Modern Insulators Ltd. Vs. The Oriental Insurance Co. Ltd.  INSC 74 (22
This appeal is directed against the order dated 08.01.97 passed by the National
Consumer Disputes Redressal Commission whereby the Commission set aside the
order passed by the State Commission of Rajasthan in the appeal filed by the
appellant has a factory wherein it manufacturers high tension insulators for
transmission lines. The appellant had taken out an insurance policy known as
'All Risk Insurance Policy' for Rs. 50 lakhs tor installation of 25 M3 kiln
with furniture. The policy covered risks against loss during
storage-cum-erection including trial and testing. After completion of the
erection of 25 M3 kiln, the same was loaded with insulators on 12.7.88 for
trial and testing and when it was opened on 16.7.88 it was found that complete
structure of kiln furniture with insulators had collapsed on kiln car and
various items of kiln furniture were damaged. A claim of Rs. 5,73,397.43 was
lodged with the respondent and the surveyors assessed the damage at Rs.
As the claim was not settled a complaint was filed before the State Commission
alleging negligence on the part of the respondent and claiming the amount
assessed by the surveyor with interest. ..
respondent - Insurance Company in the reply to the complaint filed before the
State Commission pleaded that damaged property was not covered by the insurance
State Commission after considering the materials on record rejected the plea of
the respondent and directed the respondent to indeminify the loss by making
payment of Rs.
with interest (@). 18% per annum.
appeal was filed before the National Consumer Disputes Redressal Commission and
in the grounds of appeal it was stated that the appellant violated the terms
and conditions of the policy by using used kiln furniture. This was denied by
appellant also urged betore the National Commission that only the cover note
and the schedule of insurance policy were supplied and other terms and
conditions including the exclusion clause were not communicated. According to
the appellant the above document supplied did not contain the exclusion clause.
The said exclusion clause runs as follows:
the case of second hand/used property the insurance hereunder shall, however,
cease immediately on the commencement of the test" The National Commission
asked the parties to file affidavits to prove That the exclusion clause was
duly communicated to the appellant. We have been taken through the affidavits
filed and we find in the affidavit of the appellant the letter received by the
appellant from the Branch Manager of the respondent was referred to wherein it
was confirmed that appellant was supplied only with a cover note and the
schedule of the policy. So the other terms and conditions containing the above
exclusion clause were not communicated. In the reply affidavit filed by the
respondent it was not specifically mentioned that the exclusion clause was also
communicated to the appellant..
National Commission was of the view that "it is equally responsibility of
the respondent to call for these terms and conditions even if they were not
sent by the appellant as alleged, to understand the extent of risks covered
under the policy and the associated aspects." It is the fundamental
principle of insurance law that utmost good faith must be observed by the
contracting parties and good fath forbids either party from non-disclosure of
the lads which the parties known. The insured has a duty to disclose and
similarly it is the duty of the insurance company and its agents to disclose
.ill material facts in their knowledge since obligation of good faith applies
to both equally.
view of the above settled position of law we are of the opinion that the view
expressed by the National Commission is not correct. As the above terms and
conditions of the standard policy wherein the exclusion clause was included,
were neither a part of the contract of insurance nor disclosed to the appellant
the benefit of the said exclusion clause. Therefore..
finding of the National Commission is untenable in law.
refer to the next ground on which appeal has to be allowed. It is settled
position of law that in an appeal the parties cannot urge new facts. From the
pleadings of the respondent before the State Commission it is found that
respondent pleaded that the property damaged wa.s not covered under the
insurance policy. This plea was given a go by before the National Commission
and a new plea was taken up in the grounds of appeal that the terms and
conditions of the insurance policy were violated by the appellant by using used
kiln furniture. The National Commission accepteu this new ground and allowed
the appeal, which in our opinion is not sustainable in law.
the reasons stated above we hold that the present appeal has merits.
result, appeal is allowed. The judgment of the National Commission is set aside
and the judgment of the State Commission is restored.
the fects and circumstances of the case we direct the parties to bear their own