India P. Ltd. & Anr Vs. National Insurance Co. Ltd. & Ors  Insc 728 (1
B.N. Agrawa & A.K. Mathur With (C.A. No. 6063/1999 ) National Insurance Co.Ltd. Versus Polymat India P. Ltd. & Anr. A.K. MATHUR, J.
Both the appeals arise against the order passed by the National Consumer
Disputes Redressal Commission, New Delhi.
One Civil Appeal No. 4366/1999 is filed by the Polymat India Pvt. Ltd. and
the other Civil Appeal No. 6063/1999 is filed by the National Insurance Company
Ltd. & Ors. against the order passed by the National Consumer Disputes
Redressal Commission, New Delhi on 27th May, 1999 in the Original Petition No.
204 of 1994.
Since both the appeals raise common question of law and arise out of the
same order, they are disposed of by the common order.
Brief facts of the case are as under:
That the Original Petition was filed by the Complainant M/s Polymat India
Pvt. Ltd. & Anr. as a consequence of its claim under 2 fire policies
bearing No. 101600/3101669/0 in respect of Building, machinery and accessories
and furniture and other contents and the other bearing No. 101600/3101670/0
regarding stocks and used/burn lubricating oil and refined oil in its factory
premises consequent upon a fire being repudiated by the Insurance Company,
Opposite Party No. 1. The insured Polymat India Pvt.
Ltd. is a factory measuring 251'x 150' and is bounded by 7' high brick wall
on South and Chain-link fencing on the North, East and West Sides. Inside the
factory premises the Complainant had a shed measuring 101' x 41' constructed of
brick wall with asbestos sheets louvers at upper and asbestos sheets roofing on
tubular frame structure. Attached to the South side of the shed was a lean-to
structure measuring about 85' x 25' and constructed of brick walls and roofing
on tubular frame. The construction was divided into several rooms housing the
office, quality control laboratory, workshop-cum-rest room and store room for
tools and equipment. These rooms had their opening inside the shed. In the said
factory a Dove-tail batch type acid and clay treatment process for refining the
used/burnt lubricating oil was undertaken. The raw material for the process was
the burnt and used lubricating oil which was received in barrels and stored in
the open yard. Apart from that, oil was also brought in and unloaded into used
The finished product i.e. refined lubricating oil was either being loaded
into oil tankers or being filled in drums. In the part of the plant which was
in open the centrifugation, settling and decantation, dehydration, condensation
of lighter volatile impurities, acid treatment and condensation of volatile
matters were being conducted. The part of the operation which was carried on
inside the shed were the less hazardous process like clay treatment and
neutralization, filtration and centrifugation, oil blending etc. In that shed
two Thermic Fluid Heaters, one oil fired boiler and one water softening plant
were also installed. At the material time, all these plants and machinery and materials
were covered by the two fire insurance policies. In the said policies the
banker of the claimant was also one of the beneficiaries. The said two policies
were of dated 19th and 20th March, 1992. It was alleged that in 1992 the
bankers were changed by the Complainant from Grindlays Bank, Chowringhee
Branch, Calcutta to Allahabad Bank, Camac Street Branch, Calcutta and all the
fixed assets were mortgaged by the Complainant in favour of the West Bengal
Financial Corporation to secure the loans received by the Complainant No. 1.
All the fixed assets, stocks and stocks-in-process of the Complainant remained
insured with the New India Assurance Co. upto 19th/20th March, 1992. But after the change of the bankers from Grindlays Bank to Allahabad Bank the Complainant
also changed their insurer from the New India Assurance Co. Ltd. to National
Insurance Co. Ltd.. It is also pointed out that the Development Officer of the
National Insurance Co. Ltd. one Mr. Sandip Guha brought two proposal forms for
fire insurance on or about 17th March, 1992 and got those signed by the
Complainant in blank.
He also took with him photocopies of the previous policies issued by New
India Assurance Co. Ltd. It is further alleged that the premises of the
Complainant were inspected by the said Development Officer and after
inspection, the rates of premium were fixed. The premium which was demanded by
the Opposite Party No. 1 being Rs. 12,012/- and Rs. 3,890/- respectively which
was paid by the Complainant. In the said policies the location of the property
was mentioned as "factory-cum-godown and office premises", though
there was no godown in the factory premises.
Thereafter on 13th January 1993 the said factory premises and the entire
building, furniture, fixtures and fittings, stocks in process and other
material lying outside factory shed were completely destroyed in fire. The
insurance company appointed one Shri S.N.M. Consultants as the Surveyors. The
Surveyors visited the premises and conducted an inspection. The complainant supplied
all information sought by the surveyors. The complainant was informed by the
surveyors that they had been instructed by the opposite parties not to assess
loss to the plant and machinery, furniture, fixtures and fittings and civil
structure outside the covered shed and building and all that plant and
machinery which were lying installed in the open part of the factory premises
were not allowed to be covered by the insurance. Therefore, the Surveyors only
assessed the losses inside the covered area. The Surveyors were also informed
that they were supposed to assess the loss inside the covered area only. The
complainant from the very beginning requested the Insurer to amend the policies
as there was no godown within the precincts of the factory premises and all
goods lying inside the plant and outside the plant should be insured. But no
response was received from the Insurance Company. Even the Surveyors report was
not made available to the complainant despite repeated requests. Therefore, the
present claim was filed before the National Consumer Disputes Redressal
Commission. It was also alleged that Insurance Company did not decide despite
the insured complainant continued to incur losses of interest on the
outstandings of Allahabad Bank and the West Bengal Financial Corporation. It is
alleged that release of part payment on account of payment of atleast 75% of
whatever had been assessed by the Surveyors was also not released. Ultimately
on July, 1994, Complainant received a letter dated 1st July, 1994 claiming the
two fire policies for a sum of Rs. 19,95,432.75 and Rs.9,242.28 respectively
i.e. Rs. 20,04,675/- after deduction therefrom a sum of Rs. 19,224/- as 'penal
premium' being the difference of premium between Class-I and Class II
construction for three years and two vouchers for signatures of the Complainant
with the direction to send further cheque for a sum of Rs 4239/-, which was
also paid. It was alleged that these two vouchers were signed by the
complainant without prejudice to its claim for the balance and returned to the
The complainant demanded the details of deduction from its claim and
received a statement of accounts but no reasons were given for this deduction.
The Surveyors assessed the loss at Rs.
48,73,095/- only but the reasons for reducing this amount to Rs.
20,23,899/- which was not even 50% of the loss assessed by the Surveyors.
The complainant claimed a sum of Rs. 58,20,161/- under the said two policies .
But the surveyors assessed the loss at Rs. 48,73,095/-. It is alleged that
inspite of this, the opposite parties even upto the date of filing of the
complaint had not paid even the reduced amount of Rs. 20,04,675/- minus Rs.
19,224/- which they had originally offered under the two policies. When the matter
could not be sorted out then the complainant filed the present claim before the
National Forum. Respondents filed a response to the present complaint that they
had settled the claim at a little over Rs. 20 lakhs as a non-standard claim
because under the policy the premises was described as of 1st class
The Insurance Company refuted the other allegations and explained that they
disallowed the claim relating to plant and machinery outside the covered area
installed outside the building and had also not considered the claim of the
goods i.e. the drums of oil lying in the open within the factory precincts. It
is also contended that the complainant was not kept in dark about the basis of
settlement. It was also urged that regarding queries of the Complainant, a
letter dated 12th August, 1994 was sent giving details to the complainant,
which was received by the complainant on 31st August, 1994. In this
background., National Commission examined that whether the claim of complainant
is justified or not.
The Commission after considering the matter took view that the factory
premises includes the plant & machinery and goods inside the shed and
outside the shed are covered under both fire policies.
The commission relied on the definition of the factory as given in the
Factory Act 1948.
It was also observed that as per the guidelines in settling the claims 75%
of loss should have been settled. No basis or reasons were given as to why
original claim was not settled at 75% of loss as determined by the Surveyor
which was not disputed. It was also observed that dilatory approach adopted by
Insurance Company resulted in harassment to complainant and he had to suffer
additional interest liability from time to time by the financial institutions
and it was also observed that the assessee is entitled to 75% of the claim
assessed by the surveyors i.e. 75% of Rs. 48,73,095.75, which comes to Rs.
36,54,821.25 and interest was levied @ 18% per annum commencing from two months
after the receipt of the Surveyor's report till the date of payment and also
imposed the cost of Rs. 10,000/-. Aggrieved against this order, both these
appeals were filed, one by Insurance Company and the other by M/s Polymat
India, hence both are disposed of by the common order.
The first and foremost question for consideration is, as per the terms of
the policy whether all the goods which are lying within the shed or outside the
shed are covered under the policy or not. In Policy No. 101600/3101670/0 under
heading 'Property to be insured' which reads as under:- "Stock in trade or
merchandise consisting Rs. 15,00,000/-.
(A ground plan of the premises may please be sketched in the space provided
showing also Adjoining and/or adjacent property within 15M (50ft)
therefrom." Clause 8 of the Policy which is relevant for our purpose reads
"Are there any goods stored in the open, or is there is kutcha shed or
timber built or thatched roof building with 15M (50ft.) or the property No to
which this proposal applied? If so, please give details." In the original
policy, the expression used was "Factory- cum-Godown-cum-Office".
In another Policy also in similar query No. 8, a similar answer was given
that is in negative.
The answer of the insured complainant was in negative that no goods are
stored in open, or in kutcha shed or timber built or thatched roof building
within 15M (50ft.) of the property to which proposal applies. In short that
goods lying outside plant are not insured.
Therefore, the question is when the complainant themselves has given the
answer in negative to the aforesaid queries in both the policies, whether the
complainant is entitled to the benefit of loss occasioned to him on the goods
lying outside the factory premises in the open.
It may also be relevant to mention here that after the proposal form was
received by the complainant and they immediately requested by a letter on 20th
April 1992 to National Insurance Co. pointing out certain discrepancies in both
the policies and requested to carry out corrections in both the policies, i.e.,
request for incorporating the name of the Allahabad Bank, Camac Street,
Calcutta as mortgagee along with West Bengal Financial Corporation, secondly,
the coverage of plant and machinery inside or outside the building and the
coverage for stock and stock in process and lastly the expression 'Godown cum
factory' be deleted as there is no 'godown'. Letter dated 20th April, 1992
reads as under:
"Polymat India Pvt. Ltd.
1/B , D.L. Khan Road Calcutta 700 027 20th April 1992 The National Insurance
Calcutta Division XVIII, 6, Lyons Range, Calcutta 700 001 Sub.: Correction
in Policy No. 101600/3101669/0(BMC) Policy No. 101600/3101670/0 (SSP) Dear Sir,
With reference to the captioned two policies delivered through your Development
Officer, Mr. Guha, palease note the following discrepancies which please amend
1. Policy No. 101600/3101669/0 (BMC) a) Besides West Bengal Financial
Corporation, the Allahabad Bank, Camac Street Branch is also interested as
Mortgagee in respect of our entire building: plant machinery & equipments;
and furniture, fittings & fixtures.
b) In the last paragraph, the item nos. should be 1,2 & 5 and 1,2 &
c) Besides Plant & Machinery installed in Open Yard/in Building, item 2
should also include Laboratory Equipment, Stores, Spares, etc lying anywhere in
our Factory Complex (inside and/or outside the Building).
2. Policy No. 101600/3101670/0 (SSP) The coverage required is for Stock and
Stock in Process, i.e., all types of raw materials & chemicals; stocks undergoing
any process and the semi finished/finished stock- inside or outside the
building but within our factory compound (as hypothecated to the Allahabad
Bank). It may be noted that in the Policy the sum of Rs.15,00,000/- is wrongly
stated against item 4 instead of item 3. (We have no Godown in our Factory
Please made necessary change in both the Policies on above stated basis.
Please also send us photocopies of the two proposal forms which we had handed
over to your Mr.
Guha on 17th March, 1992- signed blank by our representative Shri Sidheswar
Chakraborty so that you could fill in the queries of those two proposal forms
on the basis of expiring policies of New India Assurance Company Ltd., in
Thanking you, Yours faithfully For Polymat India (P) Ltd.
Sd/- (Rita Jhawar) Manager: Finance & Accounts CC: The Allahabad Bank
--for information Camac Street Branch 3C, Camac Street Calcitta 700 016"
These three amendments were suggested by the aforesaid communication. The
Insurance Company by the communication dated 23rd April, 1992 agreed to only
amendement to the extent of the name of the Bank, namely, Allahabad Bank as
maortgagee and no further amendment was made in the original Policies. This was
also confirmed by the evidence of sole witness Shri Samaresh Sarkar, Divisional
Manager produced by the Insurance Company in evidence before the National
Forum. No evidence was led by the complainant before the National Forum.
Therefore, the question is how the correspondence and documents produced by
both the parties are to be construed. But unfortunately the National Commission
did not consider all these aspects and immediately rushed to direct to pay 75%
of the loss assessed by the surveyors.
Now, the question whether the expression "Factory-cum- Godown"
includes all plant & machinery and all goods lying within the boundary wall
of the factory, was covered under both the Policies.
The expression "Factory" has been defined under Section 2(m) of
the Factories act which reads as under:
"Factory" means any premises including the precincts thereof- (i)
whereon ten or more workers are working, or were working on any day of the
preceding twelve months, and in any part of which a manufacturing process is
being carried on with the aid of power, or is ordinarily so carried on, or (ii)
whereon twenty or more workers are working, or were working on any day of the
preceding twelve months, and in any part of which a manufacturing process is
being carried on without the aid of power, or is ordinarily so carried on, -
but does not include a mine subject to the operation of the Mines Act, 1952,
a mobile unit belonging to the armed forces of the Union, a railway running
shed or a hotel, restaurant or eating place." The factory has also been
defined in the Law Lexicon:
"A building or buildings with plant for the manufacture of goods."
The word 'factory' unless specially defined by statute, is always used in
connection with the place where some kind of manufacturing process is carried
on. The activity of exhibiting films does not fall within the definition of
factory contained in the Factories Act." Factory means any premises,
including the precincts thereof, in any part of which a manufacturing process
is carried on. The expression 'premises' including the precincts thereof' takes
within its connotation not merely the building but the open area or the
compound Union of India, AIR 1966 Guj. 116, 125 (Employees Provident Funds Act
(19 of 1952), S 2(g)." So far as the definition of factory is concerned as
given in Factories Act, it shows that where the manufacturing process is
undertaken, that means the manufacturing process which is undertaken within the
plants. This does not cover the outside area of plant. But each definition has
to be construed in the context in which it is used. Loosely the expression,
'factory' may include the whole premises of factory. But each expression has to
be given the meaning in the context where it occurs. The expression
"Factory-cum-Godown" has to be read in the present context with the
other conditions which appear in the Policy document. In fact the Clause 8
which has been reproduced above, specifically made reference that whether the
goods are stored in open or there is kuccha shed or timber built or thatched
roof building within 15M (50ft.) of the property to which this proposal
applies? If so, give the details. But no detail was given and it was answered
in negative. Therefore, what was sought to be insured was plant and machinery.
It is admitted that there was no godown. Therefore, it is clear that goods
lying outside the plant were not insured. Had the intention of the parties been
otherwise then they would have answered query No. 8 in positive terms with details.
But it was answered in negative. Therefore, the documents have to be construed
in the manner it is presented and we cannot give a different interpretation
dehors the context. Both the parties have executed the contract and complainant
made a disclosure to query No.8 categorically in negative that no goods are
lying in open or in Kaccha shed. That shows that the goods lying in covered
area were only insured and none else.
In this connection, a reference may be made to series of decisions of this
Court wherein it has been held that duty of the Court to interpret the document
of contract as was understood between the parties.. In the case of General
Assurance Society reported in 1966 (3) SCR 500 at pages 509-510, it was
observed as under:
"In interpreting documents relating to a contract of insurance, the
duty of the court is to interpret the words in which the contract is expressed
by the parties, because it is not for the court to make a new contract, however
reasonable, if the parties have not made it themselves." Samayanallur
Primary Agricultural Co-op. Bank resported in (1999) 8 SCC 543- Para 3 at page
546-f, it was observed as under:
"The insurance policy has to be construed having reference only to the
stipulations contained in it and no artificial farfetched meaning could be
given to the words appearing in it." Therefore, the terms of the contract
have to be construed strictly without altering the nature of the contract as it
may affect the interest of parties adversely.
In this connection, it may also be relevant to mention here that when this
proposal was approved the same was sent to the complainant and the complainant
wanted some amendments in both policies i.e. coverage of goods lying outside
plant including the expression factory cum- godown as there was no godown in
existence but those amendments were not agreed to by the insurance company,
they only agreed to make amendment of incorporation of name of the Bank, i.e.,
Allahabad Bank in the Policy. When the terms of the contract have been reduced
in writing it cannot be changed without the mutual agreement by way of both the
parties. In the present case, they did not agree for amendment of the policies,
if the complainant was vigilant and wanted this expression to be deleted he
should have prosecuted the matter seriously or repudiated the Policy. The only
defence pleaded was that they were assured orally but no evidence was led by
complainant. On the contrary, suggestion was denied by single witness produced
by the Insurance Company before National Forum.
In this connection, our attention was invited to decision of J. Corporation
reported in (1996) 6 SCC 428 wherein it was observed as under:
"..After the completion of the contract, no material alteration can be
made in its terms except by mutual consent." Therefore, in the present
case when the proposal was sought to be amended and it was only agreed to by
the Insurance company to the extent substituting the Bank i.e. Allahabad Bank
and the other amendments were not agreed by the Insurance Company, the
complainant had a choice to repudiate the insurance policy or to obtain a
proper declaration. But the complainant did not pursue the matter further, it
is to be blamed itself for this.
Therefore, after construing the terms of the contract it transpires that the
intention between the parties was to cover the plant and machinery which were
lying in the factory, i.e., in the covered area and in the shed and not the
goods which were lying outside the covered area. Therefore the order of the
Commission directing the payment of 75% of the assessment made by the Surveyor
of the goods which were lying inside and outside the factory was not correct
approach on the part of the Commission.
The Commission should have examined the matter in detail in terms of the
policy and the relevant documents bearing on the subject. This was not done.
Therefore, we have no hesitation to say that what was sought to be covered by
both the Policies was only plant and machinery in shed and not the goods which
were lying outside the plant and shed.
Next question is whether the reduction of the amount by insurance company
under various heads is justified or not? We have gone through the reasons given
by the Insurance Company for reducing the amount and we are of the opinion that
the reasons given by the Insurance Company appear to be reasonable and
justified which read as under:- "1. Though surveyor assessed the total
loss on building as Rs. 5,52,049/- but while computing we only accepted Rs.
4,97,049/- as the balance amount of Rs. 55,000/- is assessment relating to the
portion which is not inside the building.
2. Regarding plant and machinery though the surveyor assessed Rs.
24,61,757/- but we considered Rs.
14,97,651/- and rest Rs. 9,64,106/- was related to the assessment of the
plant and machinery installed outside the building.
3. Regarding assessment of furniture, fixture and fittings though you
mentioned that the surveyor assessed Rs.
1,76,820/- but it did not appear true according to the survey report the
surveyor assessed only Rs. 1,55,820/-.
But we could consider to the tune of Rs. 87,320/- as the business amount of
Rs. 68,500/- was related to the portion kept outside the building.
Under SSP Policy though the surveyor assessed Rs.
16,17,212/- but we could consider only (i) Hydraulic Oil (630 litres)
amounting to Rs.11,100/- and (ii) H.S.D. in barrel (1081 litres) amounting to
Rs. 2624/- aggregating to Rs. 13,724/- and rest of the items assessed by
surveyor were beyond the scope of cover and not within the purview of the
policy." Therefore, on this account also we do not find any merit to
interfere in the matter.
The next question is with regard to award of interest. As per the guidelines
laid down, the Insurance Company had to settle the claim within two months of the
Surveyor's Report. The reason for delay has been explained. Since the fire took
place on 13th January, 1993, the Insurance Company appointed the Surveyor and
Surveyor sent his report. dated November 5, 1993 which was received by the
appellant on November 9, 1993. Since there was some discrepancies in the survey
report, the Insurance Company vide their letter dated December 14, 1993 sought clarification from the surveyors which was replied on 22.4.94 by the
Surveyors. The Insurance Company after that took the decision and informed the
claimant vide their letter dated 1.7.94 for approval of the claim for Rs.
20,23,899/- under both the polices. Therefore, it was submitted that almost
within stipulated time the intimation was sent to them, as such the levy of
interest @ 18% by the Commission is not justified.
We are satisfied that the action taken by the Insurance Co.
was within reasonable time. Therefore, it cannot be saddled with a high rate
of interest @ 18%. However Insurance Companies should have speed up disposal of
claims in order to inspire greater confidence in them. Be that as it may, since
the amount was received by the claimant in 1994, therefore, levy of interest @
18% does not appear to be justified. Hence, we set aside the order awarding interest
@ 18% per annum. Similarly a levy of cost of litigation of Rs. 10,000/- also
does not appear to be justified in the present case as in view of our finding
above. Hence, we allow the C.A. No. 6063/1999 filed by National Insurance
Company and set aside the order of the Commission.
Polymat India Pvt. Ltd.. (C.A. No. 4366/99) have also filed appeal against
the same order and their grievance is Commission ought to have granted entire
loss assessed by Surveyors instead of 75% & interest should have been awarded
from the date of loss.
Since, we have examined the whole matter in detail, we are satisfied that
claimant is not entitled to be compensated loss as claimed by them. Hence, we
do not find any merit in this appeal and the same is dismissed with no orders
as to costs.