Nehru Port Trust (JNPT) and from there, they were sent to the
appellants’ factory unit at Silvassa by a transporter by road.
The appellants’ case is that out of the eight containers, one was
stolen and the incident of theft took place on 2nd July 2010.
According to the appellants, value of stolen goods was rupees
thirtyfour
lakhs ninety two thousand and eighty one. Their
claim was lodged with the respondent on 18th March 2011 but
this was repudiated by the latter. The appellants then
approached the State Consumer Disputes Redressal Forum
(Maharashtra) against the insurance company. We shall
henceforth refer to the said forum as the State Commission.
4. The appellants’ initial Complaint Case no. CC/12/177
was rejected by the State Commission, by an order passed on
27th July 2012 and the appeal against that dismissal order
registered as Appeal No. 700 of 2012, was also dismissed by
the National Consumer Disputes Redressal Commission
(“National Commission”) by an order pronounced on 15th
January 2018. This decision is under appeal before us.
5. As we have already narrated, the policy underwent some
changes. Clause 3 of the endorsement schedule dated 25th
November 2009 specified:“
3. The supplies made from the following two works
locations are held covered under the locations mentioned
below.
a) JSK Industries Private Limited,
Survey No. 369/1/1/2,
Behind Siyaram Silk Mills,
Village Sayil,
Slivassa396230,
UT of Dadra and Nagar Haveli.
b) JSK Industries Private Limited,
126/18
Rakholi High School Road, Rakholi Village,
Slivassa396240
UT of Dadra and Nagar haveli.
Other terms and conditions of the policy remain unaltered.
(quoted verbatim from the paperbook)
6. After the appellants lodged the claim, the insurance
company by a communication dated 7th September 2011, raised
certain queries. These included:“
1. The above stock turn over policy was issued on
29.10.2009 for a sum insured of Rs. 200 crores. As per the
documents and statements submitted the above sum insured
has exhausted as on 22.12.2009 & no balance was
available to cover further declarations.
2. Endorsement for increase in sum insured was passed on
08.04.2010 for Rs. 200 crores which was fully utilized to
cover declarations for the period 08.04.2010 till May 2018
as per the 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 sufficient
balance to cover the above declarations and/ or loss.
However you being given one more opportunity to
substantiate your claim in view of the grounds of repudiation
mentioned before a final decision is taken of cure end your
representation/ clarification must reach us within 2 weeks
from the date of receipt of this letter, Please note that in case
we have response from you within 2 weeks from the date of
receipt of this letter the claim shall stand repudiated for the
reasons indicated above without further advices from us.”
(quoted verbatim from the paperbook)
7. As it would be evident from the aforesaid communication,
the appellants were given an opportunity to explain their stand
SCHEDULE OF PREMIUM
Cover
Descriptio
n
Origina
l Sum
Insure
d
Endorsemen
t Sum
Insured
Revise
d Sum
Insure
d
Endorsemen
t Premium
Total Amount in figures and works: 0 (INDIAN RUPEED
only)
in the light of the preliminary view of the insurance company
that their claims were not tenable. The appellants took a stand
that their insurance coverage was enhanced to Rs.400 crores
and in a table contained in their response dated 20th September
2011, it was explained by them that the aforesaid coverage of
Rs.400 crores was not exhausted. The insurance company,
however, stuck to their stand and formally repudiated their
claim by a letter issued on 24th January 2012. The ground for
repudiation was that there was no sufficient balance to cover
the declaration and/or loss. The repudiation letter recorded:“
The reply submitted by you have been examined and the
Competent Authority has concluded that no new facts have
been brought/furnished by you which could satisfactorily
answer the issues raised in our above letter.
Your claim therefore has been repudiated for the reason
mentioned in our above letter i.e. “there is no sufficient
balance to cover the above declaration and/or loss”
(quoted verbatim from the paperbook)
8. The State Commission rejected the claim of the
appellants, taking into account the fact that their policy was
subsequently converted into Sales Turnover basis to cover sale
transaction up to Rs.400 crores in a given time and though
their policy coverage had been enhanced, the same did not
cover the loss on which their claim was raised. It was, interalia,
held by the State Commission:
“5. On the date of occurrence i.e. cause of action
(02/07/2010) insurance cover under the policy though
earlier increased with sum assured of 400 crores but such
contingency was not covered as admittedly, the sales
transactions taken place were not covered for lack, of
balance of sales transaction to cover under insurance policy.
Even during the course of argument, Ld. counsel for the
complainant company conceded to this position, yet he tried
to press for admission of this complaint. Interestingly, survey
report of the authorized surveyor available on record to
assess the loss due to theft of the container with material
therein states that such a cover under insurance policy is not
extended and rightly so on going through the policy terms
and conditions. Complainant company has not made carrier
as a party against whom possibly the complaint could have
been processed. We do not find any merit in complaint and,
therefore, complaint is rejected in limine at the admission
stage itself.”
(quoted verbatim from the paperbook)
9. As we have already indicated, the National Commission, in
appeal, also rejected the appellants’ contention. The National
Commission in its decision under appeal construed the
implication of Sales Turnover and held:“
8. I have thoroughly examined the record and have given a
thoughtful consideration to the arguments advanced by both
the sides. It is true that the order of the State Commission is
very cryptic and does not clearly state the details of the
reasons on which the complaint has been dismissed. Prima
facie, the State Commission has dismissed the complaint on
the basis of the facts mentioned in the repudiation letter that
the insurance limit was exhausted before the claim arose.
This assertion has been disputed by the complainant and it
has been claimed that there was still an insurance limit left
for Rs.3.89 crores and, therefore, it was not correct to hold
that the total insurance limit was exhausted and that too,
without getting the version of the OP. Had this been the only
reason, the matter could have been remanded to the State
Commission, for the decision of the complaint on merits, but
the fact of the matter is that the nature of the policy after the
endorsement dated 25.11.2009 became such that only the
sold material was covered and not the imported material.
The State Commission has obliquely mentioned this fact, but
has not made this a point for dismissal of the complaint. In
fact, the complainant should have taken some other
insurance for transport of the goods from JNPT to Silvasa.
The complainant had neither taken any extra policy nor has
he made the transporter, a party in the complaint case.
9. The endorsement of 25.11.2009 that the policy would be
on "sales turnover
basis" also mentions that the insurance
would be on "sales turnover
basis" on the material going out
from the two premises of the industry at Silvasa.
10. Learned counsel for the Appellant has not shown any
document to controvert this assertion of the insurance
company that the policy was only applicable on the sales
supplies from the two premises of the industry at Silvasa.
11. It is a settled principle of law that the terms of the policy
are to be construed as per the written agreement of the
policy. It could not be shown by the learned counsel for the
Appellant that any imported material would also be included
in the covered items under the policy even after the
endorsement dated 25.11.2009 which restricts the policy to
only on "sales turnover
basis" on the supplies, from two
locations of the industry at Silvasa.”
(quoted verbatim from the paperbook)
10. Mr. Gopal Shankarnarayan, learned senior counsel for the
appellants has argued both on substantive and procedural
points to assail the aforesaid orders. His first submission is
that the insurance company cannot resist a claim petition on
grounds beyond those cited by them while repudiating a claim.
In support of this argument, a decision of this Court in the case
Saurashtra Chemicals Ltd. v. National Insurance Co. Ltd.
[(2019) 19 SCC 70] has been cited. In this judgement, it has
been held:
“23. Hence, we are of the considered opinion that the law, as
laid down in Galada [Galada Power & Telecommunication
Ltd. v. United India Insurance Co. Ltd., (2016) 14 SCC 161 :
(2017) 2 SCC (Civ) 765] on Issue (2), still holds the field. It is
a settled position that an insurance company cannot travel
beyond the grounds mentioned in the letter of repudiation. If
the insurer has not taken delay in intimation as a specific
ground in letter of repudiation, they cannot do so at the
stage of hearing of the consumer complaint before NCDRC.”
As regards implication of the Sales Turnover Policy, his
argument is that the said policy cannot be construed to mean
to cover only those goods which are already sold. His
submission on this count is that in such a situation the title of
the goods would have passed on to the buyer and the
appellants would not have any insurable interest in the said
goods.
11. He has further argued that the National Commission erred
in interpreting the terms of the policy. According to him, the
policy endorsement dated 25th November 2009 did not
withdraw coverage of any of the goods named in the policy
while in transit “from anywhere in India to anywhere in India”
and the implication of including the two locations specified
meant that as per the ‘Sales Turnover policy’ the appellants
were required to declare their sales made from the mentioned
two work locations (factories) on monthly/quarterly basis to the
respondent only for the purpose of computing the balance
cover.
12. Mr. S. M. Suri, learned counsel for the respondentinsurance
company submitted that the main case of the
insurance company is that the policy covered only those goods
within the coverage which left the two units which have been
specified in the earlier part of this judgment.
13. First, we shall examine the ratio of the decision of this
Court in the case of Saurashtra Chemicals Ltd. (supra). In
that case, it was a claim relating to standard fire and special
perils policy. Repudiation was solely on the ground that a
spontaneous combustion did not result into fire and loss had
not been caused by the fire as stipulated by policy conditions.
The insured had approached the National Commission. One of
the defenses taken by the insurance company in the
Commission was that the intimation of claim was with delay for
over a month. This delay, according to the insurance company
vitiated condition 6(i) of the general conditions of the policy, as
applicable in that case. The insurance company was successful
before the National Commission. The insured preferred an
appeal which was heard and decided by a Coordinate Bench.
Before the Bench, the main point on which the case turned was
that the insurance company was taking a defense which did
not form the basis of repudiation of 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 the
National Commission mainly rejected the appeal of the
appellant on the ground that they had converted “from
anywhere in India to anywhere in India” policy into the sales
turnover policy covering transportation of goods only from two
locations specified in the endorsement made on 25th November
2009. The repudiation of the appellants’ claim was on the
ground of exhaustion of insurance coverage and the State
Commission also determined the issue primarily on that
ground. Both the National Commission and the State
Commission had referred to, in their respective decisions, the
nature of the policy but the State Commission did not come to
a specific finding as to whether the goods otherwise remained
insured from the JNPT port to the appellants’ factory. It was the
finding of the National Commission on the other hand that the
policy was only applicable on supplies made from the two
locations at Silvassa. We have quoted this passage from the
order of the National Commission earlier in this judgment. As
regards financial limit of the policy, the appellants’ stand before
the National Commission was that there was available coverage
of Rs. 3.89 crores to accommodate their claim. On this count,
the observation of the National Commission was that if
exhaustion of the coverage limit was the sole reason for
repudiation of the claim, the matter could have been remanded
to the State Commission for the decision of the complaint on
merits. In our opinion, that was the course which ought to have
been directed by the National Commission because the only
ground on which repudiation of the claim was made was lack of
financial coverage. Thus, following the ratio of the decision of
the Coordinate Bench in the case of Saurashtra Chemicals
Ltd. (supra), the National Commission ought not to have gone
beyond the grounds of repudiation and into the nature of
coverage, which according 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 of departure at the two
locations at Silvassa. These are all terms of art applicable to the
insurance trade but we do not consider it necessary to dilate on
this aspect of the dispute having regard to the decision of this
Court in the case of Saurashtra Chemicals Ltd. (supra).
15. Under these circumstances, we set aside the decisions of
the National Commission as also of that State Commission and
remand the matter to the State Commission for taking a
decision afresh on the claim of the appellants on the grounds
which formed the basis of repudiation and determine as to
whether at the material point of time there was sufficient
balance to cover the claim on account of declaration made as
regards 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.
……………………………….. J.
(DINESH MAHESHWARI)
……………………………….. J.
(ANIRUDDHA BOSE)
NEW DELHI;
18th October 2022
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